P.1 

OAR Box 1153 

Prepped by Candice Davis 

Document Number: 

16) FED REG STRATOSPHERIC OZONE 

12/14/87 

Docket Number: 

A-87-20 

Printed 5/9/2008 11:25:59 AM Sheet 16 of 60 
P.2 

A$7-£o 

Monday 

December 14, 1987 

Part II 

Environmental 

Protection Agency 

40 CFR Part 82 

Protection of Stratospheric Ozone; Final 

Rule and Proposed Rule 
P.3 

47486 Federal Register / Vol. 51, No. 2§9 / Monday,, December 14, 1987 / Rules and Regulations 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 82 

[FHL-3299-9] 

Protection of Stratospheric Ozone 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Final rule. 

SUMMARY: EPA is requiring that 

individuals or legal entities involved in 

the production, import or export of 

specified ozone-depleting chemicals in 

1986 provide information regarding 

these activities to EPA within 30 days. 

To implement the Montreal Protocol, 

EPA must obtain data on United States 

1986 production, imports and exports of 

the chemicals covered by this 

agreement. This information is critical 

because the Montreal Protocol uses 1986 

activity as the baseline for its 

restrictions. 

In addition to this request for data, 

EPA is also publishing today in the 

Federal Register its proposed detailed 

strategy for implementing the Montreal 

Protocol on Substances that Deplete the 

Ozone Layer (Montreal Protocol). While 

EPA is asking for public comment on 

that proposed strategy, this data 

collection rule is effective immediately. 

EFFECTIVE DATE: December 14,1987. 

FOR FURTHER INFORMATION CONTACT: 

Stephen Seidel; Stratospheric Protection 

Program; Office of Program 

Development (ANR-445); Office ef Air 

and Radiation; 401 M Street, SW., 

Washington, DC 20460. (202) 382-2878. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On September 16,1987, the United 

States and 23 other nations signed the 

Montreal Protocol on Substances that 

Deplete the Ozone Layer (Montreal 

Protocol). This agreement sets forth a 

timetable for reducing specified ozonedepleting chemicals. It represents a 

significant multilateral response to 

addressing the health and 

environmental risks of stratospheric 

ozone depletion. 

The requirements contained in the 

Montreal Protocol and EPA's proposed 

plan for implementing them within the 

United States are discussed in detail in 

a Federal Register notice also published 

today. 

To implement the Montreal Protocol, 

EPA must obtain data on United States 

1986 production, imports and exports of 

the chemicals covered by this 

agreement. This information is critical 

because the Montreal Protocol uses 1986 

activity as the baseline for its 

resuigions. 

AJfiwugh the timing of the effective 

date <$ the Montreal Protocol is 

uncertain (it depends on when the 

conditions for entry into force are 

satisfied), it coald occur as early as 

Januafy 1,1989. The effective date 

(termftd entry feito force) would be 

"January 1,1989 provided that at least 

elevea instruments of ratification, 

acceptance, approval of the Protocol or 

accession thereto have been deposited 

by Stftes or re.gion.al economic 

integration organisations representing at 

least two-thirds of 1986 estimated global 

conswnption of the controlled 

substace s * * *." In addition, the 

Vienna Convention for the Protection of 

the Okone Layer, under which this 

Protocol was negotiated, must also have 

entered into force iiefore the Protocol 

can take effect. K fhese conditions have 

not been satisfied fey January 1,1989, 

than fee Protocol enters into force on the 

90th fay following the date on which the 

conditions have been fulfilled. 

Recognizing the potentially short time 

period before enuf into force, the 

participants at the Diplomatic 

Conference in Montreal passed a 

"Resolution OH R^iorting of Data." This 

resolution "[G|al§8 upon all Signatories 

to take, expedittetsly, all steps 

necessary to acquire data and report on 

the production, import and export of 

conttolled substances in a complete and 

time|y manner * * *." 

To implement this conference 

resolution, the Halted Nations 

Envi_?onment Pro-am (UNEP) has 

already requested production and 

consumption data from signatories and 

has tentatively scheduled a meeting for 

earlf next year at which signatories to 

discuss and report on data collection 

effosts. 

II. Statutory Authority 

EFA is requiring this information 

undfcr the authority granted it in Section 

114 ©f the Clean Air Act. This section 

states that "the Administrator may 

require any perssn who owns or 

operates any emission source or who is 

subject to any requirement of this Act 

* * * provide such other information, as 

he may reasonably require * * *." 

EPA has elected to require this 

information by rule to ensure that all 

producers, importers and exporters 

receive notice that this information is 

beiag collected, if the Agency instead 

sent letters to firms believed to be 

inv©ived in these activities, it might not 

reach the entire universe of involved 

parties. 

EPA intends to send foi!ow-up 

requests for information under section 

114 to producers of the specified ozonedepleting chemicals asking for more 

detailed information related to past, 

current, and future production activity. 

The information requested in those 

letters will supplement that required by 

this rule. 

The rule is being published as a final 

action without first seeking public 

comment for several reasons. First, the 

rule is limited in scope and simply 

requires that information on past 

specified activities be reported. Second, 

the information requested is 

straightforward and clearly delineated. 

Third, the resources involved in 

reporting this information should be 

minimal. Only seven firms are believed 

to produce the specified ozone-depleting 

chemicals in the United States, while 

fewer than 20 firms or individuals are 

likely to have been importers or 

exporters in 1986. Fourth, this 

information is not available through 

existing channels. While some of the 

information is available through the U.S. 

International Trade Commission and the 

Chemical Manufacturers Association, 

this data is presented in an aggregate 

manner and does not cover most of the 

specified ozone-depleting chemicals. 

Fifth, as discussed EPA will need this 

information in a timely manner to 

respond to UNEP's request and to 

participate in the upcoming meeting on 

data collection. For these reasons, EPA 

finds that notice and public comment on 

this rule are impracticable, unnecessary 

and contrary to the public interest 

within the meaning of 5 U.S.C. section 

553(b)(B). 

III. Requirements of the Rule 

A. Affected Parties 

The rule applies only to those parties 

who produced, imported, or exported 

the specified bulk chemicals (See 

section III.B below) in 1986. Thus, firms 

which use chlorofluorocarbons (CFCs) 

and halons as part of their 

manufacturing process would not be 

affected by this rule. In fact, as stated 

above, EPA believes that only seven 

firms produced the specified ozonedepleting chemicals in the United States 

in 1986 and fewer than 20 firms were 

involved in importing or exporting these 

chemicals in their bulk form. 

It is important to note that imports or 

exports of products containing or 

produced with the specified ozonedepleting chemicals would not be 

covered by this rule. Thus, it would not 

apply to a firm importing refrigerators 

containing CFC-12. It would, however, 

apply to the import or export of any bulk 

shipments of mixtures or azeotropes 
P.4 

containing die specified chemicals. The 

definition of controlled substances 

contained in the Montreal Protocol 

states that it excludes any of the 

specified chemicals "whether existing 

alone or in mixture that Is in a 

manufactured product other than a 

container used for transportation or 

storage

 4 ' "." 

B. Specified Ozone-Depleting Chemicals 

The Montreal Protocol and therefore 

this rule applies to the following 

chemicals: 

(1) CFC-13—Trichlorofluoromethane 

(CFC-11) 

(2) CC12F2—Dichlorodifluoromethane 

(CFC-12) 

(3) CC12F-CC1E2— 

Trichlorotrifluoroethane (CFC-113) 

(4) CF2C1-GC1F2— 

Dichlorotetrafluoroethane (CFC-114) 

(5) CC1F2-CF8— 

(Mono)chloropentafluoroethane 

(CFC-115) 

(6) CF2BrCl— 

Bromochlorodifiuoromethane (Halon 

1211) 

(7) CF3Br—Sromotrifluoromethane 

(Halon 1301) 

(8) C2F4Br2—Dibromotetrafluoroethane 

(Halon 2402) 

C. Data Required 

EPA is requiring that affected parties 

provide data on the quantity of each of 

the specified chemicals that was 

produced, imported or exported in 1986. 

The year 1986 is the baseline used in the 

Montreal Protocol for determining limits 

on production and consumption (defined 

as production plus imports minus 

exports) established by that agreement. 

As a result, 1986 is the year for which 

data is sought. 

Information on the quantity and 

location of each of the specified 

chemicals produced in the United States 

or its territiories is required along with 

the amount of those chemicals which 

may have been used and consumed as 

chemical intermediaries in the 

production of other chemicals. The latter 

information is necessary to avoid 

double-counting CFC or halon 

production. Documentation supporting 

the submission of 1986 production levels 

could include production records or logs, 

certified production statements used for 

other reporting purposes or similar 

information. Quantities should be 

reported in kilograms for each of the 

specified CFCs and halons. 

The quantity of each specified 

chemical imported to the United States 

and its territories is required to be 

reported to EPA along with Entry 

Number, Customs District and Port 

Code, Employer Identification Number 

(EIN) or importer number, commodity 

code, the date and port of entry and the 

country in which it was produced. The 

required information on exports 

includes the quantity exported, Use 

producer of the chemical, the date and 

port of exit, the EIN, Customs District 

and Port Code, the commodity code, and 

the country of final destination. 

Documentation supporting imports and 

exports should include copies of official 

papers (e.g., shippers export 

declarations. Form 7525 and Entry 

Summaries, if available) or other 

evidence confirming such activity. 

Affected parties should specify what 

of the submitted data is covered by 40 

CFR, Part 2, Subpart B, which governs 

the treatment of business information. 

Congress has given EPA broad authority 

to secure this information through 

Section 114 of the Clean Air Act for the 

purposes of developing regulations and 

standards. 

Under section 114, EPA is empowered 

to obtain information which may be 

considered confidential business 

information. Producers, importers, and 

exporters may request that EPA 

consider some or all of the information 

they supply as confidential at the time it 

is submitted. Failure to assert a claim of 

confidentiality at the time of submission 

may result in disclosure of the 

information by the Agency without 

further notice. 

D. Submission of Data 

The data required under this rule must 

be submitted to EPA within 30 days 

following the date of publication of this 

notice. It should be sent to: 

Stratospheric Protection Program; Office 

of Program Development (ANR-445); 

Office of Air and Radiation; 401M 

Street SW., Washington, DC 20460. 

E. Failure to Comply 

Affected parties failing to submit the 

required data will be in violation of 

section 113 of the Clean Air Act and will 

be subject to fines of up to $25,000 per 

day. In addition, since the data collected 

by this rule will likely be used in 

determining the allocation of rights to 

produce and import bulk CFCs and 

halons, the failure to notify EPA of 1986 

activities could invalidate future claims 

to such allocations. 

F. Future Steps 

EPA intends to use the information 

required by this rule to develop the U.S. 

1986 production and consumption 

baseline as required under the Montreal 

Protocol. In addition, this data would 

also be used as the basis for the 

proposed "allocated quota" approach to 

implementing the Protocol (see 

accompanying proposed rule) which 

grants past producers and importers 

rights to produce and consume based on 

their 1986 activities. EPA intends to 

publish for comment ihe allocations 

based on this data in Spring of 1988. 

Final allocations providing the basis for 

issuing rights to import and produce the 

regulated CFCs and halons would be 

published as part of the final rule . 

implementing the Montreal Protocol. 

That final rule is scheduled for 

promulgation by August 1,1988. 

IV. Additional Information! 

A. Executive Order 12291 

Executive Order (E.O.) 12291 requires 

the preparation of a regulatory impact 

analysis for major rules, defined by the 

order as those likely 4o result in: '>"-•-.' 

(1) An annual effect on the economy 

of $100 million or more; 

(2) A major increase in costs or prices 

for consumers, individual industries, 

Federal, State, or local government 

agencies, or geographic industries; or 

(3) Significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or on the 

ability of United States-based 

enterprises to compete with foreignbased enterprises in domestic or export 

markets. 

EPA has determined that this 

regulation does not meet the definition 

of a major rule under E.O. 12291, and 

therefore has not prepared a regulatory 

impact analysis (RIA). 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act, 5 

U.S.C. sections 601-612, requires that 

Federal agencies examine the impacts of 

their regulations on small entities. Under 

5 U.S.C. 604(a), whenever an agency is 

required to publish a general notice of 

proposed rulemaking, it must prepare 

and make available for public comment 

an initial regulatory flexibility analysis 

(RFA). Such an analysis is not required 

if the head of an agency certifies that a 

rule will not have a significant economic 

impact on a substantial number of small 

entities, pursuant to 5 U.S.C. 605(b). 

Because this rule will not have a. 

significant impact on small entities, no 

RFA has been prepared. 

C. Paperwork Reduction Act 

The information collection 

requirements in this rule have been 

approved by the Office of Management 

and Budget (OMB) under the Paperwork 

Reduction Act of 1980,44 U.S.C. 3501 er 

seq. and has been assigned OMB control 

number 2060-0158. 
P.5 

47488 Federal Register / Vol. 52, No.' 239 / Monday, December 14, 1987 / Rules and Regulations 

Date: December 1,1987. 

Lee M. Thomas, 

Administrator. '..-•• 

For the reasons set out in the 

preamble, Part 82 of Title 40 of the Code 

of Federal Regulations is added as 

follows: 

PART 82—PROTECTION OF 

STRATOSPHERIC OZONE 

Authority: 42 U.S.C. 7457(b). 

§ 82.20 Baseline data collection. 

(a) This section applies to any 

individual or legal entity who engaged 

in any of the following activities in 1986 

involving any of the chemicals specified 

in § 82.20(b) of this part: 

(1) Producers who manufactured the 

chemicals listed in § 82.20(b) from raw 

materials or feedstock chemicals; 

(2) Importers who transported the 

chemicals listed in § 82.20(b) from 

outside the United States or its 

territories to persons within the United 

States or its territories; and 

(3) Exporters who transported the 

chemicals listed in § 82.20(b) from 

within the United States or its territories 

to outside the United States or its 

territories. 

(b) The chemicals covered by this 

section are the following: 

(1) CFC-te—Trichlorofluoromethane 

(CFC-11) - •• • 

(2JCC12F2—Dichlorodifluoromethane 

(CFC-12) 

(3) CC12F-CC1F2— ^ 

Trichlorotrifluoroethane (GF&-113) 

(4) CF2CI-CC1F2— 

Dichlorotetrafluoroethane (CFC-114) 

(5) CClFa-CF3— 

(Mono)chloropentafluoroethane 

(CFC-115) 

(6) CF2BrCl— 

Bromoehlorodifluoromethane (Halon 

1211) 

(7) CF3Br—Bromotrifluoromethane 

(Halonl301) 

(8) C2F4Br2—Dibromotetrafluorbethane 

(Halon 2402) 

(c) Individuals and legal entities 

meeting Sie conditions set forth in 

§ 82.20 (a) and (b) must report the 

following information along with 

supporting documentation: 

(1) Name, address and telephone 

number of contact; 

(2) The amount (kilograms) of each of 

the substances it produced in 1986 in the 

United States or its territories and the 

location of its production; 

(3) The amount (kilograms) of each of 

the chemicals listed in 5 82.20(b) which 

was used and entirely consumed as a 

chemical intermediary in the production 

of other chemicals; 

(4) The amount (kilograms) of each of 

the chemicals listed in § 82.20(b) which 

it imported into the United States or its 

territories in 1986, along with the port 

and date of entry and the country in 

which it was produced; 

(5) The amount (kilograms) of each of 

the chemicals listed in § 82.20(b) which 

in 1986 it exported from the United 

States or its territories, the producer of 

the chemical, th&date aiid port of exit, 

the country of final destination and the 

date of entry into that country.' 

(dj Information required by 5.82.20(c) 

must be submitted to EPA within 30 .. . 

days after the date of publication of this 

section. Reports should be addressed to: 

Stratospheric, Protection Program; Office 

of Program Development (ANR-445); 

Office of Air and Radiation; U.S. 

Environmental Protection Agency; 401 M 

Street, SW., Washington DC 20460. 

(e) Failure to submit required 

information by this date shall be a 

violation of section 114 of the Clean Air 

Act and may-invalidate future claims for 

allocation of rights to produce or import 

chemicals listed in § 82.20(b). 

[FR Doc. 87-28214 Filed 12-11-87; 8:45 am) 

BILLING CODE 6560-50-M 
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Federal Register / Vol. 52, No. 239 / Monday, December 14,. 1987 / Proposed Rules 47489 

ENVIRONMENTAL PTOTECTtOW 

AGENCY 

40 CFR Part 82 

[FHL-3284-9] 

Protection off Stratospheric Ozone. 

AGEMCV: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY": EPA is proposing to limit the 

production and consumption of certain 

chlorofluorocarbons (CFCs) and 

brominated compounds (halons) to 

reduce the risks of stratospheric ozone 

depletion. Specifically, the proposed rule 

would require a freeze at 1986 

consumption and production levels of 

CFC-11. -12, -113. -114, and -115 on the 

basis of their relative ozone depletion 

weights, followed by reductions to 80 

percent and 50 percent of 1986 levels 

beginning in mid-1993 and mid-1998, 

respectively. It would also prohibit 

production and consumption of Halon 

1211,1301 and 2402 from exceeding 1986 

levels on a weighted basis beginning in 

approximately 1992. Under limited 

circumstances, somewhat higher levels 

of production (but not consumption) 

would be permitted. Consumption is 

defined in the proposed rule as 

production plus imports minus exports 

of the bulk chemicals described above. 

These requirements are being 

proposed under section 157(b) of the 

Clean Air Act and would constitute the 

United States' implementation of the 

"Montreal Protocol on Substances That 

Deplete the Ozone Layer" (Montreal 

Protocol) which was signed by 24 

countries, including the United States, 

on September 16,1987 in Montreal, 

Canada. 

However, EPA is proposing that the 

control requirements described above 

only take effect if the United States 

- ratifies the Protocol and following entry 

into force. 

EPA's proposed action is in response 

to growing scientific evidence linking 

increased atmospheric levels of chlorine 

and bromine to anticipated depletion of 

the ozone layer. If ozone depletion 

occurs, increased levels of harmful 

ultraviolet radiation would penetrate to 

the earth's surface resulting in 

substantial damage to human health and 

the environment. 

To implement the Montreal Protocol, 

EPA proposes to restrict production and 

consumption of the specified ozonedepleting chemicals. Quotas reflecting 

the allowable level of production and 

consumption will be allocated to each of 

the firms who engaged in these activities 

in 1986. Trading of allocated quotas 

would be permitted. Exports and 

imports of the restricted chemicals will 

also be allowed consistent with 

restrictions contained in the Montreal 

Protocol. EPA believes that this 

approach will provide glow-cost means 

of achieving its regulatory goal, spur 

technological innovation, minimize 

administrative requirements and 

facilitate enforcement. EPA is also 

considering whether to develop specific 

regulations limiting CFC and halon use 

for particular industries to supplement 

allocated quotas. 

As an alternative to the above 

regulatory approach, EPA is requesting 

comment on the use of a regulatory fee 

in addition to allocated quotas. This 

option is being considered because it 

addresses concerns that an allocated 

quota system, by itself, is inequitable— 

that CFC and halon producers and 

importers might accrue excessive profits 

at the expense of CFC and halon'user 

industries and consumers. The fee 

would be set to obtain for the United 

States Treasury price increases resulting 

from the scarcity created by EPA 

regulations. Alternatively, this same 

objective could be satisfied by 

auctioning (instead of allocating) rights 

to produce and consume CFCs and 

halons. 

In a separate notice accompanying 

today's proposal EPA is requiring firms 

involved in producing, importing or 

exporting any of the regulated chemicals 

in 1986 to report these activities to EPA. 

DATES: A public hearing will be held on 

January 7,1988 from 9:00 a.m. to 5:00 

p.m. at the location listed below, in 

order to provide an opportunity for oral 

presentations of data, views, or 

arguments concerning the regulations 

proposed in this notice. Persons who 

wish to testify at this hearing should 

notify Stephen R. Seidel at the address 

listed below prior to December 29,1987. 

Written comments must be submitted 

to the location listed below by February 

8,1988. 

ADDRESSES: The public hearing will be 

held at the EPA Education Center; 401 M 

Street, SW., Washington, DC 20460. 

Written comments should be sent to 

Docket No. A-87-20, Central Docket 

Section, South Conference Room 4, 

Environmental Protection Agency, 401 M 

Street, SW., Washington, DC 20460. The 

docket may be inspected between 8:00 

a.m. and 4:00 p.m. on weekdays. As 

provided in CFR Part 2, a reasonable fee 

may be charged for photocopying. To 

expedite review, it is also requested that 

a duplicate copy of written comments be 

sent to Stephen R. Seidel at the address 

listed below. 

FOR FURTHER INFORMATION CONTACT: 

Stephen R. Seidel, Senior Analyst 

Office of Program Development; Office 

of Air and Radiation (ANR-445). EPA, 

401M Street, SW., Washington, DC 

20460. Telephone (202) 382-^2787. 

SUPPUEMEWTASV IMFOTOSATiOW: 

I. Overview of the Problem ', .. . 

By preventing much of the potentially 

harmful ultravioletradiation (UV-B , 

radiation) from penetrating to the earth's 

surface, the stratospheric ozone layer 

acts as a vital shield protecting human 

health, welfare and the environment. 

Concern about possible depletion of 

the ozone layer from chorofluorocarbons 

(CFCs) was first raised in 1974 with 

publication of research which theorized 

that chlorine Teleased from CFCs could 

migrate to the stratosphere and Teduce 

the amount of ozone (Molina and • 

Rowland, 1974).Some of the CFCs have 

an atmospheric lifetime of over 120 

years (i.e., they do not breakdown in the 

lower atmosphere). As a;result, they 

migrate slowly to the stratosphere'• V ' 

where higher energy radiation strikes 

them, releasing chlorine. Once freed, the 

chlorine acts as a catalyst repeatedly 

combining with and breaking apart 

ozone molecules. If ozone depletion 

occurs, more UV-B radiation would 

penetrate to the earth's surface. 

Moreover, because of the long 

atmospheric lifetimes of CFCs, it would 

take many decades to over a century for 

the ozone layer to return to past 

concentrations. 

In the thirteen years since that theory 

was first proposed, substantial scientific 

research has supported the general 

concern that increased concentrations of 

chlorine, as well as bromine from 

halons, in the stratosphere pose 

substantial risks of depletion resulting in 

harm to human health and the 

environment. 

Today's proposal is in response to 

increased concerns raised by the 

improved understanding of the risks 

associated with continued use of CFCs 

and halons. During the past two years, 

two extensive assessments of these 

risks have been completed and are 

relied on by EPA in evaluating the need 

for additional restrictions on the use of 

potential ozone-depleting chemicals. 

The first, Atmospheric Ozone, 1985 

(WMO, 1986), provides an extensive 

review of the current state of knowledge 

concerning atmospheric chemistry and 

modelling, past changes in trace gases 

that affect ozone levels, and current 

trends in ozone levels. A second study, 

An Assessment of the Risks from Trace 

Gases that can Modify the Stratosphere 

(EPA, 1987), was prepared by EPA and 
P.7 

47490 <• •> Federal Register / Vol. 52, No. 2j9 / Monday, December 14, 1987 /'Proposed Rules 

reviewed by its Science Advisory Board. 

This study summarizes the state of 

knowledge related to both atmospheric 

issues (e.g., possible future changes in 

ozone levels), and human health and 

environmental effects if the ozone layer 

were depleted. These studies and more 

recent research findings are Summarized 

below in Section IV; They also were 

relied on extensively in developing the 

regulatory impact analysis (RIA) 

prepared in support of this rule which is 

summarized below in Section VII. 

Unlike most issues of concern to. EPA, 

stratospheric ozone protection 

necessarily involves all nations of the 

world. Given their long atmospheric 

lifetimes, CFCs and halons'become 

widely dispersed. As a result, the 

release of these chemicals in one 

country could adversely affect the 

' stratosphere above, and therefore the 

health and welfare of, other countries. 

Thus, to fully protect the ozone layer 

from CFCs and halons, an international 

agreement is essential. 

Recognizing the global nature of this 

issue, the United Nations Environment 

Program (UNEP) organized negotiations 

in 1982 aimed at developing an 

agreement to protect the ozone layer. 

Following a hiatus in 1986 to develop 

and assess scientific and economic 

information, negotiations resumed in 

December of that year. These 

negotiations were successfully 

concluded on September 16,1987 in 

Montreal when 24 nations signed a 

Protocol requiring substantial reductions 

in the most potent ozone-depleting 

chemicals. This international agreement 

represents a concerted effort by the 

major CFC and halon producing and 

consuming nations to respond to the 

risks from continued reliance on ozonedepleting chemicals. It constitutes a 

landmark agreement among nations to 

take action in advance to prevent 

significant environmental damage from 

occurring. The text of the Protocol is 

included as an annex to this preamble 

and is described in greater detail below. 

The regulations proposed today would 

permit the United States to meet the 

requirements established by the 

Montreal Protocol. They would also 

fulfill EPA's responsibility under section 

157(b) of the Clean Air Act to protect 

stratospheric ozone as needed to protect 

public health and welfare. 

Finally, this proposal also meets the 

requirements of an agreement settling a 

lawsuit brought by the Natural 

Resources Defense Council in the 

District Court of the District of Columbia 

(NRDC v. Thomas, No. 84-3587 (D.D.C.)) 

seeking to compel EPA to promulgate 

regulations under section 157(b). The 

terms of the settlement (as amended to 

if 

extend the schedule) require EPA to 

propose regulations or state its reason . 

for deciding not to regulate by December 

1,1987. atfd to take final action by 

August 1,1988. 

II. Backgijsund 

A. Past Regulatory Actions 

Following the initial concerns raised 

in 1974 about possible ozone depletion 

from CFG>, EPA and the Food and Drug 

Administration acted m 1978 to ban the 

use of CFlJs as"aesos®l propellants in all 

but "essential'apptcafions" (43 FR 

11301, Match 17,1P;«3 FR 11318, 

March IT1,1978)..Daring the early 1970s, 

CFCs use_d as aerosol propellants 

Constituted over 5® pelcent of total CFC 

consumpf on in the United States. This 

particular use of CFCsj was reduced in 

this country by approsSmately 95 

percent, today's proposal does not 

affect th® existing EPA and FDA 

regulations restricting the use of CFCs 

as aerosel propellants. 

Since J978, CFC use has continued to 

expand iii other applifations (e.g., as a 

foam-blotoing agent, refrigerant and 

solvent). Total production now has 

surpassed pre-1974 levels. 

Largely in response to a series of 

studies by the National Academy of 

Sciences published in the late 1970s 

(NAS, 1976,1979a, and 1979b) which 

warned ©f substantial depletion and 

harm from continued use of CFCs, EPA 

issued aa Advance Notice of Proposed 

Rulemaking (ANPR) which discussed an 

immediate freeze on Sie production of 

certain CFCs and the possibility of 

employing a system of marketable 

permits lo allocate CFC consumption 

among iadustries which use CFCs (45 FR 

66726; October 7,1986). 

Following publication of this ANPR, 

additional scientific evidence (see for 

example, Causes and Effects of Changes 

in Stratospheric Ozone: Update 1983, 

(NAS, 1984)) became available which 

suggested that the atmospheric factors 

affecting ozone levels were more 

complex than previoasly thought. For 

example, atmospheric concentrations of 

gases oiier than CFCs that also affect 

ozone were also increasing. 

Atmospheric models which are used to 

analyze possible future trends in ozone 

levels were now capable of 

simultaneously considering changes in . 

multiple trace gases including CFCs. 

Because increases in some of these 

gases (e.g., carbon dioxide and methane) 

could potentially buffer the depleting 

effects of CFCs, concern about possible 

changes in total column ozone levels 

(i.e., the total amount of ozone 

encountered by radiation passing from 

the top of the atmosphere to the earth's 

surface at any given location) was 

diminished. ' "'':.-

The apparent urgency of the ozone 

depletion problem wasalsq reduced by 

the fact that CFC use worldwide in the 

early 1980s was' relatively 'constant. 

While some nations did not follow the 

United States example by reducing their ' 

use of CFCs as aerosol propellants. .'•'•• 

others did,' which further reduced global 

consumption of CFCs. In addition, a 7 

downturn in global economic conditions 

during this period had temporarily7 ;• 

reduced the rate of growth Of CFCs'in 

nonaerosol applications. M - ' 

B. EPA's Stratospheric Protection Plan 

• Since 1983, worldwide^prdduCtion pf''", 

CFCs has grown at an average, annual 

rate of 5 percent. In light of this rate of 

growth and further advancements'in the 

scientific understanding of the link . 

between CFCs and ozone depletion, 

EPA developed its Stratospheric 

Protection Plan (51 FR 1257, January 10, 

1986). This plan described the analytic 

basis for supporting the on-going 

international negotiations and for 

reassessing the need for additional 

regulations of CFCs and other potential 

ozone-depleting chemicals. 

It also set forth a schedule for both 

domestic and international activities 

related to stratospheric ozone 

protection. It committed EPA to 

sponsoring or participating in a series of 

workshops, both here and abroad, 

aimed at developing information that 

would be used for international ' 

negotiations and for domestic 

rulemaking. Workshops discussing 

economic issues related to ozone 

protection involving interested parties 

from within the United States were held 

in March and July of 1986. International 

workshops covering the same topics 

were sponsored by UNEP and took 

place in May and July of 1986 in Rome, 

Italy and Leesburg, Virginia, 

respectively. 

The plan also committed EPA to 

preparing the risk assessment document 

mentioned above and to obtaining; , 

review of this document by the Agency's 

Science Advisory Board (SAB). 

Meetings of a subcommittee of the SAB . 

organized specifically to review this 

document were held in November 1986 

and January 1987. Comments from the 

public were also solicited (51 FR 40510, 

November 7,1986). The document has 

been revised in response to comments 

from the panel and the public and is 

available in the docket at the address 

given above. The findings of the risk 

assessment are described in greater 

detail below, in Section IV. 
P.8 

Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 47491 

Finally, the plan also committed EPA 

to conducting a rulemaking on possible 

further regulation of CFCs and to 

actively participating in the UNEP 

negotiations oh an international 

agreement to limit ozone-depleting 

chemicals. 

