TABLE OF CONTENTS

1........... Background.................................................................................................................... 1

2........... Procedural issues and consultation of interested parties.................................................... 3

2.1........ Consultations of other Commission Services.................................................................... 3

2.2........ External expertise........................................................................................................... 3

2.3........ Stakeholder consultation and conference......................................................................... 4

2.4........ Scrutiny by the Commission Impact Assessment Board................................................... 6

3........... Problem definition........................................................................................................... 7

3.1........ The problem that requires action..................................................................................... 7

3.2........ Underlying drivers of the problem.................................................................................... 9

3.3........ Evolution of the problem in the EU................................................................................ 10

3.4........ Who is affected, in what ways and to what extent?........................................................ 12

3.5........ EU right to act.............................................................................................................. 13

4........... Objectives.................................................................................................................... 14

4.1........ General policy objectives.............................................................................................. 14

4.2........ Specific policy objectives.............................................................................................. 14

4.3........ Operational policy objectives........................................................................................ 14

4.4........ Consistency with other policies and objectives............................................................... 15

5........... Policy options............................................................................................................... 15

5.1........ Policy option A: No policy change at EU level (baseline option)..................................... 15

5.2........ Policy option B: Voluntary agreements by industry (non-regulatory)............................... 16

5.3........ Policy option C: Extended scope of containment measures............................................. 16

5.4........ Policy option D: Establishment of a phasedown mechanism for placing HFCs on the EU market 17

5.5........ Policy option E: Bans of production, use or placing on the market of F-Gases in certain applications 19

5.6........ Combination of policy options....................................................................................... 20

5.7........ Options discarded from further analysis......................................................................... 20

6........... Analysis of impacts....................................................................................................... 22

6.1........ Environmental impacts.................................................................................................. 22

6.1.1..... Approach used............................................................................................................. 22

6.1.2..... GHG emission reductions.............................................................................................. 23

6.1.3..... Ecotoxicity................................................................................................................... 25

6.2........ Economic impacts......................................................................................................... 25

6.2.1..... Abatement costs and direct costs to industry................................................................. 26

6.2.2..... Impacts on sectors........................................................................................................ 27

6.2.3..... Administrative costs...................................................................................................... 35

6.2.4..... Impacts on regions........................................................................................................ 37

6.2.5..... Impacts on the functioning of the internal market and competition................................... 38

6.2.6..... Impacts on competitiveness, trade and investment flows................................................. 38

6.2.7..... Third countries and international relations....................................................................... 42

6.2.8..... Impacts on consumer prices.......................................................................................... 43

6.2.9..... Impacts on innovation and research............................................................................... 43

6.2.10... Impacts on small and medium enterprises (SMEs: see also Annex III)............................ 44

6.3........ Social impacts.............................................................................................................. 45

6.3.1..... Employment impacts and labour market........................................................................ 45

6.3.2..... Safety, occupational and health risks............................................................................. 48

7........... Comparing the options.................................................................................................. 49

8........... Monitoring and evaluation............................................................................................. 52

ANNEX I: Glossary of Terms..................................................................................................... 54

ANNEX II: Stakeholder Consultations........................................................................................ 57

1........... Conference Report on Stakeholder Meeting in Brussels, 13 February 2012................... 57

1.1........ Conference Objectives................................................................................................. 57

1.2........ Summary of Presentations and Interventions.................................................................. 57

1.3........ Concluding remarks...................................................................................................... 61

1.4........ Agenda of meeting........................................................................................................ 63

1.5........ Registered Participants.................................................................................................. 64

2........... Executive Summary of the Analysis of the On-Line Stakeholder Consultation................. 70

2.1........ Participation................................................................................................................. 70

2.2........ Methodology................................................................................................................ 70

2.3........ Policy action addressing F-gas emissions....................................................................... 71

2.4........ Impacts of policy options.............................................................................................. 71

2.5........ General Conclusions..................................................................................................... 72

ANNEX III: Consultations of SMEs........................................................................................... 73

ANNEX IV: Background Information on the Business as Usual Scenario (No Further Action – Option A) 79

1........... F-Gas Emissions........................................................................................................... 79

2........... The Model AnaFgas..................................................................................................... 81

3........... HFC demand and emissions in EU-27 until 2050 for different sectors............................ 82

4........... F-Gas sources currently not addressed by EU legislation............................................... 85

ANNEX V: Technical Assessment of Environmental Impacts....................................................... 86

1........... Emissions for Policy Options B, C, D, E vs. Baseline (Option A)................................... 86

2........... Replaced units in each sector As a result of Policy Options B, C, D and E in 2030......... 91

ANNEX VI: Assessment of cost impacts on sectors (Competitiveness proofing).......................... 93

1........... Abatement and direct costs........................................................................................... 93

2........... Abatement cost curve................................................................................................... 96

3........... Investment and Service costs, employment effects......................................................... 96

4........... Impacts on service companies..................................................................................... 100

ANNEX VII: Detailed results of Screening of Policy Options..................................................... 102

1........... Discarded policy options............................................................................................. 102

2........... Discarded sub-options of policy options B, C, D and E............................................... 103

3........... Screening of sub-options for Policy options B, C, D & E............................................. 106

ANNEX VIII: Sensitivity Analysis of Cost Estimation................................................................ 124

1........... General...................................................................................................................... 124

2........... Option B "Voluntary agreements in certain HFC applications"...................................... 125

2.1........ Effects of prices for unsaturated HFCs........................................................................ 125

2.2........ Effects of discount rate................................................................................................ 126

2.3........ Conclusions................................................................................................................ 127

3........... Option D "Quantitative limits for the Placing on the Market of certain HFCs"................ 128

3.1........ Effects of prices for unsaturated HFCs........................................................................ 129

3.2........ Effects of discount rate................................................................................................ 129

3.3........ Conclusions................................................................................................................ 130

4........... Option E "Ban the placing on the market of certain open and closed applications of F-Gases" 131

4.1........ Effects of prices for unsaturated HFCs........................................................................ 132

4.2........ Effects of discount rate................................................................................................ 132

4.3........ Conclusions................................................................................................................ 133

ANNEX IX: Model Description of the EmIO-F Europe Input-Output model and Sensitivity Analysis of Employment impacts..................................................................................................................................... 134

1........... Introduction................................................................................................................ 134

2........... The Input-output model............................................................................................. 134

3........... Sensitivity analysis of employment impacts................................................................... 138

ANNEX X: Mechanism for the Placement of HFCs on the EU Market...................................... 141

1........... Introduction and Summary.......................................................................................... 141

2........... Scope........................................................................................................................ 142

2.1........ Coverage of substances.............................................................................................. 142

2.2........ HFCs to be specified individually in a list..................................................................... 142

2.3........ Considered alternative(s)............................................................................................ 143

2.4........ Coverage of mixtures/preparations.............................................................................. 144

2.5........ Recovered, recycled and reclaimed HFC.................................................................... 144

3........... Activities subject to quantitative restrictions................................................................. 144

3.1........ HFCs in imported equipment...................................................................................... 144

3.2........ Options for taking measures on pre-charged equipment............................................... 153

3.3........ Export of products containing HFCs........................................................................... 155

3.4........ Sectors covered......................................................................................................... 156

4........... Reduction schedule for a phasedown for placing HFCs on the market.......................... 156

5........... Implementation mechanism and quota allocation.......................................................... 164

5.1........ Quota allocation – allocation through grandfathering or auctioning................................ 164

5.2........ Grandfathering or allocation on demand....................................................................... 165

5.3........ Determination of the baseline....................................................................................... 166

5.4........ Treatment of exports................................................................................................... 166

5.5........ Implementation and required data................................................................................ 166

5.6........ Transferability of quotas.............................................................................................. 167

5.7........ Administrative costs for companies.............................................................................. 168

6........... Monitoring, reporting and verification.......................................................................... 168

6.1........ Reporting................................................................................................................... 168

6.2........ Verification................................................................................................................. 170

6.3........ Compliance and enforcement...................................................................................... 171

ANNEX XI: Schedule for the Introduction of Bans.................................................................... 173

ANNEX XII: Analysis of Administrative Costs.......................................................................... 174

1........... Methodology.............................................................................................................. 174

2........... Policy Option A: No policy change............................................................................. 176

3........... Policy Option B: Voluntary Agreements...................................................................... 176

3.1........ Overview of information requirements for the option of voluntary agreements............... 177

3.2........ Annual report on HFC use.......................................................................................... 180

3.3........ Independent verification of HFC use reports / submission to trade association / monitoring institution 183

3.4........ Annual monitoring report to EU................................................................................... 184

3.5........ Communication with stakeholders............................................................................... 187

3.6........ Summary of administrative costs of voluntary agreements............................................. 189

4........... Policy Option C: Extended Scope of containment measures......................................... 190

5........... Policy Option D: Establishment of quantitative limits for placing certain F-Gases (HFCs) on the EU market (phasedown).............................................................................................................. 190

5.1........ Overview of information requirements for the phasedown option.................................. 190

5.2........ PD03 - Registration in F-Gas database....................................................................... 199

5.3........ PD04 - Submission of verified baseline report............................................................. 202

5.4........ PD05 - Verification of baseline report......................................................................... 203

5.5........ PD18 - Report (Art. 6) on placing on the market, import & export, reclamation, recycling & destruction 204

5.6........ PD 19 – Verification of Reporting & submission to MS or central authority.................. 206

5.7........ PD 30 – Reporting on reclamation and destruction...................................................... 207

