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. EOS CLIMATE .COM January 27 , 2014

Drusilla Hufford Director, Stratospheric Protection Division Office of Atmospheric Programs U.S. Environmental Protection Agency Washington D.C.

Dear Drusilla :

Congratulations to you and the team from across the Federal government on the 2014 Climate Action Report to the United Nations Framework Convention on Climate Change. I am writing with specific suggestions, grounded on the work that the U.S. EPA and the State Department are now doing on fluorocarbons, to help enable the Admin istration to meet its commitment of reducing U.S. greenhouse gas (GHG) emissions by 17 percent from 2005 levels by the year 2020.

EOS Climate was founded in 2008 to reduce emissions of fluorocarbon refrigerants through

market

- based incentives. As you kno w, p rior to co

- founding EOS Climate, I was responsible for developing and managing a n umber of EPA’s programs highlighted in the 2014 Climate Act ion Report, including those discussed in this letter. EOS has since assembled a world

- class organization at the

executive and Board levels. We originated the GHG protocol for destruction of ozone

- depleting substances adopted by California for its cap

- and

- trade program (AB 32). As the largest provider of verified emission reductions for that market, to date, our pro jects around the U.S. have prevented

emissions equal to more than 4 million tons of CO2 while accelerating the transition to more advanced refrigeration and air conditioning technologies.

Building on this success, we are also working with leading co mpan ies across the country on management of hydrochlorofluorocarbon (HCFC) and hydrofluorocarbon (HFC) refrigerants across their lifecycle, from production to use to end

- of

- life. Through a combination of technology and business model innovation, the system we have developed increases the use of existing inventories, which in turn, decreases the demand for additional virgi n material. The end result is a reduction in aggregate GHG

emissions from refrigerants with a positive return on investment f or refrigeratio n and HVAC equip ment

owners.

Our experience is that monitoring a nd tracking refrigerants quickly transform s how these gases

are managed. We estimate that if all fluorocarbon refrigerants in the U.S. were managed across their lifecycle, with 100% particip ation of system owners, facility managers, technicians, distributors, chemical producers and equipment manufacturers , reductions in emissions of greenhouse gases would

exceed 154 Million metric tons of CO2 equivalent (MMTCO2eq) per year

. Aggregated over si x years, comprehensive refrigerant management alone, at its maximum potential, could achieve nearly the Administration’s entire 17 percent reduction goal in total GHG emissions.WWW

. EOS CLIMATE .COM A ction at the Federal level will continue to play a significant role in maxim izing the potential

benefits of refrigerant management in the private sector

. In the context of refrigerants, t he 2014 Climate

Action Report focuses on HFCs and estimates that the U.S. can reduce emissions between 100 and 135

MMT CO2e q by 2020 through a com bination of efforts includ ing a global HFC phasedown agreement, reducing HFC leakage from vehicle air conditioning, and promoting low

- emission technologies and

climate

- friendly substitutes through EPA’s Significant New Alternatives Policy (SNAP) program an d federal government acquisition policy. We think t here are a dditional policy measures that the

Administration can take in the near

- term to incentivize the private sector and su pport and enhance these

efforts for HFCs as well as HCFC refrigerants (in parti cular R

- 22) . These additional measures, summarized in the following chart and described below, would nearly double the projected reductions estimated in the 2014 Climate Action Report.

Policy Measure Potential U.S. GHG Reductions

2014

- 2020 (MMTCO2eq)

U pdate/Expand Section 608 Leak Repair Requirements 66

HCFC

- 22 Allocations 2015

- 2019: Accelerate Drawdown 31

SNAP Use Conditions for Rec laimed HFC 7 Support H FC Phase down **

Total 1 04

**GHG reductions would be achieved outside the U.S. potentially fr om: 1) refrigerant management in developing countries as a pre

- condition for HFC production allowances or to accelerate the phasedown

schedules ; and/or 2) offsets to HFC production from destruction of surplus ODS in developing

countries.

Update and Expand Section 608 Leak Repair Requirements

Under business as usual, all refrigerant is ultimately released to the atmosphere. Even when equipment is properly serviced and eventually disposed (not always the case), and even if refrigerant is properly recovered and recycled (not always the case), refrigerants will be re

- used to recharge leaky equipment and eventually end up in the atmosphere. 1 For example, EPA estimates that a typical supermarket system has 3,000 to 3,500 pounds of refrigerant that leaks approxi mately 25% of its charge every year. The normal cycle is for that type of system to be recharged (topped off) with more refrigerant, with or without a full repair, until the system is retrofitted (converted) or the facility retired.

EPA ’s Section 608 reg ulations, issued in 1993, established leak repair triggers when leak rates of

ozone

- depleting refrigerants exceed 15 percent on an annual basis for air conditioning equipment, and 35 percent per year for commercial refrigeration and i ndustrial process refr igeration. The regulations do not specify monitoring or reporting requirements, and do not address HFC refrigerants.

