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[Federal Register Volume 89, Number 239 (Thursday, December 12, 2024)]
[Rules and Regulations]
[Pages 100381-100392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29243]

[[Page 100381]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 84

[EPA-HQ-OAR-2021-0643; FRL-11739-02-OAR]
RIN 2060-AW20

Phasedown of Hydrofluorocarbons: Restrictions on the Use of HFCs 
Under the AIM Act in Variable Refrigerant Flow Air Conditioning 
Subsector

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The U.S. Environmental Protection Agency is amending a 
provision of the 2023 Technology Transitions regulations promulgated 
under the American Innovation and Manufacturing Act of 2020. This 
action provides until January 1, 2027, for the installation of certain 
new variable refrigerant flow air conditioning and heat pump systems 
which use components manufactured in the United States or imported into 
the United States prior to January 1, 2026. This action also provides 
until January 1, 2028, for the installation of certain new variable 
refrigerant flow air conditioning and heat pump systems if a building 
permit that approves the use of a hydrofluorocarbon or blend containing 
a hydrofluorocarbon in such a system was issued prior to October 5, 
2023, provided that the system uses components manufactured in the 
United States or imported into the United States prior to January 1, 
2026. This action will mitigate the potential for stranded inventory of 
variable refrigerant flow systems.

DATES: This final rule is effective on January 13, 2025.

ADDRESSES: The EPA has established a docket for this action under 
Docket ID No. EPA-HQ-OAR-2021-0643. All documents in the docket are 
listed on the https://www.regulations.gov website. Although listed in 
the index, some information is not publicly available, e.g., 
Confidential Business Information (CBI) or other information whose 
disclosure is restricted by statute. Certain other material, such as 
copyrighted material, is not placed on the internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available electronically through https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Joshua Silver, Stratospheric 
Protection Division, Office of Atmospheric Protection (Mail code 
6205A), Environmental Protection Agency, 1200 Pennsylvania Ave. NW, 
Washington, DC 20460; telephone number: (202) 564-2473; email address: 
[email protected]. You may also visit EPA's website at https://www.epa.gov/climate-hfcs-reduction for further information.

SUPPLEMENTARY INFORMATION: Throughout this document, whenever ``we,'' 
``us,'' ``the Agency,'' or ``our'' is used, we mean EPA. Acronyms that 
are used in this rulemaking that may be helpful include:

AC--Air Conditioning
AHRI--Air-Conditioning, Heating, and Refrigeration Institute
AIM Act--American Innovation and Manufacturing Act of 2020
The Alliance--Alliance for Responsible Atmospheric Policy
BTU/h--British thermal units per hour
CAA--Clean Air Act
CRA--Congressional Review Act
EPA--U.S. Environmental Protection Agency
FR--Federal Register
GWP--Global Warming Potential
HARDI--Heating, Air-conditioning & Refrigeration Distributors 
International
HFC--Hydrofluorocarbon
HVAC--Heating, Ventilation, and Air Conditioning
kW--Kilowatt
NAICS--North American Industry Classification System
NTTAA--National Technology Transfer and Advancement Act
OEM--Original Equipment Manufacturer
PRA--Paperwork Reduction Act
RACHP--Refrigeration, Air Conditioning, and Heat Pumps
RFA--Regulatory Flexibility Act
UMRA--Unfunded Mandates Reform Act
VRF--Variable Refrigerant Flow

Table of Contents

I. General Information
    A. Does this action apply to me?
    B. What action is the Agency taking?
    C. What is the Agency's authority for taking this action?
    D. What are the incremental costs and benefits of this action?
II. Background
    A. Previous Technology Transitions Rules
    B. EPA's Proposal Regarding Variable Refrigerant Flow Systems
III. EPA's Final Action
    A. Final Action
    B. Avoiding Stranded Inventory
    C. Comments and Responses
    D. Limiting the Environmental Impact of This Action
    E. How do the labeling, recordkeeping, and reporting provisions 
apply?
    F. Evaluation of the Subsection (i)(4) Factors
    G. Negotiated Rulemaking
IV. Judicial Review
V. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 14094: Modernizing Regulatory Review
    B. Paperwork Reduction Act (PRA)
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act (UMRA)
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act (NTTAA)
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations and Executive Order 14096: Revitalizing Our Nation's 
Commitment to Environmental Justice for All
    K. Congressional Review Act (CRA)

I. General Information

A. Does this action apply to me?

    You may be affected by this rule if you manufacture, import, 
export, sell, distribute, or install residential and light commercial 
air conditioning and heat pump equipment. Potentially affected 
categories, by North American Industry Classification System (NAICS) 
code, include:
     New Multifamily Housing Construction (except For-Sale 
Builders) (236116).
     New Housing For-Sale Builders (236117).
     Residential Remodelers (236118).
     Industrial Building Construction (236210).
     Commercial and Institutional Building Construction 
(236220).
     Plumbing, Heating, and Air Conditioning Contractors 
(238220).
     Air Conditioning and Warm Air Heating Equipment and 
Commercial and Industrial Refrigeration Equipment Manufacturing 
(333415).
     Plumbing and Heating Equipment and Supplies (Hydronics) 
Merchant Wholesalers (423720).
     Warm Air Heating and Air Conditioning Equipment and 
Supplies Merchant Wholesalers (423730).
    This list is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This list includes the types of entities that the EPA is aware 
could potentially be regulated by this action. Other types of entities 
not included could also be regulated. To determine whether your entity 
is regulated by this action, you should carefully examine the 
regulatory text at the end of this document. If you have questions 
regarding the applicability of this action to a particular entity, 
consult the person

[[Page 100382]]

listed in the FOR FURTHER INFORMATION CONTACT section.

B. What action is the Agency taking?

    This rule provides one additional year, until January 1, 2027, for 
the installation of new variable refrigerant flow (VRF) systems used 
for residential and light-commercial air-conditioning and heat pumps 
when using components that are manufactured in the United States or 
imported into the United States before January 1, 2026. Specifically, 
this rule allows for pre-2026 condensing units, evaporators, and air 
handlers using hydrofluorocarbons (HFCs) and blends containing HFCs, 
such as R-410A, not meeting the October 2023 Technology Transitions 
Rule's (88 FR 73098) restrictions, to be assembled into new VRF systems 
(i.e., installed), so long as those systems are assembled prior to 
January 1, 2027. For projects that were issued a building permit which 
approved the use of an HFC or blend containing an HFC in a VRF system 
prior to October 5, 2023, this rule provides for installation of such 
systems until January 1, 2028, provided that they use components that 
are manufactured in the United States or imported into the United 
States prior to January 1, 2026.

C. What is the Agency's authority for taking this action?

    On December 27, 2020, the American Innovation and Manufacturing Act 
of 2020 (AIM Act) was enacted as section 103 in Division S, Innovation 
for the Environment, of the Consolidated Appropriations Act, 2021 
(codified at 42 U.S.C. 7675). Subsection (k)(1)(A) of the AIM Act 
provides EPA with the authority to promulgate necessary regulations to 
carry out EPA's functions under the Act, including its obligations to 
ensure that the Act's requirements are satisfied. Subsection (k)(1)(C) 
of the AIM Act also provides that the Clean Air Act (CAA) sections 113, 
114, 304, and 307 apply to the AIM Act and any regulations EPA 
promulgates under the AIM Act as though the AIM Act were part of title 
VI of the CAA. Accordingly, this rulemaking is subject to CAA section 
307(d) (see 42 U.S.C. 7607(d)(1)(l)) (CAA section 307(d) applies to 
``promulgation or revision of regulations under subchapter VI of this 
chapter (relating to stratosphere and ozone protection)'').
    The AIM Act authorizes EPA to address HFCs by providing authorities 
in three main areas: phasing down the production and consumption of 
listed HFCs; promulgating certain regulations for purposes of 
maximizing reclamation and minimizing releases of these HFCs from 
equipment and ensuring the safety of technicians and consumers; and 
facilitating the transition to next-generation technologies by 
restricting use of these HFCs in sectors or subsectors in which they 
are used. Subsection (i) of the AIM Act, ``Technology Transitions,'' 
provides that ``the Administrator may by rule restrict, fully, 
partially, or on a graduated schedule, the use of a regulated substance 
in the sector or subsector in which the regulated substance is used.'' 
42 U.S.C. 7675(i)(1). The AIM Act lists 18 HFCs, and by reference any 
of their isomers not so listed, that are covered by the statute's 
provisions, referred to as ``regulated substances'' under the Act.\1\ 
(42 U.S.C. 7675(c)(1)). This rule amends restrictions on the use of 
regulated substances, or blends containing regulated substances, with a 
global warming potential (GWP) above 700 for VRF systems. EPA's 
regulations at 40 CFR 84.64 describe how to determine the GWP of a 
regulated substance or blend containing a regulated substance for 
purposes of complying with regulations under the Technology Transitions 
program.
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    \1\ ``Regulated substance'' and ``HFC'' are used interchangeably 
in this document.
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D. What are the incremental costs and benefits of this action?