5.8........ Summary of administrative cost of the phasedown option............................................. 211

6........... Policy Option E: Regulatory Bans................................................................................ 212

6.1........ Overview of information requirements for the ban option.............................................. 213

6.2........ B02 - Carry out audits/inspections.............................................................................. 215

6.3........ B 03 – MS reports on implementation......................................................................... 218

6.4........ Summary of administrative cost of the ban option......................................................... 220

ANNEX XIII: Questionnaire assessing Administrative Costs of Stakeholders............................. 221

1........... Introduction................................................................................................................ 221

2........... General guidance to the users...................................................................................... 222

3........... Questionnaire addressing companies with experience under the ODS Regulation.......... 225

4........... Questionnaire addressing reclamation and/or destruction facilities currently not covered by reporting obligations.................................................................................................................................. 226

5........... Questionnaire addressing MS authorities with experience in F-Gas bans....................... 227

6........... Questionnaire addressing MS competent authorities under the ODS regulation............. 228

7........... Questionnaire addressing companies currently falling under reporting requirement in the F-Gas regulation 229

8........... Questionnaire addressing trade associations experienced with a voluntary agreement (VA) 231

ANNEX XIV: Macroeconomic Analysis of F-Gas Policies with GEM-E3................................ 233

1........... Methodology.............................................................................................................. 233

2........... Scenarios................................................................................................................... 233

3........... Detailed results........................................................................................................... 235

ANNEX XV: Differences between the EmIO-F and the GEM-E3 model................................... 240

Annex XVI: State and potential of technology in the different sectors.......................................... 241

1........... Common technology by sectors.................................................................................. 241

2........... The market potential of abatement technology............................................................. 243

2.1........ Selection of sector abatement options.......................................................................... 243

2.2........ Energy efficiency......................................................................................................... 243

2.3........ The concept of penetration rates................................................................................. 243

2.4........ Constraints to market penetration................................................................................ 244

2.5........ Determination of penetration rates............................................................................... 246

2.6........ Combination of penetration rates (“penetration mix”)................................................... 247

2.7........ Key abatement options by sectors............................................................................... 249

Annex XVII: Assesment of indirect impacts on sales.................................................................. 255

1. Background

Hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6), commonly called fluorinated gases or "F-Gases", are very potent greenhouse gases (GHG) whose climate impact is up to 23.000 times higher than CO2. Their emissions are therefore covered by the Kyoto Protocol. Currently, they account for 2% of the GHGs in the EU. In 2010, 98% (by weight) of F-Gases placed on the EU market were HFCs, 2% was SF6 and about 0.3% were PFCs.

F-Gases are commodities used in a large variety of products and equipment including refrigeration, air conditioning (AC), insulation foams, electrical equipment, aerosols and fire protection. Most F-Gases have been developed by industry specifically to replace ozone-depleting substances (ODS) that are being phased out under the Montreal Protocol and for this reason F-Gases are being increasingly used at world-wide scale.

Whereas other GHG emissions are mainly a by-product resulting from production processes, heating or transport, F-Gas emissions primarily occur either during emissive uses (e.g. as aerosol or solvent) or due to leaks during the use period and improper waste treatment of products and equipment.[1]

In order to limit the rapid growth of F-Gas emissions and contribute to the Kyoto target, the EU adopted in 2006

– a Regulation focusing on preventing leakage during use ("containment") and at end of life of (mostly) stationary equipment as well as a limited number of F-Gas bans in narrowly defined niche application areas ("F-Gas Regulation")[2], and

– a Directive introducing restrictions on the use of F-Gases with a global warming potential (GWP) above 150 in AC systems of new motor vehicles ("MAC directive")[3].

There are two ways of reducing F-Gases emissions from equipment and products. First, the use of F-Gases in applications can be completely avoided or replaced by F-Gases with a lower GWP and secondly, emissions during the use period or at the end of life of products and equipment can be reduced. Except for the MAC Directive, which focuses on AC in new passenger cars only, existing EU F-Gas legislation barely discourages the use of highly climate-relevant F-Gases. On the other hand, alternative substances to F-Gases can be used in nearly all fields of application and are readily available already today.[4],[5] Annex XVI gives a sector-by-sector overview over available alternative technologies and by what time 100% of applications in each sector can be fully replaced by safe and energy-efficient alternatives based on today`s technologies.[6]

In some Member States national legislation exists. By way of example, the Danish legislation bans the use of F-Gases for certain purposes and includes F-Gas taxation and support for R&D of alternative technology. As a result, the import of bulk F-Gases was reduced to a third between 2000 and 2010 and Danish emissions of F-Gases have been declining in recent years, while emissions are rising at EU level.[7] Austria has similarly maintained additional bans on specific appliances using HFCs.

In September 2011 the Commission published a report on the application, effects and adequacy of the existing F-Gas Regulation[8]. It concluded that there is scope for further action to reduce emissions from F-Gases in the EU, in particular by avoiding the use of F-Gases where alternative technologies with no or lower impact on climate change exist. A decrease of up to two-thirds of today's emissions by 2030 is cost-effective due to the availability and maturity of alternatives in many sectors.[9] However, policies in this area have to address a high level of complexity. Apart from taking into account the large variety of products and equipment using F-Gases, the feasibility and cost-effectiveness of reducing emissions in specific application areas may depend on e.g. equipment size and where it is intended to be used. In this context energy efficiency and safety require particular attention.

In September 2011 the European Parliament adopted a Resolution[10] stating that "fast-action regulatory strategies are available to phase down production and consumption of HFCs [..]" and urged the "Commission to come forward with a revision of F-Gas regulations and make proposals for a rapid phasedown of the production and consumption of HFCs". In March 2012 this position was reaffirmed in the Parliament's resolution[11] on the 2050 Roadmap, calling for an ambitious proposal to reduce emissions of F-Gases by the end of 2012.

The EU is clearly at the forefront internationally as regards the phasing out of ODS under the Montreal Protocol and in addressing the resulting F-Gas problem through legislation. However, the EU is not at all alone in calling for urgent action on F-Gases: In 2009, 2010, 2011 and 2012 several Parties to the Montreal Protocol including the US submitted proposals to phasedown supply and consumption of HFCs globally, which is supported by at least 108 countries[12]. Such action is projected to avoid, in a cost-effective way, more than 100 Gigatonnes of CO2 equivalents (CO2eq) by 2050[13]. For perspective, this cumulative figure is roughly 3-4 times the total annual anthropogenic CO2 emission at this point in time. The EU has supported these proposals as a complement to climate mitigation action under the United Nations Framework Convention on Climate Change (UNFCCC).[14] So far little progress has been achieved in the negotiations since, inter alia, China, India and Brazil have refused to discuss this issue under the Montreal Protocol. However, recently a new initiative called "Climate and Clean Air Coalition to Reduce Short-Lived Climate Pollutants" has been launched which calls for action on HFCs as one of five priority focal areas and is quickly gaining momentum.[15] This initiative has been joined/endorsed so far by Bangladesh, Canada, Colombia, Ghana, Japan, Mexico, Nigeria, Norway, Sweden, the USA, as well as EC, World Bank, UNEP and most recently the G8 countries. More countries have already expressed their interest in joining.

2. Procedural issues and consultation of interested parties

2.1. Consultations of other Commission Services

This Impact Assessment for the review of the F-Gas Regulation (Agenda Planning 2012/CLIMA/003) was developed by DG CLIMA in close co-operation with relevant Commission Services. The following DGs were invited to an Interservice Steering Group: COMP, EMPL, ENER, ENTR, ENV, JRC, LS, MOVE, RTD, SANCO, SG, TAXUD and TRADE. This group met eight times from April 2010 to March 2012 where it provided input to a preparatory study as well as the follow-up work and the drafting of the impact assessment. DG JRC was asked to carry out a comprehensive macro-economic analysis of possible policy options with the GEM-E3 model (Annex XIV). The final meeting on the draft Impact Assessement on 29 March 2012 was attended by CLIMA, ENER, ENTR, JRC and SG. Written comments to this meeting were provided by SANCO and TRADE.

2.2. External expertise

DG CLIMA commissioned the following studies to underpin the review:

(1) A comprehensive study was carried out by a consortium led by Öko-Recherche ("preparatory study").9 This study inter alia assessed the effectiveness of current policies, the feasibility and cost-effectiveness of the replacement of F-Gases in all main application areas (see Annex XVI), and discussed options for further action to reduce F-Gas emissions. The analysis was based on a thorough bottom-up analysis, involving the development of a model based on market data, including production, import, exports and sales, for both substances and products/equipment (referred to as AnaFgas model, Annex IV). The study assumes a conservative approach using today`s costs for alternatives and considering only available, safe and energy-efficient technologies. Future reductions in investment costs that are expected from economies-of-scale and learning-by-doing were not factored into the analysis. This study forms the main evidence base for this impact assessment.

(2) As a follow-up to the preparatory study, a consortium led by Öko-Institut assisted DG CLIMA in further refining the social and economic effects of the most promising policy options considered for a review, and examining in more detail the possible design of the option to set quantitative limits for the placing on the market of F-Gases in the EU.