1 EOS created a market

- based incentive for collection and destruction of CFC refrigerants collected from older equipment, but this type of incentive would not apply to HCFC and HFC refrigera nts until these gases are no longer produced or imported.WWW

. EOS CLIMATE .COM In 2010, EPA proposed lowering the se triggers to 10 percent (A/C) and 20 percent (refrigeration)

per year. 2 The proposal (which was not finalized) also included a number of important documentation and verification requirements to help insure effective implementation of the regulations. 3 The Agency estimated that over the p eriod 2010 to 2019, the proposed revisions would result in avoided emissions of ODS refrigerant (primarily HCFC

- 22) each year equivalent to 2.8 million metric tons of CO2

, or 28 MMTCO2eq over the 10

- year period.

T he case to update the 608 regulations and to expand its coverage to HFC refrigerants has since been strength ened, with increasing reports of high leak rates, inadequate monitoring, and increasing use of HFC refrigerants in large stationary systems. In 2009, California adopt ed leak monitoring, reporting, and repair requirements for facilities with stationary refr igeration and air conditioning equipment in

commercial and industrial facilities , and for the technicians and engineers who service the equipment

. The California regulations cover all fluorocarbon refrigerants, including HFCs , and are projected to

reduce GHG emissions by 8 MMTCO2eq by the year 2020. Extrapolating to the entire U.S., if EPA were to adopt similar regulations to California, the nationwide reductions would be approximately 66 MMTCO2eq by 2020.

EPA’s HCFC Production and Consumption Allowance s for 2015

- 2019

Although not included in the President’s Clim ate Action Plan, EPA’s production and consumption allowances for the final five years of the HCFC

- 22 (R

- 22) phasedown (2015

- 2019) is an

immediate opportunity for the Administration to significan tly reduce GHG emissions before 2020 and beyond.

Our experience is that most, if not all, owners/operators of large, pre

- 2010 R

- 22 systems have stockpiles either on

- site at facilities or have access to off

- site inventories. The Agency in fact acknowledges that existing inventories of R

- 22 around the U.S. have increased since 2011 and now

exceed 100 million pounds

. After taking into account the allowances that EPA set for 2013 and 2014, the stockpile will continue to grow and will exceed three years of tota l aftermarket demand going into

2015.

EPA’s preferred option in the December 24, 2013 proposal does not account for these existing R

22 inventories and would add to an already over

- supplied market, dampening incentives for leak detection and repair, and recovery and reclamation. 4 The preferred option would allow 90 million

2 Leak repair requirements apply to appliances that hold more than 50 pounds of ozone

- depleting refrigerant.

3 The December 24, 2013 proposed rulemaking on HCFC allocations also included proposed changes to the Section 608 reporting requirements for refrigerant reclaimers; we agree with the proposed changes and believe there could be significant economic and environmental benefits if the reporting requirements were expanded further. We will provide more detailed comments in our formal comments on the proposed rulemaking.

4 Option 3 (“Estimation approach”) in the proposed rule does account for existing inventories and projected refrigerant recovery rates. However, the starting point for 20 15 under Op tion 3 is based on the Vintaging Model estimate of R

- 22 needed for servicing pre

- 2010 equipment that: 1) assumes excessively high leak rates for commercial refrigeration that do not reflect progress in the supermarketWWW

. EOS CLIMATE .COM pounds of new R

- 22 production and import over the 5

- year period, result ing in eventual emis sions equivalent to 74 MMTCO2eq

.

Unless existing inventories are accounted for, any allocat ion would result, or further contribute,

to an over

- supply of R

- 22, resulting in unnecessary production of tens of millions of pounds of R

- 22 and unnecessary emissions equivalent to tens of millions of tons of CO2. A more aggressive allocation

drawdown in R

- 22 allocations would not only prevent these GHG emissions but would also meet the Agency’s goals of incentivizing more diligent management of refrigerants among serv ice technicians

and s ystem owners, and boosting refrigerant recovery and reclamation rate s. Both o f these goals will be

critical to successful implementation of a possible, future HFC phasedown.

We plan on s ubmitting more detailed input on the proposal as part of the public comment process. In the meantime, we encourage EPA to consider a bro ader set of options that would include re

assessment of allocations in future years (e.g., 2016

- 2019) based on better market data, rather than relying solely on modeled projections of R

- 22 demand and incomplete estimates of existing inventories.

At minim um, the Agency should adopt Option 2 in the proposal which, although not explicitly, partially accounts for existing stockpiles. This Option would prevent emissions equivalent to 31 MMTCO2 that would otherwise be associated with the excessive allocations p roposed under Option 1. While this approach would still result in excess production of virgin R

- 22, it would provide significant environmental benefits compared to EPA’s preferred option, at no additional cost. It will also help

ensure the United States ha s a robust reclamation industry that can meet aftermarket demand for R

- 22 demand beyond 2020, and put the United States in a stronger position as the Administration pursues a global agreement to phase down HFCs.