C. International Negotiations 

The initial round of international 

negotiations, conducted under the 

auspices of UNEP, resulted in the 

Vienna Convention for the Protection of 

the Ozone Layer, which was signed in 

March 1985. This agreement promotes 

global coordination necessary for the 

protection of the ozone layer by 

providing for international cooperation 

in research, monitoring, and information 

exchange. While the initial negotiations 

failed to reach agreement on specific 

obligations limiting ozone-depleting 

chemicals, the Vienna Convention 

provides a framework for the continued 

negotiation and adoption of 

international regulatory measures 

necessary to protect the ozone layer. 

On December 1,1986, negotiations 

resumed on a possible protocol to limit 

CFCs and other ozone-depleting 

chemicals. Despite wide differences in 

initial positions among participating 

nations, these negotiations resulted ten 

months later in the adoption of the 

Montreal Protocol which was signed on 

September 16,1987, by 24 nations. 

Specific provisions of the Protocol are 

discussed in detail below, and the full 

text is printed as an addendum to this 

notice. 

III. Statutory Authority 

Section 157(b) of the Clean Air Act (42 

U.S.C. 7457(b) authorizes the 

Administrator to issue "regulations for 

the control of any substance, practice, 

process, or activity (or any combination 

thereof) which in his judgment may 

reasonably be anticipated to affect the 

stratosphere, especially ozone in the 

stratosphere, if such effect in the 

stratosphere may reasonably be 

anticipated to endanger public health or 

welfare. Such regulations shall take into 

account the feasibility and the costs of 

achieving such control." 

Two aspects of this regulatory 

authority are notable. First, the 

Administrator is not required to prove 

that a "substance, practice, process or 

activity" does in fact deplete 

stratospheric ozone before he may 

regulate it. In 1977 when the ozone 

protection provisions were added to the 

Clean Air Act, Congress recognized that 

scientists were not certain whether 

stratospheric ozone was being depleted 

and what was causing any depletion 

that did occur. See, e.g., H.R. Rep. No. 

294, 95th Cong., 1st Sess. 98-99 (1977). 

However, Congress also recognized the 

potentially serious health and 

environmental consequences of ozone 

depletion if it were •occurring, and 

authorized EPA tQ act in the face of 

scientific uncertainty to protect against 

those adverse consequences. Id. Thus, 

the Administrator may regulate on the 

basis of "his judgment" that the subject 

of regulation "may be reasonably 

anticipated" to affect the stratosphere 

and tiiat the effect "may be reasonably 

anticipated to endanger public health 

and welfare." 

Second, the Administrator is given 

broad latitude to choose what and how 

to regulate. He is not limited to 

controlling ozone-depleting substances 

themselves; he may also regulate "any 

practice, process, activity" that 

threatens the ozone layer. Nor is he 

limited to a particular control strategy. 

Besides an implicit requirement that 

regulations be efficacious, the statute 

requires only that they take into account 

the cost and technological feasibility of 

achieving the required level of control. 

In short, EPA has broad latitude to 

employ the regulatory options it finds 

appropriate to control threats to 

stratospheric ozone that in turn threaten 

public health and welfare. 

IV. Risk Assessment 

A. Changes in Atmospheric Composition 

Measurements of the concentrations 

of specific gases over the past decade or 

longer have produced conclusive . 

evidence that human activities are 

altering the composition of the earth's 

atmosphere. Table 1 summarizes the 

recent rate of increase for several gases, 

along with the period for which 

measurements are available. Because 

each of these gases affects the quantity 

of ozone, past and future changes in 

their atmospheric levels are a significant 

element in understanding the risks of 

ozone depletion. 

Table 1 shows that atmospheric levels 

of CFC-11 and -12 have grown at the 

rate of 5 percent annually since 1978. 

CFC-11 is used primarily as a foamblowing agent and CFC-12 is used 

primarily as a refrigerant. Outside the 

United States, in many countries both 

are also used extensively as aerosol 

propellants. Atmospheric levels of CFC113, which is used primarily as a solvent 

by the electronics and metal cleaning 

industries, have been increasing at 

roughly double this rate during the same 

period. These growth rates reflect both 

continued emissions of CFCs during this 

period and the long atmospheric 

lifetimes of these chemicals. 

TABLE 1 .—CHANGES IN ATMOSPHERIC CONCENTRATIONS OF 

OZONE-MODIFYING GASES 

CFC-11 (CCI3F) 

CFC-12 (CCI2F2) 

CFC-113 (C2CI3F3) :... 

CFC-114 (C2CI2F4) 

CFC-115 (C2CIF5) 

Halon-1211 (CBrCIF2) 

Halon-1301 (CF3Br) 

Halon-2402 (C2F4Br2) 

Nitrous oxide (N20) 

Methane (CH4) 

Carbon Dioxide (C02) 

Measured rates of increase 

Percent 

per year 

5.0 

5.0 

10.0 

(') 

(•) 

23.0 

C) 

(') 

0.2 

1.0 

0.5 

Period 

1978-1985 

1978-1985 

1975-1983 

(') 

(M 

1979-1984 

(') 

(') 

1978-1985 

1977-1985 

1958-1985 

Reference 

WMO, 1986. 

WMO. 1986. 

Rasmussen and Khalil, 1982. 

(') 

(') 

Khalil and Rasmussen, 1985. 

(') 

(') 

WMO, 1986. 

NASA, 1986. 

WMO, 1986. 

* No data available. 

Much less information is available 

about growth in Halon 1211,1301 and 

2402. These compounds are becoming 

more widely used primarily in certain 

specialized firefighting applications. No 

data is yet available on atmospheric 

trends of Halon 1301 or 2402, while very 

limited measurements suggest that 

atmospheric levels of Halon 1211 grew 

at 23 percent annually in recent years. In 

comparison to the CFCs, total levels of 

these halons remain very small; because 

they are believed to be extremely 

efficient depleters of ozone (Prather et 

al., 1984; WMO, 1986), they are being 

proposed for inclusion in this regulation. 

(See below, Section VI.) 

Carbon dioxide and methane are also 

increasing in the atmosphere, though at 

annual rates much slower than the 

CFCs. Unlike CFCs and halons, these 

have the opposite effect on 
P.9 

47492 Federal Register / Vol. 52, No. 239 / Monday. December 14, 1987 / Proposed Rules 

concentrations of ozone and could 

potentially offset depletion caused by 

' increases in these other gases. Carbon 

dioxide emissions result primarily from 

the burning of fossil fuels. In contrast, 

the reason that methane levels have 

increased is not well understood. 

Moreover, this gas has a much shorter 

atmospheric lifetime than CFCs 

(approximately ten years). 

Nitrous oxide levels have also been 

increasing at approximately 0.2 percent 

annually. Sources of emissions include 

fossil fuel combustion and fertilizers. In 

isolation, nitrous oxides release nitrogen 

in the stratosphere which would act 

similarly to chlorine and catalytically 

destroy ozone. However, depending on 

the relative levels of chlorine and 

nitrous oxide, the latter can have the net 

effect of slowing down the rate of 

depletion by binding chlorine in a 

relatively inactive state. 

B. Changes in Ozone Levels 

The extensive measurements of recent 

growth in atmospheric levels of ozonemodifying gases provide only indirect 

evidence that human activities may be 

altering the earth's ozone layer. To more 

fully analyze these risks, two 

approaches have been developed. First, 

direct measurements of the quantity of 

ozone have been analyzed to determine 

if any trends are apparent; and second, 

atmospheric models have been 

developed that attempt to project future 

changes in ozone levels based on 

assumed changes in atmospheric levels 

of ozone-modifying gases. 

1. Direct Measurements of Ozone Levels 

Monitoring of ozone levels has been 

conducted to various degrees using 

ground-based instruments for several 

decades. These measurements examine 

both total column ozone levels and 

changes in the quantity of ozone at 

specific altitudes. Since the late 1970s, 

satellite-based instruments have 

expanded the ability to measure ozone 

levels throughout the world. 

Based on the information available at 

the time, the WMO assessment 

concluded that total column ozone 

levels had not substantially been 

altered—that no statistically significant 

change had occurred. For example, it 

cites a study by Reinsel (1985) which 

shows that for the period 1970 to 1983, 

total column ozone levels had decreased 

by only 0.003 ±1.2 percent per decade 

which does not represent a statistically 

significant trend. 

The WMO assessment also stated 

that ozone levels in the upper 

atmosphere (at approximately 40 

kilometers) had, in fact, decreased by 

approximately 0.2 percent to 0.3 percent 

per year over the period 1970 to 1980. 

However, increases in ozone levels in 

the troposphere (i.e., the lower 

atmosphere) had offset the decreases 

above resulting in effectively no change 

in total column ozone.1 / 

Both these findings—essentially little 

or no change in total column ozone and 

decreases at 40 km—appear consistent 

with current atmospheric theories and 

models and are contained in EPA's risk 

assessment which was used as the basis 

for this rulemaking. However, 

preliminary information that has only 

recently become available raises the 

question whether total column ozone 

levels have, in fact, declined in recent 

years. 

2. Preliminary Evidence of Ozone 

Depletion 

a. Seasonal Ozone Losses in 

Antarctica. In May 1985, an article was 

published in Nature (Farman, Gardiner 

and Shanklin, 1985) which provided 

evidence that ozone levels during the 

months of September to November over 

Antarctica had declined by 

approximately 40 percent from the late 

1970s. This discovery of the "Antarctic 

ozone hole" by the British Antarctic 

Survey team, based on data from a 

ground-based instrument, was 

completely unexpected. 

Losses of the magnitude observed in 

Antarctica were not predicted by 

current atmospheric theories or models. 

The Antarctic ozone hole thus raises 

several important questions. Are the 

losses in ozone caused by CFCs and 

halons? Are these loss mechanisms 

unique to the conditions found above 

Antarctica or do they have implications 

for ozone levels elsewhere? Could this 

seasonal ozone loss itself have 

implications for global ozone 

concentrations? How, if at all, do our 

current theories and models need to be 

altered to reflect this phenomenon? 

These questions have been the subject 

of considerable research within the 

scientific community since the initial 

article in Nature appeared. 

In October 1986, a team of researchers 

traveled to Antarctica to begin the 

process of collecting data to aid in 

answering these questions. Preliminary 

results from the first National Antarctic 

1

 Over the long term, increases in ozone in the 

lower atmosphere cannot continue to offset 

decreases in the stratosphere without substantial 

health and environmental damage resulting. Ozone 

in the lower atmosphere has been linked to 

respiratory disease in humans and damage to crops 

and forests and as a result is regulated by EPA 

under one of its national ambient air quality 

standards. Moreover, the same gases producing 

increased ozone in the lower atmosphere are also 

greenhouse gases and would contribute to 

substantial increases in global temperatures. 

Ozone Expedition strongly suggest that 

anomolous chlorine chemistry plays a 

role in the development of the ozone 

hole. Team members reported 

measurements of chlorine monoxide—a 

key compound in the catalytic cycle by 

which chlorine destroys ozone—that 

were 20-50 times greater than observed 

elsewhere in the atmosphere (Pyle and 

Farman, 1987). These measurements 

have recently been substantiated by 

preliminary data oellected during 

airplane flights over Antarctica during 

the formation of the ozone hole in 1987 

as part of experiments conducted by the 

NASA, the National Oceanographic and 

Atmospheric Administration (NOAA), 

and others. 

Many questions must still be 

answered before plausible changes in 

theories and models can be made to 

account for factors responsible for the 

ozone hole. Researchers still must 

determine the exact mechanisms or 

reactions which produce the high levels 

of chlorine monoxide and they must also 

determine the role of dynamic (e.g., 

meteorological forces including 

temperature, pressures and winds) 

factors. Most importantly, they still must 

determine whether these loss 

mechanisms are unique to Antarctica or 

may also affect ozone levels elsewhere 

and whether losses in Antarctica alone 

could influence global concentrations of 

ozone. Until a clearer picture emerges, 

the scientific issues raised by the 

Antarctic ozone hole cannot yet serve as 

a guide for policy decisions. 

Because of these remaining 

uncertainties, EPA believes that no 

adequate basis yet exists for factoring 

the causes and global implications of the 

Antarctic ozone hole into its risk 

assessment and regulatory scheme. The 

Agency has de facto assumed that the 

ozone hole is not related to CFCs and 

halons. Additional measurements from a 

second expedition to Antarctica, further 

review of data obtained from the 

airplane flights through the ozone hole, 

and related atmospheric modelling 

studies should become available in the 

coming year. The Agency intends to 

closely follow these scientific 

developments and will modify its risk 

assessment if new information warrants 

such changes. It also intends to actively 

participate in upcoming international 

scientific assessments that are required 

in 1989 and every four years thereafter, 

which are to be used as the basis for 

determining the need for changes to the 

terms of the protocol which could occur 

beginning in 1990. EPA is particularly 

interested in comments on its treatment 

of this issue. 
P.10 

Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 47493 

b. Possible Global Losses in Ozone. 

Recently published data have also 

called into question the conclusion that 

global total column ozone levels have 

not decreased (Kerr, 1987). Groundbased measurements of total column 

ozone now suggest that a 3 percent to 5 

percent decrease has occurred over the 

past six years. Decreases of a similar 

magnitude over roughly the same period 

have been reported based on a 

preliminary assessment of data from the 

Nimbus-7 satellite (Kerr, 1987). Because 

of the complexities in interpreting 

satellite data (e.g., calibration, 

instrument drift and other corrections), 

this data is currently undergoing further 

scrutiny. 

As was the case with the Antarctic 

ozone hole, global ozone losses of this 

magnitude appear to fall outside the 

bounds of what would be expected from 

current theories and models. If they are 

confirmed by further review of the 

evidence, several important questions 

would be raised. Are these losses in 

excess of historic variation or are they 

due to natural causes (e.g. the solar 

cycle, volcanic activity, etc.)? Are they 

related to increases in atmospheric 

levels of CFCs and halons? What, if 

anything, must be changed in current 

models to account for such losses? 

A thorough review of this data to 

resolve these important uncertainties 

has recently been initiated by scientists 

at NASA and NOAA. Pending the 

outcome of this assessment, EPA does 

not believe that this preliminary 

evidence has yet been adequately 

reviewed and analyzed by the scientific 

community to allow for it to be used in 

its risk assessment or regulatory 

decisions. Once the on-going review is 

completed, if new information becomes 

available and previously unresolved 

issues are successfully addressed, then 

EPA will modify its risk assessment to 

reflect this improved understanding of 

recent trends in ozone. This information 

will also be examined in the context of 

the upcoming international scientific 

and policy reviews under the terms of 

the Protocol. EPA specifically requests 

comments on the appropriate means of 

factoring new scientific evidence into its 

risk assessment and future policy 

decisions. 

3. Role of Atmospheric Models in 

Predicting Future Ozone Levels 

While direct measurements provide 

useful information concerning past 

changes in ozone levels, atmospheric 

models are the only available tool for 

predicting possible future trends in 

ozone. These models, in more or less 

detail, attempt to replicate the forces 

which determine ozone concentrations. 

For example, current models include 

approximately 50 chemical species 

found in the atmosphere and simulate 

over 140 different reactions among these 

chemicals which directly or indirectly 

affect ozone abundance. 

From EPA's perspective in evaluating 

risks, a key question is to what degree 

these models can accurately predict 

future ozone changes. As stated above, 

current models do not predict the 

Antarctic ozone hole and suggest that 

global ozone levels should not have yet 

declined by even one percent based on 

the historic use of CFCs and halons, and 

changes in other trace gases. 

Furthermore, current models fail to 

accurately project the abundance of all 

chemical species at all altitudes, thereby 

lowering our confidence in their 

predictive powers. 

Despite these shortcomings, both the. 

EPA and WMO risk assessments 

concluded that atmospheric models 

represent the best available fools for 

evaluating future trends in ozone levels. 

These studies show that, when tested 

against the current make-up of the 

atmosphere, the existing atmospheric 

models do a reasonably good job of 

replicating most key atmospheric 

constituents. Thus, the models 

accurately predict many, though 

certainly not all, of the key chemical 

constituents which affect the creation 

and destruction of ozone. While model 

accuracy will inevitably improve over 

time, EPA has relied on current versions 

in assessing the risks of future ozone 

depletion. 

4. Future Trends in Ozone Levels: 

Assuming No Further Regulation of 

CFCs or Halons 

In utilizing models to predict future 

ozone trends, the rate of growth of 

ozone-modifying gases is a key variable. 

As part of the Regulatory Impact 

Analysis (RIA) prepared in support of 

this proposal, EPA examined the risks of 

ozone depletion from continued use of 

CFCs, halons and other relevant trace 

gases. The assumptions underlying this 

analysis are detailed in Chapter 4 of the 

RIA and are summarized here. 

EPA conducted extensive studies 

analyzing possible future rates of growth 

for CFCs and halons in the absence of 

additional regulations. (See for example: 

Hammitt et al. (Rand), 1986; Nordhaus 

and Yohe, 1986; and Gibbs et al. (ICF), 

1986.) This issue was also the subject of 

both EPA and UNEP sponsored 

workshops in 1986. Based on this 

review, EPA believes that strong market 

demand exists for CFC products in 

many sectors of the economy, both in 

the United States and abroad, and that 

in the absence of regulation, use of 

CFC-11, -12, and -113 would increase. 

In the RIA, a middle estimate of growth 

in trace gas emissions was developed. 

For CFC-11 and CFC-12, the middle 

estimate implies an average annual 

growth rate of approximately 2.7 

percent, which reflects a 2.5 percent 

annual growth rate for the developed 

world, and slightly higher projected 

growth in the developing world and in 

the Soviet Union. The middle scenario 

includes an average annual growth rate 

of 2.9 percent for CFC-113, 2.6 percent 

for CFC-114, and 2.6 percent for CFC115. 

Recent studies by Industrial 

Economics, Inc. (1987), with the 

cooperation of an ad hoc technical 

committee representing halon producers 

and users, provided the basis for 

estimates of future growth in production 

of Halon 1211 and 1301, which are 

assumed to grow at average annual 

rates of 4.3 and 2.7 percent. Because 

Halon 2402 is only used in minor 

applications in the United States, this 

chemical was omitted from the analysis. 

Table 2 shows the range of growth 

rates assumed for these chemicals. This 

range of estimates reflect the many 

factors (e.g., economic and population 

growth, technological innovation, etc.) 

which influence projections over thisperiod of time. It also shows the growth 

rates assumed for carbon dioxide, 

methane and nitrous oxide which were 

based on past measurements showing 

increases for each of these gases. Based 

on a simplified one-dimensional model 

of the combined effects of these gases, 

Table 2 indicates the projected ozone 

depletion for each of these scenarios. 

Thus, in the case which represents the 

mid-range estimate of future trends in 

emissions of trace gases, projected total 

column ozone would decline by 3.9 

percent by 2025 and by 39.9 percent by 

2075. In the case where CFC use only 

grows by approximately 1.2 percent 

annually, projected ozone depletion by 

2075 would reach 7.0 percent, In the case 

where CFC use grows at approximately 

3.8 percent per year, projected ozone 

depletion by 2075 would exceed 50 

percent. 

TABLE 2 

(Percent total column depletion] 

Year 

LowCFC 

growth 

Medium 

CFC 

growth 

HighCFC 

growth 

Protected Futuro Ozone Depletion In tho Absence of 

Regulation 

1985 

1990 

2000 

2010 

2020 

2030 

0.00 

0.27 

0.76 

1.25 

1.87 

2.55 

0.00 

0.27 

0.88 

1.71 

3.00 

4.86 

0.00 

0.28 

1.02 

2.33 

4.73 

9.13 
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47494 Federal Register / Vol. 52, No. 23S / Monday. December 14, 1987 / Proposed Rules 

TABLE 2—Continued 

(Percent total column depletion] 

Year 

2040. 

2050 _ 

2060 

2070 

2075 

LowCFC 

growth 

3.33 

4.32 

5.40 

6.47 

7.00 

Medium 

CFC 

growth 

7.66 

12.32 

20.27 

32.48 

39:90 

HighCFC 

growth 

ie.se 

>50 

>50 

>50 

>50 

Estimates from statistical model developed by Cornell (1986) 

and discussed hi EPA Risk Assessment (1987). 

CFC and Halon Scenario* 

Average implied annual rates of growth (percent) 

Low Scenario 

CFC-11, 12,114, 

115 

CFC-113 

Halon-1211. 

Halon-1301 

Medium Scenario 

CFC-11,12.114. 

115 

CFC-113 

Halon-1211... 

Halon-1301 

High Scenario 

CFC-11.12, 114, 

115 

CFC-113 

Halon-1211 

Halon-1301 

1985-2000 

2.1 

2.1 

5.5 

-0.5 

3.6 

4.0 

8.8 

1.1 

5.2 

6.1 

12.0 

2.0 

2000-2050 

1.3 

1.3 

1.5 

1.6 

2.5 

2.5 

2.9 

3.2 

3.8 

3.8 

4.4 

4.7 

Post-2050 

Constant 

Constant 

Constant 

Constant 

Constant 

Constant 

Constant 

Constant 

Constant 

Constant 

Constant 

Other Trace Gas Scenarios 

Carbon Dioxide 

50th percentile scenario from the National Academy of 

Sciences is used (implied annual growth in atmospheric 

concentrations of 0.7 percent from 1985 to 2165). 

Methane 

Annual growth of 0.017 parts per million in atmospheric 

concentrations. 

Nitrous Oxide 

Annual growth of 0.2 percent tn atmospheric 

concentrations. 

The ozone depletion estimates in 

Table 2 are based on a parameterization 

(i.e., a statistical simplification) of a onedimensional model developed by 

Lawrence Livermore National 

Laboratory. A recent comparison of the 

results of this model with onedimensional models conducted under 

the auspices of UNEP showed that this 

parameterization produced depletion 

estimates that were somewhat lower 

than those projected by other models for 

the same trace gas scenarios. (UNEP, 

1987). 

While this parameterization provides 

a reasonable representation of a onedimensional model (Connell, 1986), by 

design it provides only a globally 

averaged estimate of depletion. More 

sophisticated two-dimensional models 

have recently been developed which 

provide estimates of ozone depletion by 

latitude. Since health and environmental 

effects will vary by latitude, these more 

detailed models would be more 

appropriate for calculating the impacts 

of depletion. However, because these 

models are expensive and timeconsuming to use, they are of limited 

utility for examining a wide range of 

scenarios as required in EPA's risk 

assessment. In addition, different twodimensional models differ substantially 

in the degree to which depletion varies 

with latitude. As a result of tjitfse 

limitations, EPA's estimates of risks rely 

only on the previously mentioned onedimensional parameterization. 

A comparison of these different 

models was conducted by EPA as part 

of its risk assessment (See Chapter 5). It 

showed that two-dimensional models 

predict greater average depletion than 

one-dimensional models for the same 

trace gas scenarios. For example, one 

two-dimensional model (developed by 

Sze) projects an 18 percent depletion 

compared to a 15 percent depletion for 

exactly the same scenario for a onedimensional model. Two-dimensional 

models also generally project depletion 

higher than global averages at latitudes 

greater than 40 degree North or South, 

especially in the spring. 

S. Effects of Ozone Depletion on Human 

Health and the Environment 

Any decrease in total column ozone 

would lead to increased penetration of 

damaging ultraviolet radiation to the 

earth's surface. Under current 

atmospheric conditions, the ozone layer 

blocks most of the UN-B part of the 

ultraviolet spectrum with the amount 

screened out increasing with latitude. 

This current gradient in exposure 

provides a useful natural experiment 

demonstrating the effects of different 

exposure to UN-B radiation. 

The health and environmental effects 

of ozone depletion are briefly described 

below; for a fuller explanation see 

Chapter 7 of the RIA and Chapters 7 to 

16 of the EPA's risk assessment. EPA 

has attempted to quantify each effect, 

but insufficient data has made 

quantifying some effects impossible. 

Estimates are also uncertain because of 

possible changes in future technologies. 

Additional research to better 

understand UV-B effects is warranted. 

However, EPA has taken account of all 

possible ozone depletion effects in 

assessing the need for controls. 

a. Increased Incidence of 

Nonmelanoma Skin Cancers. 

Laboratory studies and epidemiological 

evidence show a strong link between 

exposure to UV-B radiation and 

increased incidence of basal and 

squamous nonmelanoma skin cancers. 

(See Chapter 7 of EPA's risk 

assessment.) Several lines of evidence 

support this relationship: (1) 

Nonmelanoma skin cancers tend to 

develop in sun-exposed sites; (2) 

outdoor workers have higher incidence 

rates; (3) incidence rates are higher 

closer to the equator (correcting for 

differences in skin pigmentation); and 

individuals genetically suspectible to 

sunburn have a higher incidence of skin 

cancers. 

Several researchers have correlated 

UV-B measurements with nonmelanoma 

skin cancer incidence data. Results from 

six studies show that a 1 percent 

depletion of total column pzone would 

lead to an increase~in nonmelanoma 

skin cancer incidence of 4.8 percent to 

7.6 percent. 

Based on the expected growth in trace 

gas emissions for the middle scenario 

presented in Table 2, the resulting ozone 

depletion would lead to an increase in 

incidence of approximately 153 million 

nonmelanoma skin cancer cases among 

the United States population alive today 

and born by the year 2075. Based on 

current fatality rates from basal and 

squamous skin cancers, this increase in 

incidence could be expected to lead to 

an increase of 3.0 million deaths of 

people born during this same time 

period. Given the uncertainties 

associated with the appropriate doseresponse relationship, this projection 

could fall within the range of 1.5 million 

to 4.5 million deaths. 

b. Increased Incidence of Melanoma 

Skin Cancer. While the current 

incidence of melanoma skin cancer 

cases is small compared to 

nonmelanoma cases, the fatality rate is 

much higher. While no animal model 

and in vitro experimental evidence 

exists explaining the exact relationship 

between melanoma and UV-B radiation, 

based on the preponderance of 

evidence, EPA's risk assesssment 

concluded that increased UV-B 

exposure would increase the incidence 

of melanoma. Evidence in support of this 

conclusion includes: (1) Lighter skinned 

individuals, whose skin has less 

protective melanin, have higher 

melonoma incidence rates than darker 

skinned individuals; (2) early childhood 

exposure to sunlight appears to be 

linked to higher incidence rates; and (3) 

individuals genetically incapable of 

repairing sunlight-induced damage to 

cells have a higher rate of incidence. 

Based on a range of estimates for 

uncertain factors, EPA's risk assessment 

developed a dose-response relationship 

which suggests that for every 1 percent 

increase in ozone depletion, the 

incidence of melanoma would increase 

by slightly less than 1 percent to 2 

percent and the number of fatalities 

from melanoma would increase by 0.8 

percent to 1.5 percent. 

Based on the trace gas scenario which 

assumed a 2.7 percent average annual 
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Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 474S5 

growth in CFCs, and the resulting ozone 

depletion shown in Table 2, the number 

of melanoma cases in the United States 

would increase by 782,100 and the 

number of fatalities would increase by 

187,000 for the population alive today 

and born by the year 2075. Given the 

uncertainties associated with the doseresponse relationship, the number of 

deaths could fall within a range of 93,500 

to 280,000. 

c. Increased Incidence of Cataracts. 

UV-B radiation has been found to play a 

significant role in the formation of 

cataracts. Supporting evidence include 

animal laboratory studies and 

epidemiological studies. Based on the 

available research, a dose-response 

relationship was developed in EPA's 

risk assessment (See Chapter 10). 

Assuming trace gas trends and the 

resulting ozone depletion for the middle 

scenario described in Table 2, the 

number of cases of cataracts would 

increase by 18.2 million for the 

population in the United States alive 

today or born through 2075. 

d. Suppression of the Immune System. 

Experimental studies show a 

suppression of the immune response 

system associated with exposure to UVB radiation. Current research does not 

explain the exact mechanism by which 

the immune system is altered or the 

potential implications for a wide range 

of diseases. Limited studies do suggest, 

however, that UV-B induced 

suppression may increase the frequency 

of outbreak of herpes simplex virus and 

leishmaniasis (i.e., a skin disorder 

common in the tropics). No quantitative 

estimates of the potential harm related 

to immune suppression on these or other 

possible diseases are at this time 

possible, 

e. Damages to Plants. Limited studies 

have shown that plants exposed to 

increased levels of UV-B radiation can 

be harmed. Initial studies showed a 

substantial vulnerability to UV-B 

exposure across a wide range of plants. 

However, these studies were conducted 

in laboratories or greenhouses and their 

results.have not been replicated under 

field conditions where photorepair 

mechanisms may offset damage. 

The only long-term controlled field 

study involves soy beans. This study 

found that enhanced levels of UV-B 

radiation simulating a 16 and 25 percent 

ozone depletion caused reductions in 

crop yield of up to 25 percent in the 

tested cultivar. Substantially smaller 

changes occurred in years when drought 

conditions also greatly reduced crop 

yields of the plants grown under 

naturally occurring conditions (i.e., the 

control plants). Because a wide range of 

crops have tested sensitive to increased 

exposure to UV-8 radiation, but have 

not yet been tested under field 

conditions, the dose response 

relationship developed from the field 

tests of soy beans was used as the basis 

for estimating impactRon major grain 

crops in the RIA. 

f. Damage to Aquatic Organisms. 

While studies to date have been limited 

in scope, it appears that increased 

exposure to UV-B radiation could 

adversely affect aquatic organisms and 

potentially disrupt the aquatic food 

chain. For example, studies suggest that 

phytoplankton remain close to the 

water's surface to facilitate 

photosynthesis. As a result, they would 

be susceptible to damage from increased 

UV-B radiation. Similarly, the larvae 

stage of many fish live at or near the 

water's surface and would also be 

susceptible to damage if ozone depletion 

occurs. A case study showed that a 10 

percent ozone depletion would lead to a 

6 percent loss in the larval anchovy 

population. Because a wide range of 

aquatic organisms have shown a 

sensitivity to increased exposure to UVB radiation, but insufficient data exists 

for developing specific dose-response 

relationships, the case study examining 

the effects on anchovy larvae was used 

as the basis for estimating impacts on a 

limited group of shellfish and fin fish in 

the RIA. 

g. Accelerated Weathering of Outdoor 

Plastics. Plastics exposed to the outdoor 

environment under current ultraviolet 

conditions contain light stabilizers or 

other additives to reduce damage from 

chalking, yellowing or brittleness. If UVB radiation increases, damages would 

increase or greater expense would be 

incurred in protecting against the 

damages from such exposure. A 

relationship was developed between 

UV-B exposure and damage to outdoor 

products made of polyvinyl chloride and 

incorporated in the analysis presented 

in the RIA. 

h. Increased Formation of 

Groundlevel Ozone. Preliminary studies 

have assessed the impact of 

increasedUV-B penetration on the 

photochemical reactions responsible for 

the creation of groundlevel ozone. These 

case studies suggest that groundlevel 

ozone would form earlier in the day and 

nearer to population centers, thus 

exposing more people to its harmful 

effects. Total amounts of groundlevel 

ozone would also increase. While 

substantial harm to human health and 

welfare could result from increased 

groundlevel ozone, because of limited 

data, only the impacts on crop loss were 

included in the RIA. 

i. Climate Related Impacts Due to 

Increases in Ozone-Modifying Gases. 