(3) A complementary study on policy options for the management and destruction of ozone-depleting substances and F-Gases contained in equipment and products (so-called "banks") was carried out by SKM ENVIROS.[16]

Three other large and relevant studies by other parties were used for the drafting, thus reinforcing the validity of the results presented in this document. A study commissioned by EPEE (a European umbrella group representing members who produce, design and install heating, cooling and refrigeration technologies), was carried out by Armines/ERIE[17] and estimated the timeframe and feasibility of introducing gases with lower GWP. Secondly, a study published by the German Umweltbundesamt4 examined the availability of alternatives and their appropriateness in the individual sectors. Finally, the Technical and Economic Assessment Panel (TEAP) of the Montreal Protocol published a report5 on the assessment of alternatives at global level.

In addition, DG CLIMA set up an expert group consisting of 47 experts from different industrial sectors (24 high-level representatives), Member States (20 nominated a representative), and NGOs (3) to provide guidance and technical input to the preparatory study. The group met twice between October 2010 and May 2011 and provided written advice to DG CLIMA in the preparatory phase of the review.

2.3. Stakeholder consultation and conference

An internet-based consultation was open to individuals and organisations on the website of DG CLIMA from 26th September to 19th December 2011. 261 replies were obtained, of which 164 came from organisations. 75% of the latter were related to industry (see Fig.1). Less than 2% of these stakeholders chose the option "no further action" in response to a question on the most appropriate action at EU level to contribute to reducing GHG emissions in the absence of global action on HFCs.

Fig. 1: Respondents to the on-line stakeholder consultation representing organisations

The findings of the consultation were presented at an open stakeholder conference[18] on 13 February 2012, which was attended by over 130 participants from industry, Member States, NGOs and the European Parliament. This meeting gave participants ample time and opportunity to deliver feedback and state their views regarding options for reviewing the Regulation. Almost all stakeholders agreed there was a need for further action on F-Gases compared to the status quo. A large majority of industry preferred or could live with a phasedown of supply of F-Gases as it would allow industry flexibility in cases where alternative technologies were not considered suitable. Bans were considered to be too rigid by those industry players relying on F-Gas technology, while NGOs and industrial participants engaged in alternative technologies considered cost-effective bans to be essential and saw a phasedown as a complementary measure to bans. A few participants preferred to focus on better application of the current Regulation only. Member States had no official positions yet, but indicated support for a phasedown measure (see Annex II). The consultations involved a large number of organisations and umbrella groups. At least 47 stakeholders out of 161 consulted represented the views of SMEs (see Annex III). Industrial users of F-Gas equipment such as FoodDrinkEurope, representing many SMEs, wanted reassurance that existing equipment is not made redundant.

Subsequently, a number of European Protection Agencies have positioned themselves on the review, considering that the preparatory study8 is an appropriate basis for further action, especially as energy efficiency and economic impacts are already taken into account in the analysis. They recommend a mixture of measures based on a phasedown drawing on the experience of the ODS phase-out, and additional bans.[19]

Given these extensive consultations and expert involvement, DG CLIMA exceeded the European Commission's minimum consultations standards in the process of drafting this Impact Assessment.

2.4. Scrutiny by the Commission Impact Assessment Board

The Impact Assessment Board of the European Commission assessed a draft version of the present impact assessment and issued its opinion on 25/05/2012. The Impact Assessment Board made several recommendations and, in the light of the latter, the final impact assessment report:

– Describes the wider policy context in more detail, in particular as regards the context of the roadmap (see section 3.1), the alternatives available (see 1 & Annex XVI), the most affected interests (see e.g. 3.4, 6.2.2 and summary table 7), as well as the international context (see 1);

– Clarifies the objectives and their link to concrete monitoring indicators (see 4.3, 8);

– Gives more detail on the policy options (section 5.1-5.5), especially the mechanism of a phasedown (see 5.4, Annex X);

– Clarifies the assessment of impacts on competitiveness, SMEs, consumers, employment, health and safety, as well as the effects on market players, distributional and regional effects i.e. by providing more detail on costs by sector in section 6.2.2 and Table 3, by extending the competitiveness impact section 6.2.6 and addressing price impacts for consumers for the affected products;

– Adds views of stakeholders throughout the text.

3. Problem definition

3.1. The problem that requires action

The 4th Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) stated that developed countries would need, on the basis of existing science, to reduce GHG emissions by 80 to 95% below 1990 emissions by 2050 to achieve the objective of limiting global climate change to a temperature increase of 2˚C and thus avoid undesirable climate effects.[20] To reach this target, the European Commission (EC) has laid out a cost-effective pathway to achieve the necessary overall emission reductions in the EU by 2050.[21] This low carbon roadmap establishes the necessary sectoral contributions in 6 areas consistent with an 80% EU reduction in GHG in 2050 on the basis of 1990, namely the power sector, residential & tertiary, industry, transport, non-CO2 agriculture and other non-CO2 sectors. To achieve the climate objective at lowest costs, non-CO2 emissions (including F-gases but excluding non-CO2 from agriculture) should be reduced between 72-73% by 2030 and 70%-78% in 2050, compared to 1990 levels. If based on the reference year 2005, the roadmap requires a reduction in non-CO2 emissions (except agriculture) of 60-61% by 2030.[22] F-gases emissions were estimated at 90 Mt CO2eq in 2005 (see Annex IV). A 60% reduction implies that emissions would have to be reduced to a level of 35 Mt CO2eq by 2030. Given estimated levels of 104 Mt CO2eq emission in 2030 based on a full application of current legislation, this would mean a further decrease of ca. 70 Mt CO2eq is required. The roadmap shows that to be cost-effective the marginal costs of abating emissions should not be higher than ca. €50/t CO2.[23]

F-Gases, generally, are very potent GHGs with high to very high GWPs of up to several thousand times that of CO2.[24] F-Gases are used in a large variety of products and equipment including refrigeration, AC, foams, electrical equipment, aerosols and fire protection (Fig. 2); there are 28 diverse main application areas (Fig. 6).

Fig. 2: Sectors using F-gases in new equipment/products in the EU. 2010 data reported under the F-Gas Regulation

Fig. 3: Global estimated consumption of HFCs in CO2eq by various sectors. Rapid growth after 1990 is clearly evident. HFCs constitute the largest quantitative percentage of all F-Gases. Source: UNEP25

With the successful phase-out of ODS, the production and use of F-Gases as ODS replacements has been growing strongly in recent years (see Fig. 3 for HFCs, the bulk of F-Gases) and will eventually lead to considerable emissions into the atmosphere, with the potential to substantially influence climate in the future.[25] To better appreciate the significance: Future HFC emissions could be equivalent to 18-45% of CO2 emissions based on the IPCC's "450ppm CO2 emissions pathway"-scenario by 2050.25 Since equipment and products containing F-Gases have a long lifetime of up to 50 years (e.g. building insulation foams), a lack of public intervention today would result in higher emissions up to several decades into the future.

In 2010, emissions from F-gases in the EU were estimated to be ca. 110 million tonnes (Mt) CO2eq8, corresponding to ca. 2% of all GHG emissions. Alternatives to F-Gases exist in many applications4,5, at costs well below 50€ per tonne CO2 abated9 (Annex XVI). In fact, 95% of the overall reduction potential of HFCs (without motor vehicles) can be reached at abatement costs lower than 20€ per tonne CO2. Analysis shows further that F-Gas emissions could be reduced cost-efficiently by more than two-thirds by 20309 (see also Fig. 7 below), which would amount to cumulated emission savings of ca. 625 Mt CO2eq. in the period from 2015 until 2030.[26] If reductions in F-Gas emissions will not contribute to the EU 2050 climate targets in a consistent manner, the EU will either risk missing these targets altogether or would have to require more expensive emission reductions in other industrial sectors. A two-thirds reduction of emissions by 2030 would also be fully compliant with proposals made in the international context of the Montreal Protocol by Micronesia and North-American states (US, Canada, Mexico), thus preparing Europe for a potential international agreement. EU action on F-Gases would also strongly support recent climate action at international level promoted by the "Climate and Clean Air Coalition to Reduce Short-Lived Climate Pollutants".

3.2. Underlying drivers of the problem

– Phasing out of ozone-depleting substances (ODS) under the Montreal Protocol: In order to phase-out ODS, the Montreal Protocol controls their production and consumption. As the choice of alternatives to ODS[27] is not regulated, a shift towards the production and use of F-Gases is taking place world-wide.

– Increasing use of F-Gas containing equipment and products: The most relevant uses for F-Gases are in refrigeration & AC (RAC[28]), foams, aerosols and electrical equipment.[29] Many of these application areas, in particular the RAC, are expected to grow strongly in the future9,[30]. This higher demand is a result of economic growth and increasing life standards, a strive for energy efficiency (e.g. heat pumps, foams) and, in the developing countries, also population growth.25,[31]

– Today`s use are the emissions of the future: F-Gases are used in appliances such as RAC equipment that have ordinary lifespans of 10-20 years for smaller and 20-30 years for larger systems, throughout which leakage may occur, as well as at the end-of-life treatment. Typical leak rates for larger equipment are 5-15% per year (but smaller for hermetically sealed equipment such as domestic fridges: <1% per year). Foams have lifetimes of 15 (if used in domestic appliances) to 50 years (for building insulation), and emissions usually occur at end-of-life and thereafter (e.g. from waste dumps). Recovery of F-gases from foams is rather costly. The use of F-Gases in aerosols, as solvents and in electrical equipment mostly does not create significant banks of potential emissions. Use in fire equipment does create banks but leakage is very tightly controlled due to safety regulations.16

– Demand for and innovation of alternative technologies is hampered by market failures: Climate effects of F-Gases are not factored into the price. Industry requires a clear signal in order to switch towards investments into alternative technologies (and to invest into R&D where still needed). Demand increase would also lead to economies of scale for alternative equipment. The current absence of a clear regulatory signal leads to a lower market penetration of green products than would be optimal from a societal perspective.

