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1. Background 

As a Party to the Montreal Protocol on Substances that Deplete the Ozone Layer (the Protocol), the 

United States is subject to a cap on the production and consumption of hydrochlorofluorocarbons 

(HCFCs).1 Table 1 presents the HCFC consumption cap and the graduated reductions to allowable HCFC 

consumption for the U.S. (and all non-Article 5 countries),2 as needed for compliance with the Protocol. 

In September 2007, the Parties agreed to strengthen the phaseout of HCFCs; the U.S. is required to reduce 

consumption by 75 percent by January 1, 2010, as shown in Table 1. 

Table 1: U.S. HCFC Consumption Phaseout Targets Under the Montreal Protocol 

Date Consumption Cap ODP Weighted Quantity 

(metric tons)a

Jan 1, 1996 

Consumption freeze capped at 2.8% of the 1989 ODP-weighted 

CFC consumption plus 100% of the 1989 ODP-weighted HCFC 

consumption 

15,240 

Jan 1, 2004 35% reduction of the cap 9,906 

Jan 1, 2010 75% reduction of the cap 3,810 

Jan 1, 2015 90% reduction of the cap 1,524 

Jan 1, 2020 99.5% reduction of the cap 76.2 

Jan 1, 2030 100% reduction of the cap 0 

aAn ODP-metric ton takes into account each ODS’ relative contribution to ozone depletion. Note: one metric ton equals approximately 

2,204 pounds. 

2. Review of Existing Analyses 

A full Regulatory Impact Analysis (RIA) of the phaseout of ozone depleting substances (ODS) was 

conducted in 1993, and since then multiple cost and benefit analyses of specific aspects of the phaseout 

have been conducted. Previously conducted cost and benefit analyses were collected and reviewed. 

Table 2 below lists each of the memoranda and reports reviewed and gives a brief summary of the cost 

and/or benefit analysis provided in each. Further details from the most relevant documents are presented 

in Section 3, and data from these analyses are presented in Appendices A and B. 

Table 2. Existing Cost and Benefit Analyses Related to the Phaseout of HCFCs 

Date Memorandum/Report Title Cost Analysis Benefits Analysis 

August 12, 

1988 

Final Rule: Protection of Stratospheric 

Ozone

The allocated allowance 

method imposes the smallest 

burdens on industry and EPA 

NA 

March 12, 

1992 

Regulatory Impact Analysis: Compliance 

with Section 604 of the Clean Air Act for the 

Phaseout of Ozone Depleting Chemicals 

Complete costs of ODS 

phaseout, includes a 

Regulatory Flexibility Analysis 

Complete benefits of ODS 

phaseout using EPA’s 

Atmospheric and Health Effects 

Model (AHEF) 

September 

10, 1993 

Addendum to the 1992 phaseout regulatory 

impact analysis: Accelerating the phaseout 

of CFCs, halons, methyl chloroform, carbon 

tretrachloride, and HCFCs

HCFC phaseout costs under 

various phaseout scenarios. 

Costs based on assumption 

that alternatives are 10-50% 

more costly than the HCFCs 

UV benefits calculated using 

AHEF 

 

1

 Under the Montreal Protocol, production is defined as “the amount of controlled substances produced, minus the amount 

destroyed...and minus the amount entirely used as feedstock in the manufacture of other chemicals. The amount recycled and 

reused is not to be considered as production.” Consumption is defined as production plus imports minus exports (UNEP, 2000). 