    This rule will reduce regulatory burden associated with the 
Technology Transitions restrictions on VRF systems used for residential 
and light commercial air-conditioning and heat pumps while having a 
negligible environmental impact. Original equipment manufacturers 
(OEMs) and distributors have indicated that manufactured inventory of 
VRF equipment could go unsold without an extension of the installation 
compliance date. Commenters representing builders and owners of large 
residential buildings have also described how they may be unable to 
install already-purchased VRF equipment in projects that are currently 
under development within the existing timeframes. Stranding equipment 
that does not meet the new GWP limits is counter to the overall 
approach EPA took in the October 2023 Technology Transitions Rule. 
Providing additional time for the installation of these systems will 
not affect the environmental benefits modeled under that rule given EPA 
is limiting the extension of the installation compliance date to 
equipment manufactured in the United States or imported into the United 
States before the existing compliance date of January 1, 2026 (88 FR 
73098). Therefore, we do not anticipate an increase in the amount of 
VRF equipment manufactured or imported as a result of this rule.

II. Background

A. Previous Technology Transitions Rules

    On October 24, 2023, EPA published the final rule establishing the 
Technology Transitions program (88 FR 73098; hereafter ``October 2023 
Technology Transitions Rule''). That rule restricted the use of certain 
HFCs in many sectors and subsectors in which they are used by 
establishing limits for those uses based on GWP. Among other things, 
that rule prohibited the manufacture and import of factory-completed 
products and the installation of certain refrigeration, air 
conditioning, and heat pump systems that use HFCs or blends containing 
HFCs above specified GWP limits. The compliance dates for these 
restrictions vary by subsector and range generally from January 1, 
2025, to January 1, 2028. The rule also included a prohibition on the 
sale, distribution, and export of factory-completed products that 
applies three years after the subsector manufacture and import 
compliance dates, to allow for a sell-through period of previously 
manufactured or imported products.
    After issuance of the October 2023 Technology Transitions Rule, 
manufacturers, importers, and distributors of residential and light 
commercial air conditioning and heat pump equipment requested 
clarification about split systems and VRF systems. A letter dated 
November 13, 2023, to EPA from the Air-Conditioning, Heating, and 
Refrigeration Institute (AHRI), the Alliance for Responsible 
Atmospheric Policy (the Alliance), and Heating, Air-conditioning & 
Refrigeration Distributors International (HARDI) states that these 
organizations understand that components for these systems that are 
manufactured or imported before January 1, 2025, and January 1, 2026, 
respectively, using an HFC or blend containing an HFC with a GWP of 700 
or more, cannot be installed as new systems after each such compliance 
date (See Docket ID No. EPA-HQ-OAR-2021-0643-0246). The letter states 
that not allowing time between the manufacture and import compliance 
date and the installation date would be ``particularly problematic for 
residential new construction, including both single-family and multi-
family dwellings, where builders order heating and cooling equipment 
well in advance of knowing the exact date of install. Such equipment is 
not installed until construction is nearly complete,

[[Page 100383]]

but at time of order builders do not know when this date will be.'' The 
letter further articulates that allowing the use of components 
manufactured or imported prior to the compliance date to be installed 
as part of new systems for one year after the compliance date would 
provide some relief to these economic and practical burdens.
    In response to this letter from industry trade groups, EPA 
indicated on November 29, 2023, that the Agency ``intends to act 
swiftly to address concerns regarding the January 1, 2025, installation 
compliance date, including by potentially amending the final regulation 
to allow for installation of previously manufactured components until 
January 1, 2026, and separately intends timely consideration of VRF 
systems'' (See Docket ID No. EPA-HQ-OAR-2021-0643-0235). Subsequently, 
EPA issued an interim final rule (88 FR 88825; December 26, 2023) to 
reevaluate the specific circumstances for residential and light 
commercial air conditioning and heat pump systems. That rule extended 
the installation compliance date for those systems from January 1, 
2025, to January 1, 2026, when using components that are manufactured 
or imported prior to January 1, 2025, to prevent the stranding of 
existing inventories of equipment. That rule did not address VRF 
systems, which are subject to this action.

B. EPA's Proposal Regarding Variable Refrigerant Flow Systems

    In response to stakeholder concerns raised in the aforementioned 
letter received by EPA after the finalization of the October 2023 
Technology Transitions Rule, EPA proposed to adjust the installation 
compliance date for VRF systems manufactured or imported prior to 
January 1, 2026 (89 FR 53373; June 26, 2024; hereafter ``VRF Proposed 
Rule''). VRF systems are described in the October 2023 Technology 
Transitions Rule as direct expansion multi-split systems that 
incorporate the following: a split system air conditioner or heat pump 
incorporating a single refrigerant circuit that is a common piping 
network to two or more indoor evaporators, each capable of independent 
control, or compressor units. VRF systems contain a single module 
outdoor unit or combined module outdoor units with at least one 
variable capacity compressor that has three or more steps of capacity, 
with air or water as the heat source. While this technology is used in 
air conditioning and heat pump equipment of any size, the October 2023 
Technology Transitions Rule restrictions for VRF systems apply only to 
air-source VRF systems with capacities of 65,000 BTU/h (19 kW) or more 
and water-source VRF systems of any capacity. The regulatory text at 40 
CFR 84.54(c)(2) refers to these systems as ``variable refrigerant flow 
systems for use as residential and light commercial air-conditioning or 
heat pumps.'' \2\ Throughout this preamble, these systems are referred 
to as ``VRF systems.''
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    \2\ The regulations at 40 CFR 84.54(c)(2) treat VRF systems as a 
separate subsector, due to how the regulatory restriction is 
structured. No difference in meaning is intended as to which systems 
are addressed, however.
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    The number of VRF systems is small compared to the overall number 
of residential and light commercial air conditioning and heat pump 
equipment. EPA used data from AHRI (See Docket ID No. EPA-HQ-OAR-2021-
0643-0245) \3\ and eJARN \4\ to estimate that approximately 42,000 VRF 
units that had a capacity of 65,000 BTU/h or more were sold in 2023. 
This represents 0.49% of total air conditioning and heat pump equipment 
sales that year. The available data also indicate that approximately 
37,000 VRF units with capacities below 65,000 BTU/h were sold in 2023. 
Adding together these estimates of units sold in 2023 for VRF units of 
any capacity provides an overall estimate of 79,000 VRF units, which is 
approximately 0.91% of all air conditioning and heat pump equipment 
sold in 2023. EPA notes that this number and percentage of VRF units is 
a rough estimate intended to describe its use currently as an extremely 
small percentage of all residential and light commercial air 
conditioning and heat pump equipment.
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    \3\ AHRI notes that its ``reports track shipments, which are 
defined as when a unit transfers ownership. While some people use 
the terms shipments and sales interchangeably, they may not be the 
same.'' See https://www.ahrinet.org/analytics/statistics. Date 
Accessed: November 15, 2024.
    \4\ See https://www.ejarn.com/article/detail/83750. In this 
article, the term ``units'' is used, as in ``79,000 units.'' We note 
that VRF units is not equivalent to VRF systems.
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    In the VRF Proposed Rule, EPA proposed to extend the installation 
compliance date for new VRF systems from January 1, 2026, to January 1, 
2027, when using components that are manufactured or imported prior to 
January 1, 2026 (89 FR 53373; June 26, 2024). In the alternative, EPA 
proposed to extend the installation compliance date for new VRF systems 
from January 1, 2026, to January 1, 2027, when using components that 
are manufactured or imported prior to January 1, 2026, but only for 
projects where a building permit both approved the HFC or blend 
containing the HFC to be used and was issued prior to October 5, 2023.
    EPA received public comments on its proposal from stakeholders 
representing VRF equipment manufacturers, distributors, industry trade 
groups, real estate developers, contractors, and environmental groups. 
After the initial 30-day comment period ended on July 26, 2024, the 
Agency reopened the comment period via a document published in the 
Federal Register to offer the public an opportunity to request a public 
hearing to provide oral comment, if desired (89 FR 65575; August 12, 
2024). A public hearing was requested, and the Agency held a public 
hearing on August 27, 2024. The comment period remained open for 30 
days after the date of the public hearing, closing on September 26, 
2024. All comments received on the VRF Proposed Rule and a transcript 
of the public hearing are available in the docket for this action (See 
Docket ID No. EPA-HQ-OAR-2021-0643).

