Vol. 151, No. 21 — October 18, 2017

Registration

SOR/2017-216 October 5, 2017

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

Regulations Amending the Ozone-depleting Substances and Halocarbon Alternatives Regulations

P.C. 2017-1226 October 5, 2017

Whereas, pursuant to subsection 332(1) (see footnote a) of the Canadian Environmental Protection Act, 1999 (see footnote b), the Minister of the Environment published in the Canada Gazette, Part I, on November 26, 2016, a copy of the proposed Regulations Amending the Ozone-depleting Substances and Halocarbon Alternatives Regulations, substantially in the annexed form, and persons were given an opportunity to file comments with respect to the proposed Regulations or to file a notice of objection requesting that a board of review be established and stating the reasons for the objection;

Whereas, pursuant to subsection 93(3) of that Act, the National Advisory Committee has been given an opportunity to provide its advice under section 6 (see footnote c) of that Act;

And whereas, in accordance with subsection 93(4) of that Act, the Governor in Council is of the opinion that the proposed Regulations do not regulate an aspect of a substance that is regulated by or under any other Act of Parliament in a manner that provides, in the opinion of the Governor in Council, sufficient protection to the environment and human health;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of the Environment and the Minister of Health, pursuant to subsection 93(1) of the Canadian Environmental Protection Act, 1999 (see footnote d), makes the annexed Regulations Amending the Ozone-depleting Substances and Halocarbon Alternatives Regulations.

Regulations Amending the Ozone-depleting Substances and Halocarbon Alternatives Regulations

Amendments

1 Section 4 of the Ozone-depleting Substances and Halocarbon Alternatives Regulations (see footnote 1) is amended by striking out “or” at the end of paragraph (b), by adding “or” at the end of paragraph (c) and by adding the following after paragraph (c):

(d) an automobile that is in transit through Canada from a place outside Canada to another place outside Canada.

2 Subsection 34(1) of the English version of the Regulations is amended by striking out “or” at the end of paragraph (b) and by replacing paragraph (c) with the following:

(c) its use as feedstock; or
(d) any other purpose that complies with the laws of the importing Party.

3 Paragraph 42(3)(a) of the French version of the Regulations is replaced by the following:

a) aux soins des personnes ou des animaux, y compris les dilatateurs de bronches, les stéroïdes pris par inhalation, les anesthésiques topiques et les vaporisateurs de poudre utilisée en médecine vétérinaire sur les blessures;

4 The heading before section 55 of the Regulations is replaced by the following:

Consumption Allowances for HCFCs

5 Paragraphs 55(2)(a) and (b) of the French version of the Regulations are replaced by the following:

a) s’agissant d’une cession permanente, pour chacune des années civiles suivant celle de la cession;
b) s’agissant d’une cession temporaire, seulement pour l’année civile en cause.

6 Subsection 56(2) of the Regulations is replaced by the following:

Calculated level of consumption

(2) The calculated level of consumption for an HCFC — excluding a recovered, recycled or reclaimed HCFC that is imported or exported — that is manufactured, imported or exported during a calendar year must be determined using the following formula:

(M × ODP) + (I × ODP) – (E × ODP) – (D_i × ODP)

where
M is the quantity manufactured during the calendar year, other than the quantity manufactured for use as feedstock;
ODP is the ozone-depleting potential set out in column 2 of Table 3 of Schedule 1 for the HCFC in question;
I is the quantity imported during the calendar year;
E is the quantity exported during the calendar year; and
D_iis the quantity imported during the calendar year for destruction under paragraph 54(1)(a).

7 The heading before section 60 of the Regulations is replaced by the following:

Manufacturing Allowance for HCFCs

8 Subsection 60(2) of the Regulations is replaced by the following:

Greater manufacturing allowance

(2) When it is necessary to allow Canada to fulfill its obligations under an agreement with a Party for the purpose of industrial rationalization or to satisfy domestic HCFC needs, the Minister may permit, for a calendar year, a greater manufacturing allowance than that which a person would have obtained under subsection (1) and that greater manufacturing allowance is not taken into account in any subsequent calculation of the annual manufacturing allowance.

Written notice

(3) The Minister must inform the person in writing of their manufacturing allowance.

9 Subsection 61(2) of the Regulations is replaced by the following:

Calculated level of manufacture

(2) The calculated level of manufacture for an HCFC must be determined using the following formula:

(M × ODP) – (D_m × ODP)

where
M is the quantity manufactured during the calendar year, other than the quantity manufactured for use as feedstock;
ODP is the ozone-depleting potential set out in column 2 of Table 3 of Schedule 1 for the HCFC in question; and
D_mis the quantity manufactured during the calendar year for destruction under paragraph 54(1)(a).

10 Section 62 of the Regulations is repealed.

11 (1) Sections 64 and 65 of the Regulations are replaced by the following:

Prohibition — importing HFCs without permit

64 It is prohibited for any person to import an HFC set out in Table 4 of Schedule 1 without a permit issued under these Regulations.

Purpose of importing

64.1 (1) The permit may only be issued to import an HFC for one of the following purposes:

(a) its destruction;
(b) its use as feedstock; or
(c) a use for which a substance set out in Tables 1 to 3 of Schedule 1 has been used in Canada.

Importing regardless of purpose

(2) A permit may also be issued to import, regardless of purpose, an HFC that is recovered, recycled or reclaimed.

Exception — consumption allowance

64.2 Section 64 does not apply to a person who is granted an annual consumption allowance for an HFC or a transferee of an annual consumption allowance for an HFC intended for a use for which a substance set out in Tables 1 to 3 of Schedule 1 has been used in Canada.

