The Nickel Report

Joining a growing chorus of states, several Northeastern states, including Massachusetts, Maine and Rhode Island, have recently announced their intentions to impose a ban on the use of hydrofluorocarbons (HFCs). The looming regulatory actions by these states are generally anticipated to follow an HFC ban rulemaking model established by the members of the US Climate Alliance.[1] It remains to be seen, however, whether the states will look to additional regulatory options, as it was a worldwide product ban in the late 1980s that inadvertently set the stage to now limit alternatives containing HFCs due to their climate forcing potential as a greenhouse gas (GHG).

1. Background

Many HFCs were developed in whole or in part as a replacement to chlorofluorocarbons (CFCs), hydrochlorofluorocarbons (HCFCs) and halons. The latter grouping of products were widely blamed for punching a hole in the Earth’s protective ozone layer and allowing the Sun’s harmful ultraviolet (UV) rays to reach Earth unfettered. If left unchecked, the perhaps self-evident problem with this is that “[o]zone is Earth’s natural sunscreen, absorbing most of the incoming [UV] radiation from the sun and protecting life from DNA-damaging radiation.”

Worldwide environmental problems (i.e., DNA-damaging radiation exposure), typically call for worldwide action. Accordingly, countries acted to ban the use of CFCs and HCFCs with the adoption of the Montreal Protocol in 1987. The Montreal Protocol phases out the production and consumption of these ozone-depleting substances.

HFCs became the replacement product of choice soon after countries began implementing the Montreal Protocol and are anticipated to grow in use. The use of HFCs as a product replacement cure, however, quickly found critique. HFCs are a very potent form of GHG, which absorb and trap infrared radiation or heat in the lower atmosphere of the Earth. Many of the world’s nations thought this was sufficiently concerning to propose amendment to the Montreal Protocol.

In 2016, an amendment to the Montreal Protocol to phase out the use of HFCs was adopted in Kigali, Rwanda. In particular, the Kigali Amendment called for participating countries “…to cut the production and consumption of HFCs by more than 80 percent over the next 30 years.” Rulemaking actions were subsequently undertaken by the US Environmental Protection Agency (EPA) to implement the Kigali Amendment in the United States by prohibiting the use of some HFCs in certain end uses. However, these actions were quickly mired in litigation over whether EPA had the underlying statutory authority for its course of action. Ultimately, in a decision later left undisturbed by the US Supreme Court, the DC Circuit Court of Appeals partially vacated EPA’s rule, including the partial HFCs ban in certain end uses.[2] Federal case closed.

1. Enter the States

Not willing to wait for further federal action, Massachusetts, Maine and Rhode Island are joining a group of other states (e.g., California, Vermont, Washington, Connecticut, Delaware and New York) that have either resuscitated or announced their intention to revive EPA’s ban on the end use of some HFCs at the individual state level. The states all appear to be following a course charted through the United States Climate Alliance, which would prohibit certain HFCs in certain end-use categories (e.g., aerosols, foams, air conditioning, refrigeration, etc.) phased in over a period of time, provided the use of alternative products is feasible. Draft regulations implementing the bans are anticipated in spring and summer 2020 for Massachusetts and Rhode Island, respectively; Maine is pursuing additional state legislation first, with regulatory action anticipated to follow.

1. State and Regulated Community Considerations

For the moment, we can hypothesize that there may be exceptions and nuances to the individual state regulatory proposals; however, the end result is currently anticipated to be a prohibition or ban of certain HFCs under certain circumstances. States choosing to enter the void perhaps left by federal inaction and the regulated community alike should consider whether there are other potential regulatory approaches and strategies that may achieve the same or better results in terms of GHG reduction, perhaps more equitably and efficiently than a state-by-state level ban of HFCs. A few items to consider in this regard:

• Federal inaction is not a forgone conclusion, and the DC Circuit certainly left open the door for further regulatory actions by EPA;[3]
• States could adopt reasonable labeling and warning measures for products containing HFCs;
• States could offer product rebates and incentives for product substitution and proper disposal;
• States could sponsor enhanced operator and maintenance training for equipment containing HFCs. This may be particularly useful for the end-use categories of refrigeration, chillers and similar equipment;
• States could take steps to use their own purchasing power to further limit purchase of products containing HFCs they now seek to ban. For example, many states already have “environmentally preferable purchasing” policies that could be updated to better align with state goals for HFCs;
• States could deploy broader market-based compliance options. Take Massachusetts as an example. The Massachusetts Global Warming Solutions Act authorizes, among other things, the state to use “market-based compliance mechanisms” to address climate change concerns.[4] The lynchpin to such an approach will be to appropriately price CO₂ emissions within any market.[5] Certainly no small task. Once CO₂ has been priced, however, while perhaps still complicated, one would think the market pricing could be extended to other GHGs like HFCs. Indeed, EPA has already published a “Greenhouse Gas Equivalencies Calculator” allowing for estimated equivalency calculations of CO₂

Bans are certainly an option in the regulatory toolbox and may be effective over time. As we have seen, however, they may also come with unintended environmental consequences. The use of any one or a combination of the measures above might better provide the stakeholders with an enhanced degree of regulatory certainty, as well as overall success in terms of GHG emissions reductions.

[1] The US Climate Alliance is a bipartisan coalition of state governors seeking to reduce greenhouse gas emissions to levels set forth in the Paris Agreement. Alliance Principles, US Climate Alliance, <http://www.usclimatealliance.org/alliance-principles> (last visited March 16, 2020). The US Climate Alliance has been pursuing a “short-lived climate pollutant challenge” with a goal of significantly reducing these types of pollutants, which include compounds like methane, HFCs and black carbon. SLCP Challenge, US Climate Alliance < http://www.usclimatealliance.org/slcpchallenge> (last visited March 27, 2020).

[2] Mexichem, Fluor. v. EPA, 866 F.3d 451 (D.C. Cir. 2017), rehearing en banc denied (C.A.D.C. 15-1328) (Jan 26, 2018); cert. den., Honeywell Intern. Inc. v. Mexichem Fluor Inc., 139 S.Ct. 322, (Oct. 09, 2018); and cert. den., Natural Resources Defense Council v. Mexichem Fluor, Inc., 139 S.Ct. 322 (Oct. 09, 2018).

[3] Mexichem, 866 F.3d 451, 460 (noting several available statutory authorities to regulate HFCs).

[4] M.G.L. c. 21N, § 7.

[5] By way of analogy, the ISO New England has already concluded for the electricity sector that “[p]ricing carbon within the competitive market structure is the simplest, easiest, and most efficient way to rapidly reduce GHG emissions…. Moreover, placing a realistic price on carbon would enable consumers to pay accurate, competitive prices without the risk of paying for stranded costs.” 2020 Regional Electricity Outlook, ISO-NE at 24 <https://www.iso-ne.com/static-assets/documents/2020/02/2020_reo.pdf> (last visited March 27, 2020).