CFCs and other gases that modify 

stratospheric ozone are also greenhouse 

gases and therefore contribute to 

concern about future global warming. 

Based on the rate of growthin trace 

gases assumed in the middle scenario 

presented in Table 2, by 2075 a global 

equilibrium temperature (i.e., the earth's 

temperature at the time when incoming 

energy is balanced against outgoing 

energy) increase of-5.8 degrees 

centigrade (10.4 degrees Fahrenheit) 

could be anticipated. Based on earlier 

reports by the National Academy of 

Sciences (1983), these estimates could 

be 50 percent higher or lower to reflect 

current uncertainties in climate model 

predictions. This temperature increase 

could be expected to affect water 

resources, agricultural productivity, 

forests, and endangered species. 

However, because of the difficulty in 

quantifying these effects, the RIA does 

not assess the extent of potential harm 

related directly to climate change. 

One possible indirect effect of climate 

change is increased sea level rise. Based 

on current models and the trace gas 

scenario described above, the projected 

global warming could increase global 

sea level by 97.8 centimeters by 2075. 

However, because of the difficulty in 

quantifying impacts related to sea level 

rise, the analysis in the RIA is limited to 

extrapolation of several case studies 

quantifying damage from sea level rise 

to major port areas in the United States. 

6. Conclusion 

Based on the WMO assessment and 

EPA's recently completed risk 

assessment, the Agency believes that 

the current rate of growth in 

atmospheric levels of ozone-depleting 

gases is likely to result in substantial 

depletion of ozone which would lead to 

significant harm to human health and 

the environment While many 

uncertainties exist and only limited 

studies are available in several of the 

areas of potential harm, the current 

evidence presents a strong case for 

action to substantially reduce current 

levels of use of the most potent ozonedepleting chemicals. A comparison of 

the potential costs of limiting CFCs and 

halons to the potential health and 

environmental benefits is presented 

below in Section VII. 

V. The Montreal Protocol 

The Montreal Protocol is a 

comprehensive agreement for dealing 

with the threat of stratospheric ozone 

depletion by man-made chemicals. It 

has three key components. First, it 

requires parties to significantly reduce: 

their production and consumption of 
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47496 Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987/ Proposed Rales 

: ~. ^ - • -HM • .- ' ... . _ 

certain ozone-depleting substances over 

the next decade. Second, it provides for 

revision of the reduction requirements 

based on scheduled, periodic 

assessments of available scientific, 

environmental, technical and economic 

information. Third, it imposes 

restrictions on trade in ozone-depleting 

products with nonparties to minimize 

nonparties' potential to deplete 

stratospheric ozone and to encourage 

nations to become parties. Each of these 

components is described in greater 

detail below. 

The Montreal Protocol will take effect 

("enter into force") on January 1,1989, 

provided that at least 11 instruments 

ratifying the Protocol have been 

deposited by States or regional 

economic integration organizations 

representing at least two-thirds of 1986 

estimated global consumption of the 

covered substances, and that the Vienna 

Convention for the Protection of the 

Ozone Layer has entered into force. If 

these conditions have not been fulfilled 

by January 1,1989, the Protocol will 

enter into force on the 90th day 

following the date on which the 

conditions have been fulfilled. 

The Vienna Convention has so far 

been ratified by 14 nations, including the 

United States, as noted above. Twenty 

instruments of ratifications are required 

for its entry into force. The Department 

of State and the White House are 

currently in the process of requesting 

from the Senate its advice and consent 

to ratification of the Protocol, so that the 

President may ratify it on behalf of the 

United States. 

A. Control Provisions 

1. The Chemicals Covered 

The Protocol identifies in Annex A 

two groups of ozone-depleting 

substances for control "controlled 

substances"). Group I includes CFC-11, 

-12, -113, -114, and -115. These 

chemical compounds are fully 

halogenated and therefore are strong 

potential ozone-depleters that are either 

widely used or potential substitutes for 

those chemicals which are now widely 

used. 

Group II includes Halon 1211,1301 

and 2402. Because they contain bromine, 

these chemicals are even stronger 

potential ozone-depleters than the 

chemicals in Group I. However, they are 

currently emitted in small quantities 

relative to CFCs, substantial 

uncertainties exist as to their exact 

ozone depletion weights, and recent 

evidence suggests that their ozonedepleting potential may substantially 

depend on atmospheric chlorine 

concentrations. 

The Protocol's coverage extends only : 

to the specified chemicals in bulk form. 

Its definition of controlled substances 

excludes chemicals which are in 7 

manufactured produr^s othe,r than a 

container used for the transportation cir 

storage ©f the chemicals/EPA is seeking 

coBimejt on the implications of using 

this definition of conlfdlled substances. 

2. "Calculated Levels" 

The Montreal Protocol does not place 

limits ofi each of the controlled 

substances. Instead, M places separate 

limits og the total ozone depletion 

potenti j of Group I Wid Group II 

controlled substances that a party 

produce^ and consUrijes. A party may 

consequently produce and consume any 

mix of t|ie controlled substances within 

each of ihe Groups, SB long as the total 

ozone depletion potential of the mix 

does not exceed the specified limits. 

For purposes of calculating total 

ozone depletion potentials, the Protocol 

lists in .(Innex A ihe "ozone depleting 

potential" of all but one of the controlled 

substances. In the case of Halon 2402, it 

provides that the ozone depleting 

potential is "to be determined." More 

generally, it notes that the ozone 

depleting potentials "are estimates 

based os existing knowledge and will be 

reviewed and revised periodically," as 

provided under Article II, paragraph 9. 

The Pfrotocol uses the phrase 

"calculated levels" to refer to this 

weighting of controlled substances 

based OH their relative ozone-depleting 

potentials. It provides under Article 3 

that calculated levels be determined for 

each Group of controlled substances by 

multipljsng the amount of emissions (in 

kilograms) of each controlled substance 

within tiiat Group by the ozone 

depleting potential specified for it in 

Annex A, and adding together the 

resulting products. ,. 

3. Production and Consumption Limits 

Just as the Protocol does not place 

limits os each controlled substance, it 

does not place limits on particular uses 

(e.g. aerosols, refrigeration) of the 

controlled substances. Instead, the 

Protocol limits each party's total 

production and consumption of Group I 

(CFCs) and Group II fhalons) controlled 

substarEes for specified 12-month 

periods. It leaves up to each party how 

to stay within those limits. 

Article 1 of the protocol defines 

production as "the amount of controlled 

substances produced minus the amount 

destroyed by technotogies to be 

approved by the Parties." It defines 

consumption as "production plus 

imports minus exports of controlled 

substances." However, Article 3 

provides that after January 1,1993, any 

export of controlled substances to nonparties may not be subtracted in 

calculating the consumption level ;of the 

exporting party. ' . 

4. Timing and Magnitude of Limits 

The limits imposed by the Protocol are 

generally defined in terms of 12Tmorith 

periods and keyed to calculated levels 

of 1986 production and consumption.'

 ; 

The year 1986 was chosen as the • • 

baseline for controls so that nations did 

not have an incentive to increase their 

production and consumption during * 

1987, When the protocol was being ' . 

negotiated, in order to establish higher 

baselines. .'',' _; y 7' 7 •'"• ''•' 

a. Group I controlled substances. For 

Group I controlled^substances, Article 2 

of the Protocol requires each party to " ' 

reduce in three steps the calculated 

level of its production and consumption 

of those substances. 

For the first step, paragraph 1 of 

Article requires that if the Protocol 

enters into force on January 1,1989, 

each party must limit its calculated 

levels of consumption and production to 

1986 levels in the 12-month period 

commencing July 1,1989, and in each 12-

month period thereafter. If the Protocol 

enters into force on a later date, each 

party must meet that limit in the 12 

month period commencing on the first 

day of the seventh month following the 

date of entry into force of the Protocol, 

and in each 12-month period thereafter. 

However, the Protocol permits each 

party to increase its production in each 

of the relevant control periods by up to 

10 percent of its calculated level of 1986 

production, provided that the increased 

production is used for one or both of two 

purposes. One purpose is to satisfy the 

"basic domestic needs" of developing 

countries operating under Article 5 of 

the Protocol. That Article allows 

developing countries who are parties to 

the Protocol and whose annual . 

„ calculated level of consumption of both 

Group I and Group II controlled 

substances is less than 0.3 kilograms per 

capita on the date.it becomes a party to 

the Protocol, to delay its compliance 

with the Protocol's control provisions by 

ten years after that specified in those 

provisions, so long as its per capita 

consumption does not exceed 0.3 

kilograms. 

With Article 5, the drafters of Protocol 

sought to fairly accommodate the 

"special situation" of developing 

countries whose 1986 consumption of 

the controlled substances was low 

relative to that of developed countries. 

By allowing developing countries to 

increase their consumption somewhat 
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Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 47497 

and by allowing parties to increase their 

production to supply the developing 

countries, the drafters hoped to 

encourage developing countries to join 

the Protocol and make it unnecessary 

for them to build or expand any capacity 

for producing controlled substances in 

order to supply for a limited period of 

time their growing domestic needs. 

The second justification for the parties 

to increase their production by up to 10 

percent of 1986 levels is "for the 

purposes of industrial rationalization 

between Parties." Article 1 of the 

Protocol defines industrial 

rationalization as "the transfer of all or 

a portion of the calculated level of 

production of one Party to another, for 

the purpose of achieving economic 

efficiences or responding to anticipated 

shortfalls in supply as a result of plant 

closures." 

For the second reduction step, 

paragraph 3 requires each party to limit 

the calculated level of its production 

and consumption in the period from July 

1,1993, to June 30,1994, and in each 12-

month period thereafter, to 80 percent of 

the calculated level of its 1986 

production and consumption. Notably, 

the second reduction step takes effect 

beginning July 1,1993, regardless of 

when the Protocol enters into force, so 

long as the Protocol has entered into 

force by that date. As in the case of tbe 

first step, each party may exceed its 

production limit in each control period 

by up to 10 percent of its 1986 

production level, provided the 

production over the limit is used for one 

or both of the same two purposes 

described above. 

Finally, for the third reduction step, 

paragraph 4 requires each party to limit 

the calculated level of its production 

and consumption in the period from July 

1,1998, to June 30,1999, and in each 12-

month period thereafter, to 50 percent of 

its calculated level of 1986 production 

and consumption. Each party is allowed 

to exceed its production limit by up to 15 

percent of its calculated level of 1986 

production, provided the production in 

excess of the limit is used for one or 

both of the purposes described above. 

The third reduction step will 

automatically take effect beginning July 

1,1998, so long as the Protocol enters 

into force anytime before July 1,1998, 

and unless decided otherwise by a twothirds majority of the parties present 

and voting, representing at least twothirds of parties' total combined 

calculated level of consumption. 

Paragraph 5 of Article 2 provides in 

limited circumstances for further 

increases in production of Group I 

controlled substances during any of the 

contro' oeriods discussed above. That 

paragraph permits parties to exceed the 

production limits set out in paragraphs 1 

through 4 to the extent they receive, for 

the purposes of industrial 

rationalization, transfers of production 

from parties whose calculated level of 

1986 production of Group I controlled 

substances was less than 25 kilotonnes. 

However, the total combined calculated 

levels of production of the parties 

involved in such a transfer of production 

may not exceed the production limits set 

out in Article 2. In addition, the 

secretariat of the Protocol must be 

notified of any such transfer. 

b. Group II controlled substances. For 

Group II controlled substances, 

paragraph 2 of Article 2 requires that 

each party limit the calculated level of 

its production and consumption of those 

substances to the calculated level of its 

1986 production and consumption of the 

same. Parties must meet that limit in the 

12-month period commencing on the first 

day of the 37th month following the date 

on which the Protocol enters into force 

(January 1,1992, if the Protocol enters 

into force on January 1,1989), and in 

each 12-month period thereafter. 

However, each party may increase its 

production of Group II controlled 

substances in each control period by up 

to 10 percent of the calculated level of 

its 1986 production of those substances, 

provided that the increased production 

is used for the same purposes for which 

increased production of Group I 

controlled substances is allowed (i.e., 

supplying developing countries and for 

the purposes of industrial 

rationalization). 

Article 2 of the Protocol includes 

several other paragraphs applicable 

only to particular parties other than the 

United States (e.g., paragraph 6 and 8). 

Consequently, those paragraphs will not 

be summarized here nor implemented by 

today's proposed rule. 

B. Review and Revision Provisions 

Built into the Protocol are mechanisms 

for revising its requirements in response 

to the latest information on 

stratospheric ozone depletion and its 

consequences. Article 6 requires the . 

parties, beginning in 1990, and at least 

every four years thereafter, to assess the 

control measures set forth in Article 2 

on the basis of available scientific, 

environmental, technical and economic 

information. It further provides for 

panels of experts in the relevant fields 

to issue reports on such information one 

year prior to each assessment. 

Paragraph 10 of Article 2 permits the 

parties to change the coverage of the 

Protocol by revising the list of chemicals 

included in Group I or Group II of 

controlled substances, based on the 

periodic assessments required by 

Article 6. Should the parties add 

chemicals to either Group, paragraph 10 

also permits the parties to decide on the 

mechanism, scope and timing of control 

measures that should apply to those 

substances. Decisions under paragraph 

10 become effective when accepted by a 

two-thirds majority vote of the parties 

present and voting. 

Paragraph 9 of Article 2 allows parties 

to adjust theozone depleting potentials 

specified in Annex A and the control 

measures specified in Article 2, based 

on Article 8 assessments. Paragraph 9 

provides that the parties first attempt to 

attempt to reach consensus on the need 

for any adjustment; otherwise decisions 

to make any adjustment must be 

adopted by a two-thirds majority vote of 

the parties present and voting 

representing at least fifty percent of the 

total consumption of the controlled 

substances of the parties. 

C. Trade Provisions 

Article 4 of the Protocol requires 

parties to impose specified restrictions 

on trade of ozone-depleting products 

with nonparties. The purpose of the 

trade restrictions is to reduce the 

potential of nonparties to adversely 

affect the ozone layer and to induce 

nonparties to join, or at least comply 

with, the Protocol. 

Pursuant to paragraph 1 of Article 4, 

each party must ban the import of 

controlled substances from nonparties 

within one year of the Protocol's entry 

into force. Under paragraph 3, within 

three years of the Protocol's entry into 

force, the parties are to develop a list of 

products containing controlled 

substances (e.g., refrigerators, air 

conditioners); and within one year of the 

list having become effective, parties not 

objecting to the list are to bah imports of 

the listed products from nonparties. 

Under paragraph 4, within five years of 

the Protocol's entry into force, the -

parties shall determine the feasibility of 

banning or restricting products made 

with, but not containing, controlled 

substances (e.g., electronic equipment) 

and, if feasible, develop a list of such 

products; and within one year of the list 

having become effective, parties not 

objecting to the list are to ban imports of 

the listed products from nonparties. 

Paragraph 5 calls on parties to 

"discourage" the export to nonparties of 

technology for producing and utilizing 

controlled substances. In a similar vein, 

paragraph 6 requires parties to "refrain" 

from providing new financial help for 

the export to nonparties of anything that 

would facilitate the production of 

controlled substances. 
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47498 ' Federal Register / Vol. 52, No. 239 /Monday, December 14, 1987 •••/ Proposed Rules 

Article 4 also provides for several 

exemptions from the trade restrictions. 

Paragraph 7 provides that paragraphs 5 

and 6 will not apply to products, 

equipment, plants or technology that 

contribute to the reduction of emission 

of controlled substances; and paragraph 

8 exempts from the restrictions of 

paragraphs 1,3 and 4 those nations that 

do not join, but are found to be in 

compliance with, the Protocol. 

D. Other provisions 

As for its implementation, the Protocol 

establishes requirements for parties to 

report relevant data (Article 7); an 

accompanying conference resolution 

calls for UNEP to convene a meeting of 

government experts to recommend to 

the parties measure for harmonizing and 

coordinating data on production, 

imports and exports of controlled 

substances. The Protocol also requires 

the parties at their first meeting to 

develop enforcement mechanisms and 

penalties for non-compliance (Article 8). 

To ease compliance, the Protocol calls 

for the parties to cooperate in the 

research, development and exchange of 

information on emissions reduction 

technologies, substitutes for ozonedepleting products, and control 

strategies (Article 9). It also urges 

parties to lend one another, and 

particularly developing countries, 

technical assistance to facilitate 

participation in and implementation of 

the Protocol (Article 10). 

VI. Proposed Action 

A. Scope and Stringency 

EPA proposes to implement the 

Montreal Protocol, provided that it 

enters into force and the United States 

ratifies it. Based on its assessment of the 

available evidence, EPA believes that 

the Protocol's requirements are an 

appropriate response to the potential 

ozone depletion problem at this time. 

Moreover, given that potential ozone 

depletion is a global problem requiring a 

global response, EPA believes that the 

Protocol is the most effective means of 

addressing the problem. For these 

reasons, EPA believes that 

implementation of the Protocol would 

best protect public health and welfare 

from the adverse effects of any ozone 

depletion. 

The Protocol may be amended in ways 

that could significantly affect the 

stringency of the control regime it 

prescribes. For example, the Protocol 

provides explicitly that the fifty percent 

reductions in consumption and 

production required by Article 2, 

Paragraph 4, will not come into effect if 

the Parties by a *wo-thirds majority vote 

otherwise. In the event that any such 

amendment is adopted by the parties, 

EPA intends to conduct rulemaking to 

consider the effect the changes should. 

have on fce control regime prescribed 

by these regulations. ./-.,.-. ' 

s-.i' • , .. • 

1. Basis for control requirements 

EPA's assessment of the risks of 

ozone depletion indicates that the 

Protocol's control requirements are an 

appropriate response, particularly . --

considering that the Protocol permits 

revisions of the requirements as new 

information warrants. 

The chemicals covered by the 

Protocol are those which currently pose 

the greatest threat to stratospheric , . 

ozone. Moreover, the Protocol's different 

treatment of CFCs and halons 

reasonably reflects differences in what 

is known about the ozone depletion 

potential of the two classes of chemicals 

and the volume of their respective 

emissions. 

The extent to which a chemical will 

contribute to ozone depletion depends 

on its chlorine and bromine content and 

its atmospheric lifetime. Table 3 lists 

these characteristics for those 

compounds considered for coverage. It 

illustrates that the chemicals in Group II 

(halons) have greater ozone depletion 

potentials than the chemicals in Group I 

(CFCs), and that Group I chemicals have 

greater ozone depletion potentials than 

CFC-22 and methyl chloroform. It also 

shows that carbon tetrachloride (CC14) 

is a stronger potential ozone-depleter 

than several of the chemicals included 

in Group I. 

TABLE 3.—RELATIVE OZONE-DEPLETING POTENTIAL OF CHEMICAL COMPOUNDS 

Compound 

CFC-11 

CFC-12 

CFC-113 

CFC-114 

CFC-115 

Halon-1211 

Halon-1301 ..... 

Halon-2402 

HCFC-22 

Methyl Chloroform 

CCI 4 

Lifetime 

(years) 

75 

111 

. .90 

185 

380 

25 

110 

<•> 

20 

6.5 

50 

Ozonedepleting 

potential 1 

(mass 

basis) 

1.0 

1.0 

0.8 

1.0 

0.6 

3.0 

10.0 

6.0 

0.05 

0.1 

1.06 

2

 Not reported. •' < 

Sources: Lifetime estimates are based . 

on WMO (1986),. and are summarized in 

EPA Risk Assessment, 1987, arid.EPARegulatory impact Analysis, 1987, Ozone, 

depletion potentials for GFC-11,.T12, -

113,-114.-115, Halon-1211 • and 1301. 

methyl chloroform, and CCI4 approximate those estimated by the Lawrence 

Livermore National Laboratory-"•one-dimensional atmospheric model (Connell, 

personal communication).. Ozone 'depletion potential forJHalon-2402 reported at 

negotiations for Montreal Protocol on* 

Substances that Affect the Ozone Layer 

(Bakken, ' personal communication). 

Values for CFC-11, -12, -113, -114, r115, and Halon 1211 and 1301 are listed 

in Annex A of the Montreal Protocol. 

These values are preliminary estimates 

based on currently available research 

and are likely to change over time as new 

information becomes available. 

HCFC-22 and methyl chloroform are 

appropriately excluded from coverage 

for several reasons. First, as Table 3 

shows, they are substantially less 

harmful to the atmosphere than the. 

other chemicals considered for 

coverage. Second, they have short 

atmospheric lifetimes, so their future 

atmospheric concentrations can be more 

quickly reduced by emission limits if 

such reductions are determined to be 

necessary in the future. Third, both 

chemicals are potential substitutes for 

some of the more potent ozone-depleting 

chemicals covered by the Protocol. 

In contrast, carbon tetrachloride is a 

relatively strong potential ozonedepleter, but its small volume of 

emissions makes it reasonable to 

exclude. Most carbon tetrachloride is 

consumed as a feedstock to producing 

CFCs and relatively little is emitted into 

the atmosphere. 

CFC-114 and CFC-115 are reasonably 

included despite currently minor 

production levels because they are fully 

halogenated CFCs and therefore have 

long atmospheric lifetimes and are 

relatively strong potential ozonedepleters. Furthermore, if they were not 

covered, they could be substituted in 

some, uses for the covered CFCs. If such 

substitutions were to occur, the risk of 

ozone depletion would not be 

substantially reduced. ' 

1

 Measured relative to CFC-11 which is 

set to 1.0. Values reported on a mass 

basis (i.e. per kilogram). 

* It should be noted that CFC-115 can be used In 

a blend with HCFC-22 in several commercial 

refrigeration applications. While any such use of 

CFC-115 would be covered by the Protocol's control 

requirements, shifting from CFC-12 to this blend 

would substantially reduce the overall ozonedepleting potential of the chemicals used. Since this 

reduction in ozone depletion would occur without 

substantially altering product prices, industry may 

continue this trend as one means of reducing risks 

from ozone depletion. 
Table 3 also highlights the substantial 

concern with Halon 1211,1301 and 2402 

as potential ozone-depleters. Because 

bromine remains in a chemically 

reactive state in the stratosphere, it is an 

extremely effective catalyst contributing 

to ozone depletion. However, while 

general agreement exists that the halons 

are, kilogram for kilogram, more potent 

ozone-depleters than CFCs, substantial 

uncertainties exist regarding their 

ozone-depletion potential. As a result, 

the ozone depletion weights provided in 

Table 3 and Annex A of the Protocol, 

particularly in the case of the halons, 

should be viewed as preliminary, and 

are likely to change as more information 

becomes available. 

EPA examined the effect on future 

ozone depletion based on projections 

from a simplified one-dimensional 

atmospheric model. For a baseline case 

where CFCs are reduced by 50 percent 

over ten years, if the halons were 

allowed to continue to grow at expected 

rates, depletion of 3.2 percent would 

occur by 2075. By freezing halon 

production at current levels, the level of 

predicted ozone depletion would be 

reduced to 1.3 percent by 2075. 

EPA's risk assessment also indicates 

that the Protocol's reduction 

requirements would substantially 

reduce potential depletion and thus the 

adverse health and welfare effects of 

depletion. As shown earlier in Table 2, 

based on model projections, continued 

trends in worldwide use of CFCs in the 

absence of regulation could result in 

substantial ozone depletion sometime 

during the early part of the next century. 

The extent to which limits on CFC and 

halon production and consumption 

could reduce estimated ozone depletion 

is dependent, in part, on future trends in 

other trace gases, the extent to which 

other nations also reduce their 

consumption and production of ozonedepleting chemicals, and the ability of 

current models to predict future changes 

in ozone levels. The assumptions 

underlying this analysis are explained in 

detail in the RIA accompanying this 

rulemaking. 

Several different levels of emission 

reductions and their effects on ozone 

depletion are presented in Table 4. 

These estimates are compared to the 

base case (no regulation) shown earlier 

in Table 2. They indicate that 

international action to freeze CFCs at 

1986 levels alone would substantially 

reduce depletion compared to the base 

case, but would still result in 

approximately 6 percent depletion by 

2075. In contrast, model projections 

indicate that the reductions required by 

the Montreal Protocol arid the 

anticipated participation by most 

developed and developing nations, 

would result in less than 2 percent 

depletion by 2075. If the United States 

were to take additional steps beyond 

the 50 percent reduction required by the 

Protocol and reduce i|s CFC 

consumption by 80~percent, depletion 

would only be reduced by an additional 

0.1 percent. 

TABLE 4.—OZONE DEPLETION LEVELS FOR 

ALTERNATIVE REDUCTION OPTIONS 

(Percent depletion of total column ozone] 

Case 

3. CFC 20% 

4. CFC 50% 

5. CFC 80% 

6. CFC 50%/Halon freeze 

7. CFC 50%/Halon freeze/U.S. 

80% : 

8. U.S. only/CFC 50% -

2000 

0.9 

0.8 

0.8 

0.8 

0.8 

0.8 

0.8 

0.8 

2025 

3.9 

2.3 

1.9 

1.5 

1.2 

1.3 

1.2 

3.1 

2050 

12.4 

4.3 

3.4 

2.3 

1.6 

1.6 

1.4 

8.5 

2075 

39.9 

6.2 

5.0 

3.2 

2.2 

1.3 

1.2 

20.4 

Source: Cases 1-6 assume specified 

reductions are taken on the timetable 

specified in the Montreal Protocol and 

that 94 percent of the non-U.S. 

developed world and 65 percent of the 

developing world participate in making 

these reductions. Case 7 assumes that 

the U.S. takes unilateral action. A more 

detailed discussion of assumptions is 

included in Chapter 5 of the RIA. 

Given the many variables and 

uncertainties involved in predicting 

ozone depletion far into the future, the 

Protocol's control requirements achieve 

a reasonable degree of risk reduction. 

Moreover, the Protocol includes review 

and revision mechanisms for obtaining 

more or less risk reduction as advances 

in modelling capability, new data, or 

other relevant developments warrant. 

The Protocol's trade provisions are 

also a reasonable means of reducing the 

risk of stratospheric ozone depletion. As 

model projections indicate, broad 

observance of the Protocol is needed to 

effectively protect stratospheric ozone, 

and nations that neither joined nor 

complied with the Protocol would 

endanger the ozone layer. 

Implementation of the Protocol's trade 

restrictions would reduce the potential 

for those nations to adversely affect the 

ozone layer and would induce them to 

join the Protocol. 

2. International Considerations 

Taken as a whole, EPA believes that 

the Protocol effectively addresses the 

global problem of potential ozone 

depletion. The Agency thus considers it 

unwise to. risk undermining the 

agreement by deviating from its 

requirements. 

As explained earlier, EPA believes 

that the available evidence fully 

supports the need for the Protocol's 

control requirements. Moreover, failure 

by the United States to meet all the 

requirements would set a damaging 

precedent. For the Protocol to be 

effective, nations cannot pick and 

choosewhich of its provisions to • 

implement. 

Requiring the United States to do 

more than the Protocol requires could 

also be counterproductive. Were EPA to 

implement the reductions required by 

the Protoeol regardless of whether the 

Protocol enters into force, or require 

greater reductions than the Protocol 

requires, other nations might have less 

incentive to join the Protocol. The 

failure of many nations to join the 

United States in banning CFCs in 

aerosols demonstrates that unilateral 

United States action does not 

necessarily lead other nations to reduce 

their emissions, and raises the concern 

that other nations might "free-ride" on 

United States reductions to avoid 

making costly reductions themselves. In 

any event, as noted earlier, even if EPA 

were to require that the United States 

take an additional step beyond the 

Protocol and reduce its consumption by 

80 percent, potential ozone depletion 

would only be reduced by an additional 

0.1 percent. 

B. Control Strategy 

As noted earlier, the Montreal 

Protocol leaves up to each party how to 

achieve the required reductions in 

production and consumption. EPA's goal 

in implementing the Protocol is to 

provide the market place with as much 

flexibility as the Protocol permits to 

achieve the required reductions in the 

most economically efficient manner 

possible. 

1. Economic Incentives Versus 

Engineering Controls/Bans 

Two general approaches for achieving 

the Protocol's required reductions of 

controlled substances were evaluated 

by the Agency. One approach relies on 

market incentives to achieve low cost 

reductions in the use of CFCs and 

halons. Under this approach EPA could 

either directly restrict the supply of 

CFCs and halons or assess a regulatory 

fee on their use. Either case would 

increase costs of using CFCs which 

would give those firms with relatively 

low-cost reduction options an economic 

incentive to reduce their use of these 

chemicals. Those firms where no such 

reduction opportunities exist would 

continue to use CFCs, although they 

would have to pay a higher price. 

According to economic theory, 

providing firms with an incentive to 

make cost-effective reductions should 
P.17 

47500 Federal Register / Vol. 52, No. 2f9 / Monday, December 14, 1987 / Proposed Rules 

minimize the costs to society of meeting 

the regulatory goal. Three alternative 

economic incentive approaches were 

evaluated: marketable rights based on 

auctions ("auctioned rights"), 

marketable rights allocated by quota to 

past producers and importers 

("allocated quotas"), and regulatory 

fees. 

The second general approach is the 

use of traditional engineering controls 

and product or chemicals bans 

("engineering controls or bans"). It 

involves EPA deciding which specific 

industries or uses of CFCs and halons 

should be regulated. EPA would make 

this decision based on the availability of 

low cost reductions, the quantity of 

reductions achieved, the administrative 

burdens of monitoring compliance, the 

enforceability of the regulation, and the 

impacts on small businesses. This 

approach is EPA's usual method of 

regulating pollution. It was considered 

alone, and a supplement to allocated 

quotas based on the extent to which 

CFC users may be postponing the 

adoption of low cost reductions "hybrid 

option"). 

