02. March 2022 | Industry Insights

The refrigeration industry is coming under increasing pressure:
Natural refrigerants are the way forward

Legislators worldwide are limiting the emission of F-gases and accelerating the transformation of the HVAC&R industry. This development is long overdue, given that the Montreal Protocol was already adopted back in 1987 with the goal of cutting the global production and use of environmentally harmful substances and banning them entirely over the long term.

Climate change increasing the pressure

The time for excuses and protracted delay tactics is finally over, and the HVAC&R industry is now in the midst of a historic transformation – a development that should not, however, catch anyone in the sector by surprise. That said, the globally ratified legal restrictions will have serious repercussions for the refrigeration industry, given that climate-harmful F-gases currently still account for over 97 percent of the refrigerant market. But although the industry is coming under ever increasing pressure, many companies still shun systematic investment in green solutions, opting for environmentally harmful transitional refrigerants – hydrofluoroolefins (HFOs), or so-called low GWP refrigerants – instead.

Serious repercussions of poorly deliberated investments

Although the HFO-based alternatives have a reduced global warming potential (GWP), they are flammable and have a negative impact on the environment. This is because the degradation of HFOs in the atmosphere produces, among other things, trifluoroacetic acid (TFA(A)), which is not degradable in the environment, is highly mobile and makes its way into the groundwater and drinking water. Moreover, it is currently not even possible to filter out TFA in the processes used to treat drinking water. It is thus highly probable that further restrictions will be imposed and the F-Gas Regulation revised in the future.

Future belongs to natural refrigerants

Illegal imports flooding the market

After initially having no noticeable effect on the world market, the tightening of the F-Gas Regulation is meanwhile having a sharp impact on the availability and price of refrigerants. This is naturally also attracting the attention of criminals, since the illegal import of HFC refrigerants (article available in German only) is a highly profitable business. “They make more money than if they were selling drugs,” says Alessandro Borri, Executive Director Sales & Marketing of the Italian General Gas group, which specialises in refrigerant distribution. According to refrigerant manufacturers’ estimates, the illegal share in 2018 may already have been as high as 34 million metric tonnes of CO2 – or a third of the EU’s legally prescribed quota.

But that is now over. Following harsh criticism from environmental agencies and associations, the EU is noticeably tightening its grip and stepping up efforts to halt the trade in illegal refrigerants. As a result, increasing numbers of violations are being detected and disciplined with ever higher fines. In August 2020, for example, Romanian authorities succeeded in seizing 76 metric tonnes of illegal HFC gases, preventing them from reaching the European market.

Also, the UK’s Environment Agency fined a company more than one million pounds in September 2021 for exceeding the quota of HFCs placed on the market.

German Federal Environment Agency (UBA) also flexing its muscles

The UBA is actively championing an accelerated process and has put forward proposals as to how emissions might be reduced through avoidance, proper disposal and reuse.

The implementation of the F-Gas Regulation has already had far-reaching consequences for the HVAC&R industry. All systems using refrigerants with a GWP > 2,500 have been banned entirely since 1 January 2020, and many others – such as the frequently used R410A, R407C and R134a – are subject to a strict quota regimen that is leading to in price increases and limited availability.

96 percent of the global market planning an F-gas phase-down

In October 2016, the Montreal Protocol was extended by the Kigali Amendment which was adopted by 197 nations. The objective was to prevent warming of up to 0.5° Celsius by the end of the century. The Kigali Amendment, which entered into force on 1 January 2019, contributes significantly to achieving the goals of the Montreal Protocol by committing developed and developing countries, to varying degrees, to initially maintain constant production and usage levels of HFC refrigerants and reduce them in subsequent years.

More sustainable technologies in the refrigeration industry

The Amendment foresees that industrialised countries reduce their share of F-gases to 15 per cent by 2036. Emerging economies will also begin to make their contribution, with countries such as Tunisia, Cameroon and China ratifying the Amendment to gradually phase out HFC refrigerants. India, too, agreed to the amended Protocol – a major step forward in the fight against high emissions and environmental pollution, given that India is one of the largest emitters of HFCs, along with China and the United States.

For these nations, the HFC phase-out will begin in 2032 with a 10 percent cumulative reduction. The cumulative reduction is then envisaged to rise to 20 percent by 2037 and 80 percent by 2047.

