Preliminary	Cost	Analysis	for	Regulatory	Changes	to	

the	Listing	Status	of	High‐GWP	Alternatives	used	in	

Refrigeration	and	Air	Conditioning,	Foams,	and	Fire	

Suppression	

P REPARED FOR :

       Stratospheric	Protection	Division		

Office	of	Air	and	Radiation		

U.S.	Environmental	Protection	Agency		

Washington,	D.C.	20460		

P REPARED B Y :

ICF	International		

1725	Eye	Street,	NW		

Washington,	DC	20006		

M ARCH 2016
1

Executive Summary

This analysis presents an estimate of the overall potential costs associated with a proposed rulemaking to

change the listing status of certain high‐GWP alternatives used in refrigeration and air conditioning, foams, and

fire suppression. Exhibit 1 summarizes the regulatory changes analyzed. Using a 7% discount rate, total

annualized compliance costs across the roughly 100 affected businesses are estimated to range from $59.2

million–$71.3 million. Using a 3% discount rate, total annualized compliance costs are estimated to range from

$58.8 million–$70.6 million.

Methodology

This analysis builds on the general approach taken

previously to estimate potential economic impacts on small

businesses—as described in the Economic Impact Screening

Analysis for Regulatory Changes to the Listing Status of

High‐GWP Alternatives used in Refrigeration and Air

Conditioning, Foams, and Fire Suppression —to extend the

assessment to all‐sized businesses potentially affected by

the rulemaking. Industries potentially affected by these

regulatory changes were primarily identified by North

American Industry Classification System (NAICS) codes.

Costs to affected businesses were calculated using a direct

compliance cost method and then annualized. Costs or

savings associated with changes in energy efficiency were

not estimated because energy efficiency is related to a

number of factors, including equipment design and

performance characteristics, and not just due to the

refrigerant or foam blowing agent used.  

Apart from a few exceptions, this analysis uses the same

assumptions as the small business screening analysis,

including those about:  

 Which industries might be affected by the regulatory changes;  

 The proportion of businesses that could be directly affected by the regulatory changes, based on

whether the HFCs, HFC blends, PFCs, and other halocarbons affected by the regulatory changes are

still—or were ever—known to be in use, and what proportion of the market the affected substitutes are

expected to represent at the time that the regulatory changes would come into effect;  

 The alternatives that are implemented in the transition away from the HFCs, HFC blends, PFCs, and

other halocarbons affected by the regulatory changes, for modeling purposes; and  

 The capital, operating, maintenance, and other direct compliance costs incurred by affected businesses.

Table 1 provides the basic financial assumptions used in this analysis.  

Exhibit 1: Summary of Regulatory Changes Analyzed

 List unacceptable 24 HFCs and HFC blends for new

centrifugal chillers in 2024.

 List unacceptable 24 HFCs and HFC blends for new

positive displacement chillers in 2024.

 List unacceptable 24 HFCs and HFC blends for new

refrigerated food processing and dispensing

equipment in 2021.

 List unacceptable 28 HFCs and HFC blends for new

household refrigerators and freezers in 2021.

 List unacceptable 22 HFCs and HFC blends for new

cold storage warehouses in 2021.

 List unacceptable HFC‐134a, HFC‐245fa,  and certain

HFC blends in 1) rigid polyurethane high‐pressure

two component spray foam, 2) rigid polyurethane

low ‐pressure two component spray foam, and 3)

rigid polyurethane one‐component foam sealants in

2020, 2021, and 2020, respectively, except for certain

military, space‐ and aeronautics‐ related applications.

 List unacceptable methylene chloride in 1) flexible

polyurethane foam 30 days from date of publication

of a final rule, 2) integral skin polyurethane foam in

2017, and 3) polyolefin foam in 2020.

 List unacceptable perfluorocarbons (C3F8 and C4F10) in

total flooding uses one year after publication of a

final rule.
2

Table 1: Financial Assumptions used in Cost Analysis

Parameter Assumption

Discount rates 3% and 7%

Constant Year Dollars 2015$

Lifetime for annualizing costs Varies based on equipment type: 25 years for foam manufacturing and

centrifugal chiller manufacturer, and 20 years for household refrigerator and

freezer manufacturers.