EPA evaluated each of these options 

in light of the following criteria: 

Certainty of achieving the desired 

environmental goal; economic costs and 

efficiency in meeting that goal; equity 

considerations; administrative costs and 

enforceability; legal certainty; and 

impacts on small business. 

Each of the options has specific 

advantages, but also raises possible 

problems. The regulatory fees option 

should provide for least cost reductions, 

while providing clear price incentives 

for users to reduce their reliance on 

CFCs and halons and for producers to 

introduce chemical substitutes. 

However, regulatory fees alone would 

not ensure that the freeze or reductions 

of controlled substances would be 

achieved during the time period required 

by the Protocol. For example, more firms 

than anticipated could decide to pay the 

fee and continue using CFCs or halons. 

Engineering controls or bans would pose 

the same problem, since uses of CFCs or 

halons that were not regulated could 

continue to grow, possibly offsetting 

reductions from the regulated uses. 

Engineering controls or bans would 

also be administratively burdensome, 

considering the many thousands of 

small firms that use CFCs or halons. In 

the case of regulatory fees, another 

concern is whether EPA has the legal 

authority to impose a fee which would 

result in revenues in excess of the costs 

of operating the program; regulatory fees 

might be invalidated as beyond the 

Agency's authority under the Clean Air 

Act. (The legal issues concerning fees 

are discussed in a separate analysis 

prepared % EPA which is contained in 

thedookei) 

The auctioned rights option would 

efrtail auclioning rights-allowing a 

specified amount of production or 

consumption of CFCs or halons. The 

auctions Would be open to any 

interested party. The total amount of 

production and consumption rights 

auctioned? would reflect EPA's 

regulatorf goal. Revenues from the 

auction v|ould go to till United States 

Treasury, Rrms seeking to use CFCs or 

halons weuld have to obtain rights at 

auction ot fey purchasfeig them from 

other firafeon a secondary market. 

Akeraatifely, to the extent CFC or 

halon producers or suppliers had not 

purchase! rights at auction, final users 

of these fhemicals could simply buy 

them disfitiy through their existing 

channels* ©f supply. EPA would monitor 

compliance by check-wig whether 

producess and importers held rights 

authoring their production and 

consumption. 

Like all the economic incentive 

approaches, auctioned rights should 

provide lor economically efficient 

reductions. In addition, any revenues 

from the auction would go to the general 

treasury3 Concerns have been raised, 

howevet, that auctions, at least initially, 

would oreate large HHcertainties for 

firms abjout price aad availability, and 

could \md to speculation and short-term 

hoardmg of permits (beyond a firm's 

actual needs) during the auction 

process*4 Also, legal>questions have 

been raised consemifig EPA's authority 

under tj»e Clean Air Act to implement an 

auction to allocate rights. (These issues 

are alse discussed ia the EPA analysis 

contained in the docket.) 

EPA favors simply allocating rights 

equal te the quantity of allowable 

produoMon and consumption to 

producers and importers of controlled 

substances in 1986. Since producers and 

importers are sffiallin number (probably 

no moge than 19 to fO), it would be far 

less btffdensome to 'allocate rights to 

them instead of users. Similar to 

auctioned rights, ftwns allocated rights 

could buy and seH them to respond to 

5

 The argument advanced by economists is that 

equity would be served vyere revenues from the 

auction ©r regulatory fees to go to the Treasury 

because the revenues wsuld represent payments 

from thtse who damage the environment to those 

who ars damaged, i.e.. citizens. 

4

 Spetttlation can be SH aid to market functioning. 

Of course, if speculators enter the market and bid 

up the price to levels higher than market value, they 

will lose money in their subsequent efforts to sell in 

the aftetmarket. However, to the extent prices are 

bid up fey speculators and remain higher for some 

time, stiiall firms using CFCs or halons may be 

adversely affected. 

changes in market conditions. Price 

increases as a result of decreased 

supplies should provide firms using 

CFCs oriialons "with the economic 

incentive to make the lowest cost 

reductions of controlled substances. 

Unlike auctioned rights or regulatory 

fees, this option avoids raising any legal 

issues concerning EPA's regulatory . 

authority. 

The major concern about the allocated 

quotas option is one of equity—should 

current CFC and halon producers and 

importers reap a possible windfall profit 

from the scarcity created by EPA's 

regulation? The extent to which CFC 

and halon prices increase over time will 

determine the magnitude of this 

potential gain. 

A second concern (one that applies to 

all of the economic incentive 

approaches) is that certain industries 

where low-cost reductions are possible 

may decide not to make these 

reductions, at least for a time, and may 

elect instead to continue their use of 

CFCs or halons. For example, CFCs are 

a very small part of the costs of a 

computer. As a result, firms in this 

industry may be better able to pass on 

price increases to their customers. If 

available inexpensive reductions are not 

realized by these or other industry 

groups, then CFC and halon prices could 

increase more than they otherwise 

would, resulting in additional economic 

burden on all firms using these 

chemicals. The impact of this burden 

could be particularly large in the near 

term, before new chemical substitutes 

become available. 

These two concerns are discussed in 

greater detail in a later section which 

describes potential remedies to these 

problems and presents the alternative 

regulatory approaches still under 

consideration by the Agency. 

2. Design of Allocated Quota System 

EPA proposes to implement the 

Montreal Protocol using a system of 

allocated, marketable "rights."

 5 The 

Protocol's limits on production and 

consumption would be translated into 

allocated quotas of production rights 

and consumption rights. The Protocol's 

separate treatment of Group I and 

Group II controlled substances would be 

reflected in separate rights for each 

group of controlled substances. 

Similarly, the Protocol's definition of 

6

 The word "rights" is used as a matter of 

convenience. The "rights" that would be created by 

the regulations are really privileges, since, if future 

circumstances or shifts in the regulatory approach 

warrant changes in allocations of controlled 

substances, EPA may by rulemaking modify Ihe 

amount of rights allocated. 
P.18 

Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 47501 

limits in terms of "calculated levels" of 

Group I or Group II substances would be 

carried over into the definition of rights. 

(As explained earlier, calculated level is 

determined by multiplying the emissions 

-Cil each controlled substance by its 

ozone depletion weight and adding 

together the resulting products for all the 

controlled substances within each 

Group.) Thus, rights would be specified 

in terms of calculated level of Group I or 

Group II controlled substances, so that 

holders of rights could select any mix of 

controlled substances within each 

Group, provided that the total calculated 

level of the mix did not exceed the 

calculated level of the rights held. 

a. Chemical Coverage and Ozone 

Depletion Weights. The regulations 

would include the same chemicals in 

Group I and Group II of controlled 

substances as the Protocol does. They 

would likewise adopt the Protocol's 

ozone depletion weights for each of the 

controlled substances. However, the 

regulations would also provide an ozone 

depletion weight for Halon 2402, 

whereas the Protocol leaves the weight 

for that halon for later determination. 

EPA is proposing a 6.0 weight for Halon 

2402 based on its assessment of the 

chemical's ozone depletion potential. 

The Agency will also propose this 

weight for adoption by the Protocol 

parties; but should the parties establish 

a different weight and scientific 

evidence support their choice, EPA 

would revise its regulation to conform to 

the Protocol. In the meantime, EPA 

believes it appropriate to propose its 

assessment of the ozone depletion 

weight of Halon 2404 to give industry a 

basis for judging their compliance with 

the halon limit. 

b. Production Rights and Consumption 

Rights. Production rights held by firms 

would authorize them to produce a 

calculated level of controlled substances 

equal to the calculated level of rights 

they hold.6 Rights would be apportioned 

among producers of controlled 

substances according to the calculated 

level of controlled substances each 

produced in 1986, the baseline year 

established by the Protocol. The total of 

6

 Production rights would be required for virgin 

production, but not for recycling, of controlled 

substances. Production used and consumed as a 

chemical intermediary is also exempt. Further, the 

Protocol defines production of controlled 

substances as the amount produced minus the 

amount destroyed "by technologies to be approved 

by the parties." Because no such technologies have 

yet been approved, this proposal does not include 

any provision for credits for destruction. However. 

EPA intends to work with industry in the future to 

review existing and new destruction technologies 

and, if appropriate, submit these technologies to the 

Parties for their approval. 

these "baseline production rights" 

would thus equal United States . 

production in 1986. 

Consumption rights.would authorize 

holders to produce off import a 

calculated level ofxdntrolled substances 

equal to the calculated level of the rights 

held. As described earlier, the Protocol 

defines consumption as production plus 

imports minus exports, and keys its 

consumption limits to 1986 levels of 

these three components of the 

consumption equation. Since exports of 

controlled substances are subtracted 

from, and therefore aid compliance with 

the consumption limit, no rights would 

be required to export (although 

exporters would be required to report 

their exports to EPA). Nor would users 

of CFCs or halons ever become involved 

with either production or consumption 

rights—only producers, importers, and 

exporters would be directly involved in 

this proposed regulatory system. 

Baseline consumption rights would be 

apportioned to producers and importers, 

but in a manner that takes account of 

1986 exports. Importers would be 

allotted baseline consumption rights 

equal to the calculated level of their 

1986 imports, of controlled substances. 

Producers would be apportioned 

baseline consumption rights equal to the 

calculated level of their 1986 production, 

less a proportionate share of the 

calculated level of the United States' 

total 1986 exports. The apportionment 

formula for determining each producer's 

consumption rights would be the 

producer's 1986 production multiplied by 

a correction factor equivalent to: 

[(U.S. 1986 production)—(U.S. 1986 exports)] 

(U.S. 1986 production) 

EPA believes producers' baseline 

consumption rights should be reduced to 

reflect exports because producers 

generally have been the major exporters 

of controlled substances. 

In a separate rule also appearing in 

today's Federal Register, EPA is 

requiring producers, importers and 

exporters of controlled substances in 

1986 to provide the Agency with the 

information needed to determine the 

United States' 1986 production and 

consumption levels, individual 

producer's baseline production and 

consumption rights, and individual 

importer's baseline consumption rights. 

Based on the information received, the 

Agency plans to publish proposed 

baseline apportionments in time for final 

apportionments to be included in this 

rule when it is promulgated on August 1, 

1988. 

As their definitions suggest, 

production and consumption rights 

overlap, but not entirely. To produce 

controlled substances, a firm must have 

both production and consumption rights; 

to import controlled substances, it need 

have only consumption rights. The 

overlap simply mirrors the overlap of 

the Protocol's limits on production and 

consumption (i.e., production plus 

imports minus exports). Several 

examples illustrate how the two limits -

may interact and how the proposed -

regulatory system would accommodate 

these interactions.. 

Assume the United States in 1986 

produced 100 units, imported 10 units, 

and exported 5 units of Group I 

controlled substances. United States 

1986 production would be 100 units and 

its 1986 consumption 105 units. After the 

Protocol's freeze on Group I controlled 

substances took effect, the United States 

could not produce up to 105 units of 

controlled substances for domestic 

consumption even though it would stay 

within its consumption limit, because it 

would exceed by 5 units its production 

limit. Unless the United States gained 

the right to increase its production in the 

manner permitted by the Protocol 

(described below), it could only obtain 

the remaining 5 units of controlled 

substances permitted by the 

consumption limit by importing them. To 

restate this scenario in terms of rights, 

United States producers would be 

granted production rights for 100 units of 

controlled substances. Producers and 

importers would be granted 

consumption rights for 105 units. Thus, 

producers could produce up to 100 units 

of controlled substances using all of 

their 100 production rights and 100 of the 

105 available consumption rights; the 

remaining consumption rights could be 

used to import controlled substances. 

c. Allowance for Additional 

Consumption Rights. A slightly different 

example illustrates another aspect of the 

proposed regulatory system. Assume the 

United States in 1986 produced 100 

units, imported 5 units, and exported 10 

units of controlled substances, for a 1986 

production level of 100 and a 1986 

consumption level of 95. In this case, 

baseline consumption rights would not 

be plentiful enough to permit producers 

to produce all 100 units for which they 

held baseline production rights. The 

Protocol would permit production of all 

100 units, provided that at least 5 are 
P.19 

47502 Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 

exported so that the consumption limit 

is not exceeded. The proposed 

regulations would permit the same by 

granting additional consumption rights 

upon proof of exports of controlled 

substances to any nation until January 1, 

1993, and to any party of the Protocol 

beginning January 1,1993.7 If a producer 

held production rights for 12 units and 

consumption rights for 10 units, he could 

produce the 10 units for which he held 

production rights, export 2 of the units, 

and receive from EPA additional 

consumption rights for 2 units. With 

those additional consumption rights, he 

could produce all 12 units for which he 

held production rights. 

The regulations would require 

controlled substances to be exported 

before additional consumption rights 

would be granted, to ensure that the 

United States stayed within its 

consumption limits. If EPA were to grant 

additional consumption rights based 

merely on a producer's plan or 

agreement to export controlled 

substances, the United States could 

exceed its consumption limits if the 

producer did not ultimately export the 

substances but nonetheless increased 

his production as allowed by the 

additional consumption rights he 

received. The regulations would 

moreover require that exports reach 

their destination—not just leave the 

United States—before additional 

consumption rights would be granted. 

This requirement is necessary to track 

controlled substances for purposes of 

determining parties' compliance with the 

consumption limits. Otherwise, on the 

last day of any control period, parties 

could export controlled substances as 

needed to stay within consumption 

limits, but since the exported controlled 

substances would likely not arrive at 

their destinations until the following 

control period, no party would have to 

include the controlled substances in the 

tally of its consumption. 

Anyone who exports controlled 

substances could obtain consumption 

rights equal to the calculated level of 

controlled substances exported. If the 

exporter were not also a producer, he 

could sell the consumption rights to a 

producer. As further explained below, 

all rights created by the regulations 

would be transferable subject to EPA 

verification that the transferor in fact 

possesses the rights being transferred. 

7

 As noted earlier, the Protocol requires that, 

beginning January 1.1993, only exports to parties 

will be subtracted in determining consumption. EPA 

will in future rulemakings promulgate a list of 

parties based on the list kept by the Secretariat of 

Ihe Protocol. 

To illustrate another possible 

scenario, assume total United States 

exports increased over 1986 levels, so 

that the United States was below its 

consumption limit. While the United 

States could not increase its.pnbduction 

(except under the circumstances 

described below), it could increase its 

imports up to the level permitted by the 

consumption cap. To restate this in 

terms of rights, if a producer with 

production rights for 10 units and 

consumption rights for 12 units exported 

6 units, he could acquire additional 

consumption rights for 6 units and 

import a total of 8 units. 

As the above examples demonstrate, 

the Protocol's production and 

consumption limits can interact in many 

ways. EPA has tried to create a 

regulatory system flexible enough to 

accommodate the possible interactions. 

Comments are requested on whether the 

proposed system does provide adequate 

flexibility and how it might be improved. 

d. Scheduled Reduction of Production 

and Consumption Rights. The regulatory 

system must also provide for the 

Protocol's scheduled reductions. The 

proposed regulations would do so by 

reducing the number of rights granted 

over time. For Group I controlled 

substances, it would grant producers 

and importers 100 percent of their 

apportioned baseline production and 

consumption rights for the first 

reduction step; 80 percent of the same 

for the second reduction step; and 50 

percent of the same for the third. For 

Group II controlled substances, the 

regulations would grant 100 percent of 

the apportioned 1986 baseline 

production and consumption rights for 

all the applicable control periods. 

The proposed regulations do not yet 

specify the control periods to which the 

grants of rights would apply, since the 

Protocol makes the timing of the freezes 

of Group I and Group II substances 

dependent on when the Protocol enters 

into force. EPA solicits comments on the 

appropriate time period for which these 

rights would apply. EPA would 

promulgate the dates of the control 

periods in a future rulemaking after the 

Protocol has entered into force and 

before the Protocol's requirement have 

taken effect. 

Even after the date of entry into force 

is known, however, a question will 

remain as to the proper dates for the 

freeze of Group I controlled substances 

at 1986 levels. The issue arises from the 

potential discontinuity in the timing of 

the first and second steps of the 

reduction schedule for Group I 

controlled substances. The Protocol 

specifies 12-month control periods for all 

three steps of the Group I reduction 

schedule. But while the Protocol 

provides that the second step will take 

effect beginning July 1,1993, it makes 

the start of the first step dependent on 

when the Protocol enters into force. If 

the Protocol enters into force on January 

1,1989, the freeze will take effect 

beginning July 1,1989. In that case, the 

end of last freeze control period will 

coincide with the start of the first 

control period for the second step. On 

the other hand, if the Protocol enters 

into force on any date other than 

January 1st, there would be overlapping 

control periods, unless EPA defined the 

last control period as lasting less than 12 

months. 

To avoid this problem, EPA intends to 

promulgate dates for the last control 

period of the freeze that do not overlap 

with the first control period of the 80 

percent step. Unless the Protocol enters 

into force on January 1, the last control 

period of the freeze would be less than 

12 months long, and the rights granted 

for that period would be reduced 

accordingly. EPA solicits comments on 

this approach. 

e. Allowance for Additional 

Production Rights. As explained earlier, 

the Protocol allows parties to exceed 

their production limits by certain 

amounts under certain circumstances. 

For the first and second steps of the 

reduction schedule for Group I 

controlled substances and for the freeze 

of Group II controlled substances, the 

Protocol permits parties to exceed the 

applicable production limits by 10 

percent of the calculated level of their 

1986 production in order to supply the 

"basic domestic needs" of parties that 

are developing countries and "for the 

purposes of industrial rationalization." 

For the third step of the Group I 

reduction schedule, the Protocol allows 

production to exceed the 50 percent 

production limit by 15 percent of 1986 

production levels for the same two , 

purposes. These allowances are termed 

"potential production rights". 

EPA believes that the driving force 

behind the developing countries and 

industrial rationalization provisions was 

to minimize the construction of new 

manufacturing capacity, particularly 

during the initial period when states are 

deciding whether to adhere to the 

Protocol. So viewed, the provisions for 

10 and 15 percent increases in 

production are intended to allow nations 

that already have substantial installed 

manufacturing capacity to make 

available limited amounts of supplies to 

satisfy demand from developing nations, 

and to offset for losses in production 

that might be sustained by shutting 
P.20 

Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 47503 

down inefficient or obsolete facilities. 

The cushion provided by the allowable 

"potential production rights" will 

provide sufficient flexibility in the 

market to accommodate these needs 

without undue price increases that might 

encourage construction of new 

manufacturing capacity. 

Accordingly, EPA proposes to 

implement the provisions for 10 and 15 

percent production increases by 

allocating "potential production rights" 

that could be converted to production 

rights upon proof of exports of 

controlled substances to parties. Every 

producer granted baseline production 

rights would also be granted potential 

production rights equal to 10 or 15 

percent of his baseline production rights, 

depending on the control period and 

group of controlled substances involved. 

A producer could then obtain 

authorization from EPA to convert his 

potential production rights to production 

rights to the extent he exported 

controlled substances to parties. 

Because the industrial rationalization 

provision refers to transfers between 

parties, and the developing country 

provision similarly limits production 

increases to those necessary to supply 

parties that are developing countries, 

EPA would authorize conversion of 

potential production rights only to the 

extent controlled substances have been 

exported to parties. In future 

rulemakings, EPA would promulgate, 

and from time to time revise, as 

Appendix B to these regulations, a list of 

nations that are parties to the Protocol. 

That list would be based on the list of 

parties kept by the Secretariat of the 

Protocol. 

EPA would otherwise issue notices 

authorizing conversion of potential 

production rights on the same basis as 

the Agency would grant additional 

consumption rights upon proof of 

exports. In both cases, EPA would 

require that the exported controlled 

substances arrive in the country 

importing them before EPA would issue 

the authorizing notice or grant 

consumption rights. EPA would also 

limit the authorization or the 

consumption rights to the control period 

in which the exports arrived in the 

importing country. 

For a producer to make use of 

production rights converted from 

potential production rights, he would 

also have to obtain consumption rights 

in the same amount. Since any 

controlled substances he exported to a 

party would provide the basis for 

obtaining additional consumption rights, 

EPA would treat requests for 

authorization to convert potential 

production rights as requests for 

additional consumption rights, as well. 

Therefore, upon proof of exports to 

parties, EPA would (1) issue a notice 

authorizing the conversion of potential 

production rights equal to the calculated 

level of the exports, for the control 

period in which the exports arrived in 

the importing nation, and (2) grant 

consumption rights in the same amount 

for the same control period. 

Anyone (not just producers) exporting 

controlled substances to parties could 

obtain authorization to convert potential 

production rights, whether or not he held 

potential production rights. If he did not 

hold potential production rights, he 

could either purchase such rights from, 

or sell his authorization to, someone 

who does. If enough controlled 

substances were exported to parties, it 

would be possible for EPA to issue 

authorizations to convert more potential 

production rights than there were 

potential production rights to convert. In 

that case, authorizations beyond those 

needed to convert all available potential 

production rights could not be used 

without violating the terms of the 

Protocol and would therefore be useless. 

f. Transfers Involving 25 Kilotonne 

Parties. The Protocol also allows a party 

to increase its production beyond the 10 

or 15 percent allowances, if it receives a 

transfer, "for the purposes of industrial 

rationalization," of a calculated level of 

production from another party whose 

1986 calculated level of production was 

less than 25 kilotonnes. However, unlike 

the other provisions related to industrial 

rationalization, this section of the 

Protocol provides that "the total 

combined calculated levels of 

production of the Parties concerned 

(may) not exceed the (Protocol's) 

production limits." 

EPA proposes to implement this 

provision by permitting anyone ("the 

recipient") to obtain production rights in 

excess of baseline production rights to 

the extent a "25-kilotonne party" agrees 

to transfer to him some amount of the 

calculated level of production that the 

party is permitted under the Protocol 

and to decrease its production by that 

amount. In a future rulemaking, EPA 

would promulgate a list of 25-kilotonne 

parties as Appendix D to these 

regulations. EPA would adopt a list of 

25-kilotonne parties compiled by the 

Protocol parties, but absent such a list, 

the Agency would compile its own 

based on information available from the 

Secretariat of the Protocol and the 

parties themselves. 

EPA believes that any transfer 

meeting these requirements would serve 

the purposes of industrial 

rationalization, which are to "achiev[e] 

economic efficiencies" or "respondf ] to 

anticipated shortfalls in supply as a 

result of plant closures." EPA could 

reasonably assume that any such 

transfer would "achiev(e] economic 

efficiencies" since the United States 

recipient of a 25-kilotonne party's 

production presumably would not seek 

that production unless it were 

economically efficient for him to 

produce it. < 

The regulations would require that the 

recipient of a 25-kilotonne party's 

production obtain from the principal 

diplomatic representative in that party's 

embassy in the United States a 

document clearly stating that the 25-

kilotonne party will decrease its 

production by the amount it is " 

transferring to the recipient. The 25-

kilotonne party's agreement to decrease 

its production by the amount being 

transferred would ensure that the total 

combined calculated levels of 

production of the United States and the 

25-kilotonne party would not exceed the 

limits applicable to the two parties 

under the Protocol. Upon obtaining a 

copy of this document and other 

requisite information, EPA would notify 

the Secretariat of the Protocol of the 

transfer, as required by the Protocol, 

and issue a notice granting the recipient 

production rights equivalent to the 

calculated level of production 

transferred. 

g. Transfer of Rights. As pointed out 

earlier, all of the rights and 

authorizations obtained pursuant to the 

regulations would be transferable. 

However, for a transfer to be effective, 

the transferor would first be required to 

submit a transfer request to EPA. The 

Agency would maintain records of who 

holds what rights or has been issued 

authorizations to convert potential 

production rights. If EPA's records 

indicated that the transferor possessed 

sufficient rights or authorization to 

cover the transfer request, EPA would 

issue a notice of transfer to the 

transferor and transferee. The transfer 

would take effect as of the date EPA 

issued the notice, and EPA would revise 

its records to reflect the transfer. 

EPA is proposing these transfer 

requirements because of the need to 

assure compliance with the Protocol. A 

fraudulent transfer of rights or 

authorization would not only result in 

higher emissions of ozone-depleting 

substances, but risk the United States 

exceeding the Protocol's limits. Thus, 

EPA has provided for the procedural 

safeguards described above to minimize 

the possibility of fraudulent or mistaken 

transfers. 

h. Prohibitions on Production or 

Import in Excess of Rights. The 
P.21 

47504 Federal Register / Vol. 52, N®. 239 / Monday, December 14, 1987 / Proposed Rules 

MM - ~ i'\ 1 a ' J r. 

capstone of the proposed system of 

production and consumption rights 

would be the prohibitions on production 

and import of controlled substances. 

The regulations would prohibit anyone 

from producing a calculated level of 

controlled substances in excess of the 

amount of "unexpended" production 

rights held by that person. Similarly, 

they would prohibit anyone from 

producing or importing a calculated 

level of controlled substances in excess 

of the amount of "unexpended" 

consumption rights held by that person. 

A person's "unexpended" production or 

consumption rights would be the total of 

the calculated level of production or 

consumption rights he holds, Biinus the 

calculated level of controlledjsubstanoes 

the person has produced and/or 

imported, depending on the type of 

rights involved. In short, the prohibitions 

prevent anyone at any time from 

producing or importing controlled 

substances in amounts greater than the 

unused production and consumption 

rights that he holds at the time. 

i. Import Bans. In addition to 

implementing the Protocol's production 

and consumption limits, the regulations 

would also enact the Protocol's ban on 

imports of controlled substances from 

any nonparty, except nonparties found 

to be in compliance with the Protocol's 

requirements. The Protocol requires that 

parties impose, and the regulations 

would accordingly implement, that ban 

beginning one year after the Protocol 

enters into force. In future rulemakings, 

EPA would promulgate, and from time to 

time revise, as Appendix C to these 

regulations, a list of nonparties found to 

be in compliance with the Protocol. 

The Protocol also provides for parties 

to impose import bans on products 

containing and products made with, but 

not containing, controlled substances. 

However, those provisions are not selfexecuting, as they require further action 

of the parties to implement/ Thus, EPA is 

not proposing to impose further impart 

bans, but will promulgate such bans in 

future rulemakings when the parties 

have taken the necessary action. EPA is 

nonetheless seeking comments on 

products that should be covered by tiie 

future bans. The Agency is also seeking 

comment on whether any additional 

steps (e.g., labelling of products 

containing or produced with controlled 

substances from nonparties) might be 

warranted either prior to or in 

conjunction with the trade restrictions 

contained in the Protocol. 

j . Reporting and Recordkeeping. EPA 

is considering a variety of alternative 

recordkeeping and reporting 

requirements. One option is to require 

firms involved in tiie production of the 

regulated chemicals to maintain the 

following information: Weekly records 

of thtj quantity of segulated chemicals 

prodtced at each facilityjncluding 

contoMed substascesjiipduced and 

consumed for feedstock purposes; and 

weekly records of the quantity and 

purchaser of controlled substances 

prodsced at each plant. These records 

would be retained for a period of four 

years. 

In addition, EPA would require 

monthly reports from producers of the 

controlled substaaces for each plant and 

for aj! plants owned by the same 

comfany within 15 days after the end of 

eachiiaontii. The reports would include 

the fellowing: summaries of monthly 

production of the controlled substances; 

monthly summaries of the quantity of 

sales for each of Sie controlled 

substances; the quantity and source of 

material containing recoverable 

controlled substances and the quantity 

of controlled substances recovered; 

summaries of total monthly and controlperi®d-to-date production of the 

calculated levels of Group 1 and Group 2 

confrolled substances; and total rights 

the producer holds at the end of each 

month. 

AllOther approach and the way EPA is 

presently leaning is to require the 

following information: daily records of 

the quantity of the CFCs and halons 

produced at each facility including 

controlled substances produced and 

consumed for feedstock purposes; daily 

records of the quantities of HCFC-22 

and CFC-116 that may also be produced 

at iie same facilties; continuous 

records of reactive temperature and 

pressure within the primary reactor and 

initial distillation column at each facility 

during the production operations; daily 

rec®eds of purchases and use of the 

following materials consumed in 

producing the regulated chemicals at 

eafh plant: carbon tetrachloride, 

peschloroethyleiie, chloroform, 

hydrofluoric acid, hydrochloric acid, 

bremine, HCFC-22 and CFC-23; and 

daily records of the quantity and 

purchaser of controlled substances 

produced at each plant. These records 

would be retained for a period of four 

years. 

Under this approach, monthly reports 

required within 15 days of the end of 

each month would include the following: 

summaries of monthly production of the 

controlled substances, specifying the 

quantity used and consumed as 

feedstocks, and production quantities of 

HCFC-22 and CFC-116, if they are 

produced at the same facility; monthly 

summaries of the quantity of sales for 

each of the controlled substances; 

description of any material alterations 

in the annual production plan required 

for each facility by EPA (as described 

below); description of any shifts in 

operating characteristics;'the quantity 

and source of material containing 

recoverable controlled substances and 

the quantity of controlled substances 

recovered; summaries of total monthly 

and control-period-to-date calculated 

production levels of Group I and Group 

II controlled substances; arid the 

producer's total consumption rights, 

production rights and authorization to 

convert potential production rights to 

production rights. 

EPA is leaning toward requesting 

daily instead of weekly records of 

production since daily records will 

provide more precise information on 

production. The more precise 

information will aid in evaluating trades 

(determining expended versus 

unexpended production rights), 

pinpointing violations, and will ease 

checks on production records when 

using process parameters (quantities of 

raw materials, temperature, pressure) to 

calculate production. It is not expected 

that daily records will impose a 

significant burden on the industry since 

information currently available to EPA 

indicates that manufacturers already 

keep production data on a once per shift 

basis. Records of raw materials, process 

parameters, and Other CFC compounds 

(HCFC-22 and CFC-116) produced at 

the regulated facilities are requested to 

provide a check on production records. 

Records of sales of controlled 

substances would provide not only a 

check on production records, but would 

provide EPA information on whether 

exporters have actually purchased the 

reported quantity of controlled 

substances exported. Records of imports 

and exports are requested on a daily 

basis since EPA will need to check the 

date of import/export against records 

held by U.S. Customs and the U.S. 

Census to verify compliance. 