Developing countries are also being aided in the shift towards efficient, climate-friendly cooling. To this end, leading climate foundations already worked together and pledged more than USD 50 million in the run-up to the Montreal Protocol conference in Kigali, Rwanda – the largest single philanthropic pledge ever made to promote energy efficiency in the developing world.

A year later, this initiative founded the Kigali Cooling Efficiency Program (K-CEP), which now operates under the Clean Cooling Collaborative.

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USA finally playing an active role again

In November 2021, US President Biden urged the Senate “for its ratification of the Kigali Amendment at the earliest possible date”. This would help the United States to remain a leader in the development of HFC alternatives and give US companies access to the growing markets for refrigeration equipment abroad. Moreover, the American Innovation and Manufacturing (AIM) Act – which was passed by Congress as early as 27 December 2020 – instructs the US Environmental Protection Agency to take action against HFCs by successively curtailing their production and consumption, maximising their recycling and recovery, minimising their release from equipment, and facilitating the transition to next-generation technologies through sectoral restrictions. Moreover, the US is even going a step further, contemplating a full ban on R410A, one of the most widely used refrigerants on the market.

Switch to natural refrigerants

REACH Regulation exacerbating the situation

Things also appear to be moving in other areas of industry, as authorities in Germany, the Netherlands and the Scandinavian countries Norway, Sweden and Denmark continue work on a joint proposal – the REACH Regulation. This refers to the Registration, Evaluation and Authorisation of CHemicals, which first came into force on 1 June 2007 and was since revised once in 2020. The concept behind the REACH system (document available in German only) is the notion of industry self-responsibility. The principle of “no data, no market” also applies here and stipulates that only chemicals that have been registered beforehand may be marketed in regions covered by the REACH ambit. Every manufacturer and importer must ensure that the imported substances, mostly per- and polyfluoalkyl (PFAS) substances, have been issued with a dedicated registration number.

Countless substances classified as hazardous

PFASs comprise a group of over 4,700 chemical substances that provably cause massive damage to groundwater, surface water and soil, and are also difficult to decompose. The proposal covers all substances with a CF2 group or a CF3 group – properties that HFC and HFO refrigerants have in common. The aim is to close legal loopholes that in practice allow the F-Gas Regulation to be circumvented. The HFCs that the countries have identified as PFASs include: R32, R134a, R125, R143a and R152a. The HFOs include R1234yf, R1234ze(E) and R1233zd(E). The European F-gas industry is resisting this classification, arguing that some of these refrigerants are non-hazardous and irrelevant as regards the phasing out of F-gases. Moreover, opponents criticise that REACH only affects EU businesses or businesses producing within the European Economic Area, leading to a competitive disadvantage vis-à-vis importing companies.

How Will the F-Gas Phase-Down Change the Refrigeration Industry?

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Transformation needs smart investment

It now comes down to the farsightedness of the industry. Business as usual is simply untenable and excuses and poorly deliberated investments, such as in bridge refrigerants, will not pay off in the long run. Those wishing to avoid jeopardising their long-term operational safety need to invest sustainably now.

Operation of conventional chillers is becoming increasingly unattractive

But as in all sectors, there are different interest groups and machinations. One example of this can be seen in the F-gas lobby’s attempts to spread misinformation in response to exploding demand for natural alternatives such as water, CO2, ammonia, air or propane. Ultimately, however, this fake news is increasingly falling on deaf ears as end consumers see through the charade. Greenwashing is not a convincing solution where price-performance is questioned and sustainable production demanded.

Decision criteria Efficient and sustainability

Transformation with vision

In the book The Clean Tech Revolution: The Next Big Growth and Investment Opportunity, which was published as early as 2007, its two authors, Ron Pernick and Clint Wilder, predicted that clean technologies would become the next engine of economic growth in the face of challenges such as energy price spikes, resource scarcity, global environmental problems and security threats. They identified the six Cs – Cost, Capital, Competition, China, the Consumer and Climate – as the innovation drivers that will propel clean technologies into the mainstream. 15 years down the line, it has become clear how prescient their predictions were. Clean technologies are undeniably our future… environmentally and economically.