III. EPA's Final Action

A. Final Action

    After considering the comments and input received on the VRF 
Proposed Rule, EPA is finalizing the extended installation compliance 
date for new VRF systems to January 1, 2027, as proposed. EPA is also 
providing additional time, to January 1, 2028, for the installation of 
such systems in projects where a building permit approved the use of an 
HFC or blend containing an HFC in such a system, and was issued prior 
to October 5, 2023. Building permits are government-issued documents 
that grant authorization to an entity to begin a construction project, 
which are typically issued by local permitting authorities, or 
authorities having jurisdiction. This includes county or city offices 
of permits and licensing, departments of housing, or other authorities 
having jurisdiction. Building permits vary in the level of specificity 
provided; for purposes of EPA's regulations in 40 CFR part 84, subpart 
B, EPA considers a building permit to include designs submitted as part 
of the application that is approved by the authority having 
jurisdiction.
    These extensions only allow for installation of new VRF systems 
using an HFC, or blend containing an HFC, with a GWP above 700 in 
components that are manufactured in the United States or imported into 
the United States prior to January 1, 2026.
    To further limit the possibility of stranded inventory, EPA is 
providing the additional time for installation to January 1, 2028, for 
projects where three

[[Page 100384]]

conditions are met: (1) an approved building permit was issued for a 
project prior to October 5, 2023, (2) that building permit approves the 
use of an HFC or blend containing an HFC in a VRF system, and (3) all 
specified components of that VRF system are manufactured in the United 
States or imported into the United States prior to January 1, 2026. 
Stakeholder input indicated that even a January 1, 2027, extended 
installation compliance deadline could still risk stranding VRF 
equipment for larger buildings using VRF systems with particularly long 
construction timelines. EPA is finalizing this rule with the additional 
extension given the complexity of these systems, the size of the 
projects in which these systems are typically installed, and 
recognizing that the projects were issued approved building permits 
prior to the issuance of the Technology Transitions Rule on October 5, 
2023. EPA recognizes that a subset of construction projects that use 
VRF equipment were issued approved building permits prior to October 5, 
2023, and may not be completed by the new installation date of January 
1, 2027, and thus determines that this additional flexibility for those 
projects using VRF systems with HFCs or blends containing HFCs above 
the new GWP threshold is reasonable in light of the goal to avoid 
stranding inventory.

B. Avoiding Stranded Inventory

    An important consideration in the October 2023 Technology 
Transitions Rule was to avoid stranding inventory of equipment 
manufactured ahead of the various compliance deadlines. This includes 
systems that are already installed and operating as well as unsold 
equipment in the manufacturing and distribution chain. EPA stated that 
``[w]e recognize that the production and purchase of products or 
components that are unable to be sold to consumers is an economic and 
environmental outcome no parties desire, and the proposed rule's 
forward-looking compliance dates were intended to allow all parties in 
the market supply chain sufficient time to avoid that outcome'' (88 FR 
73123; October 24, 2023). EPA's goal of avoiding the stranding of 
inventory is consistent with the requirement in subsection (i)(6) that 
Technology Transitions restrictions may not take effect sooner than one 
year from the date of promulgation; this provision also serves to 
ensure that regulated parties have sufficient time to prepare for and 
comply with restrictions under this provision. In response to concerns 
about stranded inventory raised during the public comment period on 
that proposed rule, EPA made two significant adjustments in the October 
2023 Technology Transitions Rule.
    First, EPA removed the applicability of the rule's use restrictions 
to components. EPA explained that components are pieces of equipment 
that do not function independently and must be assembled together in 
the field in order to function for its intended purpose. Components are 
replaceable and a faulty component can be swapped out to avoid 
replacing an entire system. Recognizing the ongoing need for servicing 
and updating previously installed systems, EPA allowed for the 
continued manufacture, import, sale, distribution, offer for sale and 
distribution, and export of components that rely on higher-GWP HFC 
refrigerants. Aside from reporting and labeling requirements, 
components are not subject to the restrictions in the October 2023 
Technology Transitions Rule, except insofar as those components may not 
be installed in new systems on or after the applicable installation 
compliance dates.
    Second, EPA extended the sell-through period for factory-completed 
products in the October 2023 Technology Transitions Rule from one year 
to three years after the manufacture and import compliance date. For 
the purposes of the restrictions under that rule for the refrigeration, 
air conditioning, and heat pump (RACHP) sector, factory-completed 
products are pieces of equipment that are functional upon completion of 
manufacturing in a factory. Functional means that the equipment's 
refrigerant circuit is complete, it is charged with refrigerant, and it 
is ready to use for its intended purpose. The Agency received many 
comments on this topic, including from those commenters that considered 
one year to be insufficient for the sale of seasonal products.
    EPA believed it had minimized the potential for stranded inventory 
with these two modifications to the October 2023 Technology Transitions 
Rule. Specifically with respect to components, the Agency's view was 
that there would continue to be a market for components not meeting the 
GWP limit thresholds for new systems, because those components could 
continue to enter the market to service existing systems.
    EPA also finalized later compliance dates for the installation of 
most field-assembled refrigeration systems, recognizing, in part, that 
refrigeration systems would require manufacturers and importers to make 
components available and that such systems can be specifically designed 
for an individual facility and would need more time to transition.\5\ 
For some refrigeration subsectors, EPA also recognized in the October 
2023 Technology Transitions Rule that buildings may have already been 
issued an approved building permit prior to finalization of that rule. 
Recognizing that where earlier issued permits approved the use of an 
HFC or blend containing an HFC, and where such permitted systems were 
likely to be highly complex and costly to redesign, EPA provided one 
additional year beyond the final rule compliance dates for the 
installation of certain field-assembled systems. Specifically, that 
extension applied to the following refrigeration systems or subsectors 
(certain industrial process refrigeration systems; retail food 
refrigeration--supermarkets; cold storage warehouses; and ice rinks) if 
an approved building permit was issued prior to the signature date of 
the final rule (i.e., October 5, 2023), and the permit specified the 
use of a system containing an HFC or blend containing an HFC with a GWP 
above the relevant GWP threshold for that subsector (88 FR 73120; 40 
CFR 84.54(d)).
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    \5\ See 88 FR 73143 (industrial process refrigeration systems--
proposed January 1, 2025, compliance date, finalized January 1, 
2026, compliance date (January 1, 2028, for some subsectors); 88 FR 
73149 (data centers, ITEF, computer room cooling equipment--proposed 
January 1, 2025, compliance date, finalized January 1, 2027, 
compliance date); 88 FR 73150 (systems in retail food refrigeration 
subsector--proposed January 1, 2025, compliance date, finalized a 
range of compliance dates from January 1, 2026, to January 1, 2028); 
88 FR 73162 (cold storage warehouses--proposed January 1, 2025, 
compliance date, finalized January 1, 2026, compliance date); 88 FR 
73163 (ice rinks--retained proposed January 1, 2025, compliance date 
in final rule but increased GWP limit from 150 to 700); 88 FR 73175 
(chillers-industrial process refrigeration--proposed January 1, 2025 
compliance date, finalized compliance dates of January 1, 2026, and 
January 1, 2028 depending on the system).
---------------------------------------------------------------------------

    EPA intended this limited flexibility in the October 2023 
Technology Transitions Rule to prevent the need to redesign these 
systems and, in some cases, the facility that houses these systems, 
given that facilities or systems may already have been well along on 
the construction timeline. EPA granted this permit-based extension 
selectively, as most systems are not typically designed specifically 
for an individual facility and/or most systems covered by the October 
2023 Technology Transitions Rule have a later compliance date and thus 
could make any necessary adjustments with the GWP restrictions in mind.
    EPA did not finalize later compliance dates for the installation of 
residential and light commercial air conditioning and heat pump systems 
and VRF

[[Page 100385]]

systems in the October 2023 Technology Transitions Rule.\6\ After 
issuing that rule, EPA learned that additional time, which EPA had 
extended to nearly all of the subsectors covering field-assembled 
refrigeration systems, was also needed for residential and light 
commercial air conditioning systems and VRF systems. As noted 
previously, EPA responded by issuing an interim final rule reevaluating 
the specific circumstances for residential and light commercial air 
conditioning and heat pump systems and extending the installation 
compliance date for those systems by one year to January 1, 2026 (88 FR 
88825; December 26, 2023), and by undertaking this rulemaking for VRF 
systems.
---------------------------------------------------------------------------