This information would provide EPA 

with a double-check on whether 

producers and importers are staying 

within their production and 

consumption rights. EPA solicits 

comment on both of these approaches to 

reporting and recordkeeping 

requirements. EPA is specifically 

interested in the level of reporting 

necessary to ensure compliance with 

permit restrictions. 

Whatever approach is chosen, failure 

to maintain the required records or file 

these reports in a timely manner may 

result in EPA assuming production for 

the unknown period at maximum 
P.22 

capacity for the purposes of evaluating 

compliance. 

Records and reports could be required 

for each facility at each plant owned by 

a company or they could be required on 

an aggregate, company-wide basis. EPA 

is presently inclined to require that all 

production and sales records be 

maintained for individual production 

facilities, but that monthly reports to 

EPA be submitted containing 

information for both individual plants 

and aggregated for all the plants owned 

by a firm. 

With this approach, EPA would not 

grant rights for each CFC or halon 

production facility or plant, but will 

instead grant rights that are companywide. However, to facilitate 

enforcement with respect to these rights, 

EPA will require that firms inform EPA 

on an annual basis of their intended 

production plans for each facility and 

plant and notify the Agency of any 

significant shifts in the location or 

quantity of production described in 

these plans as part of their monthly 

reports. While compliance with these 

annual production plans will not be 

binding, they provide useful information 

to EPA for purposes of compliance 

monitoring. EPA solicits comments on 

the sufficiency of these requirements. 

For firms engaged in the import of 

controlled substances, EPA is also 

considering a variety of alternative 

reporting and recordkeeping 

requirements. EPA is presently inclined 

to require the maintenance of daily 

records of the quantity of controlled 

substances, either alone or in mixtures, 

that are imported; the dates and ports of 

call of imports; the date and port of 

entry into the United States or its 

territories; the dates on which and the 

country in which the imported 

controlled substances were produced; 

and a name and address from which 

additional information can be obtained. 

Monthly reports by importers to EPA 

must include summaries of the above 

information along with totals for 

control-period-to-date and the 

importer's total consumption rights at 

the end of the month. EPA will further 

verify reported import activities with 

information obtained by U.S. Customs 

and with information reported through 

data presented by other nations to the 

Secretariat to the Protocol. 

Exporters must report all exports not 

previously reported in the context of 

obtaining consumption or production 

rights. Reports would be required on a 

monthly basis and include: name and 

address of exporter and recipient of the 

exports; the exporter's Employer 

Identification Number (EIN); the type 

and quantity of controlled substances 

exported; the date and port from which 

the exports were shipped; the date and 

country in which the exports arrived; 

and the source from which the exported 

controlled substances weje purchased. 

To facilitate the collection of the 

relevant information, EPA is requesting 

the U.S. Department of Commerce for 

permission to obtain copies of Shipper's 

Export Declarations (Form 7525-V) filed 

by exporters of controlled substances. 

EPA is also requesting the Customs 

Service for permission to obtain copies 

of "Entry Summaries" (Form 7501) filed 

by importers of controlled substances. 

EPA solicits comments on these 

reporting and recordkeeping 

requirements. 

k. Compliance and Penalties. Based 

on its review of reports and.records and 

possible site inspections, EPA would 

determine whether firms are in 

compliance with the regulations. The 

regulations would define a violation as 

the production or import of every 

kilogram of controlled substances in 

excess of unexpended production or 

consumption rights, or in contravention 

of the ban on imports from nonparties. 

Under section 113(b) of the Clean Air 

Act, penalties of up to $25,000 per day 

per violation can be assessed. Thus, a 

firm that produced two kilograms of ' 

controlled substances beyond its rights 

would be potentially subject to a 

maximum fine of $50,000. In addition to 

the various remedies under the Clean 

Air Act, EPA has the authority to seek 

injuctive relief to limit further 

production or sales, and to seek to have 

any activity in excess of unexpended 

rights subtracted from future year's 

rights. Also, the Agency may bring 

criminal penalties against knowing 

violators, as set forth under section 

113(c) of the Act. 

Given that compliance with the terms 

of the Montreal Protocol is determined 

on a twelve month basis, the control 

period would be for one block year 

(unless otherwise specified), and EPA 

would track compliance over that same 

period. However, tracking compliance 

on an annual basis presents some 

practical limitations—in extreme 

circumstances a firm could go out of 

compliance only at the end of the 

period. With a shorter averaging time or 

a rolling average, compliance could be 

judged earlier or more frequently. As an 

alternative to the block annual control 

period, EPA could specify a rolling 

twelve-month control period where 

compliance could be measured at the 

end of each month based on the 

previous twelve months of production. 

This alternative would provide greater 

assurance that the United States 

satisfies its obligations under the 

Montreal Protocol, but could somewhat 

limit the flexibility of firms in meeting 

shifting market conditions during the 

course of a year. EPA proposes to 

initially specify compliance on a block 

one year control period, but will 

consider shifting to a twelve-month 

rolling control period if difficulties in 

ensuring compliance develop. EPA may 

impose the twelve-month rolling quota 

on firms that have violated production 

or consumption rights or in cases where 

compliance monitoring is hindered. 

1. Effective Date. The proposed 

regulations would not take effect until 

the Montreal Protocol enters into force. 

After the Protocol has entered into force, 

EPA would revise the effective date 

section of regulations to include the date 

of entry into force. 

The United States is now in the 

process of ratifying the Protocol. That 

process includes completion of an 

environmental impact statement 

concerning the Protocol, and submittal 

of the Protocol by the President to the 

Senate for its advice and consent. If the 

Senate gives its advice and consent, the 

ratification document then goes to the 

President for his signature and, once 

signed, is deposited at the United 

Nations headquarters. Unless 

unanticipated delays are encountered, 

EPA expects this process to be 

completed well before the January 1, 

1989 target date for entry into force. 

m. Payment of Fees.8 (a) Background. 

In recognition of the fact that producers 

and importers of controlled substances 

would receive production and 

consumption rights which would allow 

them to engage in their activities, EPA 

has examined the feasibility and 

desirability of making the 

administration of this regulatory system 

as self-supporting as possible by having 

the producers and importers bear some 

of its costs through payment of 

administrative fees. EPA is proposing to 

include Sec. 82.14 in the proposed rule, 

which would provide for EPA to collect 

fees in advance for granting production 

and consumption rights. The authority 

for this provision is the Independent 

Offices Appropriation Act ("IOAA"), 31 

U.S.C. 9701 (formerly 31 U.S.C. 483(a)), 

which permits and encourages Federal 

agencies to recover, to the fullest extent 

possible, costs attributable to special 

benefits provided to identifiable 

recipients. 

8

 Payment of administrative fees to cover the 

costs of operating the program is being proposed 

regardless of the regulatory approach (e.g. allocated 

quotas, auctions, or regulatory fees) employed. 

Because the fee simply covers the costs of operating 

the program, the legal issues concerning a fee used 

as a regulatory tool arc not applicable. 
-,«ai > • 11 

P.23 

47506 Federal Register / Vol. 52, N$. 239 / Monday, December 14, 1987 / Proposed Rules 

The following describes the broad 

outlines of the fee program. 

(b) Activities, the Cost of Which are 

Proposed for Recovery. The Supreme 

Court has stated that agency activities 

for which costs are properly chargeable 

to the recipient are those which 

"bestow[ ] a benefit on the applicant, 

not shared by other members of 

society." In National Cable Television 

Ass'n v. U.S., 415 U.S. 336, 340-41 (1974). 

The Court of Appeals for the D.C. 

Circuit has further specified that the full 

costs of providing a service may be 

recovered when: 

• The Agency has identified specific 

activities for which the fee is being 

assessed; 

• The service produces a private 

benefit; 

• The value of the benefit is 

reasonably related to the fee; 

• The benefit accrues at least in part 

to an identifiable private beneficiary 

and not merely to an entire industry; 

and 

• The service produces no 

independent public benefit. Central & 

Southern Motor Freight Tariff Ass'n v. 

U.S., 777 F.2d 722, 730 (D.C. Cir. 1985). 

Based on these criteria, EPA proposes 

to recover the full costs of the following 

activities, all of which relate to 

apportioning and administering 

production and consumption rights: 

(1) Determining the amount of 

baseline production and baseline 

consumption rights apportioned to 

specific producers and importers. 

(2) Processing applications, under 

Sees. 82.9 and 82.11 for additional 

production rights, and taking associated 

actions (e.g. notifying the Secretariat of 

the Protocol of 25-kilotonne party 

transfers). 

(3) Processing applications under Sec. 

82.10 for additional consumption rights. 

(4) Processing applications under Sec. 

82.12 for transfers of rights. 

(5) Processing and maintaining the 

reports required to be submitted to EPA 

under Sec. 82.13. 

EPA requests comments on whether to 

charge for additional activities, such as 

audit and enforcement activities. 

(c) Determination of Costs of 

Activities. EPA proposes to recover the 

following costs of the activities 

described above: 

(1) Direct labor costs, which will be 

based on the grade level of staff working 

directly on the activities; 

(2) Indirect labor costs, which will 

include managerial and supervisory 

support, and secretarial/clerical 

support; and; 

(3) Overhead costs, including office 

space costs, utilities, equipment, and 

materials. 

By She first day of any control period, 

every person owning production or 

consumption rights, applicable to that 

contrSi period would have to pay EPA 

the fuli amount of fie fee owed. Failure 

to pa j the fee @n a timelyjbasis would 

result te the person being1 treated as 

owning nb production or consumption 

rightaAtring the central period, until 

paymfent is made, tat e payment would 

be subject to iBterist computed at the 

Federal short-term rate. 

Under EPA's proposed system, 

ownefs of production or consumption 

rights would make one fee payment as 

of the beginning of the control period. 

No additional fees would arise from 

applif ations to EPA under Sees. 82.9-

82.12 tor additional production or 

cons*nption rights or transfers of rights. 

EPA solicits comments on the merits of 

charing separately for EPA's costs in 

processing suoh amplications and 

redt_t_5_Rg the up-frsnt fees accordingly. 

In aoMtion, EPA solicits comments on 

procedures for imposing fees with 

respect to aud i or enforcement 

activities, if EPA determines to impose 

such lees. 

(d>i%e Waivers or Adjustments. 

There may be ciroumstances under 

which waivers from, or adjustments of, 

fees Would be appropriate. While the 

IOAA is silent coacerning such matters, 

it does provide that the President shall 

set p®Mcies concerning the 

implementation of the IOAA. Office of 

Management and Budget (OMB) Circular 

A-2S, Sec. 9(b) contains guidelines for 

Federal user charge systems and 

provides for exceptions to a general user 

fee policy under several circumstances. 

Und#r these guidelines, waivers may be 

appropriate under the following 

circumstances: 

(1) Public Interest. If the person uses 

the controlled substances as part of 

activities desigsed to promote the public 

intefest, the fee iSsay be waived. EPA 

solitjits comments on the circumstances 

undgr which this exemption may be 

appScable. 

(2} Economic Hardship. A fee may be 

waited or adjusted if its imposition 

would result in an economic hardship on 

the person. Considerations for an 

ecoaomic hardship waiver include size 

of tfee firm and amount of sales or use of 

controlled substasices. 

(3| Small Business. EPA solicits 

comment on whether waivers of 

adjustments would be appropriate for 

small businesses, based on number of 

employees and annual gross revenue 

from sale or use of the controlled 

substance. 

EPA further solicits comments on 

whether a fee should be charged for 

proeessing an application for a waiver 

or adjustment (which would be refunded 

if the waiver or adjustment is granted). 

3. Other Regulatory Options Considered 

As a regulatory scheme, allocated 

quotas of production and consumption 

rights appear to offer the advantages of 

the other options while avoiding many 

of their potential problems. However, as 

discussed above, it is not free from 

concerns. 

By restricting the supply of CFCs and 

halons through regulation, EPA would 

effectively create a scarcity that would 

result in higher prices for the controlled 

substances as demand for CFCs and 

halons exceeded supply over time. 

Under the allocated quota approach, 

any additional revenue that would result 

from the scarcity created by this 

regulation accrue to the firms allocated 

rights. 

The magnitude of these transfer 

revenues would depend on how much 

the prices for the regulated chemicals 

increased over time. Based on the 

analysis presented in the RIA, Table 5 

presents EPA's estimates of possible 

transfer revenues that would accrue 

primarily to the chemical manufacturers, 

assuming that they allowed market 

forces to determine what price and 

which firms purchase CFCs and halons. 

(If market forces do not operate, the 

producers and importers will determine 

allocation to users based on criteria 

other than prices.) Table 5 shows that, 

even for scenarios where price increases 

are small in the initial years and 

gradually increase to the price where 

expected chemical substitutes come into 

play, the total amount of transfers could 

range from $2.0 billion to $5.7 billion 

from 1989 through 2000. For the scenario 

where CFC price increases in the early 

years are more substantial (e.g., the 

"stretchout cases" where 

implementation of low cost reductions is 

delayed), the amount of the transfers 

increases accordingly. Overall, for the 

decade leading up to the turn of the 

century, transfer revenues were 

calculated to be approximately three 

times greater than the social costs (i.e., 

the real resource costs to reduce use) 

involved in meeting the control 

requirement. 

TABLE 5.—PRELIMINARY ESTIMATE OF POTENTIAL SOCIAL COSTS AND TRANSFERS TO 

PRODUCERS 

CFC price increases 

(1985 S/kg): 

1989 

Least 

cost 

0.0 

Stretchouts 

Moderate 

0.0 

Moderate/ 

major 

0.0 

Major 

0.0 
P.24 

TABLE 5.—PRELIMINARY ESTIMATE OF POTENTIAL SOCIAL COSTS AND TRANSFERS TO 

PRopycERS-rContinued , 

'1994.„' _ . .'. 

1999 

2005...:......-

2075 : ...... 

Social costs (present 

value in millions of 

1985 dollars); 

1989-2000 

1989-2075............ 

Transfer revenues 

(present value in 

millions of 1985 

dollars): 

1989-2000 

1989-2075 

Least 

cost 

2.21 

"3.77 

3.77' 

5.48 

689 

27,040 

1.975 

6,163 

.Stretchouts 

Moderate 

3.50 

5.48 

5.48 

5.48 

1,146 

29,220 

2.516 

7,096 

Moderate/ 

major 

3.70 

•5.48 

5 5.48 

5.48 

"1,628 

37,910 

2,757 

6,376 

Major 

. 5.48 

5.48 

5.48 

5.48 

1,850 

38,140 

5,703 

9,400 

Assumes CFCs regulated with an 

initial freeze in 1989 at 1986 levels, 20 

percent reduction in 1993 and 50 percent 

reduction in 1998, and halons frozen at 

1986 levels in 1992. 

Social costs are discounted at a 2 

percent rate, and transfer costs are 

discounted at a rate of 6 percent, 

reflecting the opportunity cost of funds 

in the private sector. 

Source: Estimates taken from RIA. 

An argument can be made that the 

above analysis overstates the quantity 

of transfers. According to this line of 

reasoning, chemical manufacturers may 

not behave competitively and would not 

allow market prices to determine who 

gets these chemicals, but would instead 

directly allocate them to their customers 

based on past sales. CFC and halon 

prices would increase only gradually 

reflecting the higher costs of producing 

less of these chemicals and the need to 

generate capital for research and 

production of chemical substitutes. The 

resulting lower price increases could act 

as a disincentive to the introduction of 

more expensive, substitute chemicals. 

While no estimate of the price 

increases under this scenario has been 

calculated, given the slow rate of price 

increase in the EPA scenarios, the 

overall difference in the quantity of 

transfers is not likely to differ 

substantially. Thus, even in the scenario 

where CFC and halon producers 

allocate their allowable production and 

limit price increases, transfers on the 

order of a nearly a billion dollars or 

more are likely over the next ten years. 

This raises questions as to whether 

possible profits from continued 

production of the restricted chemicals 

might have the undesired effect of 

delaying the introduction of less 

profitable chemical substitutes. 

EPA has explored a number of 

possible approaches to improving the 

equity of its proposed regulation by 

reducing or eliminating the potential 

transfers to the CFC and halon 

producers and importers. One approach, 

the use of auctions to allocate 

marketable rights, was mentioned in an 

earlier section. Under this option, EPA 

would auction rights fo all interested 

parties and the resulting transfers would 

accrue to the U.S. Treasury. 

An advantage of the auction approach 

is that it takes CFC allocation out of the 

hands of producing firms and allows the 

market td function. While detailed 

design of an auction is not presented, as 

an aid to commenters, the major 

characteristics of auction forms most 

likely to be applicable to the case of 

CFCs can be briefly presented. An 

advantage in the design of an auction of 

CFC permits is the availability of 

existing models provided by the 

auctions regularly conducted by the 

Federal Government in the areas of 

government procurement, leasing of 

mineral rights (including onshore and 

outer continental oil and gas 

development, coal leases, geothermal 

development, etc.), and Treasury bills. 

The government auctions are typically 

structured as "first-price sealed-bid" 

auctions,9 in which potential bidders 

submit sealed bids and the highest 

bidder is awarded the item for the price 

he bid. An alternative is the "secondprice sealed-bid" auction, in which the 

highest bidder wins the item but pays a 

price equal not to his own bid but to the 

second-highest bid. Variations on these 

forms can be used: for example, the 

government may impose a reserve price, 

discarding all bids if they are too low; 

and bidders may be charged an entry 

fee for the right to participate. 

When a fixed quantity of a good is put 

up for sale (such as with the weekly 

Treasury bill auction), two kinds of 

sealed bid auctions are used to sell 

multiple units, as explained below. In 

the discriminatory sealed bid auction, 

each of the bidders pays the amount he 

bid. In the uniform-price sealed bid 

auction, each successful bidder pays a 

price equal to the highest unsuccessful 

bid. Procedurally, bidders submit bids 

that consist of both a price and a . 

desired number of units of the 

commodity. Enough units are available 

that a number of the highest bidders can 

be awarded the units for which they bid. 

The government then ranks all buyers' 

bids by price from highest to lowest, and 

cumulates the quantities bid.10 The 

result is a market demand curve. 

* To aid in reducing uncertainty, the 

introduction of an auction as an 

allocation mechanism couldbe phased 

in according to a preahnouriced 

schedule (such as every three months);

 u 

each auction would offer only a fraction 

of total rights for sale. The phase-in 

approach would allow time for •' 

procedural and substantive familiarity 

to be gained by all parties; if necessary, . 

limitations could be placed on the 

amount of rights any one firm could 

acquire. With a very short timeframe , 

between auctions, a firm Concerned 

about the bidding up of prices could 

hold back, bid only its true value for 

rights in a subsequent auction, and have 

less concern over rights acquisition..To 

the extent it is desirable to protect small 

firms or particularly vulnerable 

industries, set asides could be 

designated for these groups. 

In EPA's consideration of the use of 

an auction to allocate rights, several 

concerns have arisen. EPA is concerned 

about the potential large uncertainties 

regarding the price and availability of 

the controlled substances which an 

auction might create, particularly in its 

initial years. Related concerns are that 

big companies could easily outbid small 

companies, that speculators would drive 

up the price of rights, and that 

companies would hoard supplies. "A s 

suggested above, a number of steps in 

designing an auction could be taken to 

address these concerns. 

The final concern involves the 

question of EPA's legal authority under 

the Clean Air Act to operate an auction. 

Such an auction would constitute 

regulatory action by an administrative 

agency, pursuant to an asserted grant of 

authority from Congress, requiring the 

payment of money by the private sector 

to the U.S. Treasury. The principal legal 

issues EPA is considering concern (i) 

whether such an asserted grant of 

congressional authority constitutes a 

delegation by Congress of its 

constitutional power to impose taxes or, 

alternatively, its constitutional power to 

regulate commerce; and whether 

Congress in fact granted such authority 

for an auction under the statutes EPA 

administers. 

One potential alternative—a "zero 

revenue auction"—might avoid some of 

the legal and practical problems. This 

alternative would not yield revenue to 

the government. 

Under this approach, each producer 

(or user) would receive a provisional 

• Sealed-bids are preferred due to risk aversion 

on the part of bidders. 

10

 The cumulation process may require several 

steps (not detailed here). 

1

' To some extent uncertainty stems from the 

shortages themselves and sufficient information 

regarding the auction form would alleviate concerns 

over the method of allocation. 
P.25 

47508 Federal Register / Vol. 52, No. |3 9 / Monday, December 14, 1987 / Proposed Rules 

allocation of rights equal to its 1986 

production (or use). Each producer or 

user would then be required to submit a 

sealed bid presenting the number of 

rights it would purchase at a range of 

alternative prices (i.e. its demand 

schedule). These bids would be 

aggregated to construct the market 

demand for these rights. The resulting 

market price would then be set at the 

price that equates market demand with 

the 1986 ceiling on total production. 

Each firm's final allocation will be its 

reported demand at the market price. 

Each firm would then pay an amount 

equal to the price of these rights times 

its final allocation and receive back an 

amount equal to the price times its 

provisional allocation. Net payments to 

the government would be zero for all 

firms taken together. Each firm would 

receive exactly the number of rights it 

initially stated it would be willing and 

able to purchase at the equilibrium 

price. 

The zero revenue auction has several 

features that make it an attractive 

interim option. First, it virtually 

eliminates uncertainty by guaranteeing 

each firm the number of rights it initially 

reported in its ceiled bids at each 

alternative price.12 Second, it 

automatically produces the first round of 

trades in the system of marketable 

permits, thus reducing any one firm's 

ability to hoard, speculate, or to outbid 

others. Third, it produces a public price 

signal providing information for future 

(non-zero revenue) auctions and other 

allocation systems that the government 

may want to implement as well as for 

potential entrants into the industry. 

Finally, if the auction is conducted for 

users (as opposed to producers), it 

would address the concerns that some 

users may be forced out of business. 

Each user could guarantee that it stays 

in business or be compensated for going 

out of business at a price to which it 

agreed. 

If it is determined that EPA lacks the 

authority to conduct an auction, 

legislative authorization would be 

necessary. These legal issues are 

addressed in greater detail in an 

analysis prepared by EPA which is 

included in the docket. 

EPA is specifically interested in 

receiving comments on the desirability 

of using auctions as the method of 

allocating rights, the possible steps EPA 

could take to minimize disruption in the 

12

 In fact, any firm could go so far as to guarantee 

its provisional allocat:on as its final one by 

reporting that it would purchase its provisional 

allocation regardless of the price. If all firms did 

this, the provisional allocation would be the final 

one and change hands. 

early years of an auction, and the legal 

issues concerning the possible need for 

additional legislative authority. 

If the legal obstacles to auctioning 

marketatle permits cannot be resolved, 

a potentially attractive alternative 

would involve EPA allocating CFC or 

halon rights to firms now using (as 

opposed) to producing, importing, or 

exportbjjpjl these cnemicals. This option 

is very sjfeiilar to tiie scenario described 

above v#ereby tise ctiemical producers 

would reallocate theft1 allowable quotas 

to their customers ba^ed on historic 

sales. Tfee major difference is that in the 

option where EPA allocates rights 

directly to users, the.possibility of 

transfe® from users fo producers is 

substantially reduced. However, under 

this opion EPA would be required to 

allocate rights to approximately 10,000 

firms wfeo now buy firectly from CFC 

and haten producers, EPA is interested 

in receMng comments on the 

desirability of this approach and 

possible ways to miaimize the 

administrative burden of the intitial 

allocation. 

Anofier attractive option which 

provides a strong alternative to the 

auctioai option would be to combine 

allocated quotas with a regulatory fee. 

While a fee alone would not ensure 

compliance with the reductions required 

by the Montreal Protocol, when teamed 

with ajocated quotas; this flaw would 

be remedied. The quota would provide a 

relatively straightforward means of 

ensuriBg that the reductions required by 

the Montreal Protocol are achieved. A 

fee assessed against producers and 

importers would provide an economic 

incentive for the introduction of 

chemif al substitutes and for firms to 

employ other low oast methods of 

reducing emissions. It would also 

provide clear signals about future price 

increases and avoid many of the 

potenSal uncertainties associated with 

auctions. The fee would also capture 

most $f the traasfefs for the U.S. 

Treassry, thus serving equity. 

The fee woutd be set to capture all or 

most ©f the CFC a»d halon price 

increases which result from the scarcity 

created by EPA's regulations, The 

margteal cost of tite CFC control 

alternatives (including substitutes) 

would provide the primary basis for 

setthfg the level of such fees. As with 

tradable rights, fees would be scaled on 

the besis of ozone»depleting potential, 

e.g. dollars per kilogram-equivalent of 

ozone-depleting substance produced. 

An important design consideration is 

the extent to which periodic fee 

adjustments would occur on an 

automatic basis or would require 

regulatory intervention. With the quota 

system in place, automatic fee changes 

specifically intended to bring actual 

CFC production into alignment with 

production goals would not be 

necessary. However, any adjustments 

needed as a result of significant changes 

in economic activity, new scientific 

evidence, and/or discovery that the cost 

of switching to certain substitutes was 

different than previousjy thought would 

likely be difficult" to accomplish on an 

automatic basis. On the other hand, the 

more automatic the adjustment, the 

more certainty for investment and 

production decisions the system is likely 

to provide. 

Another important design 

consideration is the extent to which the 

fee should be phased in: should it be set 

from the start at levels calculated to 

extract the full amount of transfer 

payments or should it be set low (merely 

as a price signal) and subsequently 

adjusted upward in (either small or 

large) increments? 

Collection of fee payments would be 

directly from the firms allocated the 

CFC and halon quotas, on a periodic 

(e.g. monthly or annual) basis. 

EPA seeks comments on the feeswith-quotas option, in comparison with 

both the auction option and the 

allocated quota option without fees. 

EPA is interested in receiving comments 

on the desirability and implementation 

issues related to this option, including 

the legal issues raised earlier. 

Under a final approach to reducing 

the potential inequities of the allocated 

quota system, some portion of the 

transfers could be recaptured through 

voluntary donations by the producers to 

an industry-wide research organization. 

This approach would not be mandated 

by EPA, but would be pursued by a 

voluntary organization created by CFC 

and halon producer and user industries. 

Essentially, some or all of the producer 

firms would agree to set aside some 

portion of the price increase from CFCs 

and halons to support research 

activities. Funds set aside for this 

organization could be used to support 

projects to aid producers and users in 

their transition away from the use of 

these regulated chemicals. Examples of 

possible projects could include: joint 

toxicity testing for new chemicals; 

studies to support fire and building code 

changes; testing of the compatibility of 

new chemicals with existing equipment; 

education and training to encourage 

increased recycling by professionals 

involved with servicing equipment using 

CFCs and halons; support for tests 

required to obtain regulatory approvals 

needed for product substitutes, etc. All 
P.26 

Federal Register / Vol. 52, No. 239,/: Monday, December 14, 1987 / Proposed Rules 47509 

proposed projects would be submitted 

on a voluntary basis and reviewed by a 

committee representing the members of . 

the institute. 

Joint research groups have-been 

established by other industries (e.g., the 

Electric Power Research Institute) and 

are generally highly regarded by their 

members. Several CFC user groups have 

already initiated and funded joint efforts 

to resolve obstacles to testing and using 

CFC substitutes. The major halon 

producers and users have agreed in 

principal to pursue this option with the 

chemical producers assessing a few cent 

per kilogram tariff on all halon sales to 

fund joint projects to reduce emissions, 

to develop new fire protection chemicals 

and practices. EPA is interested in 

comments on the possible structure and 

scope of this type of organization, how it 

might aid in facilitating technology 

transfer and the extent to which it might 

add to research and development efforts 

undertaken anyway by individual firms. 

The second major concern with 

allocated quotas relates to the 

possibility that some industries— 

particularly those where CFCs or halons 

are only a small fraction of total product 

cost—may be slow to respond to 

economic incentives to reduce their use 

of the controlled substances and may 

elect to simply pay higher prices for 

CFCs/halons instead. The rate at which 

firms will move to make cost effective 

reductions rests on a behavioral 

assumption about the extent to which 

firms will minimize production costs. To 

gain some insights into the effect of 

alternative assumptions on costminimizing behavior, EPA included in 

the RIA several scenarios where the 

analysis assumed that firms elected to 

delay or failed entirely to pursue certain 

cost-effective, low-cost reduction 

options. 

Table 5 shows the differences in CFC 

prices for various assumptions about the 

rate at which firms employ low-cost use. 

reductions. Compared to the "least cost" 

case where reductions are taken as they 

become cost competitive and 

technologically available, the three 

"stretchout" cases demonstrate that 

should firms not seek to minimize costs, 

CFC prices, social costs and transfers ... 

could all increase. Given the assumption 

on the availability of substitutes in the 

future, these increases occur primarily in 

the early years when the burden on user 

industries will be most difficult and 

before chemical substitutes for many 

applications will be commercially 

available. 

This analysis shows the close 

interrelationships among CFC- and 

halon-using industries under the 

proposed regulatory approach. To the 

extent those industries where. 

inexpensive reductions are available 

postpone making such reductions, prices 

of CFCs and halons would likely 

increase to all industries. For those user . 

groups where CFCs are $ large 

percentage of final product price (e.g., 

the foamblowing applications), such 

increases could be burdensome 

particularly in the initial years before . 

chemical substitutes come to market 

and place a ceiling on such cost 

increases. Table 6 shows EPA estimates 

of the total amount of CFCs and halons 

consumed by the major user industries. 

TABLE 6.— 1985 U.S. CONSUMPTION 

OF CFCs AND HALONs BY MAJOR 

USER INDUSTRIES . 

Industry 

Flexible Foam 

Rigid polyurethane 

foam. 

Rigid non-urethane 

foam. 

Refrigeration and air 

conditioning. 

Aerosol 

Solvent 

Fire extinguisher 

Miscellaneous 

Total 

weighted use 

(mill 

kg) 

18.6 

61.3 

12.8 

96.0 

11.6 

54.8 

43.4 > 

22.0 

Chemicals 

used 

CFC-11 

CFC-11. 12 

CFC-12, 

114 

CFC.11,12, 

114.115 

CFC-11,12 

CFC-113 

Halon-1211, 

1301, 

2402 

CFC-12 

• Estimates do not include Halon 2402. 

Source: Estimates prepared for EPA Regulatory Impact Analysis. 