3.3. Evolution of the problem in the EU

F-Gas emissions can be prevented by avoiding their use in the first place and/or by reducing losses during the lifetime and at the end of life of F-Gas containing equipment. The current F-Gas Regulation mainly focuses on the latter. It includes provisions on

– containment (preventing leakage of F-Gases from stationary equipment) and recovery of F-Gases from end-of-life equipment (Art. 3/4);

– training and certification requirements for personnel handling F-Gases (Art. 5);

– reporting in order to monitor the sales of F-Gases (Art. 6);

– labelling of equipment containing F-Gases (Art. 7); and

– bans and market restrictions in a few niche areas where superior alternatives were already common place (Art. 8 and 9).

The report8 on the application of the F-Gas Regulation showed that, while these measures have the potential to reduce emissions, there are unfortunately shortcomings in the current application of the training and certification as well as the containment provisions, while compliance with Art. 6, 7, 8 and 9 was found to be satisfactory or better. Training and certification apply to approximately 600,000 persons and 66,000 companies (of which 98% in the RAC sector), posing a challenge to Member States to swiftly implement the necessary vocational training and certification systems in a timely manner, especially where such systems had not existed previously. Consequently, in some sectors more than 50% of personnel and companies had not been certified by 4 July 2011. Compliance by companies with the schedules for leakage checks and the obligation to install leakage detection systems was found to be unsatisfactory, as there was low awareness among operators due to deficiencies in enforcement. However, it must be noted that many of these shortcomings may be considered initial effects, especially since some requirements became applicable only in 2011, allowing little time for proper application. There is also a growing potential for recovery from systems containing F-gases in the coming years, as such systems will be reaching their end of life. In the stakeholder consultation, 84% of respondents expressed the view that the current status quo of implementing the existing regulation was not sufficient. While some stakeholders believed that better implementation would suffice, others wanted to see further legal action.

The MAC Directive introduced restrictions on the use of F-Gases with a GWP above 150 in mobile AC of new passenger cars. In other sectors, current legislation does little to support an increased use of viable alternatives to F-Gases in new products and equipment.

Potentially, considerable emission reductions are achievable through the existing F-Gas Regulation and MAC Directive.8 Assuming full application of the two pieces of legislation, the total emissions of F-Gases would stabilise around today's level of 110 Mt CO2eq in the EU-27 as a result of existing EU policy (Fig. 4, solid line). Without any legislation, F-Gases emissions in the EU would grow to over 200 Mt CO2eq in 2050 (Fig. 4: dotted line), almost doubling today's levels (see Annex IV for details). However, the observed shortcomings in the application of the F-Gas Regulation risk undermining these projected benefits and, if not sufficiently addressed, could lead to forfeiting 38 Mt CO2eq of cost-efficient emission reductions, ending up at ca. 150 Mt CO2eq in 2050. While it is important to step up efforts to ensure full compliance, observed low compliance on existing containment measures is a further argument for also reducing use of F-Gases in equipment in the first place.

Furthermore, the SKM study16 on F-Gas banks concluded that switching to alternatives is key to addressing F-Gas emissions in the waste stream. Although improved implementation of waste legislation can contribute to emission reductions, it can only address an overall small proportion of the problem and cannot substitute for measures addressing the origin of the problem.

Fig. 4: Projections of F-Gas emissions in the EU with and without the measures in the F-Gas Regulation and the MAC Directive. Source: Schwarz et al. (2011)9

Last but not least, a full application of the current F-Gas Regulation would at best achieve a stabilisation of emissions, which is fully insufficient to reach the EU's climate goals requiring a fair share reduction in the F-Gas sector of 60% by 2030, compared to 2005. Nor would the current Regulation be anywhere near sufficient if an international agreement to phase down F-Gases is reached, on the basis of the proposals currently on the table. Therefore, action to complement the existing measures in the F-Gas Regulation is absolutely essential.

3.4. Who is affected, in what ways and to what extent?

– Climate change affects everybody. During the first ten years of this millennium temperatures were the highest ever recorded, confirming the finding of the IPCC that total temperature increased already by 0.76°C from 1850–1899 to the period 2001–2005[32]. Evidence is rising strongly that a warming of the climate results in more frequent and more intense "extreme weather events".[33]

– The overall economy and non-F-Gas European industries may suffer a loss of price competitiveness if they must abate emissions at higher costs than possible within the F-Gas sector.

– Too little innovation and market penetration of alternative technologies represent a missed opportunity to stimulate innovation, green jobs and growth. Many of these "green growth" companies are SMEs[34], who find it hard to market their products under current market conditions (see Annex II).

– The F-Gas sector comprises a number of different market players who may be affected in different ways by any policy changes; these players include producers of F-Gas, manufacturers of equipment, electricity companies, service companies, importers and exporters, users of equipment, the retail sector and raw material sectors (e.g. metals and products). Currently, industrial sectors relying on F-Gases are affected in different ways. While producers of F-Gases and of equipment and products are only to a very limited extent subject to restrictions related to F-Gases, users of F-Gas equipment are subject to the containment requirements. If more alternative technologies were deployed, end-users of equipment could in several cases have lower costs overall e.g. for small industrial refrigeration, which is relevant for SMEs in particular.

– Emissions from F-Gases are covered by the "Effort Sharing Decision" establishing annual binding GHG emission targets for Member States for the period 2013–2020. Some Member States consider that the current EU legislation does not provide sufficient tools to ensure cost-effective reductions of F-Gas emissions. Therefore, several Member States have adopted national laws that are more stringent than the EU legislation, e.g. in Austria and Denmark the use of F-Gases for certain purposes is prohibited. While such prohibitions have driven innovation, unilateral action is not favoured by business and may pose challenges, in particular for SMEs.

3.5. EU right to act

The right for the Union to act in this field is set out in Articles 191 and 192 of the Treaty on the Functioning of the European Union (TFEU) which in Article 191 explicitly refers to the objective of combating climate change as part of the Union policy on the environment.

Action in this field also respects the principle of subsidiarity. Climate change is a transnational issue and since the EU has a common emission reduction target, Union-wide action is necessary. Such action can better be taken at EU level compared to diverse actions taken at Member State level, thereby achieving a high degree of environmental protection while also taken into account the need to minimise distortions in the internal market by introducing a level-playing field for all enterprises affected. Where appropriate the right of Member States is preserved to implement some provisions, such as the training and certification requirements or penalties, through provisions at Member State level taking into account their national circumstances.

4. Objectives

4.1. General policy objectives

It is the general objective of this initiative to contribute significantly to meeting the global challenge of keeping climate change below 2º C of pre-industrial levels by reducing GHG emissions in the EU by 80 to 95% in 2050 compared to 1990. This target correspond to the necessary reduction levels identified by the Intergovernmental Panel on Climate Change (IPCC) for developed countries and was endorsed both by the Council and the European Council as the EU 2050 emission reduction target.

4.2. Specific policy objectives

It is the specific objective of this initiative to contribute to the achievement of the EU 2050 reduction target by reducing CO2eq-emissions from F-Gases in the EU, in particular by:

– discouraging the use of F-Gases with high GWP in the EU where suitable alternatives exist;

– encouraging the use of alternative substances or technologies when they result in lower GHG emissions without compromising safety, functionality and energy efficiency, and achieving higher market shares for these technologies;

– preventing leakage from equipment and proper end of life treatment of F-Gases in applications;

– facilitating convergence towards a potential future agreement to phase down HFCs under the Montreal Protocol;

– enhancing sustainable growth, stimulate innovation and develop green technologies by improving market opportunities for alternative technologies and gases with low GWP;

– creating efficient and proportionate mechanisms for reaching the environmental objectives while limiting any undesirable effects on SMEs and employment, the administrative burden for companies and authorities, the abatement costs per tonne CO2 and preserving the competition in the Internal Market, to the extent possible.

4.3. Operational policy objectives

Consistent with the specific and general objective, the operational objective is to reduce F-Gas emissions in the EU by 60% in 2030 compared to 2005.

A second operational objective is to do so in a cost-effective manner by taking consistent, and cost-efficient measures (up to a maximum of 50€/t CO2eq), at reasonable costs to industry and with minimum administrative effort.

In addition, an upgrading of the existing legislation through clarifications as well improving the enforceability of legislation should contribute to achieving better implementation and application of the legislation and contribute to achieving the objectives above.

4.4. Consistency with other policies and objectives

The objectives of this initiative are consistent with and reinforce the following policies and objectives:

– The required emission reductions are consistent with the pathway outlined in the 2050 EU Low Carbon Roadmap. The selected sub-options are also cost-effective since they are estimated to have (marginal) abatement costs of less than 50€/t CO2 by 2030;

– support to novel alternatives will help maintain the competitiveness of the European economy and in particular support green growth as demanded by the EU 2020 priority sustainable growth: building a more competitive low carbon economy, protecting the environment and capitalising on Europe's leadership in developing new green technologies[35];

– improving the legislative text will ensure simplification and clarification of existing policy to enable better implementation in the spirit of better regulation[36];

– measures are introduced to safeguard the interests of SMEs along the "think small first" principle[37];

– special attention is paid to impacts on energy efficiency to ensure consistency in line with EU efforts of eco-design[38] and energy efficiency[39];

– taking action now at European level will lend support to the negotiations for an international agreement under the Montreal Protocol to phase down HFCs.