    \6\ See 88 FR 73178 (residential and light commercial air 
conditioning and heat pumps--proposed January 1, 2025, compliance 
date, finalized January 1, 2025, compliance date); id. (VRF 
systems--proposed January 1, 2026, compliance date, finalized 
January 1, 2026, compliance date).
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    EPA has reevaluated the planning, purchasing, and installation 
timeframes for VRF systems in new construction projects as referenced 
in the Agency's response to industry stakeholders (See Docket ID No. 
EPA-HQ-OAR-2021-0643-0235). EPA is providing one additional year to 
install VRF systems, which aligns with the additional time already 
provided for system installations in many refrigeration subsectors in 
the October 2023 Technology Transitions Rule and in the interim final 
rule for installation of residential and light commercial air 
conditioning and heat pump systems. In addition, EPA is allowing 
installation of VRF systems that use an HFC, or a blend containing an 
HFC, with a GWP above 700 until January 1, 2028, in projects where a 
building permit approves the use of an HFC or blend containing an HFC 
in a VRF system, and that approved building permit was issued prior to 
October 5, 2023, provided the components were manufactured or imported 
prior to January 1, 2026. EPA is providing this additional extension 
based on information received from commenters that detailed the length 
of the timeline from initial design, to permitting, to construction 
completion of projects that incorporate VRF systems, which are 
typically much larger and more complex than other projects. Given the 
longer lead times for the compliance dates for new projects 
incorporating VRF systems, EPA does not anticipate similar scenarios 
for equipment used in other sectors and subsectors covered by the 
October 2023 Technology Transitions Rule.
    The construction of new multi-unit residential and commercial 
buildings is planned well in advance, including plans for the heating 
and cooling systems intended to be installed in that new construction. 
Builders may order those planned heating and cooling systems in concert 
with the planning process well in advance of when those systems are 
installed. As noted by commenters, installation of these systems is 
often one of the final steps in construction. For construction planned 
to occur after January 1, 2026, components of VRF systems that use a 
regulated substance, or a blend containing a regulated substance, with 
a GWP above 700 may have already been incorporated into the design of 
the building and ordered by builders. In addition, such buildings may 
have already been issued a building permit approving the use of an HFC 
or blend containing an HFC with a GWP above 700, from the appropriate 
local permitting authority or the authority having jurisdiction, prior 
to October 5, 2023. In these cases, the VRF equipment associated with 
these projects are at risk of being stranded. EPA also recognizes that 
as one of the first systems facing a system installation compliance 
date under the October 2023 Technology Transitions Rule, the ability of 
installers of VRF systems to comply with this deadline relies on 
equipment manufacturers, importers, and distributors to quickly make 
commercially available component parts that comply with the GWP 
thresholds. For this reason, as well, EPA has determined it is 
appropriate to provide a limited extension for compliance.
    As discussed in the October 2023 Technology Transitions Rule, EPA 
established the compliance date of January 1, 2026, for these systems 
based on consideration of the AIM Act's subsection (i)(4) factors, and 
in particular, the assessment that VRF systems will be able to meet the 
GWP limit of 700 and transition from the current use of HFCs. EPA's 
consideration of the statutory factors continues to support a swift 
transition for these systems, but the January 1, 2026, installation 
compliance date could result in builders of new construction being left 
with stranded inventory that could not be used. Stranding inventory is 
an economically and environmentally undesirable outcome, and the issue 
addressed in this rule--that the January 1, 2026 installation deadline 
for new VRF systems could result in stranded inventory--was not brought 
to the Agency's attention until after the October 2023 Technology 
Transitions Rule was finalized. Through this action, EPA is extending 
the January 1, 2026, installation compliance date to January 1, 2027, 
provided the new installation uses components that are manufactured or 
imported prior to January 1, 2026. In addition, for those projects that 
were issued a building permit prior to October 5, 2023 which approves 
the use of an HFC or blend containing an HFC in a VRF system, EPA is 
extending the installation compliance deadline to January 1, 2028, 
provided all specified components of that VRF system were manufactured 
or imported prior to January 1, 2026.

C. Comments and Responses

    The Agency received several comments on the VRF Proposed Rule. 
These comments are addressed in this section.
    Comment: Several commenters, representing original equipment 
manufacturers (OEMs), distributors, air conditioning contractors, 
developers, and trade associations--including the groups that contacted 
the Agency in the November 13, 2023, letter--expressed support for the 
proposal to extend the installation compliance date by one year. They 
reiterated that the proposal ``provides indispensable relief to 
manufacturers, homebuilders, and other stakeholders in the 
implementation of the . . . AIM Act and the [October 2023 Technology 
Transitions Rule]'' (See Docket ID No. EPA-HQ-OAR-2021-0643-0255). 
Commenters underscored the importance of the proposed extension to 
mitigate the potential for significant stranded inventory that would 
otherwise burden the industry (See Docket ID No. EPA-HQ-OAR-2021-0643-
0249). Some requested this rule to be finalized soon, or before the end 
of 2024, to provide clarity for the industry (See Docket ID No. EPA-HQ-
OAR-2021-0643-0253, and Docket ID No. EPA-HQ-OAR-2021-0643-0276).
    Response: EPA agrees with commenters that extending the 
installation compliance date by one year, until January 1, 2027, for 
such equipment would avoid stranding inventory and provide relief to 
most manufacturers, distributors, builders, and other stakeholders. EPA 
takes note of the request to finalize this rule quickly to provide 
clarity for the industry.
    Comment: Three commenters requested the Agency exempt projects that 
were already permitted. One commenter suggested EPA exempt buildings 
from any VRF system installation compliance date if they received a 
permit prior to October 5,

[[Page 100386]]

2023. Another commenter encouraged EPA to consider a variance or 
exemption for already-designed projects that had applied for permits 
based on heating, ventilation, and air conditioning (HVAC) systems 
then-available on the market. One commenter requested the Agency 
consider a further exemption of previously permitted VRF equipment.
    Response: While some flexibility is fitting, it would not be 
appropriate with the application of the subsection (i)(4) factors to 
provide a broad, indefinite exemption for VRF systems from the October 
2023 Technology Transitions Rule to any project where the project in 
which the system would be installed was issued an approved building 
permit prior to October 5, 2023. EPA was cognizant in establishing 
restrictions in the October 2023 Technology Transitions Rule, and in 
considering the new information provided after finalization of the 
October 2023 Technology Transitions Rule that there may be equipment 
that would need to work its way through the distribution chain. As 
demonstrated in the October 2023 Technology Transitions Rule, EPA 
recognized that in discrete situations, projects that were issued 
approved building permits prior to October 5, 2023, may not have the 
system installed by the relevant compliance date as anticipated. EPA's 
analysis under the October 2023 Technology Transitions Rule was that 
substitutes with a GWP below 700 will be available for the components 
needed for the installation of VRF systems in time for the January 1, 
2026, compliance date. One of the primary manufacturers of this 
equipment has confirmed EPA's assessment about availability in the 
materials provided to the Agency during the comment period. However, as 
noted previously, EPA became aware of new information after the 
issuance of the October 2023 Technology Transitions Rule that indicated 
the potential for stranded inventory held by some affected entities. As 
a result, EPA is extending the compliance date for installation by one 
year and based on the comments received, is finalizing a limited 
additional extension for projects where abuilding permit approves use 
of an HFC or blend containing an HFC in a VRF system, and that approved 
building permit was issued by the relevant permitting authority prior 
to October 5, 2023. This additional time recognizes that some projects 
were well underway ahead of the issuance of the October 2023 Technology 
Transitions Rule. The Agency expects that projects with an approved 
building permit issued on or after October 5, 2023, will either use VRF 
systems that meet the 700 GWP threshold, or will use VRF components 
that are manufactured or imported prior to January 1, 2026, and will be 
installed by the January 1, 2027, installation deadline.
    Comment: Some commenters requested that the installation compliance 
date be extended by two years, instead of one, and described the 
several-year construction timeline in support of this request. One 
commenter stated this extended timeline is necessary to provide 
projects that have already been designed, permitted, financed, and 
contracted with enough time to meet the installation compliance date 
(See Docket ID No. EPA-HQ-OAR-2021-0643-0251). Other commenters stated 
that more than one year is needed to provide building owners and 
developers with time to comply without significantly disrupting 
existing projects, particularly larger, in-process development projects 
where construction has already started (See Docket ID EPA-HQ-OAR-2021-
0643-0256). Two commenters requested a blanket two-year extension to 
the installation compliance date given the several-year construction 
timeline. They described this timeline, from initial design to 
construction completion, for buildings with VRF systems. One of these 
two commenters stated that it can take six to 18 months to design a 
building, obtain building permits, and go through the entitlement 
process. This commenter noted that the HVAC system is incorporated into 
the initial design of a building based on available equipment. Further, 
this commenter stated that the construction timeline after the design 
and permitting stage ranges from 12 months to three years, depending on 
jurisdiction, construction type, project size, and project complexity. 
The other commenter indicated the total time between initial design and 
selection of the project's mechanical systems and the installation of 
those mechanical systems in large development projects is typically 
between four and eight years. This commenter further noted that design 
takes at least two years, and that HVAC systems are selected during the 
design planning process. This commenter, who is based in New York, 
stated that the building permit approval process in New York takes six 
to 12 months, and that construction starts three to six months after 
building permits are approved. Lastly, this commenter noted that actual 
construction takes two to six years, and that installation of the HVAC 
systems, while purchased at the start of the construction period, are 
installed within the last six months of this schedule.
    Response: EPA took into consideration the comments from 
stakeholders who preferred a blanket two-year extension to the 
installation compliance date for VRF systems, however we do not agree 
that a blanket two-year extension to the installation compliance date 
for VRF systems is warranted.
    EPA considered the information on construction timelines that 
commenters provided. EPA's decision in this final rule to extend the 
installation compliance date by one year for VRF systems, and by two 
years for projects that were issued an approved building permit prior 
to October 5, 2023, and meet the other conditions described in this 
rule, is informed by these comments. This rule and its extension of the 
compliance dates for installation of VRF systems is designed to 
mitigate the narrow issue of stranded inventory without delaying the 
overall transition to substitutes for VRF systems that are compliant 
with the GWP thresholds established in the October 2023 Technology 
Transitions Rule. Regulated parties also have a responsibility to 
ensure that they are not taking actions, particularly after 
promulgation of a regulation, that risk creating stranded inventory. 
Such actions may include, but are not limited to, submitting building 
permits for approval at such a point that does not give sufficient time 
for the authority having jurisdiction to issue an approved building 
permit and allow the project to be constructed, with the relevant 
equipment installed, by a regulatory deadline. It also includes 
purchasing equipment that may not be able to be installed by a 
regulatory deadline.
    In establishing the January 1, 2026, deadline in the October 2023 
Technology Transitions Rule, EPA provided more than two years between 
promulgation of that rule and the relevant installation compliance 
date. In this action, EPA is providing an additional year for all VRF 
systems that were subject to the January 1, 2026 deadline, or two 
additional years under a specific set of circumstances. Most affected 
regulated entities will therefore have more than three years from the 
time the October 2023 Technology Transitions Rule was published in the 
Federal Register, and the new installation compliance deadline. For 
those projects that were issued an approved building permit prior to 
the finalization of the October 2023 Technology Transitions Rule, and 
were therefore further along on the

