Testimony John Cabaniss, Director, Environment & Energy

Global Automakers

EPA Public Hearing on Proposed Rulemaking To Change Listing Status for Certain Substitutes Under the Significant New Alternatives Policy Program

August 27, 2014

Good morning. My name is John Cabaniss, Director, Environment & Energy, at the Association of Global Automakers. l

Our members include 12 auto manufacturers z with about 40 percent of the light duty market and growing.

Since 2009 Global Automakers and our members have been actively involved from the outset of the development, promulgation, and implementation of the national greenhouse gas and fuel economy programs, involving two separate rulemakings for first, the 2012 to 2016 model years, and the second, for the 2017 to 2025 model years (One National Program). Both rulemakings recognize the importance of hydrofluorocarbons (HFCs) as greenhouse gases and provide incentives and credits for improving mobile air conditioning efficiency, reducing refrigerant leakage, and transitioning to low GWP (global warming potential) refrigerants (in lieu of the current refrigerant R-134a). Among other things, the proposed rule published on August 6, 2014 (79 FR 46126) would de-list R-134a as an approved automotive refrigerant in model year 2021, and this requirement would apply to new vehicles sold in the U.S. and vehicles produced in the U.S. for both U.S. sales and export.

The proposed rule includes several provisions which we fully support.

We support EPA's intention and conclusion that this proposal "will have no direct effect on theMY 2017-2025 light duty vehicle GHG standards," including the credits for transitioning of lowGWP refrigerants. We support EPA's decision to continue to allow legacy vehicles designed for R-134a to continue to be serviced with that refrigerant.We support EPA's conclusion that vehicles subject to service during their useful life should be recharged only with the refrigerant of original design.

Global Automakers, however, also has several concerns with the proposed rulemaking.

1 The Association of Global Automakers represents international motor vehicle manufacturers, original equipment suppliers, and other automotive-related trade associations. We work with industry leaders, legislators, regulators, and other stakeholders in the United States to create public policy that improves motor vehicle safety, encourages technological innovation and protects our planet. Our goal is to foster an open and competitive automotive marketplace that encourages investment, job growth, and development of vehicles that can enhance Americans' quality of life. For more information, visit www.globalautomakers.org

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ZAmerican Honda Motor Co., Aston Martin Lagonda of North America, Inc., Ferrari North America, Inc., Hyundai Motor America, Isuzu Motors America, Inc., Kia Motors America, Inc., Maserati North America, Inc., McLaren Automotive Ltd., Nissan North America, Inc., Subaru of America, Inc., Suzuki Motor of America, Inc., and Toyota Motor North America.1. We do not support the proposed de-listing of R-134a for MY 2021.

As noted above, we are committed to the national GHG and fuel economy program. One crucially important feature of the national program is the compliance flexibility provided to manufacturers. While providing credits for mobile AC improvements, the EPA GHG regulations also provide auto manufacturers the flexibility to utilize these AC technology improvements (efficiency, leakage, and low GWP refrigerants) along with other technologies available to reduce GHGs throughout the 2012-2025 time period. Such flexibility allows manufacturers to manage the mix of the avaifable technologies in developing their product plans.

The proposed end date of MY 2021 reduces that flexibility and restricts the product cycle. As noted in EPA's proposed rulemaking, major redesigns of vehicles typically occur on an average cycle of 5 model years, and major engineering changes, such as transitioning to an alternative refrigerant would occur during this cycle. However, the 5-year redesign cycle is an "average" with some models having longer redesign cycles of 7-8 years. Vehicles in this latter category which have major redesigns for model year 2016 (which begins on January 2, 2015) already have their designs finalized locked in many cases and won't be scheduled for another re-design until model year 2023 or later.

In light of these factors, Global Automakers supports maintaining the full compliance flexibility provided to manufacturers by the One National Program. Therefore, the de-listing of R-134a should not occur before December 31, 2025 (which is the last date of production for the MY 2025) or with the MY 2026. Even with this later de-listing date, auto manufacturers will continue to have the incentive under the One National Program to transition to low GWP refrigerants earlier, and we believe EPA's forecast that this transition will occur largely by the 2021 MY will remain valid. Therefore it is unnecessary to restrict the flexibility under the One National Program.

2. We do not support the inclusion of vehicles manufactured in the U.S. for export to other markets which do not support alternative refrigerants.

The proposal as published would apply the de-listing requirement for R-134a for all vehicles manufactured or sold in the U.S. Currently, auto manufacturers produce about 2 million vehicles annually for export, over 20 percent of the vehicles manufactured in the U.S. The value of these exports is reported at over $52 billion annually by the Federal Commerce Commission (FCC). According to the FCC about half of these vehicles are exported to Canada and Mexico, which are expected to phase in GHG standards for vehicles in parallel with the U.S. About 10 percent of these exports are shipped to Europe where alternative refrigerants are also being phased in. The remaining 40 percent of these exports are shipped to various destination countries, many of which have not yet decided to transition to low GWP refrigerants and do not have service capabilities to support these alternative AC systems. In addition, some of these countries may have Fire and Safety codes which prohibit "flammable" refrigerants.

Requiring the de-listing requirement for R-134a to apply to all export vehicles is bad policy for several

reasons:

a. This requirement could cause some manufacturers to switch production for these markets outside of the U.S. This could reduce manufacturing jobs in the U.S. and have negative effects on our balance of payments. Or,b. Vehicles for export with the R-134a AC system could continue to be produced on U.S. assembly lines, but the charging of the AC system would occur after the vehicles were shipped from the U.S. This would reduce factory quality control, increase costs, and have negative environmental impacts due to higher leakage rates. Or,

c. Vehicles manufactured in the U.S. for export would have AC systems that could not be adequately serviced in some ill-equipped destination countries. This could have economic or competitiveness impacts due to dis-satisfied customers and could also lead to negative environmental impacts due to attempted service with inappropriate refrigerants.

Another complication which could arise with respect to destination countries is the status of their Fire and Safety codes with respect to "flammable" refrigerants. Our experience in the U.S. was that a number of states had Fire/Safety codes which prohibited the use of "flammable" refrigerants. As part of the SNAP rulemakings to approve several low-GWP refrigerants, including R-152a and HFO-1234yf, both of which are slightly flammable, automakers worked with EPA to contact states and work with them to update their Fire/Safety codes to accommodate low-GWP refrigerants. This effort took several years to accomplish the needed regulatory and sometimes statutory changes. This same situation could apply in some destination countries. It is essential for manufacturers to have the flexibility to design and build vehicles that are supported both legally and technically in destination markets.

Therefore, we recommend that EPA exempt the de-listing of R-134a only for vehicles that have destination markets which do not support low GWP refrigerants. This approach would allow manufacturers to build vehicles that match the market conditions and any legal constraints in the destination country. This is the exact approach adopted by the EU in its low GWP automotive refrigerants program.

In summary, we strongly recommend that EPA alter the proposal with the following two changes:

Delay the de-listing of R-134a to MY 2026, or no earlier than December 31, 2025. Apply the de-listing requirement for R-134a only to vehicles sold in the U.S. market; export vehicles should be exempted if they will be exported to a country that does not support low GWP refrigerants.

Thank you.