5. Policy options

5.1. Policy option A: No policy change at EU level (baseline option)

This option includes the existing legislation and assumes, in particular, full application of the provisions of the F-Gas Regulation in all Member States and sectors. This implies that current shortcomings are effectively addressed. 84% of respondents to the online stakeholder survey thought the current status quo (i.e. existing legal rules and implementation) was not sufficient. The steps to remediate current shortcomings include rigorous persecution of non-compliance by Member States as well as measures of encouragement at European level through non-legislative actions such as awareness raising, exchange of best practices and assistance which may take many shapes, e.g. the Commission is currently incorporating labelling rules into the Integrated Tariff of the European Communities to support Member States in enforcing the labelling provisions of the F-Gas Regulation. Numerous suggestions were made by stakeholders during the on-line survey, many of which require better control, policing and enforcement at Member State level. Stakeholders and Member State representatives also made several suggestions for clarifications and simplification in the Regulation, in particular on definitions, in reaction to a pertinent question in the stakeholder survey, which are similarly addressed under this option.

Hence, Option A is the baseline that includes current legislation as well as some necessary measures to approve its application. Options B to E describe further measures that are additional to this baseline.

5.2. Policy option B: Voluntary agreements by industry (non-regulatory)

This option considers additional or enhanced voluntary agreements in the EU to reduce F-Gas emissions. Such action was preferred in particular by industrial stakeholders in the online survey, with the exception of F-Gas producers. Stakeholders reported mixed experiences with voluntary agreements in the past, some reported on successful examples whereas others did not consider voluntary agreements to be adequate and/or enforceable. Such agreements could be considered realistic in the following areas, considering that abatement costs for these applications are estimated to be relatively low[40] (see Annex VI for more details):

– phase-out HFCs in commercial refrigeration (centralised systems, commercial hermetics, condensing units);

– replace HFC-134a in XPS foams;

– replace HFC-23 in fire protection;

– destroy HFC-23 emissions from halocarbon production;

– replace SF6 and NF3 in photovoltaic industry;

– and reach an enhanced agreement on the use of PFCs, NF3, HFC-23 and SF6 in the semiconductor industry.

5.3. Policy option C: Extended scope of containment measures

This option foresees an extension of the current F-Gas Regulation in its main provisions, i.e. the requirements on containment (Art. 3) and recovery (Art. 4). Such action was strongly supported by many industrial players in the online stakeholder survey.

A number of potential extensions were screened in terms of e.g. effectiveness and efficiency (see details in Annex VII). Eventually, the only sub-option considered to be relevant was an extension of the scope of these requirements to AC in some transport modalities.

In order to improve containment, improved product standards on leak tightness of applications containing F-Gases are desirable and should be further pursued.[41] This development of mandatory technical standards is part of the work under the Ecodesign Directive (2009/125/EC) and, possibly, in the future also under the proposed Energy Efficiency Directive[42]. However, considering the large number of appliances, corresponding standards and the timeframes involved, this relevant approach cannot substitute for measures addressing the origin of the problem. Impacts of such standards were hence not explicitly considered under this option.

5.4. Policy option D: Establishment of a phasedown mechanism for placing HFCs on the EU market

This option involves a phasing down of the supply of bulk HFC substances in the EU complemented with measures to cover quantities imported inside of equipment ("pre-charged"). In the online survey, a phasedown was supported by producers of F-Gases and producers of equipment (both alternatives and F-Gases) as well as users of equipment, in addition to strong support from public authorities and many individuals. In the ensuing stakeholder conference meeting on 13 February 2012, there was widespread support for such a measure by industry as it was considered to be more flexible than bans and would allow industry to adapt and continue using F-gases in applications where this was considered to be the optimal solution. However, in particular NGOs considered that bans were also necessary.

The phasedown mechanism assessed implies a gradually declining "cap" for the total placement of bulk HFCs (in tonnes of CO2eq) on the market in the EU with a freeze in 2015, a first reduction step in 2016 and reaching 21% of the levels sold in 2008-2011 by 2030. These levels have been determined so as to fully respect current market needs and the possibilities of replacements in all sectors (compare Annex XVI) with proven, safe and energy-efficient technologies already available today. The expected accelerated future development of alternative technologies will provide an additional safety margin.

Entities placing HFCs on the EU market must hold rights to "place on the market" (POM). ‘Placing on the market’ means the supplying of or making available to a third party within the EU for the first time and includes imports of bulk substances. The Commission allocates free quotas of rights to POM to stakeholders based on past reporting data ("grandfathering"). Stakeholders must ensure that they hold enough rights to cover their actual placing on the market and they may transfer rights between them. Compliance checks are carried out by the Commission in the following year, with independent verification of reports. As the participating entities are known through the existing reporting from the F-Gas Regulation and their number is a manageable size of ca. 100 companies, the phasedown is fully implementable through setting of limits by the Commission at EU level, making use of the experience gained through the ODS phase-out. A reserve will be available to new market entrants.

Measures to address quantities imported in pre-charged RAC equipment are indispensable for the environmental integrity[43] of the phasedown mechanism and a level playing field in the market. Here one must differ between hermetically sealed and non-hermetically sealed equipment. For the latter, a requirement of filling on the installation site only (instead of being factory pre-charged) is the preferable way to subject these HFCs to the quantitative restrictions of a phasedown (see also Annex X). This requirement is non-discriminatory as it would apply in the same way to products produced in the EU and to those imported. The appliances affected would essentially be "non-monobloc" AC systems (i.e. single-split, multi-split and rooftop systems) and would cover ca. 86% of refrigerants imported in AC equipment. By submitting these quantities to the cap, the replacement of high-GWP HFCs with alternatives is favoured in the vast majority of these appliances, so that over time the on-site filling requirement will affect less and less units. Filling of equipment during the installation on site would also alleviate the expressed concerns of the service industry (mainly SMEs) that currently the installation of new equipment is often done without the legally required use of certified experts, leading to additional and avoidable emissions, malfunctioning and loss of energy efficiency.[44] For the sealed equipment (e.g. AC movables), a placing on the market ban would safeguard the environmental performance of the mechanism as well as attaining a more level playing field for importers vs. domestically produced equipment.

Fig. 5 shows the phasedown schedule. The grey area represents the quantities which need to be placed on the market to satisfy the demand for F-Gases for product and equipment where cost-efficient alternatives do not exist. The schedule is calculated on the basis of the AnaFGas model and up-scaled to match the quantities reported under the F-Gas Regulation. These quantities do not account for the expected technological progress on alternative equipment which will provide an additional safety margin to avoid shortage of supply for applications that are not (yet) replaceable (see Annex X for details).

Fig. 5: Key features of phasedown schedule (see Annex X for more details)

The system should be flexible enough to allow modifying the allocation mechanism to improve its functioning where deemed necessary. To accommodate the outcome of a potential international agreement, amendments to the phasedown schedule at a later state should be possible. Furthermore, the Commission should have the possibility to exempt HFC quantities produced or imported for specific uses from the phasedown mechanism if the supply for applications which are critical for health and safety reasons would otherwise not be ensured.

5.5. Policy option E: Bans of production, use or placing on the market of F-Gases in certain applications

This policy option bans, from a specific date onwards, the sale of certain new appliances with F-Gases in the EU or the use of F-Gases in the following sectors where full market penetration of cost-efficient alternatives was considered feasible:

– Commercial refrigeration (stand-alone systems, condensing units, centralised systems);

– Industrial refrigeration[45]

– Transport refrigeration (Refrigerated trucks and trailers);

– Stationary AC (moveable systems, single split systems, multi split/VRF systems, rooftop systems, displacement chillers);

– HFC-23 in fire protection;

– SF6 in Magnesium die-casting <850 kg/ y and recycling of die casting alloys;

– Non-medical technical aerosols (except if 100% inflammability is required);

– HFC-134a in XPS foam blowing; and

– Mandatory destruction of HFC-23.

Bans were strongly favoured by individuals, public authorities and NGOs, but few industrial players. Some noted that substantive exemptions would be necessary e.g. due to local building codes prohibiting the use of certain alternatives in certain areas. Importers of foreign equipment argued that bans would be detrimental to their business.

5.6. Combination of policy options

The policy options presented above are not all mutually exclusive, as measures contained in the options address e.g. different gases or different application areas, so some could be implemented jointly, which is e.g. the case for Option C that is complementary to all other policy options. The impacts of such combined options would therefore often be a simple addition of the individual impacts of policy options combined. But bans under Option E could also be combined with an HFC phasedown, in particular to steer the choice of alternative technologies in sectors where they are most cost-efficient. In this case the environmental impact and economic costs are to a large extent already included in the impacts of Option D as measures overlap.

All policy options would contain clarification and simplification of the legislative text in order to improve implementation in the spirit of better regulation.

Given the complexity of the sector, many stakeholders in the online survey seemed to suggest that a mix of policies is the best approach forward. A number of European Environmental Protection Agencies have openly declared to favour such a combined approach, based on a phasedown accompanied by bans in certain areas, in order to meet the emission reduction targets in a cost-efficient way.19

5.7. Options discarded from further analysis

Additional policy options were screened but discarded from further analysis and are therefore not presented in detail in this section (See Annex VII for details). These policy options were:

– Suspension of the current F-Gas Regulation, as it would mean forfeiting significant emission savings.