[[Page 100387]]

construction timeline, we are providing more than four years, until 
January 1, 2028. Builders, VRF equipment manufacturers, distributors, 
and installers therefore will have had multiple years to accommodate 
the restrictions in their planning. Moreover, available information 
indicates that equipment using compliant lower-GWP substitutes will be 
available for installation allowing the affected regulated entities to 
meet the new installation compliance date of January 1, 2027. Those 
projects that were issued an approved building permit prior to the 
signature of the October 2023 Technology Transitions Rule, and meet 
other conditions as described in this rule, are being granted until 
January 1, 2028, not because of the lack of available equipment for 
compliance with the restrictions, but because it is more likely that 
the construction timeline of such projects is further along such that 
the likelihood of stranding inventory for these projects is greater.
    Commenters requesting a blanket two-year extension did not supply 
sufficient information to support such an extension, or a longer 
extension, for installation of VRF systems. One commenter's 
construction timeline of 12 months to three years is fully within the 
time provided in this rule. The other commenter's construction timeline 
of two to six years goes beyond the more than four years provided for 
projects that were issued an approved building permit prior to October 
5, 2023. However, this commenter noted just one project that would be 
adversely affected by a January 1, 2027, compliance date, and the 
extension to January 1, 2028, for projects that were issued an approved 
building permit prior to October 5, 2023 and meet the other conditions 
described in this rule, resolves the commenter's concern with respect 
to the specified project.
    The Agency is also cognizant of the remaining phasedown period for 
HFCs in declining to adopt commenters' request for additional 
extensions. Per Congress' phasedown schedule in the AIM Act, by 2029 
overall domestic production and consumption of HFCs must be reduced by 
70 percent from historic baseline levels and by 85 percent from the 
baseline by 2036. AIM Act subsection (i)(4)(D) directs EPA to factor 
in, to the extent practicable, ``the remaining phase-down period for 
regulated substances,'' when promulgating restrictions under the 
Technology Transitions program. 42 U.S.C. 7675(i)(4)(D). EPA explained 
in the October 2023 Technology Transitions Rule that the fact that most 
of the AIM Act's phasedown would occur by 2029 was ``an important 
factor'' in finalizing the compliance dates and restrictions in the 
Technology Transitions Rule (See 88 FR 73140). As the phasedown is 
implemented, the supply of available HFCs will decrease significantly. 
Timely restricting the use of HFCs in sectors and subsectors that are 
well positioned to transition to new substitutes and technologies 
supports the phasedown and fulfills Congress' direction to the Agency 
in subsection (i). For VRF systems, the best available information from 
manufacturers and industry commenters is that substitutes that meet the 
October 2023 Technology Transitions Rule's restrictions are currently 
being manufactured and will be commercially available in time to 
support the transition. We therefore do not agree that extensions 
beyond those established in this rule are warranted.
    Comment: One commenter requested a two-year extension to the 
installation compliance date for VRF systems in projects that use 
higher-GWP refrigerants, were permitted prior to October 24, 2023, and 
where the components for such systems are manufactured or imported 
prior to January 1, 2026 (See Docket ID No. EPA-HQ-OAR-2021-0643-0251). 
This commenter described that it is in the process of constructing a 
building and expects to complete the installation of the VRF system in 
that building by April 1, 2027. The commenter stated that this project 
was issued an approved building permit prior to finalization of the 
October 2023 Technology Transitions Rule and submitted its approved 
permitting documents and building designs to the docket. These 
documents indicate R-410A, a refrigerant blend that has a GWP of 2,088 
and consists of two HFCs regulated under the AIM Act, is intended to be 
used in the VRF system in the project.
    Response: EPA appreciates the details and documents provided by 
this stakeholder on this project. EPA notes this stakeholder's concern 
would not be addressed with a one-year extension to the installation 
compliance date. Projects that had already been issued an approved 
building permit prior to October 5, 2023, are more likely than those 
that were issued an approved building permit on or after this date to 
be substantially further along in the construction timeline, such that 
switching the refrigerant to one that complies with the 700 GWP 
threshold could risk stranding already-manufactured, and already-
purchased, VRF equipment inventory, as well as require developers to 
re-design, re-permit, and in some cases, rebuild ongoing projects to 
accommodate a different VRF system (See Docket ID No. EPA-HQ-OAR-2021-
0643-0242). We are therefore finalizing an extension to January 1, 
2028, for installation of VRF systems where the project was issued a 
building permit prior to October 5, 2023, where the building permit 
approves the use of an HFC or blend containing an HFC in a VRF system, 
and where the components of the VRF system were manufactured or 
imported prior to January 1, 2026.
    EPA is finalizing October 5, 2023, instead of October 24, 2023, as 
the date by which an approved building permit must have been issued to 
allow projects to install certain VRF systems until January 1, 2028, 
because this was the signature date of the October 2023 Technology 
Transitions Rule, it aligns with the flexibility provided to entities 
in the October 2023 Technology Transitions Rule as described in section 
III.B. of this rule, and entities could have become aware of the 
Technology Transitions restrictions on or around this date. In 
addition, the commenter's project that was issued an approved permit 
would not be adversely affected by this earlier date than their 
request.
    EPA can reasonably anticipate that there may be a discrete number 
of projects that may also have been issued building permits ahead of 
October 5, 2023, that approve the use of an HFC or blend containing an 
HFC in VRF systems, and thus is providing this additional flexibility 
where these circumstances exist and the other conditions in this rule 
are met.
    Comment: Several commenters opposed the alternative proposal in the 
VRF Proposed Rule to limit the one-year extension to only those 
projects with an approved building permit that specified an HFC or 
blend containing an HFC and was issued prior to October 5, 2023 (See 
Docket ID No. EPA-HQ-OAR-2021-0643-0252, Docket ID No. EPA-HQ-OAR-2021-
0643-0254, Docket ID No. EPA-HQ-OAR-2021-0643-0255, Docket ID No. EPA-
HQ-OAR-2021-0643-0258). They said this alternative proposal is too 
narrow in comparison to the proposed extension. One commeter noted that 
it ``would fail to resolve the inventory and order fulfillment concerns 
articulated by industry'' (See Docket ID No. EPA-HQ-OAR-2021-0643-
0255).
    Response: EPA agrees with these commenters. Based on its review of 
the comments received in total, EPA finds that a limited one-year 
extension solely for projects that were issued an approved building 
permit prior to October 5, 2023, will not provide sufficient relief to 
avoid stranding

[[Page 100388]]

