HCFC-22 and HCFC- 142b Allo cation Adjustments: The 2009 Final Rule vs. 2011 Interim Final Rule Background In the 2009 Final Rule, approximately 45,400 metric tons (MT) of HCFC-22 consumption and approximately 100 MT of HCFC-142b consumption (both aggregate, nationwide totals) were alloca ted to the allowance holders identified at 40 CFR 82.17 and 82.19 for 2011. While the same methodology used in th e 2009 Final Rule is being used in the 2011 Interim Final Rule, and the number of consumption allowances is about the same, the actual number of production allowances given to companies is different in this rule . This is a result of the way EPA allocates production and consumption allowances under Title VI of the Clean Air Act (CAA).
To allocate allowances, EPA uses the following formula for each HCFC: Step 1: Add up all company-specific consumption baselines. Step 2: Determine how much consumption the mark et needs for a given year, taking into account recycled and reclaimed material. Step 3: Divide calendar-year consumption need s (Step 2) by the aggregate amount of baseline allowances (Step 1). Step 4: The resulting percentage is listed in the table at section 82.16 and becomes what each company is allowed to cons ume in a given control period. Historically, EPA has allocated the same per centage of baseline allowances for HCFC production as it does for HCFC consumption. The above-described methodology is being used in the Interim Final Rule for 2011. For 2011, the estimated demand for HCFC-22 is 57,900 MT based on the 2009 Servicing Tail Report 1 . EPA is allowing for 12,500 MT of HCFC-22 demand to be met with recovered and reclaimed material to encourag e a smooth transition to 2015, wh en the U.S. must reduce its HCFC production and consumption to 10 percent of its baseline. This results in a total of 45,400 MT of HCFC-22 consumption allowances for 2011. Since the aggregate HCFC-22 baselines are increasing due to Arkema and Solvay’s 2008 inter-pol lutant transfers, the percentage of baseline allowed in 2011 must decrease to get to the same actual number of cal endar-year allowances (45,400 MT). While consumption levels are roughly the same, there are sli ght differences in the number of production allowances for HCFC-22 and HCFC-142b. This occurs because the aggregate HCFC -22 production baseline increased less than the aggregate consumption baseline relative to the 2009 Final Rule due to Arkema, Inc.’s transfer of both production and consumption baseline a llowances. Solvay, on the other hand, only transferred its baseline consumpti on allowances. The increase in aggregate baseline production is therefore less than the increase in aggregate baseline consumption (see the table below). Since

1 The Servicing Tail Report is an EPA document included in the docket for this rulemaking (EPA-HQ-OAR-2010- 1040) analyzing the servicing demand for the HCFC appliances in the U.S. refrigeration and air-conditioning sector projected to be in service between 2010-2019. EPA has issued and sought comment on three versions of the draft report as part of the rulemaking establishing HCFC allowances for 2010-2014.the allocation percentage is chosen with the goa l of getting the aggregate number of consumption allowances to match what is in the 2009 rule, when that same percentage is applied to the production baseline, calendar-year production decr eases. The end result is more HCFC-142b production allowances and fewer HCFC-22 producti on allowances relative to the 2009 Final Rule.

HCFC-22 Allocation in 2009 Final Rule vs. 2011 Interim Final Rule

2009 Final Rule 2011 Interim Final Rule Consumption Production Consumption Production Aggregate

Baseline

(MT) 119,384 110,619 141,865 129,093

% Change in Baseline - - 18.9% 16.7%

% Allocated 38% 38% 32% 32% 2011 Allowances (MT) 45,366 42,035 45,397 41,310

% Change from 2009 Final Rule - - 0.15% -1.73%

Slight rounding differences result in sma ll changes in production and consumption, but since production baselines increased by a smaller percentage than consumption baselines, fewer calendar-year production allowances are allocated compared to th e 2009 Final Rule by using the same percentage of baseline as for consumption allowances.

HCFC-142b Allocation in 2009 Final Rule vs. 2011 Interim Final Rule

2009 Final Rule 2011 Interim Final Rule Consumption Production Consumption Production Aggregate

Baseline

(MT) 21,089 25,090 2,047 9,444

% Change in Baseline - - -90.3% -62.4%

% Allocated 0.47% 0.47% 4.9% 4.9% 2011 Allowances (MT) 99.1 117.9 100.3 462.8

% Change from 2009 Final Rule - - 1.20% 292.42%

Slight rounding differences result in small ch anges in production and consumption, but since production baselines decreased by a smaller percenta ge than consumption ba selines, significantly more calendar-year production allowances are a llocated compared to the 2009 Final Rule by using the same percentage of base line as for consumption allowances.