– Inclusion under the EU-Emission Trading System (ETS). The current ETS has been designed to give a price to actual emissions from activities such as energy production, not for gases sold to be used in equipment for long periods of time and with no clear emission endpoint as is the case for most F-Gas applications. Also, the number of players who would have to acquire licenses would be prohibitively high and difficult to monitor. Only few stakeholders selected this measure among the 3 most appropriate options in the online survey (6%).

– EU harmonized tax schemes. There are a number of reason why this option was discarded, inter alia (i) tax levels and exemptions should reflect national differences and the risk of emissions, (ii) correct tax levels are difficult to set at European level, and (iii) control of the tax scheme at European level would involve a high administrative effort. A minority of stakeholders selected this measure among the 3 most appropriate options in the online survey (19%).

– Deposit and refund schemes. A number of existing national differences make it preferable to implement these at national level. A minority of stakeholders selected this measure among the 3 most appropriate options in the online survey (18%).

In addition to discarding these general options, some additional sub-options to policy options B, C, D and E were screened against criteria relating to:

– Effectiveness in terms of level of emission reductions (>1Mt of CO2eq)[46]. However, to ensure consistency with requirements for similar sectors[47], it is appropriate to retain specific options, even if the threshold is not reached, where the measure is cost-neutral or even beneficial, for example through gains in energy efficiency;

– Efficiency in terms of abatement costs (<50€ per t of CO2eq abated);

– Technical constraints like safety or loss of energy efficiency; and

– Other constraints such as consistency with other EU policies.

By way of example, a number of sub-options under Option C as regards extending the scope of containment were discarded because the costs were too high (e.g. for refrigerated vans and rail transport marginal costs were estimated to be €291 and €340 /t CO2eq abated, respectively; see Table A-VII_2 to Table A-VII_7 in Annex VII).

6. Analysis of impacts

F-Gases are used in many diverse application areas. Fig. 6 gives the main 28 (sub)-sectors (in addition to HFC-23 by-production) which are considered in the following analysis. Refrigeration is the most relevant sector in terms of emissions (estimated 34% of total F-Gas emissions in 2010, based on Schwarz et al.9), followed by mobile AC (30%), stationary AC (13%), other HFC uses (8%), SF6 uses (5%), PFCs and other halocarbons (5%), and foams (4%). The strongest long-term growth is expected for stationary AC. A detailed assessment of costs for all sub-sectors is given in Annex VI.

Fig. 6: Main F-Gas application areas and sub-sectors9

6.1. Environmental impacts

6.1.1. Approach used

Four key environmental impacts were analysed for the period 2010 until the reference year 2030 (vs. baseline option A):

(1) Reductions in direct F-Gas emissions (in Mt CO2eq);

(2) New direct emissions resulting from alternative substances (in Mt CO2eq);

(3) Emissions due to energy efficiency changes resulting from shifts to alternative technologies. The expected difference in annual energy consumption (kWh) between abatement technology and HFC reference technology was estimated and converted into CO2 emissions by using a specific CO2 emission factor per kWh of electricity consumption.

(4) The emissions of ecotoxicologically relevant substances were quantified in metric units of toxic substances.

The bottom-up stock model AnaFgas[48] was used to estimate emission scenarios for F-Gases in the EU-27. Baseline emissions are expected to remain stable from 2010 until 2050, but are higher than 1995 (see Annex IV for further details).[49]

In order to reduce overall emissions, measures on direct emissions (use of F-Gases) should not lead to higher indirect emissions (e.g. due to increased energy use of equipment). In order to avoid such a potential trade-off, only safe and energy-efficient (i.e. at least as efficient as conventional technology) alternatives were considered as feasible replacement substances in the calculation of scenarios9 (see Annex XVI).

6.1.2. GHG emission reductions

The largest emission reductions (71 Mt CO2eq) in 2030 can be achieved with policy option D (phasedown combined with complimentary measures targeting HFC in imported equipment and products) (see Table 1). For perspective, this is almost twice as high as the yearly reduction of 37 Mt CO2 in the ETS cap between 2008 and 2012. It is also a reduction of ca. 63% in 2030 compared to emissions reported in 2005, i.e. at the level of emission reductions needed (60-61%) in 2030 from the non-CO2 sector (without agriculture) to be consistent with the 2◦ C target as expressed in the roadmap for a competitive low carbon economy.21 Option E (bans of placing HFCs on the EU market) would also achieve a substantial emission reduction of about 53 Mt CO2eq of emissions in 2030 but still falls short as to the emissions reductions stipulated by the Low Carbon Economy Roadmap, while Option B (voluntary agreements) would achieve considerably lower emission reductions of 22 Mt CO2eq, which are insufficient as regards the climate goals. Option C (enlarged scope) achieves only very small additional emission reductions[50].

Of the two most promising options on environmental grounds (D and E), the emissions reductions from Option E are lower mainly because bans can only be implemented when replacement substances are available for all applications in the sector (=100% penetration rate, see Annex XVI), whereas the phasedown can gradually take effect also in sectors where replacements are only partly available at the onset of the measure. For voluntary agreements (Option B) the reduction potential is relatively low compared to D and E because a smaller number of sectors would reduce emissions (see Annex V for further detail).

Additional emissions due to replacement substances are very low for all options. Additional indirect emissions reductions occur if the energy efficiency of replacements is higher compared to conventional technologies, which is the case e.g. in the refrigeration sector, whereas for others, e.g. foam blowing and AC, the energy efficiency of the abatement technologies is the same as that of the reference technology. A faster replacement schedule in Option D in the refrigeration sector leads to higher indirect emission reductions in this case compared to the other options. The reduction of indirect emissions is, however, also very low compared to direct emission changes from replacing F-Gases in use today.

The study conducted by ERIE/Armines17 confirms the findings by Schwarz et al. (2011)9 as it obtained very similar metric tonnes of refrigerant emissions for the main application sectors by 2030. While Schwarz et al. is conservative, i.e. based on available technologies, the ERIE/Armines study takes the possible future technological development (i.e. "best non-available technologies") into account. The ERIE/Armines study is however much more limited in scope, addressing only 7 main sectors as opposed to 28 (plus HFC-23 by-production) by Schwarz et al. Regarding a phasedown option, ERIE/Armines conclude that it "seems to be an effective measure to reduce significantly the climate impact of refrigeration, air-conditioning and heat pump equipment [..]".

Table 1: Environmental impacts of policy options in 2030 compared to baseline (Option A)

|| Option B VA || Option C Extend Scope || Option D Phasedown || Option E Bans

Direct emission changes in [Mt CO2eq] || - 21.7 || - 1.4 || - 69.2 || - 52.7

Additional emissions from replacement substances [Mt CO2eq] || + 0.02 || not occurring || + 0.14 || + 0.1

Additional indirect emissions due to energy-efficiency [Mt CO2eq] || - 0.51 || not occurring || higher efficiency for refrigeration -1.6 || higher efficiency for refrigeration - 0.72

SUM [Mt CO2eq] || - 22.2 || - 1.4 || - 70.7 || - 53.3

Emission reduction in 2030 compared to 2005 || -10% || +13% || -63% || -44%

Ecotoxicity || low risk || not applicable || low risk || low risk

6.1.3. Ecotoxicity

As regards ecotoxicity, F-Gases and other replacement substances (or their decomposition products) used in abatement technologies could potentially damage the environment if released to the atmosphere in large quantities. HFCs have long atmospheric lifetimes of up to 250 years but eventually decompose in the troposphere to yield hydrofluoric acid (HF) and trifluoroacetic acid (TFA) which are washed out by rainwater. PFCs and SF6 are even more persistent (several 1000 – 50,000 years) and do not decompose, but are eventually photolysed in the mesosphere.4 The release of HF and TFA could cause acidification of ecosystems, in particular aqueous ecosystems, as they impact pH values. Among the natural alternatives, hydrocarbon (HCs) emissions could potentially lead to ground level ozone and formation of photochemical smog. Ammonia which is toxic to humans contributes to acidification of ground and aquatic systems.

In the examined policy scenarios, Option B would lead to the formation of small quantities of HF and TFA in the atmosphere. Options D and E would in addition cause the release of hydrocarbons (HC-290, HC-600a), ethanol, and ammonia. Highest emissions from replacement substances would be expected for Option D and were estimated as 6800t HCs, 890t ammonia and 10.300t of unsaturated HFCs, mostly from potential use in refrigeration and AC in 2030. It must be borne in mind that the use of replacement substances reduces the amount of HFC in the atmosphere (and resulting long-term breakdown products). From a purely ecotoxicological point of view, the release of natural replacement substances (HCs, ammonia, ethanol, CO2,..) to the atmosphere is preferable to the release of HFCs as they occur naturally in much larger concentrations than would be released under any of the options. But also atmospheric concentrations of HFCs are in the parts-per-trillion range which is far below effective ecotoxic levels.4 Ecotoxicity effects are therefore assumed to be low for all options, based on state-of-the-art knowledge.[51],[52]

6.2. Economic impacts

Fig. 7 shows that F-Gas emission reductions of ca. 72 Mt CO2eq could be achieved at marginal costs often far below 50€ per t CO2eq. Beyond this level there are few other additional possible emission reductions considering only technologies available today. These findings are based on a very comprehensive analysis of replacebility of F-Gases in all main application sectors based on available technologies that are safe and energy-efficient. Detailed data and analysis covering each individual sector is available in Schwarz et al.9 The discussion in this section profits from this analysis (most relevant background data from the latter study is summarised in e.g. Annexes IV, V, VI, VIII, and XVI of this document).