Reduce Emissions and I ncrease Rec lamation of HFCs Through EPA SNAP Program

The President’s Climate Action Plan and the 2014 Climate Action Report refer to GHG emissions that can be achieved through EPA’s SNAP program. One pathway that has been proposed by the Natural Resources Defense Council (in formal petitions submitted in 2010 and 2012) is “de

- listing” the use of specific HFCs from specific applications, e.g., the use of HFC

- 134a in motor vehicle air conditioning in new cars and in household and retail refrigerator

- freezers.

As the Agency re views these petitions and other proposals, we encourage EPA and the Administration to consider a modified option: For those sectors and applications where viable alternatives to HFCs are available and practical, prohibit the use of “virgin” HFC while allow ing

continued use of rec laimed HFC refrigerant. The rec laimed HFC refrigerant would have to meet all relevant government and industry safety and performance standards, with chain

- of

- custody documentation to verify that it was recovered and reclaimed in the U.S. according to EPA regulations.

industry as reported by GreenChill par tners; 2) assumes growth rates in all categories of R

- 22 equipment despite the fact that newly produced/imported R

- 22 can only be used for pre

- 2010 equipment and that import of “dry

- shipped” condensing units are decreasing, as noted in the preamble; and 3) fails to account for the widespread availability of HFC alternative refrigerants which now account for more than 20 percent of aftermarket demand.WWW

. EOS CLIMATE .COM This simple modification would allow the industry a smooth transition for specific products and sectors where new technologies may have significant cost implications or performance uncertainties.

Since no additional HF Cs would be produced, there would be no additional GHG emissions. This would also “soak up” available inventories of used HFCs and incentivizes better management and greater

rec lamation of HFC refrigerants 5 , instead of the current model of produce/use/emit

.

If the Agency were to de

- list use of virgin HFCs from specific applications sooner than it would otherwise, and allow reclaime d HFCs for those applications, potential GHG reductions can be calculated

since rec laimed refrigerant would be displacing new production of refrigerant, thereby eliminating a

source of additional emissions. As an example, if over a 3

- year period all newly manufactured refrigerator

- freezers in the U.S. were charged with rec laim ed HFC

- 134a instead of virgin gas, emissions equivalen t to 6.6 Million metric tons of CO2 would be avoided. Applying a similar use condition to other applications (e.g., automotive A/C) would achieve additional GHG reductions.

Support Global HFC Phase down

The phasedown/phaseout schedules imposed by the Mon treal Protocol created a new industry in reclaiming CFCs and HCFCs. As noted abov e, the industry would benefit from domestic policies around both HFC refrigerants and R

- 22, outlined above. In turn, the reclamation infrastructure in the U.S.

combined with t echnologies and tracking systems for refrigerant lifecycle management, will be needed for an effective and safe implementation of a future HFC phasedown.

The benefits of comprehensive refrigerant management capabilities in the U.S. can extend to

creatin g flexibility, reducing costs, and potentially increasing the pace of an HFC phasedown both in the

U.S. and in other countries. If refrigerant management/recycling systems are in place and displacing new virgin production, thereby preventing GHG emissions, it would be possible to incorporate the following elements into any negotiated HFC phasedown:

• Accelerated phasedown timetables

• Additional p roduction allocation credits

These elements could potentially apply to an individual country or a group of countr ies, or particular economic sectors. Any such enhancements to a potential HFC phasedown agreement would be based on a technical evaluation by the Montreal Protocol Technology and Economic Assessment Panel (TEAP) or equivalent organization validating that the refrigerant management systems are established, with verified emission reductions based on established protocols.

In addition, the U.S. and other countries could increase flexibility where appropriate by allowing HFC production credits from destruct ion of unwanted CFCs and other eligible ODS. The Parties could adopt a standardized GHG protocol with monitoring, operational , and verification requirements similar to one already estab lished for carbon markets (e.g., the Climate Action Reserve ODS Destruc tion

Pr otocol for Article V Countries). This is a proven and highly verifiable GHG emission reduction that would support longstanding efforts by the Parties to the Montreal Protocol to leverage “carbon finance”

5 According to EPA, in 2012, only 16.6% of the total R

- 22 consumed in the U.S. was reclaimed. Although EPA r efrigerant reclamation reporting does not include HFCs, reclaim rates for HFCs would likely be even lower given the lower economic incentive for recovery and re

- use relative to R

- 22.WWW

. EOS CLIMATE .COM to safely dispose of CFC stockpiles and other unwanted inventories still in use or storage that would otherwise be released to the atmosphere.

In sum, maximum adoption in the private sector of comprehensive refrigerant management systems alone can achieve the Administration’s climate goals for 2020 . There are multiple opportunities for the Administration to issue new policies that woul d support these actions and achieve additional,

GHG emission reductions from HFCs and HCFCs , potentially doubling the projections in the 2014 Climate Action Report. We appreciate this opp ortunity and would be happy to provide additional

information.

Sincerely,

Jeff Cohen Senior VP, Science & Policy

cc. Sarah Dunham, EPA Bob Perciasepe , EPA Dan Reifsnyder, State Department John Thompson, State Depa rtment Richard Corey, C alifornia Air Resources Board