inventory. Comments from multiple OEMs, distributors, developers, and 
trade associations provided information that indicated that a broad 
one-year extension was necessary to provide certainty to those looking 
to complete construction on projects with long timeframes. We are also 
cognizant that the compliance date for VRF systems is among the earlier 
deadlines of all the Technology Transitions program's restrictions for 
assembled systems. The flexibility of a blanket one-year extension to 
January 1, 2027, to install components that were manufactured or 
imported by January 1, 2026, is intended to help smooth the transition. 
It provides some cushion to OEMs, distributors, and developers if roll-
out of the new rule-compliant components are delayed in any way, 
ensuring that builders and installers will be able to depend on 
available supply of previously manufactured equipment for these systems 
to reliably meet the January 1, 2027, installation deadline.
    Comment: One commenter supported the alternative approach in the 
VRF Proposed Rule to limit the one-year installation compliance 
extension to only those projects that were issued an approved building 
permit with a specified HFC or blend containing an HFC, prior to 
October 5, 2023 (See Docket ID No. EPA-HQ-OAR-2021-0643-0260). This 
commenter questioned how much stranded inventory there would be since 
no data was provided by OEMs on the volume of potential stranded 
equipment. This commenter also encouraged the Agency to avoid continued 
compliance date extensions.
    Response: After reviewing the comments, EPA disagrees that it 
should finalize the alternative approach described in the VRF Proposed 
Rule since it is likely that far fewer projects would qualify for this 
one-year extension, which could result in stranding already-purchased 
VRF equipment. EPA instead agrees with other commenters that a broad 
one-year extension provides certainty and avoids stranding inventory.
    EPA recognizes that finalizing an extension to January 1, 2028, for 
projects that were issued a building permit prior to October 5, 2023, 
and where the building permit approves the use of an HFC or blend 
containing an HFC with a GWP above the threshold, provides one 
additional year beyond the alternative proposal that this commenter 
supported. EPA is finalizing this targeted extension to still limit the 
universe of who may qualify for additional time while addressing the 
needs of certain affected regulated entities to avoid stranding 
inventory.
    Comment: One commenter requested clarification on whether a VRF-
Dedicated Outdoor Air System with a single direct expansion coil 
connected to a VRF condensing unit meets the definition of VRF systems 
under the Technology Transition Program and thus would be on the same 
timeline as other VRF systems. This commenter also asked if outdoor 
units which are tested in accordance with AHRI 1230 and listed as VRF 
units, regardless of whether they are installed with one or multiple 
associated evaporators, would fall under this definition of VRF 
systems.
    Response: Air conditioning systems that have one indoor evaporator 
instead of two or more as described in the October 2023 Technology 
Transitions Rule, do not fall under the description of VRF systems in 
that rule. This rulemaking does not reconsider the description of VRF 
systems from the October 2023 Technology Transitions Rule. For purposes 
of the Technology Transitions program, the systems that the commenter 
described are considered residential and light commercial air 
conditioning and heat pump systems, and have an installation compliance 
date of January 1, 2026, when using components that are manufactured or 
imported prior to January 1, 2025. VRF systems described in this rule, 
which uses the same description as the one found in the October 2023 
Technology Transitions Rule, do not cover all designs using VRF 
technology. For example, air-source VRF units with capacities below 
65,000 BTU/h are not subject to this final rule and instead are 
regulated with other residential and light commercial air conditioning 
and heat pump systems.
    Comment: One commenter provided their estimate that the costs 
associated with an installation compliance deadline earlier than 
January 1, 2028, will be $112 million for a project currently under 
development (See Docket ID No. EPA-HQ-OAR-2021-0251). This project was 
issued an approved building permit prior to October 5, 2023. The costs 
that this commenter highlights stem from real estate taxes, land loan 
interest, insurance expenses, the equity costs of capital, cost of new 
VRF equipment, and the cost to re-design the building to accommodate 
incorporation of additional ventilation into the building to account 
for the flammability of the new refrigerant.
    Response: EPA appreciates comments, including in this case, with 
detailed information on cost breakdowns. EPA appreciates this 
commenter's description of the cost impacts associated with a 
compliance deadline earlier than January 1, 2028. With EPA's decision 
to extend the installation compliance deadline to January 1, 2028, for 
projects issued an approved building permit prior to October 5, 2023 
and that meet the other conditions described in this rule, the 
commenters' projected cost estimates, which EPA has not independently 
evaluated or verified, will in any case be avoided.
    Comment: One commenter suggested EPA change the definition of 
``install'' to mean that VRF equipment are mounted in place, regardless 
of whether the field-installed system is charged (See Docket ID No. 
EPA-HQ-OAR-2021-0275).
    Response: EPA is not adopting a change in the definition of 
``install'' to its regulations. EPA defined that term in the October 
2023 Technology Transitions Rule after a notice-and-comment rulemaking 
and did not reopen that definition in this rulemaking. As such, this 
request is outside the scope of this narrow rulemaking. Such a change 
would have far-reaching impacts on existing stakeholder plans to comply 
with the October 2023 Technology Transitions Rule in numerous 
subsectors. Other subsectors with an installation compliance deadline 
include, but are not limited to, chillers, industrial process 
refrigeration, and several retail food subsectors. Based on the 
information provided by this commenter, finalizing an additional year 
to install VRF systems in certain projects that were issued an approved 
building permit prior to October 5, 2023, beyond the one year as 
proposed would also alleviate the commenter's concerns and would not 
affect the broader Technology Transitions program.
    Comment: Two commenters stated that EPA did not give the real 
estate industry sufficient notice about this rule's potential effects 
on the real estate industry. They note that NAICS codes that correspond 
to builders and developers were not used in the October 2023 Technology 
Transitions Rule, the interim final rule issued in December 2023 (88 FR 
88825), or the VRF Proposed Rule (See Docket ID No. EPA-HQ-OAR-2021-
0643-0273). One commenter called this a ``major oversight'' (See Docket 
ID No. EPA-HQ-OAR-2021-0643-0274). This commenter also mentioned that 
EPA set installation deadlines without engaging developers, and thus 
failed to meaningfully consider or discuss compliance needs and 
challenges of commercial and multifamily housing

[[Page 100389]]

developers. As such, this commenter requested that EPA work with the 
real estate industry to set compliance deadlines, and the other 
commenter requested that EPA delay the installation compliance 
deadline.
    Response: EPA acknowledges that the October 2023 Technology 
Transitions Rule, interim final rule (88 FR 88825), and VRF Proposed 
Rule did not include NAICS codes for developers and general 
construction. EPA has included those codes in this final rule and will 
continue to include them where appropriate in further regulations under 
the Technology Transitions program. EPA disagrees that this means the 
Agency provided insufficient notice of the rule. Notice of EPA's 
intention to regulate is provided through publication in the Federal 
Register. The list of NAICS codes within that document serves as a 
guide for readers regarding entities the EPA expects could potentially 
be affected, but EPA states that the list is not intended to be 
exhaustive, and that other types of entities not listed could also be 
affected. EPA received input from multiple developers and real estate-
related trade associations during the comment period on this rule and 
the interim final rule, and has met with real estate developers before 
finalizing this rule. A record of meetings EPA held with stakeholders 
after publication of the VRF Proposed Rule on June 26, 2024, is 
included in the docket for this rule (See attachment 1, Docket ID No. 
EPA-HQ-2021-0643-0276. EPA intends to continue its engagement with 
these stakeholders.
    Comment: One commenter suggested EPA should not set compliance 
deadlines until it develops a building code amendment strategy with 
model code bodies, state legislatures, and the buildings sector (See 
Docket ID No. EPA-HQ-OAR-2021-0643-0274). This commenter stated further 
that EPA should clarify the regulatory impacts that will arise on 
existing buildings' air conditioning and chiller systems when they 
reach the end of their useful lives. In particular, this commenter 
noted that existing buildings would need to be retrofitted to 
accommodate new air conditioning systems using refrigerants with lower 
GWP but higher flammability ratings. Another commenter noted that the 
latest building codes, which harmonize requirements for lower-GWP A2L 
refrigerants, have not been adopted in numerous jurisdictions across 
the country, which makes it harder to comply with these installation 
compliance dates. Other commenters also noted that lack of consistent 
A2L requirements across building codes could result in an inability to 
complete construction for projects that have already been issued 
approved building permits.
    Response: This rule serves the limited purpose of extending 
compliance deadlines for the installation of new VRF systems. To the 
extent that commenters are identifying concerns regarding building 
codes as an impediment to compliance with the October 2023 Technology 
Transitions Rule deadline for installation of VRF systems, this rule 
only alleviates those concerns by extending that deadline by one year, 
or in specific cases, two years. This rule does not address the 
retrofit of buildings to accommodate new air conditioning systems with 
lower GWP and higher flammability ratings but EPA welcomes further 
discussion on this topic. As discussed in section III.F. of this 
preamble, in electing to provide additional time for compliance, the 
Agency is not revisiting or reopening its analysis of the AIM Act 
subsection (i)(4) factors with respect to VRF systems, as set forth in 
the October 2023 Technology Transitions Rule preamble (88 FR 73177-
73180). In that rule, EPA considered building codes as one factor of 
its assessment of the availability of substitutes for HFCs used in the 
VRF systems. As noted in that final preamble, model building codes for 
this subsector were updated in 2021 to incorporate the use of lower-GWP 
refrigerants (88 FR 73178). When EPA issued the October 2023 Technology 
Transitions Rule, it noted that 41 states had either updated state 
building codes or legislatively ensured that refrigerants classified as 
A2Ls (i.e., lower-GWP substitutes that can support compliance with the 
October 2023 Technology Transitions Rule restrictions) could be used 
(See attachment 5, p. 5-6, of Docket ID No. EPA-HQ-OAR-2021-0643-0227). 
At the time of this rulemaking, only Alaska, the District of Columbia, 
Kentucky, Massachusetts, Michigan, and Nevada have yet to update their 
codes or legislatively provide for the use of A2Ls in air conditioning 
(See attachment 2, Docket ID No. EPA-HQ-OAR-2021-0643-0276).\7\ 
Finally, with respect to regulatory impacts of the marginal cost of 
installing a new rule-compliant system at the end of the useful lives 
of existing systems, that comment is beyond the scope of this rule, 
which has the limited effect of extending the deadline for compliance 
for one air conditioning and heating subsector.
---------------------------------------------------------------------------

    \7\ See AHRI's Building Code Map, web page, accessed November 
13, 2024. Available at https://www.ahrinet.org/a2l-refrigerant-building-code-map.
---------------------------------------------------------------------------

    Comment: One commenter, noting its engagement in other EPA 
partnerships, suggested that the Agency develop partnership programs 
with the real estate industry to drive the responsible and methodical 
phasedown of HFCs and appropriate building equipment transitions.
    Response: The establishment of potential partnership programs, or 
expansion of existing ones, is beyond the scope of this rulemaking. EPA 
welcomes additional opportunities for communication and collaboration 
with the real estate industry to successfully implement the phasedown 
of HFCs.
    Comment: Some commenters referenced issues outside the scope of 
this rulemaking or made inaccurate statements about rules promulgated 
under the AIM Act. One commenter noted concerns about how air 
conditioning systems used on boats are classified under the Technology 
Transitions program (See Docket ID No. EPA-HQ-OAR-2021-0643-0257). Two 
commenters requested EPA extend the installation compliance date for 
residential and light commercial air conditioning and heat pump systems 
beyond the time provided in the interim final rule (88 FR 88825) (See 
Docket ID No. EPA-HQ-OAR-2021-0643-0272 and EPA-HQ-OAR-2021-0643-0273). 
One commenter noted that this rulemaking ``would set the HFC production 
and consumption baseline levels from which reductions will be made 
[and] establish an initial methodology for allocating and trading HFC 
allowances for 2022 and 2023'' (See Docket ID No. EPA-HQ-OAR-2021-0643-
0267).
    Response: These comments are outside the scope of this rulemaking, 
which is solely related to an extension of the installation compliance 
date for VRF systems.