Fig. 7: Marginal emission abatement costs vs. achievable emission reductions by 2030. Source: Schwarz et al. (2011)9 (MACC: Marginal Abatement Cost Curve, WM scenario = Option A). Costs are in € at 2010 levels.

6.2.1. Abatement costs and direct costs to industry

The following key direct economic impacts were analysed in a quantitative way for the reference year 2030 in comparison to the baseline scenario (Option A) for subsectors affected by each of the options (see details in Annex VI):

(1) Abatement costs for F-Gas emissions (€ per t CO2eq, assessed for the sector-typical F-Gas reference systems and the most promising (safe) alternative technologies). The considered parameters are:

– Emissions: GWP of substance, charge (amount) of substance used, emission factor for use-phase and disposal, manufacturing emission factor (e.g. for production of foam);

– Energy consumption: e.g. refrigerating capacity, installed electric power, annual running time;

– Cost: investment cost of equipment and of first substance fill, price of substance per kg, price of energy per kWh, equipment lifetime, discount rate.

The average abatement costs per t CO2eq in 2030 for the three policy options with significant emission reduction effects (B, D and E) are very similar (see Table 2). The marginal costs are somewhat higher for Option D at €49/t CO2eq but consistent with the projected marginal abatement costs for the implementation of GHG mitigation policies and measures in 2030, namely 50€ / t CO2. For Option C, average and marginal abatement costs are identical (one sector) and amount to €46/t CO2eq. All options are therefore considered cost-efficient. This finding also holds for higher discount rates or lower prices of F-Gases (see sensitivity analysis in Annex VIII).

(2) Total (annualised) net costs to industry (€ per year); these include:

– Capital investment costs: These costs include capital investments (as well as interest payments) to install new equipment or to modify a production facility (in the time from 2015 to 2030);

– Operating and maintenance costs: These costs include costs to operate and maintain the equipment as well as changes in all other input costs, e.g. service costs for leakage checks, refill, and energy.

The total net costs to sectors are highest for Option D (1,500 M€/year), due to the largest number of sectors affected, closely followed by Option E (1,330 M€/year) and are smaller for Option B (530 M€/year) and C (66 M€/year) (see Table 2). The individual costs per (sub-) sector vary considerably (see also 6.2.2).

Costs were calculated on an annual basis, using a general discount rate of 4% and product specific lifetimes varying between 10 and 30 years.

Table 2: Comparison of direct cost impacts in 2030

|| Unit || Option B VA || Option C Extend Scope || Option D Phasedown || Option E Bans

Average abatement costs in 2030 || € / t CO2eq || 17 || 46 || 16 || 17

Marginal abatement costs || € / t CO2eq || 24 || 46 || 49 || 24

Total direct net costs to industry sectors || M€ / year || 527 (from -0,1 to 417 per sub-sector) || 66 || 1,499 (from -66 to +489 per sub-sector) || 1286 (from -5 to +489 per sub-sector)

Source: Schwarz et al. (2011)9, Table 8-24 and Table 8-25.[53] All costs in € at 2010 levels.

6.2.2. Impacts on sectors

According to Table 3, the direct net costs differ widely for the different subsectors affected by Options B, D and E (Option C only includes one sector). A large part of the costs occurs in commercial refrigeration (commercial hermetics, condensing units and centralized systems (option B, D and E).

Table 3: Additional annual cost by sector in 2030

|| B || C || D || E

Domestic Refrigeration || 0 || 0 || 0 || 0

Commercial refrigeration: || || || ||

Commercial hermetics || 0 || 0 || 0 || -5

Condensing units || 105 || 0 || 105 || 276

Centralized systems || 417 || 0 || 417 || 380

Industrial Refrigeration: || || || ||

Industrial Ref small || 0 || 0 || -1 || 0

Industrial Ref large || 0 || 0 || -66 || -5

Transport refrigeration: || || || ||

Refrigerated Vans || 0 || 0 || 21 || 0

Refrigerated Trucks || 0 || 0 || 17 || 1

Fishing vessels || 0 || 0 || 2 || 0

Transport AC: || || || ||

Cargo ship AC || 0 || 0 || 6 || 0

Passenger ship AC || 0 || 0 || 3 || 0

Bus AC || 0 || 0 || 107 || 0

Truck AC || 0 || 66 || 244 || 0

Moveable AC systems || 0 || 0 || 2 || 19

Stationary AC: || || || ||

Split AC systems || 0 || 0 || 489 || 489

Multi-split AC systems || 0 || 0 || 54 || 46

Rooftop AC systems || 0 || 0 || 12 || 12

Chillers || 0 || 0 || 36 || 33

Centrifugal chillers || 0 || 0 || 1 || 0

Fire protection: || || || ||

Fire protection 227ea || 0 || 0 || 11 || 0

Fire protection 23 || 3 || 0 || 3 || 3

Aerosols || 0 || 0 || 36 || 36

Foam blowing: || || || ||

XPS-152a || 0 || 0 || -1 || 0

XPS-134a || 1 || 0 || 1 || 1

PU other || 0 || 0 || 0 || 0

Other: HFC-23 by-product || 1 || 0 || 0 || 1

SUM || 527 || 66 || 1499 || 1286

For Option D, transport AC (trucks and buses) is also important as well as stationary AC (i.e. single-split AC). Under this option, the five subsectors with the highest net costs account for almost 90% of the costs arising in all 25 subsectors affected. Low direct net costs occur for abatement in the remaining sectors (see Annex VI for detailed data on costs per sector). A detailed assessment of the impacts of these costs on turnover and competiveness for the most important sectors is given in section 6.2.6.

– Direct impacts

Key economic effects have been assessed comprehensively using two models: To analyse the direct (and indirect) effects on output resulting from changes in costs or investment, an Input-Output model framework (i.e. the EmIO-F Europe model, see model description in Annex IX) was used. EmIO-F Europe can give a basic assessment of the effect of the additional burden a policy or measure may impose on the economy. Secondly, a general equilibrium model (GEM-E3) was used to complement the analysis (see model description in Annex XIV). A comparative description of the latter two models is given in Annex XV. Based on these models, impacts for the F-Gas application sectors are expected to be small at less than 0.6% of total output in all cases (Fig. 8, Annex XIV). A sensitivity analysis was carried out and is elaborated in Annex VIII. The result was that even under conditions of a discount rate of 8% (instead of 4%) or halved prices for unsaturated HFCs, cost-efficiency and environmental effectiveness of all policy options B, D and E are not distorted significantly.

At a more detailed level, the Input-Output model shows that direct effects within each application sector may occur in four main areas of commercial activity: (1) equipment manufacturing, (2) supply of chemicals (i.e. F-Gases or replacement substances), (3) services and maintenance, and (4) energy supply (i.e. electricity).

(1) Equipment manufacturing:

As a starting point manufactures of the affected appliances are, in general, facing growing markets e.g. for AC or refrigeration equipment. Option B, D and E would impact on the choice of substance used in the production of a growing number of appliances and may therefore require higher investment costs. Given that the direct impact in all sectors is small, it can be expected that costs per unit will also be relatively small. The analysis with the I/O model assumed that costs can be passed on to consumers without affecting sales (additional investments). Hence, equipment suppliers would be able to increase their sales due to higher prices (related to the higher investment costs of the equipment). An analysis based on abatement costs derived with the AnaFgas model (Schwarz et al., 20119) shows that Option D yields the highest sales as it affects the highest number of appliances. Consequently, effects for Options E, B (and C) are lower, in this order, as fewer sectors are affected (see Table 4). In Section 6.2.6 the assumption on passing on costs is examined further. That section looks at the increase in annual costs and the elasticity of demand for the major pieces of equipment covering more than 90% of the costs. It shows that the overall annual costs increases are small (around 1 to 2 %) and demand for the goods is rather inelastic. Consequently, the expected increases in sales in Table 4 (and output) may be overestimated by around 1%.

Table 4: Comparison of the net additional sales of domestic suppliers of equipment (M€ / year)

|| Unit || Option B || Option C || Option D || Option E

Additional sales of domestic equipment suppliers || M€/year || 1,610 || Not applicable || 3,040 || 2,060

Source: Annex VI Table A_VI-2 based on Table 8.24 in Schwarz et al. (2011)9 with additional adjustments

Fig. 8 gives the EmIO-F Europe model outcome for the direct output effects as a result of the different F-Gas policy options. In line with the discussion above, the model shows higher outputs for the machinery and equipment sector for all options. Highest outputs were modelled for Option D (+0.52%), followed by Option B (+0.32%) and Option E (+0.23%)[54].

Fig. 8: Effects on output of directly impacted activities, derived with EMIO-F Europe (as % of 2007 output; Phasedown = Option D, Ban = Option E, VA = Option B)

These positive impacts on the equipment sector are confirmed by GEM-E3 (see Annex XIV). Potential advantages for EU manufacturers in terms of additional exports, having a strong position on the market for alternative technologies, are not captured by the models used and are difficult to quantify at the present stage. In conclusion, manufacturers of equipment can expect to profit from policy options B, D and E, with strongest effects expected from a phasedown measure (Option D).

(2) Services/Maintenance:

For service and maintenance companies some losses may be expected due to reduced service needs for F-Gas equipment (Table 5). Options B, D and E focus on replacing HFCs with a high GWP as opposed to Option C and the current F-Gas Regulation, the latter having a strong focus on improved leakage detection and recovery at the end of the life. However, alternative technology using high pressure or flammable substances also require maintenance. Overall, the net effect on the service sector is estimated based on AnaFGas (Schwarz et al., 20119) to be negative in the long run for those policy options that favour most strongly the use of alternative substances (in particular Option D and E; see Table 5).