The sections below briefly describe the cost assumptions to extend the small business economic impact

screening assessment to those businesses not characterized as small under the Small Business Administration

guidelines (hereafter referred to as “larger” businesses).

Refrigeration and Air Conditioning Assumptions		

Cost assumptions for the refrigeration and air conditioning sector are summarized below; for more detail, see

Economic Impact Screening Analysis for Regulatory Changes to the Listing Status of High‐GWP Alternatives.

 Chillers (Centrifugal and Positive Displacement)—Nine manufacturers of centrifugal and positive

displacement chillers were identified based on an internet search.  Compliance costs incurred as a result

of the proposed regulatory changes are based on the assumption that manufacturers would use R‐450A

(a blend of HFC‐134a and HFO‐1234ze) or R‐513A (a blend of HFC‐134a and HFO‐1234yf) in centrifugal

chillers in place of HFC‐134a; SolsticeTM‐1233zd(E) in low‐pressure centrifugal chillers in place of HFC‐

245fa (or centrifugal chillers that historically used HCFC‐123); and R‐450A or R‐513A in positive

displacement chillers in place of R‐407C and R‐410A.1 It is assumed that there is a one‐time capital cost

of approximately $51,000 associated with transitioning to SolsticeTM‐1233zd(E) (UNEP 2012), and annual

costs of $3,500 to $4,200 for centrifugal chillers and $1,100 to $1,400 for positive displacement chillers

using R‐450A or R‐513A, and $7,800 to $8,500 for centrifugal chillers using SolsticeTM‐1233zd(E),

associated with charging the systems.2 As a result, it is estimated that each manufacturer of centrifugal

chillers and positive displacement chillers could incur an annual cost of roughly $2.9 million to $3.3

million and roughly $3.0 million to $3.8 million, respectively, as a result of the proposed regulatory

changes.3

 Retail Food Refrigeration (Food Processing and Dispensing Equipment)—Based on an internet search, it

is assumed that there are 20 manufacturers of refrigerated food processing and dispensing equipment

                                                            

1 The Vintaging Model assumes that by 2024, new positive displacement chillers no longer use HFC‐134a (EPA 2014). 2 Chiller compressors can be charged at the manufacturing facility, shipped partially charged and filled on‐site, or shipped

dry and filled on site depending on the size and installation location of the system. For the purposes of this analysis, it is

assumed that all charging costs will be incurred by the manufacturer, although it is likely that some of these costs would be

passed on to the end‐user. 3 Annual costs are based on the assumption that manufacturers on average sell roughly 545 centrifugal chillers and 2,681

positive displacement chillers each year that will require transition to an alternative refrigerant.  Approximately 41% of new

chillers are assumed to transition to SolsticeTM‐1233zd(E) and 59% are expected to transition to R‐450A or R‐513A. These

assumptions are based on 2024 sales of centrifugal chillers and positive displacement chillers estimated by EPA’s Vintaging

Model (EPA 2014).
3

in the United States. Compliance costs incurred as a result of the proposed regulatory changes are based

on the assumption that manufacturers of refrigerated food processing and dispensing equipment will

incur an incremental cost of $4‐5 for each piece of equipment they produce associated with using R‐

450A in low temperature applications in place of R‐404A (UNEP 2012; Alpine Freezer 2015).  With units

estimated to sell for $10,000 a piece on average, manufacturers are estimated to incur on average an

annual incremental cost of roughly $200‐$200,000, depending on the size of the firm.4

 Household Refrigerators and Freezers—According to the U.S. Census Bureau (2012), there are 23

manufacturers of domestic refrigeration equipment. Compliance costs incurred as a result of the

proposed regulatory changes are based on the assumption that small businesses will transition from

HFC‐134a to either R‐450A or R‐513A, and large businesses will transition to isobutane (R‐600a).  