2

 Article 5 countries, primarily developing countries identified in the Montreal Protocol, are on a later schedule for phasing out 

ODS. 
3

Date Memorandum/Report Title Cost Analysis Benefits Analysis 

September 

30, 1999 

Report: Costs and Benefits of the HCFC 

Allowance Allocation System

Reporting and implementation 

costs for industry and the 

Agency (similar to an ICR) 

Refers to the 1993 RIA 

Addendum 

September 

26, 2000 

Memorandum: Cost/Benefit comparison of 

the HCFC Allowance Allocation System

Reporting and implementation 

costs for industry and the 

Agency, based on the 1999 

Report 

AHEF output based on 

expected exceedences of the 

consumption cap in a noncompliance scenario 

January 

21, 2003 

Final Rule: Protection of Stratospheric 

Ozone: Allowance System for Controlling 

HCFC Production, Import and Export

 

March 14, 

2005 

Memorandum: Recommended scenarios for 

HCFC phaseout costs estimation

Costs of switching to 

alternatives 

NA 

March 28, 

2006 

ICR: Reporting and Recordkeeping 

Requirements of the HCFC Allowance 

System

Reporting costs to industry and 

the Agency 

NA 

June 2006 Report: Global Mitigation of Non-CO2 

Greenhouse Gases

Cost of switching from HFCs to 

alternatives 

NA 

April 13, 

2007 

Memorandum: Estimate of the incremental 

cost of accelerating the phaseout of HCFCs 

in China by 10 years

Incremental cost of 

accelerating the phaseout of 

HCFCs in China by 10 years 

NA 

August 31, 

2007 

Memorandum: Preliminary estimates of the 

incremental cost of the HCFC phaseout in 

Article 5 countries

Range of incremental costs for 

phaseout projects in A5 

countries 

NA 

September 

12, 2007 

Report: Changes in HCFC Consumption and 

Emissions from the U.S. Proposed 

Adjustments for Accelerating the HCFC 

Phaseout

Changes in consumption 

based on the U.S. proposed 

adjustments for accelerating 

the HCFC phaseout 

Changes in emissions based 

on the U.S. proposed 

adjustments for accelerating 

the HCFC phaseout 

September 

24, 2007 

Analysis: HCFC Consumption Results NA Consumption effects of the new 

phaseout schedule for A5 and 

A2 countries agreed upon at 

the 19th Meeting of the Parties 

September 

24, 2007 

Analysis: HCFC Production Results NA Production effects of the new 

phaseout schedule for A5 and 

A2 countries agreed upon at 

the 19th Meeting of the Parties 

December 

4, 2007 

Memorandum: Avoidance of Skin Cancer 

Incidences and Mortalities Associated with 

the Accelerated HCFC Phaseout Schedule

NA AHEF output based on the 

accelerated HCFC phaseout 

schedule agreed to at the 19th 

Meeting of the Parties 

December 

7, 2007 

Memorandum: Revised Ozone and Climate 

Benefits Associated with the 2010 HCFC 

Production and Consumption Stepwise 

Reductions and a Ban on HCFC Precharged Imports 

NA Ozone and climate benefits of 

the 75% reduction of the HCFC 

cap in 2010 

January 

17, 2008 

Memorandum: Draft Memorandum on Costs 

Associated with Refrigerant Substitution 

from R-22 to R-410A in Pre-charged 

Equipment Imports

Costs of a proposed 2010 ban 

on pre-charged R-22 imports 

Ozone and climate benefits (in 

terms of avoided emissions) of 

a proposed 2010 ban on precharged R-22 imports 

3. Summary of Existing Cost and Benefit Analyses 

The many previous analyses reviewed in the preparation of this memorandum provide a wealth of 

information on the costs and benefits of the U.S. HCFC phaseout. The one change to the HCFC phaseout 
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schedule since the 1993 RIA Addendum was completed results from the Montreal Adjustment in 

September 20073 and has also been analyzed (see analyses developed in September and December 2007, 

Table 2). The U.S. phaseout schedule was strengthened such that the percent reduction of the 2010 

consumption and production caps was changed from 65% of the baseline to 75% of the baseline, as 

agreed to by the Parties at the 19th Meeting of the Parties to the Montreal Protocol, September 2007. The 

review of these analyses reveals many updates over the past fifteen years to the costs and benefits 

calculated in the 1993 RIA Addendum. Existing data from these analyses are presented in more detail in 

Appendices A and B. The most relevant analyses are briefly summarized below. 