Of course, direct limits on specific 

CFC or halon uses—^either bans or 

engineering controls—also have serious 

drawbacks. They would reduce or 

effectively eliminate the markets' ability 

to allocate CFCs and halons to their 

highest valued uses and result in a 

waste of resources. This happens 

because they reduce individual's and 

firm's rewards from finding those uses 

as well as their incentives to find 

substitutes that do not deplete ozone. 

Requirements of this type are also 

generally inflexible and unresponsive to 

changes in the relative values of CFCs 

and halons in other uses. An approach 

relying on bans and engineering controls 

places in the'hands of the Federal 

government basic decisions on the use 

of these chemicals. There is no 

guarantee that the mandated restrictions 

will result in better or more valuable 

uses of these chemicals. 

Since the initial limits are at 1986 

levels, any shortfall in supply (and 

associated increases in prices) are not 

likely to be large in the early years. 

Further, it could take several years to > 

promulgate regulations restricting 

specified uses.tThus, such regulations ; 

may not be helpful in easing the 

transition. .. 

However, because of the potential 

concerns that some users may not 

minimize their costs, EPA is seeking 

comment on the desirability of 

supplementing the allocated quota 

system with direct limits on specific 

CFC or halon user industries where 

inexpensive reductions appear feasible. 

These limits could be established by 

EPA on a voluntary (e.g., the publication 

of technical guidance) or mandatory 

basis, or they could start as voluntary -

and become mandatory, through a 

rulemaking procedure, only if necessary. 

They could be developed through the 

traditional agency process or through a 

different process (e.g., a negotiated 

process) with greater involvement of 

industry and other interested groups. 

In developing the RIA cost analysis, 

EPA obtained substantial information 

from a variety of sources on low-cost 

measures to reduce CFC and use. Based 

on its preliminary cost analysis, the 

following steps to reduce CFC and halon 

use appear possible during the period 

covered by this regulation: 

a. Commercial Air Conditioning. 

Firms in this industry have taken steps 

in recent years to shift away from CFC12 in air conditioning. For example, 

window and central units are no longer 

of concern from the perspective of this 

proposal because they now use HCFC22. Commercial chillers have already 

begun to shift, but could make greater 

use of HCFC-22, CFC-502, CFC-500 and 

other chemicals and mixes with ozone 

depletion weights that are significantly 

lower than CFC-11 and CFC-12. 

Although CFC-502 is a blend of 48.8 

percent HCFC-22 and 51.2 percent CFC115, it has a combined ozone depletion 

weight of approximately 0.3, and 

therefore represents a potentially 

attractive option for many firms. By 

altering their market mix and shifting 

more toward CFC-22. CFC-502, etc., 

substantial reductions in CFC-11 and 

CFC-12 use are currently possible. 

Nonetheless, there appear to be 

substantial emissions resulting from 

current practices of venting CFCs during 

routine maintenance. Relatively minor 

design changes (e.g., different valves) by 

equipment manufacturers could 

facilitate improved servicing practices 

and reduced emissions. 

Over the longer-term, chemical 

substitutes may make it possible to 

eliminate use of CFC-11 and CFC-12 in 

new equipment. The most promising 

chemical substitute now appears to be 
P.27 

47510 Federal Register / Vol. 52, No. 389 / Monday. December 14. 1987 / Proposed Rules 

HFC-134a. This chemical does not 

contain any chlorine and therefore 

would not: deplete ozone. It has passed 

preliminary short-term toxicity tests, but 

has not yet undergone longer-term. 

testing and is not yet available in 

commercial quantitites. Recent industry 

estimates suggest this chemical could be 

available in 5 years to 6 years if no 

major problems are encountered. It has 

many of the same chemical and physical 

properties of CFC-12 and initial tests 

suggest that it might require only minor 

changes to be used in new equipment. It 

is likely, however, to cost several times 

the current price of CFC-12. 

b. Automobile Air Conditioning. 

Approximately 25 percent of all CFCs 

are used in automobile air conditioners 

making it by far the single largest user 

industry. In the near term, the auto 

manufacturers could improve 

component quality and several could 

redesign their air conditioning units to 

require a lower initial CFC charge per 

unit. While substantial progress has 

been made in reducing emissions in 

manufacturing over the past years, 

EPA's analysis suggests that a wide 

variance exists among automobile 

manufacturers and that additional steps 

could be taken in this area. Other CFC 

reductions which appear possible in the 

near term at the point of manufacture 

include completing the switchover to 

helium gas for testing systems and 

eliminating unnecessary losses during 

charging. 

Over the longer term, automobile 

manufacturers appear to have several 

promising options for eliminating this 

use of CFC-12, including the use of 

chemical substitutes (e.g., HCFC-22, 

CFC-142b/22 blend, and HFC-134a). In 

addition, alternate air conditioning 

systems including a modified sterling 

cycle may be feasible. Because of the 

difficulty in knowing which of these or 

other options will prove to be most 

attractive, research into several of these 

options simultaneously may be 

desirable. 

Even if automobile manufacturers are 

capable of shifting away from CFC-12 

based air conditioners over the next 

seven years or longer, substantial 

quantitites of CFC-12 will still be 

required to service the existing fleet. 

Although a large number of facilities 

service car air conditioners (leaving 

aside for the moment the portion of the 

market serviced by car owners directly), 

several promising options deserve 

attention because of the large quantity 

of CFCs used by this market segment. 

One option involves the sale of small 

containers used by car owners and some 

service centers to recharge vehicles. 

These containers eliminate the 

possibility of recovery at a service 

station, resulting in substantial 

quantitites of CFCs lost through venting, 

and loss® due to refrigerant trapped in 

the cont^toer following use. ... 

A secofjd option involves jthe 

possibilifer of blending a non-CFC 

chemicapwith CFC-12 to reduce the 

latter's u_5e in servicing the aftermarket 

Initial research has shown promising 

preliminary results that such a 

compound could be used in existing 

equipment without costly modifications 

and would be more energy efficient and 

less expensive. 

c. Electronics and metal cleaning. 

Perhaps Hie fastest growing use of CFCs 

is the use of CFC-113 as a solvent by the 

electronics industry. Because CFC-113 is 

nontoxic and compat&le with a variety 

of materials, its use has increased 

substanSally during the past several 

years, particularly as health concerns 

have been raised concerning other 

chlorinated solvents currently being 

used. 

Because of the high cost of CFC-113 

and the fact that it is used as a solvent 

and therefore is not consumed in the 

manufacturing process, recovery and 

reclamation of substantial quantities of 

CFC-113 already occurs. However, 

based oa EPA's preliminary analysis, 

additional opportunities exist for 

improved recycling. For example, 

existing equipment frequently does not 

have automatic covers or hoists (in the 

case of epen top vapor degreasors), both 

of which could reduce losses. In 

addition, operating practices could be 

improved to further reduce CFC losses. 

Increased recovery of CFC-113 may 

be particularly important because of the 

drawbacks of switching from CFC-113 

to other chlorinated solvents. EPA's 

Office of Toxic Substances, as part of its 

Chlorinated Solvents Task Force, is 

working along with other EPA offices 

and other agencies such as the 

Occupational Health and Safety 

Administration and Consumer Product 

Safety Commission, to review the use of 

methylene chloride, perchloroethylene, 

trichloroethylene, and methyl 

chloroform in solvent and other 

applications. Before switching to any of 

these alternatives, firms should consult 

with EPA and state agencies to 

determine current requirements and the 

potential for future regulations. In the 

case of metal cleaning applications, 

alternatives to these chlorinated 

solvents which might be appropriate for 

many current applications including 

aqueous cleaning as well as other nonchlorinated solvents. 

The electronics industry consumes 

CFC-113 to remove solder flux from 

printed circuit boards, to degrease 

semiconductors, to manufacture etchant 

gases, to degrease printed circuit boards 

in storage media manufacture, and in 

other ways. Viable alternatives exist for 

each of these uses. Beginning in the 

short term and expanding over the 

longer term, the use of aqueous cleaning 

and flux that does not require cleaning 

appears most promising. EPA convened 

a panel of experts in this field and they 

reported that it is technically possible to 

eliminate up to 90 percent of current 

CFC-113 use in non-surface mount 

applications by substituting aqueous 

cleaning. The remaining 10 percent 

depends on non-aqueous cleaners 

because of design choices that can be 

changed over time. An important step in 

facilitating the use of aqueous and nonclean fluxes may involve working with 

the U.S. military to review its current 

solvent and solder specifications to • 

facilitate the use of these alternatives 

where appropriate. 

d. Flexible Foam. This industry group 

includes makers of polyurethane foam 

slabstock used primarily for bedding 

and mattresses. CFC-11 is used as an 

auxiliary blowing agent in that segment 

of the industry which produces less 

expensive, low density or supersoft 

foams. Many producers now use 

methylene chloride to make similar 

foam products. However, because of 

toxicity concerns and the possibility of 

more stringent regulations both inside 

and outside the workplace, it is unlikely 

that many firms will elect to switch to 

this alternative blowing agent 

No alternative technologies or 

chemical substitutes currently appear as 

the likely replacements for use of CFCll in blowing flexible foam. Instead, in 

the near-term it is possible that the very 

softest, lowest density foams will be 

replaced by firmer foams blown without 

an auxiliary agent Over the longer-term, 

depending on its price, HCFC-123 may 

become a viable replacement for CFCll blown foam. This chemical appears 

to be a possible replacement for CFC-11 

in many foam applications. It has similar 

industrial properties and initial tests 

suggest that it might be an effective 

substitute blowing agent. HCFC-123 has 

a substantially shorter lifetime than 

CFC-11 and therefore has not been 

included under the chemicals covered 

by this proposal. However, additional 

toxicity tests will be required before 

widespread use is possible and the costs 

of this substitiute are likely to be 

approximately 2 times to 3 times the 

current price of CFC-11. Like HFC-134a, 

this chemical should be commercially 

available in 5-years to 6 years assuming 

no major problems are encountered. 
Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 47511 

^ A - —s s 5 "ir- - - - •' w '•" •• « * • — ' . • . •--.• • — • i II. i • „ . • u f • •. • • i i. 

P.28 

In addition to slabstock foam, flexible 

molded foam blown with CFC-11 is 

used primarily in seat and back 

cushions by auto manufacturers and 

also in some furniture uses. Several 

companies have stated that they 

currently do not use CFC-11 as an 

auxiliary blowing agent; they have 

shifted to water blown foam. Other 

companies have noted that within three 

months they will also shift out of CFC 

use and into water blown foams. 

e. Commercial and Residential 

Refrigeration. As was the case with air 

conditioning, over the last few years, 

commercial refrigeration has moved in 

the direction of shifting some uses from 

CFC-12 to HCFC-22, CFC-502, CFC-502 

and other refrigerants. This trend is 

likely to continue in the area of 

commercial refrigeration. Manufacturers 

can also further reduce emissions from 

leak testing and rework. Increased 

recovery at reworking, venting and 

disposal will also reduce the use of 

CFCs. Over the longer term, HFC-134a 

appears promising as a means of 

eliminating this use of CFC-12. 

For home refrigerators, the same 

substitute may prove feasible. In 

addition, home appliances might be 

produced using a modified sterling cycle 

or other technology that does not use 

CFC as its refrigerant. CFC-500, which 

has as ozone-depleting potential of 0.7, 

can be used in some appliances such as 

dehumidifiers. 

f. Rigid Insulating Foam. CFC-11 is 

widely used as a foam blowing agent to 

make various forms of insulating foam 

(e.g., polyurethane, isocyanurate, 

phenolic, etc.). Its molecular weight and 

low thermal conductivity make CFC-11 

an excellent chemical in the 

manufacture of highly efficient 

insulating materials used for roofs, 

walls, and foundations. 

In the near-term, this use of CFCs may 

not be significantly reduced because of 

its utility in saving energy (and meeting 

code requirements) and because no 

substitute blowing agents are available. 

However, some product substitutes may 

make inroads into its current market. 

Over the longer-term, HCFC-123 may 

become an attractive means of reducing 

this use of CFC-11. 

g. Rigid Packaging Foam. CFC-12 is 

used as a blowing agent in the 

manufacture of polystyrene foam which 

is widely used in the food packaging 

industry. CFC-12 currently competes 

with pentane as a blowing agent for 

producing this foam with each capturing 

about 50 percent of the market. 

Because of pentane's potential 

problems with flammability and air 

pollution, many firms now using CFC-12 

will not want to incur the substantial 

costs of shifting to this chemical. 

Instead, recent process development 

efforts have demonstrated that HCFC22 can effectively be used as an 

alternate blowing agent. Industry 

estimates suggest that onlyminimal 

costs would be incurred in converting a 

plant from CFC-12 to HCFC-22 (on the 

order of $50,000 to $100,000) and that 

operating costs and efficiencies will not 

be significantly affected. An application 

was recently approved by the Food and 

Drug Administration granting nonobjection (e.g., a ruling that the proposed 

product for a particular use does not 

differ materially from an already 

approved product) to the use of HCFC22 blown foam in fast food packaging. 

h. Total Flooding Fire Extinguishant 

Systems. Halon 1301 is used almost 

exclusively as the agent in total flooding 

systems used to protect computer 

centers, document rooms, libraries, 

military installations, etc. Because it is 

nontoxic (which allows it to be 

discharged without evacuating the 

facility) and because it does not leave a 

residue, its provides an extremely useful 

function in protecting high value 

property. 

In response to recent concerns about 

the role of halons as a potential ozonedepleting substance, the industry has 

initiated a series of steps to better 

understand and reduce any unnecessary 

emissions of this gas. For example, the 

industry decided not to require 

mandatory discharge testing of new 

systems as part of a review of its fire 

protection code. It is exploring the 

development of alternative test gases 

and ways to limit discharges from false 

alarms. It also conducted an industrywide survey to determine current uses 

and sources of emissions and is 

exploring ways to track halons from the 

time of production to their release as 

basis for possibly shifting to an 

emissions (instead of production) based 

regulatory regime. 

In the near term, the voluntary 

emission reduction steps described 

above might provide ample room for 

continued growth in the number of 

systems assuming substantial reductions 

from unncessary testing and false 

alarms can be realized. Over the longer 

term, alternate chemicals may be 

developed, more efficient use of these 

chemicals may be possible (e.g., shifting 

from 1301 total flooding systems to more 

directed, less depleting 1211 systems), or 

the industry may be capable of 

demonstrating that an emissions based 

regulatory system is a viable means of 

protecting the environment while 

continuing the use of these chemicals. 

i. Halon Fire Extinguishers. Halon 

1211 is used extensively in wheeled and 

handheld portable fire extinguishers. 

These extinguishers are used in 

situations where human exposure to the 

agent is possible (e.g., airplanes) or 

where concerns exist about harm from 

residues from other agents (e. g., 

computers). At the same time, these 

extinguishers have recently penetrated 

the broader consumer market and some 

percentage are now being purchased 

and used for appjications where other 

agents would be adequate. 

In addition, the major user of Halon 

1211 is the military as part of its training 

exercises. The U.S. military has already 

initiated a review of possible steps to 

reduce unneccesary steps from training 

and is also working on developing 

alternative fire-fighting agents. 

j . Sterilization. CFC-12 in 

combination with ethylene oxide (EO) 

(in a 12/88 blend) is widely used by 

hospitals, medical equipment 

manufacturers and contractors for 

sterilizing equipment. While 30 percent 

of the commercial market and majority 

of hospitals now use this CFC/EO blend, 

other options are currently feasible. 

Hospitals could shift to a blend of 

carbon dioxide and ethylene oxide and 

totally eliminate their use of CFC-12. 

While this shift requires that a chamber 

be able to withstand higher pressure 

and may involve a longer processing 

time, neither of these concerns are 

expected to create problems for most 

hospitals. 

Because of their higher volume use, 

commercial sterilizers could 

economically increase their recapture 

and recovery of CFC-12 through the 

addition of carbon adsorption or 

refrigerated condensors. In turn, 

hospitals could elect to increase their 

reliance on contract sterilizers as an 

alternative to shifting to carbon dioxide/ 

ethylene oxide mix. 

Sterilization using cobalt radiation 

has recently achieved a growing share 

of the market and offers another 

attractive alternative to current use of 

CFC-12 in this application. Other 

methods of sterilization such as electron 

beam and alternative chemicals are also 

possible over a longer time period. 

Finally, EPA is also seeking comment 

on the desirability of requiring that 

products produced with the controlled 

substances be labelled. This 

requirement would provide useful 

information for consumers. By making it 

possible for consumers to distinguish 

between those spraycans that contained 

CFCs and those that did not, it was an 

effective part of the regulatory program 

limiting this use of CFCs in 1978. 

Labelling requirements could be used as 
P.29 

47512 Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 

an adjunct to any of the other regulatory 

options described above. 

VII. Impact of Proposed Action 

A. Reductions in Ozone Depletion 

The proposed regulation would 

substantially reduce the threat of 

stratospheric ozone depletion and the 

accompanying risks to human health 

and the environment. As shown earlier 

in Table 4, in the absence of any 

regulation, a continuation of current 

trends in the use of ozone-depleting 

chemicals could result in a global 

average of 12 percent depletion by 2050 

and as much as 40 percent depletion by 

2075. 

By reducing consumption of the most 

potent ozone-depleting CFCs in 

approximately a decade by 50 percent 

from 1986 levels and by freezing 

consumption of halons 1211,1301, and 

2402, the projected depletion of ozone 

would be substantially eliminated. 

Based on current models, these 

limitations (assuming a significant 

portion of other nations take similar 

steps) would result in depletion 

estimates of 1.6 percent by 2050 and 

under 1.4 percent by 2075. 

Given the large uncertainties 

concerning current atmospheric models, 

the rates of growth of other trace gases, 

and reduction steps by other nations, 

EPA's proposed action represents a 

reasonable near-term strategy for 

safeguarding the ozone layer. However, 

as we develop a better understanding of 

these factors, EPA intends to 

periodically reassess its actions. The 

Agency also intends to participate in 

similar reassessments conducted under 

the auspices of the Montreal Protocol. 

B. Economic Impact 

In its regulatory impact analysis, EPA 

has examined the potential costs (in 

terms of U.S. industry) and health and 

environmental benefits also limited ta 

the U.S. which are likely to result from 

the proposed action. The analysis 

assumes that a large portion of other 

developed and developing nations jom 

with the United States in reducing their 

consumption and production of the 

controlled substances. 

Given the nature of this issue, the RIA 

necessarily covers a broad range of 

areas. On the costs side, this analysis 

covers eight major industrial groupings: 

refrigeration; air conditioning; flexible 

foam; rigid foam; solvent cleaning; 

sterilization; miscellaneous; and fire 

extinguishant. The RIA contains 

information on over 650 different control 

options for limiting use of CFCs and 

halons within these industrial groupings. 

The potential benefits from limiting 

the amount of future depletion also 

cover a broad raage of health and 

environmental concerns. An increase in . 

the quantity of damagidg ultraviolet 

radiation flux would-represent a major 

chafige in one of the basic 

environmental parameters potentially 

affecting to varying degrees most forms 

of biological life. While research to date 

on fce effects of increased exposure to 

UV-B radiation has been limited, the 

RIA explores several specific potential 

areas of damage, only some of which 

cartibe quantified with currently 

available information. 

1. Economic Costs of Reductions 

EPA used a bottom-up approach in 

analyzing the costs of meeting the 

proposed regulation. As described 

above, studies were initiated in eight 

major CFC and halon use categories. 

These groupings were then further 

divided into 82 specific applications. For 

example, refrigeration was divided into 

18 categories including retail food, home 

refrigerators, refrigerated transport, etc. 

Finally costs and emission reduction 

estifnates were developed for over 650 

distinct control options covering the full 

range of use applications. These options 

included engineering controls, chemical 

substitutes, product substitutes, 

recovery and recycling, and work 

practices. Cost estimates included 

capital and operating expenses 

(including, where applicable, any energy 

penalty). Technologies were assessed in 

terms of the date at which they would 

be available (0-3 years, 4-7 years, or 

longer), and tiie (ate and limits for 

achieving market penetration. 

Tiie cost estimates for these 

redactions were used as the input for the 

Integrated Assessment Model (IAM) 

which provided estimates of the total 

cost of meeting a regulatory goal. The 

model operates fey prioritizing the 

potential reductions on the basis of least 

cost and the judgment of EPA's 

corttractors based on discussion with 

industry representatives concerning the 

likely response to regulations on the 

part of specific iadustry sectors. 

The output from the model provides 

an estimate of the total social costs for 

meeting a required level of reductions, 

the CFC or halon price increases which 

wosld likely accompany such costs, and 

the amount of transfers which would be 

involved. Table 5 contains these 

estimates for proposed regulation under 

fouf different assumptions concerning 

the rate at which firms respond to 

changes in market conditions resulting 

from restrictions on the regulated 

chemicals. 

The "least cost" scenario assumes 

that all reductions are taken as soon as 

they are technologically available and ' 

as soon as the cost of CFCs or halons 

exceed the cost of making the reduction. 

In this scenario, CFC price increases are 

minimal in the early years, rise to $3.77/ 

kg around the turn of the century and 

plateau around $5.48/kg well before 

2075 when chemical substitutes have 

penetrated jnajor markets. 

The low initial cost increases reflect 

the large quantity of CFC and halon 

reductions that are available with 

current technologies and which either 

will save firms money (e.g., through 

additional CFC or halon recovery) or 

which are competitive. In the latter 

years of the analysis, the $5.48 price 

ceiling reflects the anticipated costs of 

alternative chemicals (e.g., primarily 

HFC-134a replacing CFC-12 and HCFC123 replacing CFC-11 in foam 

applications) which could replace large 

quantites of current CFC use. In the 

least cost scenario, total social costs 

were calculated to be $689 million 

through 2000 and $27 billion through 

2075 (all social costs assume a 2 percent 

discount rate). 

In contrast to the "least cost" case, 

the other scenarios assume varying 

degrees of delay in implementation of 

steps to reduce CFC and halon use. 

Firms might delay their response for any 

of several reasons: They lack 

information about the availability or 

applicability of a technology; they are 

less concerned about minimizing costs 

in the short-run because they can pass 

on price increases to consumers; they 

may lack access to capital to make a 

shift to a lower cost technology; or they 

may assume a high "hurdle rate" (i.e., 

the desired return on capital for any 

new investments) for capital committed 

to pollution control. 

The costs of meeting the proposed 

regulation under these alternative 

scenarios is also shown in Table 5. The 

social costs calculated from the IAM 

through 2000 ranged from $1.1 billion to 

$1.8 billion depending on the rate at 

which firms implemented low cost 

reductions. The CFC price increase 

which would accompany these costs in 

all scenarios reached $5.48/kg just 

before the turn of the century. However, 

the range of transfer costs during this 

time period (1989-2000) was much 

wider, reflecting different price increase 

in the initial years. In the "moderate 

stretchout" case transfers through 2075 

totaled $7.15 billion, while in the "major 

stretchout" case transfers totaled $9.4 

billion. 

Thus, the rate at which firms 

implement low cost reductions is an 
P.30 

Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 47513 

important determinant, particularly in 

the near-term, of the costs and transfer 

payments involved in meeting the 

proposed regulations. 

As part of analyzing the economic 

costs of reducing CFC and halon use, the 

RIA also takes into consideration 

possible impacts of the proposed 

regulation on energy use. CFCs are used 

in a wide range of energy-related areas 

including insulation for buildings and 

appliances. Its thermal efficiency also 

affects energy consumption of 

refrigerators and other appliances. 

Based on the analysis in the RIA, no 

significant increases in energy 

consumption or costs are likely to occur. 

In the near-term, CFCs are still likely to 

be used in major appliances. In the case 

of insulation, building and energy codes 

generally require a set level of energy 

efficiency which will either continue to 

be satisfied by CFC-blown foam or by 

other insulating materials (e.g. 

fiberglass). In the longer-term, substitute 

blowing agents are likely to be 

developed and formulations modified to 

maintain current insulating values. 

2. Health and Environmental Benefits 

The RIA also contains a description of 

the potential benefits that would result 

from actions to limit the risks from 

ozone depletion. In some of the health 

and environmental areas, sufficient 

research has been completed to provide 

a basis for a dose response relationship 

which can be used for calculating 

potential benefits. Examples of these 

areas include nonmelanoma and 

melanoma skin cancer, and cataracts. In 

other areas, research on UV-B radiation 

effects primarily has taken the form of 

case studies. For example, research on 

plant effects has progressed the furthest 

on soy beans, while research on aquatic 

effects has examined potential impacts 

on anchovies. In these and similar areas 

(e.g., increased groundlevel ozone 

formation and sea level rise impacts), 

the RIA quantifies benefits based on an 

extrapolation from existing case studies. 

Finally, in several areas, initial studies 

have clearly shown that increased UV-B 

radiation will cause damage, but not 

enough information exists to quantify 

those impacts. Examples include 

suppression of the immune system and 

climate related impacts on water 

resources, agriculture, forests, etc. A 

detailed decription of the derivation of 

the benefits estimates are included in 

volumes 1 and 2 of the RIA. 

Table 7 summarizes estimates of the 

economic benefits which would result 

from the proposed actions to prevent 

future depletion of the ozone layer. 

These benefits reflect the difference 

between the base case (no regulation) 

described in Section IV and the "CFC 

50%, Halon Freeze" case which forms 

the basis for this proposed regulation. 

It should be stated that projecting 

benefits out to the year 2075 is a very 

speculative exercise at best (but is 

required because of the long 

atmospheric lifetime of these chemicals). 

The estimates are subject to substantial 

uncertainties both in the calculation of 

the dose-response effects, and in the 

economic values placed on such effects. 

Due to this enormous uncertainty, the 

benefits have been estimated in ranges. 

TABLE 7.—SUMMARY OF BENEFITS FROM 

PROPOSED REGULATION* 

Effects: 

Valuation:" 

Value of skin cancer casesflow and high sensitivity).. 

Value of skin cancer 

deaths. 

(low and high sensitivity).. 

Value of cataract cases 

(low and high sensitivity).. 

(low and high sensitivity).. 

(low and high sensitivity).. 

Damage to crops from 

ground level ozone. 

(low and high sensitivity).. 

(low and high sensitivity).. 

Sea level rise damage to 

major ports. 

Total monetary benefits: 

(low and high sensitivity).. 

Reference scenario 

154.43 million cases. 

$61.3 billion. 

($1.1 bill.-$205 Ml.). 

$6.35 trillion. 

($17.4 bill.-$342 toil.). 

$2.57 billion. 

($72 mill.-$7.8 bill.). 

$23.4 billion. 

($2.3 MI.-S46 Ml). 

($3bill.-$11.4bill.). 

$12.4 billion. 

($1.1 bill.-S24.9 bill.). 

$3.12 billion. 

($221 mill.-$6.3 bill.). 

$4.3 billion. 

$6.3 trillion. 

($29 bill, to $340 toil). 

* Shows value of avoided damage relative to "no regulation" For populations alive today and born before 2075. 

" Ranges for damage valuation reflect the following scenarios: the high scenario assumes a 1 percent discount rate 

and a $4 million value of life which increases by 3.4 percent 

per year. The low scenario assumes a 6 percent discount 

rate and a $2 million value of life which increases by 0.65 

percent per year. The medium scenario assumes a 2 percent 

discount rate and a $3 million value of life which increases 

by 1.7 percent per year. 

Health effects (skin cancer incidence and mortality, and 

cataract incidence modeled based on dose-response estimates presented kl EPA (1987). Crop estimates presented 

for grain crops based only on dose response developed for 

soy beans. Damage to fish estimated for commercial harvest 

of fin and shell fish based on dose response developed tor 

anchovies. Polymer estimates based on dose response 

models developed lor PVC and extended to include acrylics 

and polyesters. Damage to crops from ground level ozone 

based on case studies of 3 U.S. cities and a national crop 

loss model. Sea level rise estimates. assume anticipatory 

action to lessen damages, but only includes storm damage 

to major ports based on limited case studies. 

The total benefits through 2075 were 

estimated to be between $29 billion and 

$340 trillion (benefit estimates were 

discounted over a range of 1 percent to 6 

percent annually). The majority of these 

benefits resulted from decreases in the 

number of deaths from skin cancer 

which is an area where effects research 

has progressed the furthest. The skin 

cancer benefit estimates, however, 

assume no improvement in our ability to 

treat skin cancer. If a cure for cancer 

were discovered, these benefits would 

decrease enormously. Because more 

limited research has been undertaken in 

the area of potential damage to crops 

and aquatic organisms, the estimates of 

potential benefits for these areas are 

also uncertain. In its report to EPA, the 

Science Advisory Board stated that it 

believed that damage related to these 

areas could prove to be of greater global 

magnitude than harm from skin cancers. 

3. Comparison of Costs and Benefits 

Based on the analysis presented 

above and detailed in the RIA, the 

estimated benefits from the proposed 

regulation would far exceed the 

estimated costs. Table 8 summarizes 

these benefits and costs. It shows that 

for those areas where quantification 

was possible, benefits would total from 

$29 billion to $340 trillion for the period 

1989-2075. In comparison, costs of 

reducing CFCs and halons called for by 

the proposed regulation for the same 

period would total approximately $27 

billion. Table 9 illustrates the extreme 

sensitivity of this analysis to specific 

individual assumptions about discount 

rates and the valuation of life. 

Additional sensitivities are included in 

the RIA. 

TABLE 8.—COMPARISON OF COSTS 

AND BENEFITS THROUGH 2075 by 

Scenario 

f Billions of 1985 dollars] 

No Controls: 

CFC Freeze .... 

(low) 

(high) 

CFC 20% 

(low) 

(high) 

CFC 50% 

(low) 

(high) 

CFC 80% 

(low) 

(high) 

CFC 50%/ 

Halon freeze ... 

(low) 

(high) 

CFC 50%/ 

Halon 

freeze/U.S. 

80% 

(low) 

(high) 

U.S. only CFC 

50% 

(low) 

(high) 

Health 

and 

environmental 

benefits 

5.995 

16 

324,000 

6,132 

17 

330,000 

6,299 

18 

339,000 

6,400 

19 

341,000 

6,463 

19 

345,000 

6,506 

19 

346,000 

2,852 

8 

135,000 

Costs 

7 

0.7 

12 

12 

2 

21 

24 

5 

41 

31 

7 

51 

27 

5 

46 

34 

7 

56 

27 

5 

46 

Net 

benefits 

5.988 

15 

323,988 

6,120 

15 

229,979 

6,275 

13 

338,959 

6.369 

12 

340,949 

6,436 

14 

344,954 

6,472 

12 

345,944 

2,825 

3 

134,954 

All dollar values reflect the difference 

between the No Controls Scenario and 
P.31 

47514 Federal Register /Vol . 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 

the specified alternative scenario. 