Assuming an average charge size of 0.16 kg (EPA 2014), it is estimated that small business

manufacturers will incur an annual cost of roughly $1,400 to $1.7 million, depending on the size of the

firm, associated with the incremental cost of the refrigerant.5,6  Large business manufacturers are

assumed to incur a one‐time capital investment cost of $150,000 to $500,000 associated with (a)

purchasing new charging equipment, (b) testing and certifying equipment to UL standards, and (c)

converting their facilities to accommodate a flammable refrigerant, resulting in an annualized cost of

about $31,000 to $102,000 per affected large business.7

 Cold Storage Warehouses—Given this industry’s reliance on ammonia, it is estimated that only four

manufacturers produce R‐404A and R‐507A cold storage refrigeration systems in the United States. In

response to the proposed regulatory changes, these manufacturers are assumed to transition to R‐407F

in new systems, which will cost each manufacturer $20,000 to $40,000 per year, due to the larger

charge size of R‐407F required (i.e., 1.07 times greater than the charge sizes of R‐404A and R‐507A

systems) (Honeywell 2012).8

Foam Blowing Assumptions

In the foams sector, compliance costs generally include one‐time capital costs for a production facility to

transition to an alternative blowing agent. In some cases, these capital costs could be offset by annual savings

associated with lower alternative blowing agent costs; however, these savings are not accounted for in this

                                                            

4 For the purposes of this analysis, it is assumed that all refrigerant costs will be incurred by the manufacturer, although it is

possible that some of these costs would be passed on to the end‐user. 5 Annual costs are based on 2021 estimated sales of household refrigerators and freezers (approximately 11 million units)

using EPA’s Vintaging Model (EPA 2014). This analysis assumes that refrigerator sales are proportionally distributed among

manufacturers based on average sales across each establishment size category.   6 For the purposes of this analysis, it is assumed that all refrigerant costs will be incurred by the manufacturer, although it is

possible that some of these costs would be passed on to the end‐user. 7 Using a 7% discount rate.   8 For the purposes of this analysis, it is assumed that all refrigerant costs will be incurred by the manufacturer, although it is

possible that some of these costs would be passed on to the end‐user.
4

direct compliance cost approach. Assumptions are briefly described below; for more detail, please see Economic

Impact Screening Analysis for Regulatory Changes to the Listing Status of High‐GWP Alternatives.  

 High‐pressure two‐component spray foam—It is assumed that companies still using HFC‐245fa, HFC‐

365mfc and blends thereof would transition to SolsticeTM Liquid Blowing Agent (LBA) 1233zd(E), trans‐1‐

chloro‐3,3,3‐trifluoroprop‐1‐ene). Capital costs for transitioning to SolsticeTM LBA are assumed to be

$200,000–$300,000 per facility, associated with the cost of formulation development and compliance

testing, which results in an annualized cost of about $20,000 to $70,000 per affected business.9

 Low‐pressure two‐component spray foam—Companies still using HFC‐134a, HFC‐245fa, and blends

thereof are assumed to transition to SolsticeTM Gaseous Blowing Agent (GBA) (HFO‐1234ze).Capital costs

for transitioning to HFO‐1234ze are assumed to be $500,000–$600,000 per facility to cover the cost of

extensive formulation development and compliance testing, which results in an annualized cost of about

$40,000 to $175,000 per affected business.10  

 One‐component foam sealants—Companies still using HFC‐134a and blends thereof are expected to

transition to SolsticeTM GBA (HFO‐1234ze). Capital costs for transitioning to HFO‐1234ze are assumed to

be $200,000–$300,000 per facility to cover the cost of formulation development and compliance

testing, which results in an annualized cost of about $20,000 to $70,000 per affected business.11

 Flexible polyurethane foam—Methylene chloride is not known to be used in any flexible polyurethane

(PU) foam applications. Therefore, prohibiting the use of methylene chloride in this end‐use is not

expected to impact any businesses. The proposed regulatory changes would serve to prevent uptake of

methylene chloride into this foam end‐use.