• The 1993 Addendum to the 1992 phaseout regulatory impact analysis: Accelerating the phaseout 

of CFCs, halons, methyl chloroform, carbon tretrachloride, and HCFCs provides a complete 

analysis of the costs and benefits of the HCFC phaseout in the United States. 

− Costs of the HCFC phaseout are calculated for the six phaseout scenarios explored in the 

RIA. Costs were based on the assumption that HCFC alternatives would be 10 percent to 

50 percent more costly than the HCFCs. 

− Benefits are calculated using the AHEF model to compare to costs. The benefits are 

presented for the entire phaseout of ODS in the United States under the Montreal 

Protocol in both health and monetary units and are not calculated separately for HCFCs. 

• The 1999 Report Costs and Benefits of the HCFC Allowance Allocation System re-calculates the 

reporting and administrative costs of the HCFC phaseout presented in the 1993 RIA Addendum. 

The report does not recalculate benefits. 

− Reporting and administrative costs for industry and U.S. EPA are calculated as they are 

for an ICR. The calculations and assumptions made are documented in great detail. The 

analysis includes some costs that existed at the time, but no longer apply (e.g., start-up 

costs) and some expected costs that were not realized (e.g., annual site visits to allowance 

holders). 

• The 2000 Memorandum Cost/Benefit comparison of the HCFC Allowance Allocation System

refers to the 1999 Report for its cost estimates and recalculates the benefits estimates from the 

1993 RIA Addendum, tailoring them specifically to the phaseout of HCFCs. 

− Costs were estimated for EPA and industry from 2000 to 2030 and presented as 

annualized and net present value costs discounted at 3 and 7 percent. Costs presented in 

the memorandum remain the same as those presented in the 1999 report, Costs and 

Benefits of the HCFC Allowance Allocation System.

− Benefits are calculated based on expected exceedences of the HCFC consumption cap 

between 2000 and 2010 in a non-compliance scenario. These exceedences are then used 

as input for the AHEF model and benefits data are presented in health and monetary units 

for the period from 2000 to 2030. 

• The 2005 Memorandum Recommended scenarios for HCFC phaseout costs estimation presents 

three methods for updating the calculation of the costs of switching from HCFCs to alternatives 

from the 1993 RIA Addendum. 

− Costs of switching to HCFC alternatives are calculated in three scenarios based on (1) the 

 

3Decision XIX/6 reflects the 2007 Montreal Adjustment to strengthen the HCFC phaseout. 
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results of the 1993 RIA and (2) actual prices of HCFCs and their substitutes. Only 

Scenario III takes into account complete costs (as were considered in the 1993 RIA 

Amendment). Scenarios I and II consider only the difference in price of the chemicals 

themselves, and do not include costs of transitioning HCFC production facilities and 

equipment. 

• The 2006 ICR Reporting and Recordkeeping Requirements of the HCFC Allowance System

provides an updated calculation of the reporting and administrative HCFC phaseout costs to 

industry and U.S. EPA. 

− The reporting and administrative costs calculated in the ICR are generally still up to date 

and are the most accurate source for estimating current reporting and administrative costs 

of the HCFC phaseout. 

• The 2007 Memorandum Preliminary estimates of the incremental cost of the HCFC phaseout in 

Article 5 countries presents a range of incremental costs for phaseout projects in A5 countries, but 

in doing so provides inputs of cost data for the phaseout of HCFC consumption and production 

that is specific to the U.S. These costs could be supplemented to calculate total costs for 

transitioning to alternatives in the U.S. 

− HCFC consumption phaseout costs are calculated for specific equipment conversions in 

the refrigeration and foam sectors. For each sector, incremental costs were estimated as 

the capital cost of converting equipment production lines and the incremental operating 

costs (IOCs). IOCs were based on changes in costs resulting from switching from 

HCFCs to alternative refrigerants and also from changes in equipment design. 