Valuation of the health and 

environmental benefits applies only to 

people born before 2075; costs are 

estimated through 2075. 

Ranges for damage valuation reflect 

the following scenarios: the high 

scenario assumes a 1 percent discount 

rate and a $4 million value of life which 

increases by 3.4 percent per year. The 

low scenario assumes a 6 percent 

discount rate and a $2 million value of 

life which increases by 0.85 perceat per 

year. The medium scenario assumes a 2 

percent discount rate and a $3 million 

value of life which increases by 1.7 

percent per year. 

Source: EPA Regulatory Impact 

Analysis, 1987. 

TABLE 9.—SUMMARY OF RESULTS OF SENSITIVITY ANALYSES FOR COSTS AND MAJOR 

HEALTH BENEFITS FOR PEOPLE BORN BEFORE 2075 

Sensitivity 

t. Base case (assumes 

a two percent 

discount rate) 

2. Discount rates 

A. 1 percent 

B. 6 percent 

Protocol 

3. Value ot life 

A. $2 million 

S. $4 million 

Protocol 

Ozone 

depletion 

by 

2075 

(percent) 

39.9 

1.3 

38.6 

39.9 

1.3 

38.6 

39.9 

1.3 

38.6 

39.9 

1.3 

38.6 

39.9 

1.3 

38.6 

Value 

of lives 

lost 

<10") 

6,499 

150 

6,349 

24.650 

388 

24.262 

71 

9 

62 

4,333 

100 

4,233 

8,667 

225 

8,442 

Control 

costs 

(10») 

27 

27 

46 

46 

5 

5 

27 

27 

27 

27 

Net 

present 

value 

of 

benefitscosts 

(10«> 

6.322 

24,216 

57 

4,206 

8.415 

Source: EPA Regulatory Impact Analysis, 1987. 

VIII. Additional Information 

A. Executive Order 12291 

Executive Order (E.O.) 12291 requires 

the preparation of a regulatory impact 

analysis for major rules, defined by the 

order as those likely to result in: 

(1) An annual effect on the economy 

of $100 million or more; 

(2) A major increase in costs or prices 

for consumers, individual industries. 

Federal, State, or local government 

agencies, or geographic industries; or 

(3) Significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or on the 

ability of United States-based 

enterprises to compete with foreignbased enterprises in domestic or export 

markets. 

EPA has determined that this 

proposed regulation meets the definition 

of a ijpajor rule under E.O. 12291, and 

has prepared a regulatory impact 

anabjfete (RIA). Th6t document, along 

with ibis notice oflproposed rulemaking, 

has hgen submitted to the Office of 

Management wid Budget (OMB) for 

review under Hkeeaitive Order 12291. 

Any fjsmments from OMB and any EPA 

responses to saoh comments are 

available for public inspection at the 

Cental Docket Section, South 

Confluence Room#, Docket No. A-87-

20, U1S. Environmejital Protection 

Agenfy, 401M Striet SW., Washington, 

DC 2#460. A copy of the RIA has also 

been placed in the rulemaking docket. 

B. Regulatory Flexibility Act 

The Regulatory flexibility Act, 5 

U.S.C, 601-612, requires that Federal 

agenrjes examine the impacts of their 

regulations on small entities. Under 5 

U.S.C, 604(a), whenever an agency is 

requited to publish a general notice of 

proposed rulemaking, it must prepare 

and make available for public comment 

an inlial regulator^ flexibility analysis 

(RFA|. Such an analysis is not required 

if the head of asi agency certifies that a 

rule vwM not have a significant economic 

impatft on a substantial number of small 

entities, pursuant to 5 U.S.C. 605(b). EPA 

has pfepared an initial regulatory 

flexibility analysis* for the regulations 

proposed in this notice, and this initial 

RFA feas been placed in the rulemaking 

docket. 

The initial RFA concluded that of the 

many industries potentially affected by 

tiie psoposed regulation, the foam 

blowfrs were the only group that could 

be substantially aftected based on the 

criteria contained ki EPA guidelines on 

preparation of an I F A. For their 

industries, because CFCs are such a 

minoS portion of total product costs, 

price increases of ifhe magnitude 

anticipated by this*regulation would not 

resultin significant economic impacts. 

The preliminary RFA suggests that 

differgat segments of the foamblowing 

industry are lifeely to be affected to 

differist extents depending on the 

availability of chemical substitutes 

versus alternative products. For 

example, the polystyrene foam blowers 

may fe able to shift from CFC-12 to 

HCFGr-22 without mcurring large capital 

costs and therefore would remain 

competitive with paper and other forms 

of packaging. In the case of rigid foam, 

price increases may cause some loss of 

market share to non-CFC blown foam or 

to other materials. Due to data 

limitations and the inability to 

accurately model behavioral changes, 

the number of firms that might go out of 

business versus the number that would 

shift to providing other insulating 

material could not be determined. 

In designing and evaluating its 

regulatory options, EPA sought to 

minimize the burdens placed on small • 

firms. In addition, the proposed hybrid 

approach (allocated quotas plus 

targetted regulations) would further 

reduce potential increases in CFC prices 

and thereby reduce the impact on the 

foamblowing industry. Because foam 

blowing is one of the major uses of 

CFCs, providing foam blowers with set 

asides and outright exemptions would 

have substantial impacts on efforts to 

protect the ozone layer or substantially 

increase costs to other industries. 

C. Paperwork Reduction Act 

The information collection 

requirements in this proposed rule will 

be submitted for approval to the Office 

of Management and Budget (OMB) 

under the Paperwork Reduction Act of 

1980, 44 U.S.C. 3501 et seq. Comments on 

these requirements should be submitted 

to the Office of Information and 

Regulatory Affairs, OMB, 726 Jackson 

Place, Washington, DC 20530 marked 

"Attention: Desk Officer for EPA." The 

final rule will respond to any OMB or 

public comments on the information 

collection requirements. 

IX. References 

Connell, P.S., (1980), "A parameterized 

numerical fit to total column ozone changes 

calculated by the LLNL 1-D model of the 

troposphere and stratosphere", Lawrence 

Livermore National Laboratory, Livermore, 

CA. 

Farman, J.C, B.G. Gardiner, and J.D. 

Shanklin, (1985), "Large losses of total ozone 

in Antarctica reveal seasonal ClOx/NOx 

interaction", Nature. 315, 207-210. 

Kerr, R.A., (1987), "Has Stratospheric 

Ozone Started to Disappear?", Science, 237, 

131-132. 

Khalil, M.A.K., and R.A. Rasmussen, (1985), 

"Trichlorofluoroethane (F-113) trends at Pt. 

Barrow, Alaska", in Geophysical Monitoring 

for Climate Change, No. 13. Summary Report 

1984, U.S. Department of Commerce, Boulder, 

CO. 

Molina, M.J., and F.S. Rowland. (1974), 

"Stratospheric sink for chlorofluoromethanes: 

chlorine atom-catalysed destruction of 

ozone", Nature, 249, 810-812. 

National Academy of Sciences, (NAS), 

(1976), Halocarbons: Effects on Stratospheric 

Ozone, National Academy Press, 

Washington, DC. 

National Academy of Sciences, (NAS), 

(1979a), Protection Against Depletion of 

Stratospheric Ozone by Chlorofluorocarbons. 

National Academy Press, Washington, DC. 

National Academy of Sciences. (NAS), 

(1979b), Stratospheric Ozone Depletion by 
P.32 

Federal Register / 'Vol. 52, No. 239 / Monday. December 14, 1987'/ Proposed Rules

 ; 47515 

—* 

Halocarbons: Chemistry arid Transport, .. 

National Academy Press, Washington, DC. • 

National Academy of Sciences, (NAS), 

(1983), Changing Climate, National Academy 

Press, Washington, DC. , 

National Academy of Sciences', (NAS), 

(1984), Causes and Effects of Changes in '• ' 

Stratospheric Ozone: Update 1983, National 

Academy Press, Washington, DC' 

National Aeronautics and Space -

Administration, (NASA). (1986). Present State' 

of Knowledge of the Upper Atmosphere: Ah 

Assessment Report,Processes that Control . 

Ozone arid Other Climatically ImportantTrace Gases, NASA Reference Publication 

1162; NASA, Washington, DC. 

Prather; M.J., M.B. McElroy, and S.C. 

Wofsy, (1984), "Reductions in ozone at high 

concentrations.of stratospheric halogens", ... 

Nature, 312,227-231. 

Pyle, J.A., and J.C. Farman, (1987), "Ozone 

Depletion: Antarctic Chemistry to Blame", 

Nature, 329,103-104. 

Rasmussen, R.A., and M.A.K. Khalil, (1982), 

"Atmospheric fluorocarbons and methyl 

chloroform at the South Pole",Vl/itorc//c 

Journal of the United States: 1982 Review, 

203-205. 

United Nations Environment Programme, 

(1987), "Ad Hoc Scientific Meeting to 

Compare Model Generated Assessments of 

Ozone Layer Change for Various Strategies 

for CFC Control", Wurzburg, Federal 

Republic of Germany, 9-10 April 1987, UNEP/ 

WG.167/INF.1 

United States Environmental Protection 

Agency (EPA), (1987), An Analysis of the 

Risks from Trace Gases That Can Modify the 

Stratosphere, U.S. EPA, Washington, DC. 

World Meteorological Organization . 

(WMO), (1986), Atmospheric Ozone 1985. 

Assessment of Our Understanding of the 

Processes Controlling its Present Distribution 

and Change. WMO Global Ozone Research 

and Monitoring Project—Report No. 16, 

WMO, Geneva, Switzerland. 

Date: December 1,1987. ' 

Lee M. Thomas, 

Administrator. 

United Nations Environment Programme 

. MONTREAL PROTOCOL ON 

SUBSTANCES THAT DEPLETE THE 

OZONE LAYER . 

Final Act, 1987 

Montreal Protocol on Substances That 

Deplete the Ozone Layer 

The Parties to this Protocol, 

Being Parties to the Vienna 

Convention, for the Protection of the 

Ozone Layer, 

Mindful of their obligation under that 

Convention to take appropriate 

measures to protect human health and 

the environment against adverse effects 

resulting or likely to result from human 

activities which modify or are likely to 

modify the ozone 1 year, 

Recognizing that world-wide 

emissions of certain substances can 

significantly deplete and otherwise 

modify the ozone layer in a manner that 

is likely td result in adverse effects on 

human health and the environment, 

Conscious of the potential climatic 

effects of emissions of these substances, 

Aware that measures taken to protect 

the ozone layer from depletion should 

be based on relevant scientific 

knowledge, taking into account technical 

and economic considerations. 

Determined to protect the ozone layer 

by taking precautionary measures to 

control equitably total global emissions 

of substances that deplete it with the 

ultimate objective of their elimination on 

the basis of developments in scientific 

knowledge, taking into account 

technical and economic considerations, 

Acknowledging that special provision 

is required to meet the needs of 

developing countries for these 

substances, 

Noting the precautionary measures for 

controlling emissions of certain 

chlorofluorocarbons that have already 

been taken at national and regional 

levels, 

Considering the importance of 

promoting international co-operation in 

the research arid development of science 

and technology relating to the control 

and reduction of emissions of 

substances that deplete the ozone layer, 

bearing in mind in particular the needs 

of developing countries, 

Have agreed as follows: 

Artcle I: Definitions 

For the purposes of this Protocol: 

1. "Convention means the Vienna 

Convention for the Protection of the 

Ozone Layer, adopted on 22 March'1985. 

2. "Parties" means, unless the text 

otherwise indicates, Parties to this 

Protocol. 

3. "Secretariat" means the secretariat 

of the Convention. 

4. "Controlled substance" means a 

substance listed in Annex A to this 

Protocol, whether existing alone or in a 

mixture. It excludes, however, any such 

substance or mixture which is in a 

manufactured product other than a 

container used for the transportation or 

storage of the substance listed. 

5. "Production" means tbe amount of 

controlled substances produced minus 

the amount destroyed by technologies to 

be approved by the Parties. 

6. "Consumption" means production 

plus imports minus exports of controlled 

substances. 

7. "Calculated levels" of production, 

imports, exports and consumption 

means levels determined in accordance 

with Article 3. 

8. "Industrial rationalization" means 

the transfer of all or a portion of the 

calculated level of production of one 

Party to another, for the purpose of 

achieving economic efficiencies or•>•j ' 

responding to anticipated shortfalls in 

supply as a result of plant closures. 

Article 2: Control Measures 

1. Each Party shall ensure that for the 

twelve-month period commencing on the 

first day of the seventh month following . 

the date of the entry into force of this > 

Protocol, and in each twelve-month 

period thereafter, its calculated level of 

consumption of the controlled . \ 7 " 

substances in Group I of Annex A does 

not exceed its calculated level of

 : 

consumption in 1986. By the end of the . 

same period, each Party producing.one • 

or more of tiiese substances shall ensure 

that its calculated level of production of 

the substances does not exceed its • 

calculated level of production in 1986, . 

except that such level may have 

increased by no more than ten per cent : 

based on the 1986 level. Such increase 

shall be permitted only so as to satisfy 

the basic domestic heeds of the Parties 

operating under Article 5 and for the 

purposes of industrial rationalization 

between Parties. 

2. Each, Party shall ensure that for the 

twelve-month period commencing on the 

first day of the thirty-seventh month 

following the date of the entry into force 

of this Protocol, and in each twelvemonth period thereafter, its calculated 

level of consumption of the controlled 

substances listed in Group II of Annex 

A does not exceed its calculated level of 

consumption in 1986. Each Party 

producing one or more of these 

substances shall ensure that its 

calculated level of production of the 

substances does not exceed its 

calculated level of production in 1986, 

except that such level may have 

increased by no more than ten per cent 

based on the 1986 level. Such increase 

shall be permitted only so as to satisfy 

the basic domestic needs of the Parties 

operating under Article 5 and for the 

purposes of industrial rationalization 

between Parties. The mechanisms for 

implementing these measures shall be 

decided by the Parties at their first 

meeting following the first scientific 

review. 

3. Each Party shall ensure that for the 

period 1 July 1993 to 30 June 1994 and in 

each twelve-month period thereafter, its 

calculated level of consumption of the 

controlled substances in Group I of 

Annex A does not exceed, annually, 

eighty per cent of its calculated level of 

consumption in 1986. Each Party 

producing one or more of these 

substances shall, for the same periods, 

ensure that its calculated level of 

production of the substances does not 
P.33 

47516 Federal Register / Vol. 52, No, 239 / Monday, December 14, 1987 / Proposed Rules 

exceed, annually, eighty per cent of its 

calculated level of production in 1986. 

However, in order to satisfy the basic 

domestic needs of the Parties operating 

under Article 5 and for the purposes of 

industrial rationalization between 

Parties, its calculated level of production 

may exceed that limit by up to ten per 

cent of its calculated level of production 

in 1986. 

4. Each Party shall ensure that for the 

period 1 July 1998 to 30 June 1999, and in 

each twelve-month period thereafter, its 

calculated level of consumption of the 

controlled substances in Group I of 

Annex A does not exceed, annually, 

fifty per cent of its calculated level of 

consumption jn 1986. Each Party 

producing one or more of these 

substances shall, for the same periods, 

ensure that its calculated level of 

production of the substances does not 

exceed, annually, fifty per cent of its 

calculated level of production in 1986. 

However, in order to satisfy the basic 

domestic needs of the Parties operating 

under Article 5 and for the purposes of 

industrial rationalization between 

Parties, its calculated level of production 

may exceed that limit by up to fifteen 

per cent of its calculated level of 

production in 1986. This paragraph will 

apply unless the Parties decide 

otherwise at a meeting by a two-thirds 

majority of Parties present and voting, 

representing at least two-thirds of the 

total calculated level of consumption of 

these substances of the Parties. This 

decision shall be considered and made 

in the light of the assessments referred 

to in Article 6. 

5. Any Party whose calculated level of 

production in 1986 of the controlled 

substances in Group I of Annex A was 

less than twenty-five kilotonnes may, 

for the purposes of industrial 

rationalization, transfer to or receive 

from any other Party, production in 

excess of the limits set out in paragraphs 

1, 3 and 4 provided that the total 

combined calculated levels of 

production of the Parties concerned 

does not exceed the production limits 

set out in this Article. Any transfer of 

such production shall be notified to the 

secretariat, no later than the time of the 

transfer. 

6. Any Party not operating under 

Article 5, that has facilities for the 

production of controlled substances 

under construction, or contracted for, 

prior to 16 September 1987, and 

provided for in national legislation prior 

to 1 January 1987, may add the 

production from such facilities to its 

1986 production of such substances for 

the purposes of determining its 

calculated level of production for 1986, 

provided that such fecilities are 

completed by 31 December 1990 and 

that st^h production does not raise that 

Party's annual calculated level of 

consuntption of the controlled 

substances above 0.5 kilograms per 

capita. """ 

7. Assy transfer of production pursuant 

to paragraph 5 or any addition of 

production pursuant to paragraph 8 shall 

be noticed to the secretariat, no later 

than ths time of the transfer or addition. 

8. (aj Any Parties which are Member 

States ef a regional economic 

integration organization as defined inArticle 1(6) of the Convention may agree 

that thgy shall j_Mirt|r fulfill their 

obligall&as respecting consumption 

under wts Article provided that their 

total combined calculated level of 

consuntption does not exceed the levels 

required by this Article. 

(b) 1%e Parties to any such agreement 

shall inform the secsetariat of the terms 

of the agreement before the date of the 

reduction in consumption with which 

the agreement is concerned. 

(c) S»ch agreement will become 

operative only if all Member States of 

the regional economic integration 

organisation and th | organization 

concerned are Parties to the Protocol 

and ha^e notified the secretariat of their 

manner: of implementation. 

9. (a) Based on the assessments made 

pursuant to Article 6, the Parties may 

decide whether: 

(i) adjustments to the ozone depleting 

potentials specified in Annex A should 

be made and, if so, what the 

adjustments should be; and 

(ii) further adjustments and reductions 

of production or consumption of the 

controlled substances from 1986 levels 

should be undertaken and, if so, what 

the scope, amount and timing of any 

such adjustments and reductions should 

be. 

(b) Proposals for such adjustments 

shall be communicated to the Parties by 

the secretariat at least six months 

before Hie meeting of the Parties at 

which feey are proposed for adoption. 

(c) In taking such decisions, the 

Parties shall make every effort to reach 

agreement by consensus. If all efforts at 

consensus have beea exhausted, and no 

agreement reached, such decisions shall, 

as a last resort, be adopted by a twothirds aajority vote of the Parties 

present and voting representing at least 

fifty per cent of the total consumption of 

the controlled substances of the Parties. 

(d) Tbe decisions, which shall be 

binding on all Parties, shall forthwith be 

communicated to the Parties by the 

Depositary. Unless otherwise provided 

in the decisions, they shall enter into 

force on the expiry of six months from 

the date of the circulation of the 

communication by the Depositary. 

10. (a) Based on the assessments 

made pursuant to Article 6 of this 

Protocol and in accordance with the 

procedure set out in Article 9 of the 

Convention, the Parties may decide: 

(i) Whether any substances, and if so 

which, should be added to or removed 

from any annex to this Protocol; and 

(ii) The meehanism, scope, and timing 

of the control measures that should 

apply to those substances; 

(b) Any such decision shall become 

effective, provided that it has been 

accepted by a two-thirdy majority vote 

of the Parties present and voting. 

11. Notwithstanding the provisions 

contained in this Article, Parties may 

take more stringent measures than those 

required by this Article. 

Article 3: Calculation of Control Levels 

For the purposes of Articles 2 and 5, 

each Party shall, for each Group of 

substances in Annex A, determine its 

calculated levels of: 

(a) Production by: 

(i) Multiplying its annual production 

of each controlled substance by the 

ozone depleting potential specified in 

respect of it in Annex A; and 

(ii) Adding together, for each such 

Group, the resulting figures; 

(b) Imports and exports, respectively, 

by following, mutatis mutandis, the 

procedure set out in subparagraph (a); 

and 

(c) Consumption by adding together 

its calculated levels of production and 

imports and subtracting its calculated 

level of exports as determined in 

accordance with subparagraphs (a) and 

(b). However, beginning on 1 January 

1993, any export of controlled 

substances to non-Parties shall not be 

subtracted in calculating the 

consumption level of the exporting 

Party. 

Article 4: Control of Trade With NonParties 

1. Within one year of the entry into 

force of this Protocol, each Party shall 

ban the import of controlled substances 

from any State not party to this Protocol. 

2. Beginning on 1 January 1993, no 

Party operating under paragraph 1 of 

Article 5 may export any controlled 

substance to any State not party to this 

Protocol. 

3. Within three years of the date of the 

entry into force of this Protocol, the 

Parties shall, following the procedures in 

Article 10 of the Convention, elaborate 

in an annex a list of products containing 

controlled substances. Parties that have 
P.34 

not objected to the annex in accordance 

with those procedures shall ban, within 

one year of the annex having become -

effective, the import .of those products 

from any State hot party to this Protocol. 

4. Within five years of the entry into 

force of this Protocol, the Parties shall 

determine the feasibility of banning or 

restricting, from States not party to this . 

Protocol, the import of products 

produced with, but not containing, 

controlled substances. If determined 

feasible, the Parties shall, following the 

procedures in Article 10 of the 

Convention, elaborate in an annex a list 

of such products. Parties that have not 

objected to it in accordance with those 

procedures shall ban or restrict, within 

one year of the annex having become 

effective, the import of those products 

from any State not party to this Protocol. 

5. Each Party shall discourage the 

export, to any State not party to this 

Protocol, of technology for producing 

and for utilizing controlled substances. 

6. Each Party shall refrain from 

providing new subsidies, aid, credits, 

guarantees or insurance programmes for 

the export to States not party to this 

Protocol of products, equipment, plants -

or technology that would facilitate the 

production of controlled substances. 

7. Paragraphs 5 and 6 shall not apply 

to products, equipment, plants or 

technology that improve the 

containment, recovery, recycling or 

destruction of controlled substances, 

promote the development of alternative 

substances, or otherwise contribute to 

the reduction of emissions of controlled 

substances. 

8. Notwithstanding the provisions of 

this Article, imports referred to in 

paragraphs 1, 3 and 4 may be permitted 

from any State not party to this Protocol 

if that State is determined, by a meeting 

of the Parties, to be in full compliance 

with Article 2 and this Article, and has 

submitted data to that effect as specified 

in Article 7, 

Article 5: Special Situation of 

Developing Countries 

1. Any Party that is a developing 

country and whose annual calculated 

level of consumption of the controlled 

substances is less than 0.3 kilograms per 

capita on the date of the entry into force 

of the Protocol for it, or any time 

thereafter within ten years of the date of 

entry into force of the Protocol shall, in 

order to meet its basic domestic needs, 

be entitled to delay its compliance with 

the control measures set out in 

paragraphs 1 to 4 of Article 2 by ten 

years after that specified in those 

paragraphs. However, such Party shall 

not exceed an annual calculated level of 

consumption of 0.3 kilograms per capita. 

Any such Party shall be entitled to use 

either the average of its annual 

calculated level of consumption for the 

period 1995 to 1997 inclusive or a 

calculated level of consumption of 0.3 

kilograms per capita, whichever is the 

lower, as the basis for its-compliance 

with the control measures, 

2. The Parties undertake to facilitate 

access to environmentally safe 

alternative substances and technology 

for Parties that are developing countries 

and assist them to make expeditious use 

of such alternatives. 

3. The Parties undertake to facilitate 

bilaterally or multilaterally the provision 

of subsidies, aid, credits, guarantees or 

insurance programmes to Parties that 

are developing countries for the use of 

alternative technology and for substitute 

products. 

Article 6: Assessment and Review of 

Control Measures 

Beginning in 1990, and at least every 

four years thereafter, the Parties shall 

assess the control measures provided 

for in Article 2 on the basis of available 

scientific, environmental, technical and 

economic information. At least one year 

before each assessment, the Parties 

shall convene appropriate panels of 

experts qualified in the fields mentioned 

and determine the composition and 

terms of reference of any such panels. 

Within one year of being convened, the 

panels will report their conclusions, 

through the secretariat, to the Parties. 

Article 7: Reporting of Data 

1. Each Party shall provide to the 

secretariat, within three months of 

becoming a Party, statistical data on its 

production, imports and exports of each 

of the controlled substances for the year 

1986, or the best possible estimates of 

such data where actual data are not 

available. 

2. Each Party shall provide statistical 

data to the secretariat on its annual 

production (with separate data on 

amounts destroyed by technologies to 

be approved by the Parties), imports, 

and exports to Parties and non-Parties, 

respectively, of such substances for the 

year during which it becomes a Party 

and for each year thereafter. It shall 

forward the data no later than nine 

months after the end of the year to 

which the data relate. 

Article 8: Non-Compliance 

The Parties, at their first meeting, 

shall consider and approve procedures 

and institutional mechanisms for 

determining non-compliance with the 

provisions of this Protocol and for 

treatment of Parties found to be in noncompliance. 

Article 9: Research, Development, 

Public Awareness and Exchange of 

Information .vM .. . 

1. The Parties shall co-operate, 

consistent with their national laws, 

regulations and practices and taking 

into account in particular the needs of 

developing countries, in promoting, 

directly or through competent 

international bodies, research, 

development and exchange of 

information onT 

(a) Best technologies for improving the 

containment, recovery, recycling or 

, destruction of Controlled substances or 

otherwise reducing their emissions; 

(b) Possible, alternatives to controlled 

substances, to products containing' such 

substances, and to products 

~ manufactured with them; and 

(c) Costs and benefits of relevant 

control strategies. 

' 2. The Parties, individually, jointly or 

through competent international bodies, 

shall co-operate in promoting public 

awareness of the environmental effects 

of the emissions of controlled 

substances and other substances that 

deplete the ozone layer. 

3. Within two years of the entry into 

force of this Protocol and every two 

years thereafter, each Party shall submit 

to the secretariat a summary df the 

activities it has conducted pursuant to 

this Article. 

Article 10: Technical Assistance 

1. The Parties shall, in the context of 

the provisions of Article 4 of the 

Convention, and taking into account in 

particular the needs of developing 

countries, co-operate in promoting 

technical assistance to facilitate 

participation in and implementation of 

this Protocol. 

2. Any Party or Signatory to this 

Protocol may submit a request to the 

secretariat for technical assistance for 

the purposes of implementing or 

participating in the Protocol. 

3. The Parties, at their first meeting, 

shall begin deliberations on the means 

of fulfilling the obligations set out in 

Article 9, and paragraphs 1 and 2 of this 

Article, including the preparation of 

workplans. Such workplans shall pay 

special attention to the needs and 

circumstances of the developing 

countries. States and regional economic 

integration organizations not party to 

the Protocol should be encouraged to 

participate in activities specified in such 

workplans. 

Article 11: Meetings of the Parties 

1. The Parties shall hold meetings at 

regular intervals. The secretariat shall 

convene the first meeting of the Parties 
II fil l T 

47518 Federal Register / Vo i 52, No» 239 / Moaday, December 14, 1987 / Proposed Rules 

not later than one year after the date of 

the entry into force of this Protocol and 

in conjunction with a meeting of the 

Conference of the Parties to tiae 

Convention, if a meeting of the latter is 

scheduled within that period. 

2. Subsequent ordinary meetings of 

the Parties shall be held, unless the 

Parties otherwise decide, in conjunction 

with meetings of the Conference of the 

Parties to the Convention. Extraordinary 

meetings of the Parties shall be held at 

such other times as may be deemed 

necessary by a meeting of the Parties, or 

at the written request of any Party, 

provided that, within six months of 

such a request being communicated to 

them by the secretariat, it is supported 

by at least one third of the Parties. 

3. The Parties, at their first meeting, 

shall: 

(a) Adopt by consensus rules of 

procedure for their meetings; 

(b) Adopt by consensus the financial 

rules referred to in paragraph 2 of 

Article 13; 

(c) Establish the panels and determine 

the terms of reference referred to in 

Article 6; 

(d) Consider and approve the 

procedures and institutional 

mechanisms specified in Article 8; and 

(e) Begin preparation of workplans 

pursuant to paragraph 3 of Article 10. 

4. The functions of the meetings of the 

Parties shall be to: 

(a) Review the implementation of this 

Protocol; 

(b) Decide on any adjustments or 

reductions referred to in paragraph 9 of 

Article 2; 

(c) Decide on any addition to, 

insertion in or removal from any annex 

of substances and on related control 

measures in accordance with paragraph 

10 of Article 2; 

(d) Establish, where necessary, 

guidelines or procedures for reporting of 

information as provided for in Article 7 

and paragraph 3 of Article 9; 

(e) Review requests for technical 

assistance submitted pursuant to 

paragraph 2 of Article 10; 

(f) Review reports prepared by the 

secretariat pursuant to subparagraph (c) 

of Article 12; 

(g) Assess, in accordance with Article 

6, the control measures provided for in 

Article 2; 

(h) Consider and adopt, as required, 

proposals for amendment of this 

Protocol or any annex and for any new 

annex; 

(i) Consider and adopt the budget for 

implementing this Protocol; and 

(j) Consider and undertake any 

additional action that may be required 

for the achievement of the purposes of 

this Protocol. 

5. Trfe United Nations, its specialized 

agencies and the International Atomic 

EnergjaAgency, as well as any State not 

party tfe this Protocol, may be 

represented at meetings of the Parties as 

observfss. Any 'tedf-or agency, whether 

natioa.fl or in'tei#ia*i|>nal, governmental 

or nongovernmental, qualified in fields 

relating to the pfioteftion of the ozone 

layer-uihieh has inf#med the secretariat 

of Its ¥#s_h to be repjesented at a 

meeting of tiie Parties as an observer 

may be!admitted unless at least one 

third of tiie Parties gjpesent object. The 

admission and participation of 

observers shall fee sfbject to the rules of 

procedure adopted % the Parties. 