 Integral skin polyurethane foam—Methylene chloride is not known to be used in any integral skin PU

foam applications. Therefore, prohibiting the use of methylene chloride in this end‐use is not expected

to impact any businesses. The proposed regulatory changes would serve to prevent uptake of

methylene chloride into this foam end‐use.  

 Polyolefin foam—Methylene chloride is not known to be used in any polyolefin foam applications.

Therefore, prohibiting the use of methylene chloride in this end‐use is not expected to impact any

businesses. The proposed regulatory changes would serve to prevent uptake of methylene chloride into

this foam end‐use.

Fire Suppression and Explosion Protection Assumptions

No businesses are assumed to be affected by the proposed regulatory changes. PFCs (i.e., C3F8 and C4F10) are not

used currently in new fire extinguishing equipment. These assumptions are based on modeling by EPA’s

                                                            

9 Using a 7% discount rate. The range in annualized costs is dependent on the average number of establishments per

business, which varies depending on the size of the business. 10 Ibid. 11 Ibid.
5

Vintaging Model, which is informed by industry input. The Vintaging Model estimates that 0.2% of the market

uses HFC‐23 in total flooding systems in 2015, with the remaining using halon 1301, other HFCs (e.g., HFC‐

227ea), and agents with zero ODP and low GWP, including fluoroketone, inert gas, CO2, powdered aerosols,

foam, and water mist (EPA 2014).

Results

Using the methodology and additional assumptions described above,  

   
6

Table 2 below summarizes the estimated number of businesses potentially affected by the proposed regulatory

options as well as the estimated annualized costs by sector at a 7% discount rate. Table 3 summarizes the

estimated annualized costs by sector at a 3% discount rate.   

Using a 7% discount rate, total annualized compliance costs across affected businesses are estimated to range

from $59.7 million–$71.9 million. Using a 3% discount rate, total annualized compliance costs across affected

businesses are estimated to range from $59.3 million–$71.2 million. This analysis assumes the minimum cost to

comply with the proposed regulatory changes. Emissions reductions associated with the regulated community’s

compliance with these changes were also investigated.12  

                                                            

12 See EPA 2016, ‘Climate Benefits of the Proposed SNAP Program Status Change Rule’.
7

Table 2: Estimated Compliance Cost of the Regulatory Changes using a 7% Discount Rate

Sector

Estimated Number of

Businesses Impacted

by the Rulea

Higher Lower

Annualized Costsb Annualized Costsb

Refrigeration and Air Conditioning 50 $69,878,000 $58,288,000

Centrifugal Chillers

<10

$29,365,000 $25,892,000

Positive Displacement Chillers $33,799,000 $27,039,000

Food Processing and Dispending Equipment 20 $419,000 $335,000

Household Refrigerators and Freezers 20 $5,810,000 $4,678,000

Cold Storage Warehouses <10 $142,000 $69,000

Foams 50 $2,026,000 $1,452,000

High‐Pressure Two‐Component Spray Foam 40 $1,414,000 $943,000

Low‐Pressure Two‐Component Spray Foam <10 $606,000 $505,000

One‐Component Foam <10 $6,000 $4,000

Flexible Polyurethane Foam 0 $0 $0

Integral Skin Polyurethane Foam 0 $0 $0

Polyolefin Foam 0 $0 $0

Fire Suppression 0 $0 $0

Total Flooding 0 $0 $0

ALL SECTORS 100 $71,904,000 $59,739,000

Totals may not sum due to independent rounding. a It is possible that some businesses will be affected for multiple types of equipment, resulting in a lower total number of discrete

businesses affected by the rule.  However, since it is not known how many businesses would be affected by multiple equipment types,

the total maximum number of businesses that could be affected is shown. b Includes annualized upfront capital costs as well as recurring annual costs.
8

Table 3: Estimated Compliance Cost of the Regulatory Changes using a 3% Discount Rate