− HCFC production phaseout costs are based on the cost of building regional and world 

scale production facilities for alternatives. According to industry experts, HCFC 

refrigerant production processes cannot be easily converted to produce alternatives and, 

as a result, new plants must be constructed. 

• The 2007 analyses HCFC Consumption Results and HCFC Production Results calculate the 

effects on consumption and production of the accelerated phaseout schedule agreed to at the 19th

Meeting of the Parties in 2007. Benefits (i.e., avoided emissions) are calculated for both Article 2 

and Article 5 countries. 

• The 2007 Memorandum Revised Ozone and Climate Benefits Associated with the 2010 HCFC 

Production and Consumption Stepwise Reductions and a Ban on HCFC Pre-charged Imports

calculates ozone and climate benefits of the 2010 production and consumption step-downs in the 

United States. 

− The benefits, expressed in terms of avoided HCFC consumption, production, and 

emissions, are calculated using the Excel tool “2010 step-down benefits.xls.” See the 

original memorandum for a more detailed explanation of the tool. These results apply 

only to the 2010 step-down portion of the overall U.S. HCFC phaseout. 

4. Summary of Existing Small Business Analyses 

The regulatory flexibility analysis in the 1992 RIA examined foam blowing and methyl chloroform 

industries in detail because they appeared most likely to be significantly affected from a financial 

perspective. The results were as follows: 
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• Foam blowing: a large number of facility closings are note expected; most firms in the industry 

do not expect a major decline of small-firm viability as a result of CFC regulation. 

• Methyl chloroform: significant negative economic impacts due to the regulation are not expected 

in this industry. 

The regulatory flexibility analysis section in the 2003 phaseout rule stated that “EPA has determined that 

it is not necessary to prepare a regulatory flexibility analysis in connection with this final rule. EPA has 

also determined that this rule will not have a significant economic impact on a substantial number of 

small entities.” “Although this final rule will not have a significant economic impact on a substantial 

number of small entities, EPA nonetheless has tried to reduce the impact of this rule on small entities” 

through the following: 

• Unlimited inter-pollutant transfers; 

• 0.1% offsets, as opposed to 1.0% for Class I substances; 

• Allowing for late entrants; and 

• Consultation with small entities to ensure accuracy of baseline year reports. 

A change to the allocation of HCFCs in 2010 will affect existing allowance holders. The allocation 

method chosen may impact small and large allowance holders in different ways, allocating a relatively 

greater or smaller number of allowances to businesses of different sizes (see the March 13, 2008 

memorandum Draft Regulatory Options for Allocating HCFC Allowances after 2009 for more details on 

the allocation options). However, large HCFC allowance holders, which are in direct competition with 

smaller businesses that hold HCFC allowances, ultimately sell the majority of their products to small 

businesses through a complex supply chain. Furthermore, according to industry experts, there are several 

different pathways to the aftermarket distribution chain that may represent how HCFC product is 

ultimately obtained by the consumer, and small companies exist throughout the distribution channel. As 

such, information to date does not suggest that small businesses as a whole will be subject to differential 

impacts from the 2010 proposed rulemaking. However, further research into this topic could be 

conducted. 
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Appendix A: HCFC Phaseout Benefits – Recent Data 

Results from two recent analyses of benefits attributable to the HCFC phaseout are presented here. 

A.1. 2007 memorandum: Revised Ozone and Climate Benefits Associated with the 2010 

HCFC Production and Consumption Stepwise Reductions and a Ban on HCFC 

Pre-charged Imports 

The 2007 memorandum Revised Ozone and Climate Benefits Associated with the 2010 HCFC Production 

and Consumption Stepwise Reductions and a Ban on HCFC Pre-charged Imports was delivered on 

December 7, 2007 along with the spreadsheet entitled “2010 stepdown benefits.xls.” This spreadsheet 

contains a tool for calculating the ozone and climate benefits associated with the 2010 reduction to both 

the HCFC consumption and HCFC production caps in the U.S. See the original memorandum for a more 

detailed explanation of the tool. Table A-1 presents the ozone and climate benefits calculated using this 

tool expressed in terms of avoided HCFC consumption, production, and emissions. These results apply 

only to the 2010 stepdown portion of the overall HCFC phaseout in the U.S. 