Article 12: Secretariat 

For ti e purposes off this Protocol, the 

secretariat shall: 

(a) Arrange for and service meetings 

of the Parties as provided for in Article 

11; 

(b) Receive and make available, upon 

requesfby a Party, dfata provided 

pursuant to Article 7; 

(c) P^pare and distribute regularly to 

the Parties reports based on information 

receive!! pursuant to Articles 7 and 9; 

(d) Notify tiie Parties of any request 

for tech_j»ical assistance received 

pursuant to Article M so as to facilitate 

the provision of such assistance; 

(e) Eacourage aoa|Parties to attend 

the meetings of the Karties as observers 

and to set in accordance with the 

provisions of this Protocol; 

(f) Provide, as appropriate, the 

information and requests referred to in 

subparagraphs (e) aifd (d) to such nonparty observers; and; 

(g) Perform such o#ier functions for 

the achievement of the purposes of this 

Protocol as may be assigned to it by the 

Parties. 

Article 13: Financial Provisions 

1. The/funds required for the operation 

of this protocol, mcluding those for the 

functioning of the secretariat related to 

this Protocol, shafl be charged 

exclusively against contributions from 

the Partes. 

2. The Parties, at their first meeting, 

shall adkpt by consensus financial rules 

for the operation of tins Protocol. 

Article 14: Relationship of This Protocol 

to the Convention 

Except as otherwise provided in this 

Protocol, the provisions of the 

Convention relating to its protocols shall 

apply to this Protocol 

Article 15: Signature 

This Protocol sfeall be open for 

signature by States and by regional 

economic integration organizations in 

Montreal on 16 September 1987, in 

Ottawa from 17 September 1987 to 16 

January 1988, and at United Nations 

Headquarters in New York from 17 

January 1988 to 15 September 1988. 

Article 16: Entry Into Force 

l.This Protocol shall enter into force 

oh 1 January 1989, provided that at least 

eleven instruments of ratification, 

acceptance, approval of the Protocol or 

accession thereto have been deposited 

by States or regional economic 

integration organizations representing at 

least two-thirds of 1986 estimated global 

consumption of the controlled 

substances, and the provisions of 

paragraph 1 of Article 17 of the 

Convention have been fulfilled. In the 

event that these conditions have not 

been fulfilled by that date, the Protocol 

shall enter into force on the ninetieth 

day following the date on which the 

conditions have been fulfilled. 

2. For the purposes of paragraph 1, 

any such instrument deposited by a 

regional economic integration 

organization shall not be counted as 

additional to those deposited by 

member States of such organization. 

3. After the entry into force of this 

Protocol, any State or regional economic 

integration organization shall become a 

Party to it on the ninetieth day following 

the date of deposit of its instrument of 

ratification, acceptance, approval or 

accession. 

Article 17: Parties Joining After Entry 

Into Force 

Subject to Article 5, any State or 

regional economic integration 

organization which becomes a Party to 

this Protocol after the date of its entry 

into force, shall fulfil forthwith the sum 

of the obligations under Article 2, as 

well as under Article 4, that apply at 

that date to the States and regional 

economic integration organizations that 

became Parties on the date the Protocol 

entered into force. 

Article 18: Reservations 

No reservations may be made to this 

Protocol. 

Article 19: Withdrawal 

For the purposes of this Protocol, the 

provisions of Article 19 of the 

Convention relating to withdrawal shall 

apply, except with respect to Parties 

referred to in paragraph 1 of Article 5. 

Any such Party may withdraw from this 

Protocol by giving written notification to 

the Depositary at any time after four 

years of assuming the obligations 

specified in paragraphs 1 to 4 of Article 

2. Any such withdrawal shall take effect 
P.36 

Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 47519 

upon expiry of one year after the date of 

its receipt by the Depositary, or on such 

later date as may be specified in the 

notification of the withdrawal. 

Article 20: Authentic Texts 

The original of this Protocol, of which 

the Arabic Chinese, English, French, 

Russian and Spanish texts are equally 

authentic, shall be deposited with the 

Secretary-General of the United 

Nations. 

In witness whereof the undersigned, 

being duly authorized to that effect, 

have signed this protocol. 

Done at Montreal this sixteenth day of 

September, One Thousand Nine 

Hundred and Eighty Seven. 

ANNEX A.—CONTROLLED 

SUBSTANCES 

Group 

Group 1: 

Group II: 

Substance 

CFCfe (CFC-11) „. 

CF,Cl22 (CFC-12).... 

CjF3Cb (CFC-113)... 

G.F«Cl2(CFC-114)... 

CjFsa (CFC-115).... 

CF2BrCI (halon1211). 

CF3F3r (halon-1301).. 

C2F.Br.. (halon2402). 

Ozone 

depleting 

potential' 

1.0 

1.0 

0.8 

1.0 

0-6 

3.0 

10.0 

(

2

) 

1

 These ozone depleting potentials are estimates based on existing knowledge and will 

be reviewed and revised periodically. 

2

 To be determined. 

For the reasons set out in the 

preamble, Part 82 of Title 40 of the Code 

of Federal Regulations is proposed as 

follows: 

1. The authority citation for Part 82 

continues to read as follows: 

Authority: 42 U.S.C. 7457(b). 

2. Part 82 is amended by adding the 

following §§ 82.1 through 82.14 and 

appendices A through D to read as 

follows: 

PART 82—PROTECTION OF 

STRATOSPHERIC OZONE 

Sec. 

82.1 Purpose and scope. 

82.2 Effective date. 

82.3 Definitions. 

82.4 Prohibitions. 

82.5 Apportionment of baseline production 

rights. 

82.6 Apportionment of baseline 

consumption rights. 

82.7 Grant and phased reduction of baseline 

production and consumption rights for 

group I controlled substances. 

Set. 

82.8 Grant and freeze of baseline production 

and consumption rights for group II 

controlled substances. 

82.9 . Allowance for production rights in 

addition to baseline production rights. 

82.10 Allowance for consumption rights in 

addition to baseline consumption rights. 

82.11 Exports to parties. 

82.12 Transfers of production and 

consumption rights. 

82.13 Recordkeeping and reporting 

requirements. 

82.14 Payment of fees. 

Appendix A to Part 82—Controlled 

substances and ozone depletion weights. 

Appendix B to Part 82—Parties to the 

Montreal Protocol. 

Appendix C to Part 82—Nations complying 

with,, but not party to, the protocol. 

Appendix D to Part 82—Twenty-fivekilotonne parties. . - ' 

Authority: 42 U.S.C. 7457(b). 

§82.1 Purpose and scope. 

(a) The purpose of these regulations is 

to implement the Montreal Protocol on 

Substances that Deplete the Ozone 

Layer under authority provided by 

section 157 of the Clean Air Act. The 

Montreal Protocol requires each nation 

that becomes a Party to the Protocol to 

limit its total production and its 

consumption (defined as production plus 

imports minus exports) of certain ozonedepleting substances according to a 

specified schedule. The Protocol also 

requires Parties to impose certain 

restrictions on trade in ozone-depleting 

substances with nonparties. 

(b) This rule applies to any individual, 

corporate, or governmental entity that 

produces, imports, or exports controlled 

substances. 

§82.2 Effective date. 

The regulations under this Part will 

take effect when the Montreal Protocol 

enters into force. The Montreal Protocol 

will enter into force on January 1,1989, 

provided that at least 11 instruments of 

ratification, acceptance, approval of the 

Protocol or accession thereto have been 

deposited by States or regional 

economic integration organizations 

representing at least two-thirds of 1986 

estimated global consumption of the 

controlled substances, and provided that 

the Vienna Convention for the 

Protection of the Ozone Layer has 

entered into force. If these conditions 

have not been fulfilled by January 1, 

1989, the Protocol will enter into force 

on the ninetieth day following the date 

on which the conditions have been 

fulfilled. 

§ 82.3 Definitions. 

As used in this Part, the term: 

(a) "Administrator" means the 

Administrator of the Environmental 

Protection Agency or his authorized 

representative. 

(b) "Baseline consumption rights" 

means the consumption rights 

apportioned under Sec; 82.6. 

(c) "Baseline production rights" means 

the production rights apportioned under 

Sec. 82.5. 

(d) "Calculated level" means the level 

of production, exports or imports of 

controlled substances determined for 

each Group of controlled substances by: 

(1) Multiplying the amount (in 

kilograms) of production, exports or 

imports of each controlled substance by 

that substance's ozone depletion weight 

listed in Appendix A to this Part; and 

(2) Adding together the resulting 

products for the controlled substances 

within each Group. 

(e) "Consumption rights" means the ; 

privileges granted by this Part to 

produce and import calculated levels of 

controlled substances; however, 

consumption rights may be used to 

produce controlled substances only in 

conjunction with production rights. A 

person's consumption rights are the total 

of the rights he obtains under Sees. 82.7 

(baseline rights for Group I controlled 

substances), 82.8 (baseline rights for 

Group II controlled substances), and 

82.10 (additional consumption rights 

upon proof of exports of controlled 

substances), as may be modified under 

Sec. 82.12 (transfer of rights). 

(f) "Control periods" means those 

periods during which the prohibitions 

under Sec. 82.4 apply. Those periods are: 

(1) For Group I controlled substances: 

[reserved] 

(2) For Group II controlled substances: 

[reserved] 

(g) "Controlled substance" means any 

substance listed in Appendix A to this 

Part, whether existing alone or in a 

mixture, but excluding any such 

substance or mixture that is in a 

manufactured product other than a 

container used for the transportation or 

storage of the substance listed. 

(h) "Export" means the transport of 

controlled substances from within the 

United States or its territories to persons 

or countries outside the United States or 

its territories. 

(i) "Facility" means any process 

equipment (e.g., reactor, distillation 

column) to convert raw materials or 

feedstock chemicals into controlled 

substances. 

(j) "Import" means the transport of 

controlled substances from outside the 

United States or its territories to persons 

within the United States or its 

territories. 

(k) "Montreal Protocol" means the 

Montreal Protocol on Substances that 
P.37 

47520 Federal Register / Vol. 52, No. $39 / Mondjay, December 14, 1987 / Proposed Rules 

Deplete the Ozone Layer which was 

adopted on September 16,1987, in 

Montreal, Canada. 

(1) "Nations complying with, but not 

joining, the Protocol" means any nation 

listed in Appendix C to this Part. 

(m) "Party" means any nation that is a 

party to the Montreal Protocol and listed 

in Appendix B to this Part. 

(n) "Person" means any individual or 

legal entity, including an individual, 

corporation, partnership, association, 

state, municipality, political subdivision 

of a state, Indian tribe, and any agency, 

department, or instrumentality of the 

United States and any officer, agent, or 

employee thereof. 

(o) "Plant" means one or more 

facilities at the same location owned by 

or under common control of the same 

person. 

(p) "Potential production rights" 

means the production rights obtained 

under Sec. 82.9 (a) and (b). 

(q) "Production" means the 

manufacture of a controlled substance 

from any raw material or feedstock 

chemical; however, production does not 

include the manufacture of controlled 

substances that are used and entirely 

consumed in the production of other 

chemicals. 

(r) "Production rights" means the 

privileges granted by this Part to 

produce calculated levels of controlled 

substances; however, production rights 

may be used to produce controlled 

substances only in conjunction with 

consumption rights. A person's 

production rights are the total of the 

rights he obtains under Sees. 82.7 

(baseline rights for Group I controlled 

substances), 82.8 (baseline rights for 

Group II controlled substances), and 

82,9 (c) and (d) (additional production 

rights), as may be modified under Sec. 

82.12 (transfer of rights). 

(s) "Twenty-five-kilotonne Party" 

means any nation listed in Appendix D 

to this Part. 

(t) "Unexpended consumption rights" 

means consumption rights that have not 

been used. At any time in any control 

period, a person's unexpended 

consumption rights are the total of the 

calculated level of consumption rights 

he holds at that time for that control 

period, minus the calculated level of 

controlled substances that the person 

has produced and imported in that 

control period until that time. 

(u) "Unexpended production rights" 

means production rights that have not 

been used. At any time in any control 

period, a person's unexpended 

production rights are the total of the 

calculated level of production rights he 

holds at that time for that control period, 

minus the calculated level of controlled 

substances that the person has produced 

in that control period until that time. 

§82.4 Prohibitions. 

(a) Nojteerson may produce at any 

time in apy control period, ajcalculated 

level of tsontrolled substances in excess 

of the amount of unexpended production 

rights held by that pefison at that time 

for that eontrol period Every kilogram 

of s«ch eSocess constitutes a separate 

violation of this regulation. 

(b) No person may {produce or import 

at any tiihe in any coijtrol period, a 

calculated level of controlled substances 

in excess of the amount of unexpended 

consumption rights held by that person 

at that tifee for that control period. 

Every kifegram of sucfe excess 

constitutes a separate-violation of this 

regulation. 

(c) A person may net use his 

production rights to pgoduce a quantity 

of controlled subs*a*ie*es unless he owns 

at the sape time consumption rights 

sufficient to cover that quantity of 

controlled substances, nor may he use 

his consumption rights to produce a 

quantity ®t contro*ed|substances unless 

he owns at the same'tfme production 

rights suSficient to cover that quantity of 

controlled substances. However, 

consumption rights alfne are required to 

import controlled substances. 

(d) Beginning oae year after the 

effectiveiferate of this Part, no person 

may import any qaanfity of controlled 

substances from arty nation not listed in 

Appends B to this P-asrt (Parties to the 

Montreal Protocol), unless that nation is 

listed in Appendix C to this Part 

(NationsComplyiBg wiith. But Not Party 

to, tiie Pibtocol). Every kilogram of 

controlled substances imported in 

contravention of this regulation 

constitutes a separate violation of this 

regulation. 

§ 82.5 Apportionment of baseline 

production rights. 

PersoflB who produced one or more 

controlled substancesiin 1986 are 

apportioned calculates levels of 

baseline (production rights as set forth in 

paragraphs (a) and |b | of this section. 

Each pesson's apportionment is 

equivalent to the eaicalated levels of 

that person's produotfbn of Group I and 

Group Uncontrolled substances in 1986. 

(a) Fof Group I confrolled substances: 

Person Calculated level 

§ 82.6 Apportionment of baseline 

consumption rights. . 

Persons who produced, imported, or 

produced and imported one or more 

controlled substances in 1986 are 

apportioned calculated levels of 

baseline consumption rights as set forth 

in paragraphs (a) and (b) of this section. 

The apportionment for each person who 

imported controlled substances is 

equivalent to the calculated levels of 

Group I and Group II controlled 

substances that the person imported in 

1986. The apportionment for each person 

who produced controlled substances is 

equivalent to the calculated levels of 

Group I and Group II controlled 

substances that the person produced in 

1986, multiplied by a correction factor. 

The general equation for thecorrection 

factor is (the calculated level of 1986 

United States production minus the 

calculated level of 1986 United States 

exports) divided by (the calculated level 

of 1986 United States production);.. 

correction factors are separately 

calculated for Group I and Group II 

controlled substances. 

(a) For Group I controlled substances: 

Person Calculated level 

(b) For Group II controlled substances: 

Person Calculated level ' 

Pi»rson Calculated level 

(b) For Group II controlled substances: 

§ 82.7 Grant and phased of baseline 

production and consumption rights for 

group I controlled substances. 

(a) For each of the control periods that 

ends before July 1,1993, every person is 

granted 100 percent of the baseline 

production and consumption rights 

apportioned to him under Sees. 82.5(a) 

and 82.6(a). 

(b) For each of the control periods that 

occurs between July 1,1993, and June 30, 

1998, inclusive, every person is granted 

80 percent of the baseline production 

and consumption rights apportioned to 

him under §§ 82.5(a) and 82.6(a). 

(c) For each of the control periods that 

begins after June 30,1998, every person 

is granted 50 percent of the base-line 

production and consumption rights 

apportioned to him under §§ 82.5(a) and 

82.6(a). 
P.38 

Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 47521 

§82.8' .Grand and (freeze o? baseline • 

production and consumption rights totgroup II controlled substances. 

For each of the control periods 

specified in § 82.3(f)(2), every person is 

granted 100 percent of the baseline 

production and consumption rights 

apportioned to him under § 82.5(b) and 

82.6(b). 

§82.9 Allowance tor production rights in 

addition to baseline production rights. 

(a) Every person apportioned baseline 

production rights for Group I controlled 

substances under § 82.5(a) is also 

granted a calculated level of potential 

production rights equivalent to: 

(1) 10 percent of his apportionment 

under § 82.5(a), for each control period 

ending before July 1,1998; and 

(2) 15 percent of his apportionment 

under § 82.5(a), for each control period 

beginning after June 30,1998. 

(b) Every person apportioned baseline 

production rights for Group II controlled 

substances under § 82.5(b) is also 

granted a calculated level of potential 

production rights equivalent to 10 

percent of his apportionment Under 

§ 82.5(b), for each control year specified 

in § 82.3(f)(2). 

(c) A person may convert potential 

production rights, either granted to him 

under paragraphs (a) and (b) of this 

section or obtained by him under § 82.12 

(transfer of rights), to production rights 

only to the extent authorized by the 

Administrator under § 82.11 (Exports to 

Parties). A person may 

obtainauthorization to convert potential 

production rights to production rights 

either by requesting issuance of a notice 

under § 82.11or by completing a transfer 

of authorization under § 82.12. 

(d) Any person ("the recipient") may 

obtain productionrights in accordance 

with the provisions of this paragraph. 

(1) A nation listed in Appendix D to 

this Part (Twenty-five-kilotonne Parties) 

must agree to transfer to the recipient at 

a specified time some amount of the 

calculated level of production that the 

nation is permitted under the Montreal 

Protocol. The recipient must obtain from 

the principal diplomatic representative 

in that nation's embassy in the United 

States a document clearly stating that 

that nation agrees to reduce its 

allowable calculated level of production 

by the amount being transferred to the 

recipient and for the control period(s) to 

which the transfer applies. 

(2) The recipient must submit to the 

Administrator a transfer request that 

includes a true copy of the document 

required by paragraph (d)(1) of this 

section and that sets forth the following: 

(i) The identity and address of the 

recipient; 

(ii) The identity of the Twerity-fivekilotonne Party; 

(iii) The names and telephone 

numbers of contact persons for the 

recipient and for the Twenty-fivekilotonne Party; f '''•'•'•-' " 

(iv) The amount of allowable 

calculated level of production being 

transferred; and 

(v) The control period(s) to which the 

transfer applies. 

(3) After receiving a transfer request 

that meets the requirements of 

paragraph (d)(2) of this section, the 

Administrator will: 

(i) Notify the Secretariat of the 

Montreal Protocol of the transfer; and 

(ii) Issue the recipient a notice 

granting the recipient production rights 

equivalent to the calculated level of 

production transferred, and specifying 

the control periods to which the grant of 

production rights applies. The grant of 

production rights will be effective on the 

date that the notice is issued. 

§ 82.10 Allowance tor consumption rights 

in addition to baseline consumption rights. 

(a) Except as limited by paragraph (b) 

of this section, any person may obtain, 

in accordance with the provisions of this 

paragraph, consumption rights 

equivalent to the calculated level of 

controlled substances that the person 

has exported from the United States or 

its territories. The consumption rights 

granted under this section will be valid 

only during the control period in which 

the exports arrived in the country to 

which they were transported. 

(1) The person who exported (the 

"exporter") the controlled substances 

must submit to the Administrator a 

request for consumption rights setting 

forth, with supporting documentation, 

the following: 

(i) The identities and addresses of the 

exporter and the recipient of the exports 

(the "importer"); 

(ii) The exporter's EIN (Employer 

Identification Number); 

(iii) The names and telephone number 

of contact persons for the exporter and 

for the importer; 

(iv) The quantity and type of 

controlled substances exported; 

(v) The date on which and the port 

from which.the controlled substances 

were exported from the United States or 

its territories; 

(vi) The country to which the 

controlled substances were exported 

and the date on which they arrived in 

that country; 

(vii) The source from which and the 

date on which the exporter purchased 

the controlled substances. 

(2) The Administrator will review the 

information and documentation 

submitted under paragraph (a)(1) of this 

section, arid issue the exporter a notice • 

granting the exporter consumption rights 

equivalent to the calculated level of 

controlled substances that the 

documenta tion, verifies were exported.' 

The grant of the consumption rights will 

be effective on the date the notice is 

issued. 

(b) No consumption rights will be 

granted after Januarj 1,1993, for exports 

of controllecTsubstances to any nation 

not listed in Appendix B to this Part 

(Parties to the Montreal Protocol). 

§82.11 Exports to parties. 

In accordance with the provisions of 

this section, any person may obtain 

authorization to convert potential 

production rights to production rights by 

exporting controlled substances to 

nations listed in Appendix B to this Part 

(Parties to the Protocol). Authorization 

obtained under this section will be valid 

only during the control period in which 

the controlled substances arrived in the 

party to which they were exported. A 

request for authorization under this 

section will be considered a request for 

consumption rights under § 82.10, as 

well. 

(a) The exporter must submit to the 

Administrator a request for authority to 

convert potential production rights to 

production rights. That request must set 

forth, with supporting documentation, 

the following: 

(1) The identities and addresses of the 

exporter and the importer; 

(2) The exporter's EIN number; 

(3) The names and telephone numbers 

of contact persons for the exporter and 

for the importer; 

(4) The quantity and type of controlled 

substances exported; 

(5) The date on which and the port 

from which the controlled substances 

were exported from the United States or 

its territories; 

(6) The country to which the 

controlled substances were exported 

and the date on which they arrived in 

that country; and 

(7) The source from which and the 

date on which the exporter purchased 

the controlled substances exported. 

(b) The Administrator will review the 

information and documentation 

submitted under paragraph (a) of this 

section, and assess the quantity of 

controlled substances that the 

documentation verifies were exported to 

a party. Based on that assessment, the 

Administrator will issue the exporter a 

notice authorizing the conversion of a 

specified quantity of potential 

production rights to production rights in 

a specified control year, and granting 
P.39 

47522 Federal Register / Vol. 52, No. 239 / Monday, December 14, 1987 / Proposed Rules 

consumption rights in the same amount 

for the, same control year. The. 

authorization may be used to convert 

potential production rights to production 

rights as soon as the date on which the 

notice is issued. 

§82.12 Transfers of Production and 

Consumption Rights. 

Any person ("transferor") may 

transfer to any other person 

("transferee") any amount of the 

transferor's consumption rights, 

production rights, potential production 

rights, or authorization to' convert 

potential production rights to production 

rights, as follows: 

(a) The transferor must submit to the 

Administrator a transfer request setting 

forth the following: 

(1) The identities and addresses of the 

transferor and the transferee; 

(2) The names and telephone numbers 

of contact persons for the transferor and 

for the transferee; 

(3) The type of rights (i.e., 

consumption rights, production rights, or 

potential production rights) or 

authorization being transfered; 

(4) The Group of controlled 

substances to which the rights or 

authorization being transferred pertains; 

(5) The amount of rights or 

authorization being transferred; 

(6) The control period(s) for which the 

rights or authorization are being 

transferred; and 

(7) The amount of unexpended rights 

of the type and for the control period 

being transferred that the transferor 

holds as of the date of the request. 

(b) If the records maintained by the 

Administrator, taking into account any 

previous trades and any production or 

imports reported by the transferor, 

indicate that the transferor possessed, 

as of the date the transfer request was 

processed, unexpended rights or 

authorization sufficient to cover the 

transfer request, the Administrator will 

issue a notice of transfer to the 

transferee and the transferor. The notice 

will specify the transferor and 

transferee, and the amount, type and 

control year of the rights or 

authorization transferred. The transfer 

will be effective on the date the notice 

of transfer is issued. 

§ 82.13 Recordkeeping and reporting 

requirements. 

(a) Unless otherwise specified, the 

recordkeeping and reporting 

requirements set forth in this section 

take effect as follows: 

(1) For Group I controlled substances, 

beginning with the first day of the first 

control period specified in § 82.3(f)(1). 

(2) For Group II controlled substances, 

beginning'with the first day of the first 

control period specified in § 82.3(f)(2). 

(b) Unless otherwise specified, reports 

required by this section must.be mailed 

within 15 days of the end of the •••-' 

applicable reporting period to the 

Administrator. 

(c) Records and copies of reports 

required by this section must be 

retained for four years. 

(d) In reports required by this section, 

quantities of controlled substances must 

be stated in terms of kilograms. 

(e) Every person ("producer") who 

will produce controlled substances 

during a control period must comply 

with the following recordkeeping and 

reporting requirements: 

(1) By the first day of each control 

period, every producer must submit to 

the Administrator a plan estimating for 

each of his facilities the type and 

amount of controlled substances he will 

produce and the time periods during 

which the controlled substances will be 

produced. The plan must also include 

estimates of the quantities of 

chlorodifluoromethane (HCFC-22) and 

hexafluoroethane (CFC-116) each of 

these facilities will produce in that 

control period. Any change in the plan 

during the control period must be 

communicated to the Administrator no 

later than the month following the 

change, as part of the monthly report 

required under paragraph (e)(3) of this 

section. 

(2) Every producer must maintain the 

following: 

(i) Daily records of the quantity of 

each of the controlled substances 

produced at each facility, including 

controlled substances produced for 

feedstock purposes; 

(ii) Daily records of the quantity of 

HCFC-22 and CFC-116 produced at 

each facility also producing controlled 

substances; 

(iii) Continuous records of the reactive 

temperature and operating pressures 

within the primary reactor and initial 

distillation column during the 

production operations at each facility; 

and 

(iv) Daily records of the quantity of 

the following raw materials and 

feedstock chemicals purchased for and 

used at each plant: carbon tetrachloride, 

perchloroethylene, chloroform, 

hydrofluoric acid, hydrochloric acid, 

bromine, CFC-113, HCFC-22, and CFC23. 

(v) Daily records of the quantity and 

purchaser of controlled substances 

produced at each plant. 

(3) For each month, every producer 

must provide the Administrator with a 

report containing the following 

information: 

(i) The production and sales in that 

month of each controlled substance, 

specifying the quantity of any controlled 

substance used for feedstock purposes 

for each plant and totaled for all plants 

owned by the same person; 

(ii) th e quantities of HCFC-22 and 

CFC-116 produced that month at the 

same facilities producing any of the 

controlled substances for each plant;. 

(iii) A description of any shifts that -. 

have occurred that month in the planned 

utilization of facilities as described in 

the plan provided to the Administrator 

under paragraph (e)(1) of this section; 

(iv) The total for that month and for 

the control-period-to-date of calculated 

levels of production for Group I and 

Group II controlled substances for each 

plant; 

(v) The producer's total consumption 

rights, potential production rights, 

production rights and authorization to 

convert potential production rights to 

production rights, as of the end of that 

month; and 

(vi) The quantity and names and 

addresses of the source of recyclable or 

recoverable materials containing the 

controlled substance which is recovered 

at each plant. For any person who fails 

to maintain the records and reports 

required by this paragraph, the 

Administrator may assume that the 

person has produced at full capacity 

during the period for which records or 

reports were not kept, for purposes of 

determining whether the person has 

violated the prohibitions at Sec. 82.4. 

(f) For Group I controlled substances, 

beginning with the first control period 

specified under Sec. 82.3(f)(1), and for 

Group II controlled substances, 

beginning one year after the Montreal 

Protocol enters into force, any person 

("importer") who imports controlled 

substances during a control period must 

comply with the following 

recordkeeping and reporting 

requirements: 

(1) Any importer must maintain the 

following daily records: 

(i) The quantity of each controlled 

substance imported, either alone or in 

mixtures; 

(ii) The date on which the controlled 

substances were imported; 

(iii) The port of exit and port of entry 

through which the controlled substances 

passed; and 

(iv) The dates on which and the 

country in which the imported 

controlled substances were produced. 

(2) For each month, every importer 

must submit to the Administrator a 
P.40 

T 

Federal Register /•Vol.: 52, No- 239 /Monday, December 14, 1987 / Proposed Rules 47523 

report containing the following 

information: j ' 

(i) The daily records required in 

paragraph (g)(1) of this section for the 

previous month; 

(ii) The total for that month and for 

the control-peripd-to-dateof calculated 

levels of imports for Group land Group 

II controlled substances; and 

(iii) The importer's total] consumption 

rights at the end of that month. 

(g) For any exports of controlled 

substances not reported under Sees. 

82.10 (additional consumption rights) or 

82.11 (Exports to Parties), the person 

("exporter") wh'o exported the 

controlled substances must submit to 

the Administrator the following 

information within one month of the 

otherwise unreported exports leaving 

the United States: 

(1) The names and addresses of the 

exporter and the recipient of the 

exports; 

(2) The exporter's EIN number; 

(3} The type and quantify of controlled 

substances exported; 

(4) The date on which and the port 

from which the controlled substances 

were exported from the United States or 

• its territories; 

(5) The country to.which the 

controlled substances were exported 

and the date on which they arrived in 

that country; and 

(6) The source from which and that 

date on which the exporter purchased 

the controlled substances exported. 

§82.14 Payment of fees. 

[Reserved] 

Appendix A to Part 82—Controlled 

Substances and Ozone Depletion 

Weights 

... Controlled substances 

Controlled substances 

A. Group I: 

CFCI3—Trichlorofluormethane (Cf C-11) 

CCI2F2—Dichlorodifluoromethane (CFC-12) 

CCI2F-CCIF2—Trichlorotrifluorethane (CFC113) .'. 

CF2CI-CCIF2—Diehlorotetrafluoroeihane 

(CFC-114) 

Ozone 

depletion 

weights 

CCIF2-CF3—(Mono)chloropentafluoroethane : 

. (CFCr115)..., 

B. Group II: 

CF2BrCI—Bromochlorodifiuoromethane (Halon 

1211) '. 

CF3Br—Bromotrifluoromethane (Halon 1301).... 

C2F4Br2—Oibromotetrafluoroethane (Halon 

2402) , 

Ozone 

dec-lotion 

weights 

0.6 

3.0 

10.0 

6.0 

1.0 

1.0 

0.8 

1.0 

Appendix B to "Part 82—Parties to the 

Montreal Protocol 

[Reserved] 

Appendix C to Part 82—Nations 

Complying With, But Not Parties to, the 

Protocol 

[Reserved] 

Appendix D to Part 82—Twenty-FiveKilotonne Parties 

[Reserved] 

[FR Doc. 87-28215 Filed 12-11-87; 8:45 am] 

BILLING CODE 6560-50-M