D. Limiting the Environmental Impact of This Action

    EPA is narrowly tailoring this action to respond to stakeholder 
concerns about stranded inventory and longer construction timelines for 
projects that incorporate VRF systems while maintaining the human 
health and environmental benefits of the October 2023 Technology 
Transitions Rule. To do so, EPA is granting the extension for 
installation of a VRF system only if all ``specified components'' of 
that system are manufactured or imported prior to January 1, 2026. The 
term ``specified component'' is defined in the October 2023 Technology 
Transitions Rule as ``condensing units, condensers,

[[Page 100390]]

compressors, evaporator units, and evaporators'' (88 FR 73112).\8\ As a 
result, the total number of VRF systems using HFCs, or blends 
containing HFCs, with a GWP above 700 installed in 2025, 2026, and 2027 
for projects that were issued an approved building permit prior to 
October 5, 2023, would match what the Agency modeled for installation 
before the January 1, 2026, deadline. The extra year that is being 
provided for installation of new VRF systems, and two years for certain 
installations, would not increase total demand for HFCs in VRF systems, 
but rather shift some of the modeled demand from 2025 into 2026 and 
2027.
---------------------------------------------------------------------------

    \8\ Other components of an air conditioning or heat pump system 
such as valves or refrigerant piping are not restricted by the 
October 2023 Technology Transitions Rule and can be installed 
regardless of manufacture or import date.
---------------------------------------------------------------------------

    Specified components manufactured or imported on or after January 
1, 2026, remain subject to the restrictions of the October 2023 
Technology Transitions Rule. Specifically, if they use or are intended 
for use with an HFC or a blend containing an HFC with a GWP of 700 or 
greater, their use is limited to servicing previously installed 
systems. All the labeling, reporting, and recordkeeping requirements, 
as delineated in the October 2023 Technology Transitions Rule, also 
continue to apply to components using, or intended to use, any 
regulated substance.
    EPA finds that providing additional time for installation 
effectively responds to stakeholder concerns about stranded inventory 
while remaining protective of the environmental benefits of the 
restrictions in the October 2023 Technology Transitions Rule. This 
approach was suggested by industry stakeholders in their letter dated 
November 13, 2023, and it aligns with industry's plans to transition 
VRF systems to use lower-GWP substitutes.

E. How do the labeling, recordkeeping, and reporting provisions apply?

    The October 2023 Technology Transitions Rule requires labels on 
products and specified components that use regulated substances. The 
labeling requirement takes effect at the time of the manufacture and 
import prohibition for products and specified components. This timing 
reflects the primary purpose of the labels, which is for assessing 
compliance of products and systems in sectors and subsectors with 
active HFC restrictions.
    Consistent with the October 2023 Technology Transitions Rule, this 
action does not require any new labeling for specified components 
intended for use in VRF systems that are manufactured in the United 
States or imported into the United States prior to January 1, 2026 
(i.e., existing inventory). This action also does not change the 
labeling requirements for specified components used in VRF systems that 
are manufactured or imported after January 1, 2026. As such, they must 
be labeled with the following: (1) the statement ``For servicing 
existing equipment only,'' (2) the HFC or blend containing an HFC that 
is used or intended for use, and (3) the date of manufacture.
    This labeling is particularly important to distinguish between 
components manufactured or imported before January 1, 2026, which are 
not subject to restrictions, from those that are manufactured or 
imported on or after January 1, 2026, which may be subject to the GWP 
limit depending on whether it is new or intended for servicing existing 
equipment. For a complete description of the Technology Transitions 
program labeling requirements, including formatting requirements, 
please refer to the October 2023 Technology Transitions Rule, or 40 CFR 
84.58.
    The October 2023 Technology Transitions Rule established 
recordkeeping and reporting requirements for any entity that 
manufactures or imports products or specified components that use or 
are intended to use HFCs in the sectors and subsectors covered in that 
rule. The reporting period for all sectors and subsectors starts on 
January 1, 2025, and the first reports covering the 2025 calendar year 
must be submitted to the Agency by March 31, 2026. This action does not 
add to nor modify the existing reporting and recordkeeping requirements 
for specified components. This rule does not establish new reporting 
and recordkeeping requirements related to the sale or installation of 
components manufactured or imported prior to January 1, 2025. However, 
EPA notes that entities that intend to rely on the flexibility 
associated with the date of their approved building permit should 
maintain that approved building permit as a record and have it 
available for inspection, if requested. Reporting and recordkeeping 
requirements finalized in the October 2023 Technology Transitions Rule 
are still applicable for specified VRF components that are manufactured 
in the United States or imported into the United States on or after 
January 1, 2025.

F. Evaluation of the Subsection (i)(4) Factors

    Subsection (i)(4) of the AIM Act directs EPA to factor in, to the 
extent practicable and using best available data, various 
considerations when carrying out a rulemaking under subsection (i). As 
discussed in detail in the preamble to the October 2023 Technology 
Transitions Rule, EPA views subsection (i)(4)(A) through (D) as 
providing overarching direction for setting restrictions under 
subsection (i) (88 FR 73129-73141). In this action, EPA did not 
reconsider the interpretations provided in the October 2023 Technology 
Transitions Rule regarding how it considers the factors laid out in 
subsection (i)(4). Nor did the Agency revisit or reopen its analysis of 
the (i)(4) factors with respect to VRF systems as set forth in the 
October 2023 Technology Transitions Rule preamble (88 FR 73177-73180). 
However, in finalizing this narrow adjustment to the installation 
compliance date for VRF systems, EPA considered the (i)(4) factors to 
the extent practicable, as applicable to the Agency's adjustment of 
that compliance date.
    The issue being addressed by this final rule was brought to the 
Agency's attention by stakeholders impacted by the October 2023 
Technology Transitions Rule after the issuance of that rule. As noted 
in EPA's discussion of subsection (i)(4)(A), in addition to information 
generated by other governing bodies and agencies, the Agency considered 
information provided by industry, environmental non-governmental 
organizations, trade associations, academia, standard-setting bodies, 
and more (88 FR 73129). EPA acknowledges that in some cases, regulated 
entities may be best situated to identify best available information, 
particularly regarding implementation challenges.
    With respect to the Agency's evaluation of the availability of 
substitutes under subsection (i)(4)(B), EPA previously determined that 
substitutes with a GWP less than 700 are available effective January 1, 
2026, for VRF systems. EPA did not change that determination and 
continues to find that substitutes with a GWP less than 700 will be 
available January 1, 2026, for these systems. Manufacturers and 
importers in this subsector are currently making or importing VRF 
systems and components with lower-GWP refrigerants for other markets 
and are prepared to meet the January 1, 2026, manufacture and import 
compliance date for such systems. This action did not reconsider the 
Agency's prior