Table A-1. 2010 Caps Allocated Entirely to HCFC-22: Total Avoided HCFC Consumption, 

Production, and Emissions, 2010-2014; Calculated in 2007 

Ozone Benefit Climate Benefita

ODP MT MMTCE MMTCO2e 

Consumption 57,150 513 1,881 

Production 58,264 523 1,917 

Emissions 42,485 431 1,579 

aAvoided GWP-weighted emission results also include avoided HFC-23 emissions. 

A.2. 2007 memorandum: Avoidance of Skin Cancer Incidences and Mortalities 

Associated with the Accelerated HCFC Phaseout Schedule 

The 2007 memorandum Avoidance of Skin Cancer Incidences and Mortalities Associated with the 

Accelerated HCFC Phaseout Schedule presents the benefits of the global HCFC adjustments agreed to at 

the 19th Meeting of the Parties in September 2007 in terms of the incidences of skin cancer and mortalities 

avoided. The avoidance of skin cancer cases and deaths were calculated using the AHEF model. These 

estimates are based on reductions in global HCFC emissions of 524,000 ODP-weighted metric tons. See 

the original memorandum for a more detailed explanation of the calculations. Table A-2 presents these

estimates, which are of limited use to a U.S. phaseout benefits analysis since they include benefits from 

the accelerated HCFC phaseout schedule globally. 

Table A-2. AHEF Model Results of the Avoidance of Skin Cancer Incidences and Mortalities Associated with the 

Accelerated HCFC Phaseout Schedule Calculated in 2007 

Nonmelanoma Skin Cancer Cutaneous Malignant Melanoma 

Cases 

Avoided 

Premature 

Mortalities Avoided 

Cases 

Avoided 

Premature 

Mortalities Avoided 

Total Cases 

Avoided 

Total Premature 

Mortalities Avoided 

191,134 338 5,083 637 196,218 975 
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Appendix B: HCFC Phaseout Costs – Recent Data 

Two types of costs are explored here: (1) reporting and administrative costs for both industry and EPA

and (2) costs of transitioning from HCFCs to alternatives. 

B.1. Reporting and Administrative Costs for Industry and the Agency 

Reporting and administrative costs were presented in a 1999 report, a 2000 memorandum, and the 2006 

ICR on reporting and recordkeeping for the HCFC allowance system. The results from each analysis are 

presented for comparison in Table B-1 below. Each of these analyses contains a thorough accounting of

reporting and administrative activities and their associated costs. However, the 1999 and 2000 analyses 

are outdated, as some costs that existed at the time but no longer apply (e.g., start-up costs) and some 

expected costs that were not realized (e.g., annual site visits to allowance holders). The costs in the 2006 

ICR are generally still up to date and these costs – approximately $140,000 for industry and $220,000 for 

U.S. EPA annually – are the most accurate source for estimating current reporting and administrative 

costs of the HCFC phaseout. 

Table B-1. Summary of Previously Analyzed HCFC Phaseout Reporting and 

Administrative Costs for Industry and US EPA 

Annual Industry Costs Annual US EPA Costs 

Source Min (3% 

Discount) 

Max (7% 

Discount) 

Min (3% 

Discount) 

Max (7% 

Discount) 

2006 ICR (2006$) $138,963 $222,261 

2000 Memorandum (1997$) $235,600 $241,100 $129,000 $129,800 

1999 Report (1997$) $512,255 $523,183 $171,780 $173,069 

B.2. Costs of Switching to Alternatives 

Costs to transition from HCFCs to other chemicals can be broken down into two categories—chemical 

costs and costs associated with manufacturing modifications. Previous analyses have shown chemical 

costs to be variable at any given time and unstable over time due to changing regulatory and market 

conditions. Costs associated with manufacturing modifications can include changes to manufacturing 

processes, manufacturing equipment and design of the final products. 