Table 5: Comparison of losses from ceased service under Art. 3 and 4 F-Gas Regulation in the long run (M€ / year)

|| Unit || Option B || Option C || Option D || Option E

Losses (-) from ceased service under Art 3+4 || M€/year || -290 || 70 || -1,280 || -1,270

Source: Schwarz et al. (2011)9 as well as Annex VI

Results of the EmIO-F Europe model also show that service companies experience (small) negative effects, which are most pronounced for Option D (-0.38%) and E (-0.37%), and less for Option B (-0.09%) (see Fig. 8).

However, these effects may still be overestimated since the baseline assumes full application of the existing legal obligations. In reality, these obligations have not yet been fully applied since implementation and awareness among users are delayed8. Moreover, apparently the European Air-Conditioning, Refrigeration and Heat Pump Contractors (AREA) are keen on exploiting the new business opportunities linked to alternatives. In an internal survey[55] they conclude that there is a potential risk of shortage of contractors trained in the use of low GWP refrigerants and advises compulsory training based on harmonised minimum requirements.

In conclusion, maintenance needs due to the existing F-Gas Regulation might decrease, in particular, for the most effective options, phasedown (D) and bans (E), but the effects on relevant companies are expected to be small.

(3) Supply of chemicals:

The replacement of HFCs with low-GWP substances would result in a shift in the sales of F-Gas producers and distributors. Producers and distributors of low-GWP substances are not always the same as those of HFCs. Current F-Gas producing companies in the EU (7-10 in total) are large chemical companies which have production sites distributed globally. In the transition from producing high GWP substances to low GWP substances, the impacts will depend on the ability of some producers to benefit more from the HFC replacements through the development of alternative substances than their competitors. As there are several replacement substances (currently two unsaturated HFCs, as well as mixtures of HFCs, hydrocarbons, CO2 and ammonia) and since all major producers are already developing low GWP replacement substances, a situation in which only a few producers benefit from the lower HFC consumption is unlikely to occur. Current F-Gas producers would likely be the distributors of unsaturated HFCs which are expected to contribute most to the turnover of F-Gas producers and distributors, as a result of the comparably high prices of these chemicals.

The EmIO-F Europe model gives small net effects on the output of the chemicals sector for all options (Fig. 8). A small positive effect (0.17 %) is obtained in case of a phasedown (Option D), almost no effect in case of bans (Option E: +0.03%) and a negative impact in case of voluntary agreements (Option B: -0,19%). The GEM-E3 model suggests small negative impacts on output for Option D and E for the chemical sector (see Table 6 and Annex XIV). Domestic production decreases slightly as it is substituted by imports. In the case of passing on costs to end-users, the price of chemical products further increases and hence production decreases further. Actual effects are likely to be even smaller (and could be even positive) as imports of F-Gases are already addressed in Option D which is not reflected by the model. In summary, effects on the chemical sector are expected to be small for all options.

Table 6: Chemical Production compared to the Baseline in 2030 (% change)

|| Option D || Option E

1. Option D || -0.13 || -0.06

2. Option D with costs pass-on || -0.35 || -0.22

Source: GEM-E3 (see Annex XIV for details)

(4) Energy supply:

The output of this sector is affected by the changes in electricity consumption for new technologies. The model EMIO-F Europe forecasts an output reduction of -0.59% for Option D, -0.26% for Option E, and -0.19% for Option B (Fig. 8). This output reduction is explained by a reduced electricity demand (and further emission saving, see also Table 1) of replacement technologies. The effect is highest for Option D as this option stimulates replacement in most sectors, followed by E and B. Several stakeholders in the on-line survey similarly expected that end-users would profit from reduced electricity consumption. The negative impact of Option D and E is confirmed by GEM-E3. In conclusion, electricity demand will decrease, in particular for Option D, and will lead to small output reductions in this area.

– Indirect impacts

Since equipment manufacturers are expected to pass on costs to consumers, the industrial users of such equipment, e.g. supermarkets and the food and drink manufacturing industry, could be indirectly affected by potentially higher investment costs and changes in annual operating costs for new equipment. The difference in annualized net costs for operators investing in new equipment based on alternative technologies range widely. Considerable annualised savings were estimated for new investments in large industrial refrigeration (€ -22,642) which is affected by Option D and E and in many other subsectors new investments would incur only small direct costs for the operators. The highest costs (€ 2,876) for operators were estimated for new centralised commercial systems (supermarkets), affected by Options B, D and E (see Annex VI, Table A_VI-1).

Fig. 9: Effects on output of selected, indirectly impacted sectors determined with EmIO-F Europe (% of 2007 sector output; Phasedown = Option D, Ban = Option E, VA (voluntary agreement = Option B)

Fig. 9 displays the impact on selected sectors that are indirectly affected, as obtained with the model EmIO-F Europe. The indirect effects range from small but positive effects on sectors that deliver inputs to the machinery and equipment sector (e.g. basic metals, metal products) to very small but negative effects on sectors providing services or products to final consumers (e.g. retail, clothing, luxury consumption such as tobacco, hotels & restaurants etc.). The latter effects are explained by the fact that consumers would have less money in their pockets to spend on services and end-products, if higher prices of F-Gas equipment are passed on to them. These effects are observed for all Options B, D and E, but are generally most pronounced for Option D, followed by B and E. The reduced consumption pattern leads to a very small reduction in aggregate output of -0.011% in case of Option B, -0.014% in output for the case of Option D, and -0.004% in case of Option E. Results in Fig. 9 assume that additional costs for equipment would reduce final demand for all goods and services (e.g. food, textiles, furniture, restaurants,..) proportionally. GEM-E3 confirms the positive impacts for the metals sectors (Option D and E) and shows neutral to positive effects for the consumer goods sectors (see Annex XIV). Given that the sales for new equipment might be overestimated (due to the negative impact of price increases on demand) the indirect reduction in demand for other goods might be somewhat smaller.

– Total impact from both direct and indirect effects

Overall, the total effect on output based on direct and indirect effects across all sectors is very small. EmIO-F Europe predicts a slightly positive effect at 0.006%, 0.009%, and 0.003% for Options B, D and E, respectively (based on Fig. 8 and Fig. 9), while slightly negative (-0.006 for Option D to -0.003 for Option E) are obtained with GEM-E3 (see Table 10 below).

For clarity and as a number of different industrial players may be affected by the F-Gas policy options as outlined above, the following Table 7 gives a qualitative overview over the most important actors and the impacts they may experience, summarizing the discussions above. For most players, impacts would be small and nobody is expected to lose out significantly, as demand for equipment will rise and not decline. However, actors will have to adjust to the new situation, e.g. retailers would see a shift towards selling more equipment with low GWP substances. Most market players have experienced a similar transition already under the Montreal ODS phase-out, which was achieved successfully and 10 years faster than required in the EU, so they are expected to adapt quickly also to a use reduction of F-Gases, as soon as a clear regulatory signal is set. It is clear that producers of alternative equipment would be the big winners, fostering the growth of green companies, many of which are SMEs similar to what has been observed in some Member States (e.g. DK, AU) where there is more stringent F-Gas legislation already.

Table 7: Overview of expected impacts of different market players: scales reach from very high positive impacts (+++) to very high negative impacts (---)

|| Impact due to policy options || Types of company || Estimated Impact

Producers of F-Gases (chemical industry) || direct || 7-10 large, globally acting companies || 0 (see 6.2.2, Fig. 8, Table 6)

Producers of equipment overall (manufacturers) || direct || large and small companies || 0/+ (see 6.2.2, Fig. 8, Table 4)

Producers of alternative equipment || direct || many SMEs || +++ (see e.g. 6.2.9)

Electricity production || direct || large companies || - (see 6.2.2, Fig. 8)

Service companies || direct || many SMEs || 0/- (see 6.2.2, Fig. 8, Table 5, 6.2.10, Annex III, Annex VI)

Importers of equipment || direct || large and small companies || 0/- (see e.g. 6.2.6)

Exporters of equipment || direct || large and small companies || 0/- (see 6.2.6, Table 12)

Users of equipment || indirect || large companies, SMEs, microenterprises, consumers || 0 (see 6.2.2, 6.2.6, 6.2.10, Fig. 9, Table 11)

Retail sectors || indirect || large and small companies || 0/- (see 6.2.2, Fig. 9)

Input sectors (Basic metals, metal products) || indirect || large and small companies || 0/+ (see 6.2.2, Fig. 9)

6.2.3. Administrative costs

The definition of administrative costs refers to the costs incurred by enterprises, public authorities or citizens in meeting legal obligations to provide information on their actions or production. Information is used in a broad sense to cover labelling, reporting, registration, monitoring and assessment needed to provide information as well as the transfer of information to public authorities. Administrative costs are the sum of business-as-usual costs (costs that would still be incurred if the legislation were to be removed) and administrative burden (incurred due to the legislation). In the following the given costs are on top of costs currently resulting from the monitoring and reporting under the existing F-Gas Regulation, which remain the same for all considered policy options. Table 8 provides an overview of the total additional administrative costs for the policy options (details in Annex XII and XIII). It shows that administrative costs are small in general, as they represent only a small percentage of the direct costs to industry, ranging between <0.1% (Options C, D & E) and 2% (Option B).

Table 8: Administrative costs of the policy options

|| Option B || Option C || Option D || Option E

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