Sector

Estimated Number of

Businesses Impacted

by the Rule

Higher Lower

Annualized Costsa Annualized Costsa

Refrigeration and Air Conditioning 50 $69,659,000 $58,213,000

Centrifugal Chillers

<10

$29,352,000 $25,879,000

Positive Displacement Chillers $33,799,000 $27,039,000

Food Processing and Dispending Equipment 20 $419,000 $335,000

Household Refrigerators and Freezers 20 $5,604,000 $4,616,000

Cold Storage Warehouses <10 $142,000 $69,000

Foams 50 $1,560,000 $1,118,000

High‐Pressure Two‐Component Spray Foam 40 $1,089,000 $726,000

Low‐Pressure Two‐Component Spray Foam <10 $467,000 $389,000

One‐Component Foam <10 $5,000 $3,000

Flexible Polyurethane Foam 0 $0 $0

Integral Skin Polyurethane Foam 0 $0 $0

Polyolefin Foam 0 $0 $0

Fire Suppression 0 $0 $0

Total Flooding 0 $0 $0

ALL SECTORS 100 $71,219,000 $59,331,000

Totals may not sum due to independent rounding. a Includes annualized upfront capital costs as well as recurring annual costs.

   
9

References

The following references are cited in this memorandum; see also Economic Impact Screening Analysis for

Regulatory Changes to the Listing Status of High‐GWP Alternatives used in Refrigeration and Air Conditioning,

Foams, and Fire Suppression for a full list of references used for this analysis.

Alpine Freezer. 2015. Soft Serve Machines. Available online at: http://www.alpinefreezer.com/soft‐serve‐

machines/. Accessed November 2, 2015.

DuPont. 2014. Opteon XP10: Product Information Bulletin Low GWP Replacement for R‐134a. Available online

at: https://www.chemours.com/Opteon_Stationary/en_GB/assets/downloads/opteon‐xp‐10‐pib.pdf  

Environmental Protection Agency (EPA). 2013. Global Mitigation of Non‐CO2 Greenhouse Gases: 2010‐2030

Available online at: http://www.epa.gov/climatechange/Downloads/EPAactivities/MAC_Report_2013.pdf.  

Environmental Protection Agency (EPA). 2014. Vintaging Model, Version VM IO File v4.4_10.13.14.xls

Environmental Protection Agency (EPA). 2016. Climate Benefits of the Proposed SNAP Program Status Change

Rule.

Honeywell. 2015. Solstice® N13 (R‐450A) Refrigerant: Low GWP HFO Blend Alternative for R‐134a. Available

online at: http://www.honeywell‐refrigerants.com/europe/wp‐content/uploads/2015/04/Honeywell‐

Solstice‐N13‐Brochure.pdf.  

Honeywell. 2012. HFC Retrofit Guidelines – HFC‐404A & HFC‐507 to HFC‐407F. Available online at:

http://www.honeywell‐refrigerants.com/india/?document=hfc‐retrofit‐guide‐focuses‐on‐converting‐404a‐

and‐507‐to‐lt&download=1.

United Nations Environment Programme (UNEP). 2010. 2010 Report of the Refrigeration, Air Conditioning and

Heat Pumps Technical Options Committee. Available online at:

http://www.ozone.unep.org/Assessment_Panels/TEAP/Reports/RTOC/RTOC‐Assessment‐report‐2010.pdf

United Nations Environment Programme (UNEP). 2012. Report of the Technology and Economic Assessment

Panel, Additional Information on Alternatives to Ozone Depleting Substances. Available online at:

http://ozone.unep.org/Assessment_Panels/TEAP/Reports/TEAP_Reports/teap‐task‐force‐XXIII‐9‐report‐

may2012.pdf.     

U.S. Census Bureau. 2012. 2012 County Business Patterns. Number of Firms, Number of Establishments,

Employment, and Annual Payroll by Enterprise Employment Size for the United States, All Industries:  2012.

Retrieved November 3, 2015 from: http://www.census.gov/econ/susb/  

The White House. 2015. FACT SHEET: Obama Administration and Private‐Sector Leaders Announce Ambitious

Commitments and Robust Progress to Address Potent Greenhouse Gases. Available online at:

https://www.whitehouse.gov/the‐press‐office/2015/10/15/fact‐sheet‐obama‐administration‐and‐private‐

sector‐leaders‐announce.