Data from two memoranda that analyze the cost of the HCFC phaseout are presented here. 

B.2.1. 2007 Memorandum: Preliminary estimates of the incremental cost of the HCFC 

phaseout in Article 5 countries

The 2007 memorandum Preliminary estimates of the incremental cost of the HCFC phaseout in Article 5 

countries includes U.S. based cost data for the phaseout of consumption and production of HCFCs. 

Details on the calculations and their limitations can be found in the original memorandum. HCFC 

consumption phaseout costs from this memorandum are presented in Table B-2. For each sector, 

incremental costs were estimated as the capital cost of converting equipment production lines and the 

incremental operating costs (IOCs). IOCs were based on changes in costs resulting from switching from

HCFCs to alternative refrigerants and also from changes in equipment design. While the costs for 

converting manufacturing facilities can vary widely based on equipment and volume produced, proxy 

equipment conversions were chosen to represent entire sectors. 
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Table B-2. Costs of Phasing out HCFC Consumption in the Refrigeration and Foam Sectors Calculated in 2007 

Sector Proxy Example Incremental Cost per 

Kg (US$/kg) 

Incremental Cost per ODP 

Kg (US$/ODP kg) 

Domestic AC Converting an HCFC-22 window AC unit to an R-410A 

unit 

$6.00 $109.07 

Commercial 

AC 

Converting an HCFC-22 positive displacement chiller

to an HFC-134a unit 

$16.91 $307.37 

Rigid PU 

Foam 

Converting an HCFC-141b based appliance spray 

foam manufacturing facility to HFC-245fa based foam

$12.42 $112.93 

XPS Foam Converting an HCFC-142b based XPS foam 

manufacturing facility to HFC-134a based foam 

$16.86 $259.32 

HCFC production phaseout costs from this memorandum are presented in Table B-3. According to 

industry experts, HCFC refrigerant production processes cannot be easily converted to produce 

alternatives and, as a result, new plants must be constructed. Thus, the cost of converting HCFC 

production facilities to produce alternatives was based on the capital cost of building world and regional 

scale facilities. 

Table B-3. Costs of Phasing out HCFC Production in the Refrigeration 

and Foam Sectors Calculated in 2007 

Data Point Cost per Unit Unit 

Capital cost of building a world-scale 

refrigerant production facility (>10,000 MT/yr) 

$200,000,000 per facility 

Capital cost of building a regional-scale 

refrigerant production facility (<10,000 MT/yr) 

$10,000,000 per facility 

Total capital cost for all facilities $2,640,000,000 US$ 

Total Incremental Cost per ODP Kg $129.01 US$/ODP kg 

Because the data in Tables B-2 and B-3 above is calculated based on recent data and input from industry 

experts, it is the most accurate source for estimating current costs of switching to HCFC alternatives. 

B.2.2. 2005 Memorandum: Recommended scenarios for HCFC phaseout costs estimation

The 2005 memorandum Recommended scenarios for HCFC phaseout costs estimation calculates costs of 

switching to HCFC alternatives based on (1) the results of the 1993 RIA and (2) actual prices of HCFCs

and their substitutes. Only Scenario III takes into account complete costs (as were considered in the 1993 

RIA Amendment). Scenarios I and II consider only the difference in price of the chemicals themselves,

and do not include costs of transitioning HCFC production facilities and equipment. 

Table B-4. Cost of Transitioning from HCFCs to Alternatives Calculated in 2005 

Scenario Minimum Cost 

per ODP kg 

Maximum Cost 

per ODP kg 

I. HCFC substitute is assumed to be ten to fifty percent more expensive 

than HCFC 

$0.20 $4.00 

II. Actual prices of HCFCs and HCFC substitutes are used ($3.65) $5.08 

III. Limited RIA data used – includes replacement equipment costs, energy 

costs, training, scraping of obsolete equipment, and other sector specific 

costs 

$286 $1,432