[[Page 100391]]

evaluation of the availability of substitutes for meeting the use 
restrictions issued in the October 2023 Technology Transitions Rule for 
VRF systems; rather, this action addresses the disposition of 
components manufactured in the United States or imported into the 
United States before January 1, 2026.
    This rule to adjust the installation compliance date for VRF 
systems was motivated by the policy goal of avoiding the negative 
environmental and economic impacts of stranding inventory where 
possible, while recognizing that the AIM Act authorizes the Agency to 
establish use restrictions where appropriate for sectors and subsectors 
to move away from the use of high-GWP HFCs. These goals are consistent 
with the direction in subsection (i)(4)(C), which instructs the Agency 
to factor in, to the extent practicable, overall economic costs and 
environmental impacts, as compared to historical trends. As discussed 
in the October 2023 Technology Transitions Rule, EPA interprets 
(i)(4)(C) as purposefully accommodating different types and degrees of 
analysis of economic costs and environmental impacts, including costs 
and impacts that may be difficult to quantify (88 FR 73138). The narrow 
adjustment in this final rule reduces the potential to unintentionally 
strand equipment used in VRF systems, while still achieving a prompt 
transition for this equipment. Specifically, even with the adjustments 
in this final rule, manufacturers and importers of components for new 
VRF systems will be required in the near term (i.e., before January 1, 
2026) to transition away from using HFCs or blends containing HFCs with 
a GWP above 700 in those components, and developers and builders will 
not be allowed to install new systems that use non-compliant regulated 
substances beginning January 1, 2027 (or January 1, 2028, in limited 
circumstances). This action does not affect the overall consumption of 
HFCs because EPA does not anticipate a change in the amount of new VRF 
equipment that will be manufactured or imported prior to January 1, 
2026. Further discussion of environmental impacts can be found in 
section III.D.
    Finally, subsection (i)(4)(D) directs the Agency to factor in, to 
the extent practicable, the remaining phasedown period for regulated 
substances under the allowance allocation program. The reduction in the 
supply of HFCs is an important factor supporting compliance dates and 
GWP limits that are as stringent as feasible under the analysis of all 
the (i)(4) factors. This rule will not materially affect the demand for 
HFCs because it limits installations to components that are 
manufactured or imported before January 1, 2026. The effect of this 
rule is to extend the installations that EPA modeled to occur in 2025 
over the two-year period of 2025 and 2026, with further limited 
installations extending into 2027 for projects issued an approved 
building permit prior to October 5, 2023, providing the other criteria 
established in this rule are met.

G. Negotiated Rulemaking

    Prior to proposing a rule, subsection (i)(2)(A) of the AIM Act 
directs EPA to consider negotiating with stakeholders in the sector or 
subsector subject to the potential rule in accordance with negotiated 
rulemaking procedures established under subchapter III of chapter 5 of 
title 5, United States Code (commonly known as the ``Negotiated 
Rulemaking Act of 1990''). If EPA makes a determination to use the 
negotiated rulemaking procedures, subsection (i)(2)(B) requires that 
EPA, to the extent practicable, give priority to completing that 
rulemaking over completing rulemakings under subsection (i) that are 
not using that procedure. If EPA does not use the negotiated rulemaking 
process, subsection (i)(2)(C) requires the Agency to publish an 
explanation of the decision not to use that procedure before 
commencement of the rulemaking process. A discussion on EPA's 
consideration of using negotiated rulemaking procedures and its 
decision not to use such procedures prior to proposal can be found in 
section II.G. of the VRF Proposed Rule (89 FR 53378-53380; June 26, 
2024).

IV. Judicial Review

    The AIM Act regulations promulgated herein may be challenged in the 
United States Court of Appeals for the District of Columbia Circuit. 
Pursuant to section 307(b)(1) of the CAA, petitions for judicial review 
of the AIM Act regulations must be filed in that court within 60 days 
after the date notice of this final action is published in the Federal 
Register.
    The AIM Act provides that certain sections of the CAA ``shall 
apply'' to the AIM Act and actions ``promulgated by the Administrator 
of [EPA] pursuant to [the AIM Act] as though [the AIM Act] were 
expressly included in title VI of [the CAA].'' 42 U.S.C. 7675(k)(1)(C). 
Among the applicable sections of the CAA is section 307, which includes 
provisions on judicial review. Section 307(b)(1) provides, in part, 
that petitions for review must only be filed in the United States Court 
of Appeals for the District of Columbia Circuit: (i) when the agency 
action consists of ``nationally applicable regulations promulgated, or 
final actions taken, by the Administrator,'' or (ii) when such action 
is locally or regionally applicable, but ``such action is based on a 
determination of nationwide scope or effect.''
    The AIM Act regulations promulgated herein are ``nationally 
applicable regulations'' within the meaning of CAA section 307(b)(1). 
These regulations establish regulatory requirements applicable across 
the entire United States to implement restrictions under subsection (i) 
of the AIM Act. The regulations promulgated herein amend an existing 
nationally applicable regulation by adjusting a compliance deadline for 
certain systems. The deadlines in the amended regulation and the 
conditions required to qualify for those extended deadlines are 
nationally applicable to all affected entities. Accordingly, under 
section 307(b)(1) of the CAA, petitions for judicial review of these 
AIM Act regulations must be filed in the United States Court of Appeals 
for the District of Columbia Circuit by February 10, 2025.

V. Statutory and Executive Order Reviews

    Additional information about these statutes and Executive Orders 
can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 14094: Modernizing Regulatory Review

    This action is not a significant regulatory action as defined in 
Executive Order 12866, as amended by Executive Order 14094, and was 
therefore not subject to a requirement for Executive Order 12866 
review.

B. Paperwork Reduction Act (PRA)

    This action does not impose an information collection burden under 
the PRA because it does not contain any information collection 
activities.

C. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. In 
making this determination, EPA concludes that the impact of concern for 
this rule is any significant adverse economic impact on small entities 
and that the Agency is certifying that this rule would not have a 
significant economic impact on a substantial number of small entities

[[Page 100392]]

because the rule would relieve regulatory burden on the small entities 
subject to the rule. This rule will prevent the stranding of components 
used to install VRF systems. EPA therefore concluded that this action 
will relieve regulatory burden for all directly regulated small 
entities.

D. Unfunded Mandates Reform Act (UMRA)

    This action does not contain an unfunded mandate of $100 million 
(adjusted annually for inflation) or more (in 1995 dollars) as 
described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or 
uniquely affect small governments.

E. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, or on the distribution of power 
and responsibilities among the various levels of government.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications as specified in 
Executive Order 13175. It will not have substantial direct effects on 
tribal governments, on the relationship between the Federal government 
and Indian tribes, or on the distribution of power and responsibilities 
between the Federal government and Indian tribes, as specified in 
Executive Order 13175. Thus, Executive Order 13175 does not apply to 
this action.

G. Executive Order 13045: Protection of Children From Environmental 
Health and Safety Risks

    EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that concern environmental health or safety risks 
that EPA has reason to believe may disproportionately affect children, 
per the definition of ``covered regulatory action'' in section 2-202 of 
the Executive Order. This action is narrowly tailored to prevent the 
stranding of certain air conditioning and heat pump equipment using VRF 
technology while not affecting the demand for HFCs. Therefore, this 
action is not subject to Executive Order 13045 because it does not 
concern an environmental health risk or safety risk. Since this action 
does not concern human health, EPA's Policy on Children's Health also 
does not apply.

H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    This action is not subject to Executive Order 13211, because it is 
not a significant regulatory action under Executive Order 12866.

I. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations and 
Executive Order 14096: Revitalizing Our Nation's Commitment to 
Environmental Justice for All

    EPA believes that this type of action does not concern human health 
or environmental conditions and therefore cannot be evaluated with 
respect to potentially disproportionate and adverse effects on 
communities with environmental justice concerns. This action is 
narrowly tailored to prevent the stranding of inventory of air 
conditioning and heat pump equipment using VRF technology while not 
affecting the demand for HFCs.
    Although this action does not concern human health or environmental 
conditions, EPA identified and addressed environmental justice concerns 
within the October 2023 Technology Transitions Rule (88 FR 73098; 
October 24, 2023).

K. Congressional Review Act (CRA)

    This action is subject to the CRA, and the EPA will submit a rule 
report to each House of the Congress and to the Comptroller General of 
the United States. This action is not a ``major rule'' as defined by 5 
U.S.C. 804(2).

List of Subjects in 40 CFR Part 84

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Chemicals, Imports, Reporting and recordkeeping 
requirements.

Michael S. Regan,
Administrator.

    For the reasons set forth in the preamble, the EPA amends 40 CFR 
part 84 as follows:

PART 84--PHASEDOWN OF HYDROFLUOROCARBONS

0
1. The authority citation for part 84 continues to read as follows:

    Authority: Pub. L. 116-260, Division S, Sec. 103.

Subpart B--Restrictions on the Use of Hydrofluorocarbons

0
2. Amend Sec.  84.54 by revising paragraph (c)(2) to read as follows:

Sec.  84.54  Restrictions on the use of hydrofluorocarbons.

* * * * *
    (c) * * *
    (2) Effective January 1, 2026, variable refrigerant flow systems 
for use as residential or light commercial air-conditioning or heat 
pumps, using a regulated substance, or a blend containing a regulated 
substance, with a global warming potential of 700 or greater. Such new 
variable refrigerant flow systems using a regulated substance, or a 
blend containing a regulated substance, with a global warming potential 
of 700 or greater may be installed prior to January 1, 2027, where all 
specified components of that system are manufactured or imported prior 
to January 1, 2026. Such new variable refrigerant flow systems using a 
regulated substance, or a blend containing a regulated substance, with 
a global warming potential of 700 or greater may be installed prior to 
January 1, 2028, when an approved building permit issued prior to 
October 5, 2023, specifies the use of a restricted regulated substance, 
or blend containing a restricted regulated substance, in such system 
detailed in that building permit, and where all specified components of 
that system are manufactured or imported prior to January 1, 2026.
* * * * *
[FR Doc. 2024-29243 Filed 12-11-24; 8:45 am]
BILLING CODE 6560-50-P
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