Refillable container

64.3 Any HFC that is imported for use as a refrigerant must be stored in a refillable container.

Importing Products Containing HFCs

Prohibition — importing certain products containing HFCs used as refrigerants

64.4 (1) As of the date indicated in column 3 of Schedule 1.1, it is prohibited for any person to import any product set out in that Schedule that contains or is designed to contain an HFC that is set out in Table 4 of Schedule 1 and is to be used as a refrigerant, if the global warming potential of the refrigerant used in that product is greater than the specified limit in Schedule 1.1.

Exception — personal effect

(2) Subsection (1) does not apply to a product set out in Schedule 1.1 that is destined for residential use if it is a personal effect of the person.

Automobiles — 2021 and subsequent model years

(3) Beginning with the 2021 model year, it is prohibited for any person to import an automobile equipped with an air-conditioning system that contains or is designed to contain an HFC that is set out in Table 4 of Schedule 1 and is to be used as a refrigerant if the global warming potential of the refrigerant used in that system is greater than 150.

Exception — personal use automobile

(4) Subsection (3) does not apply to an automobile destined for the person’s personal use.

Plastic foam or rigid foam product

64.5 (1) As of January 1, 2021, it is prohibited for any person to import a plastic foam or a rigid foam product in which an HFC set out in Table 4 of Schedule 1 is used as a foaming agent if the global warming potential of the foaming agent is greater than 150.

Exception — personal effect

(2) Subsection (1) does not apply to a person’s personal effect that contains a plastic foam or a rigid foam product.

Exception — military, space or aeronautical applications

(3) Subsection (1) does not apply to a plastic foam or a rigid foam product that is intended to be used for military, space or aeronautical applications.

Pressurized containers — 2 kg or less of HFC used as propellant

64.6 (1) As of January 1, 2019, it is prohibited for any person to import a pressurized container that contains 2 kg or less of an HFC when the HFC is used as a propellant if the global warming potential of that HFC is greater than 150.

Exceptions — miscellaneous products

(2) Subsection (1) does not apply to a pressurized container that contains

(a) a mould release agent or mould cleaning agent;
(b) a spinneret lubricant or cleaning agent used in the manufacture of synthetic fibers;
(c) a document preservation agent;
(d) a lubricant, cleaning agent, freezing agent or corrosion prevention agent used for electrical equipment or electronic components;
(e) a duster agent used on photographic negatives and semiconductor chips;
(f) a lubricant, cleaning agent or corrosion prevention agent used for aircraft maintenance;
(g) a pesticide used near electrical wires or in aircraft or a certified organic-use pesticide;
(h) a stench gas used in mines; or
(i) a cooling agent used for testing electronics and electro-mechanical systems.

Exception — health care products and laboratory or analytical use

(3) Subsection (1) does not apply to a pressurized container that contains a product that is intended

(a) for use in animal or human health care, including a bronchial dilator, inhalable steroid, topical anaesthetic, bandage adhesive remover and veterinary wound powder spray; or
(b) for a laboratory or analytical use.

Manufacture of HFCs

Prohibition — manufacture of HFCs without permit

65 It is prohibited for any person to manufacture an HFC set out in Table 4 of Schedule 1 without a permit issued under these Regulations.

Purpose of manufacture

65.01 The permit may only be issued to manufacture an HFC to be used as feedstock.

Prohibition — manufacturing products containing HFCs used as refrigerants

65.02 (1) As of the date indicated in column 3 of Schedule 1.1, it is prohibited for any person to manufacture any product set out in that Schedule that contains or is designed to contain an HFC set out in Table 4 of Schedule 1 and used as a refrigerant if the global warming potential of the refrigerant used in that product is greater than the limit specified in Schedule 1.1.

Automobiles — 2021 and subsequent model years

(2) Beginning with the 2021 model year, it is prohibited for any person to manufacture an automobile equipped with an air-conditioning system that contains or is designed to contain an HFC that is set out in Table 4 of Schedule 1 and is to be used as a refrigerant if the global warming potential of the refrigerant used in that system is greater than 150, unless it is intended to be exported.

Plastic foam or rigid foam product

65.03 (1) As of January 1, 2021, it is prohibited for any person to manufacture a plastic foam or a rigid foam product in which an HFC set out in Table 4 of Schedule 1 is used as a foaming agent if the global warming potential of the foaming agent is greater than 150.

Exception — military, space or aeronautic applications

(2) Subsection (1) does not apply to a plastic foam or a rigid foam product that is intented to be used for military, space or aeronautical applications.

Pressurized containers — 2 kg or less of an HFC used as propellant

65.04 (1) As of January 1, 2019, it is prohibited for any person to manufacture a pressurized container that contains 2 kg or less of an HFC when the HFC is used as a propellant if the global warming potential of that HFC is greater than 150.

Exception — miscellaneous products

(2) Subsection (1) does not apply to the pressurized containers referred to in subsections 64.6(2) and (3).

Destruction of HFCs

HFC no longer needed

65.05 A person in possession of an HFC set out in Table 4 of Schedule 1 that was imported or manufactured under a permit issued under these Regulations and that is no longer needed for the use set out in that permit must, within six months after the day on which it is no longer needed,

(a) ensure that it is sent for destruction to a facility referred to in paragraph 12(c);
(b) ensure that it is exported for destruction, for use as feedstock or for a laboratory or analytical use; or
(c) in the case of a recovered, recycled or reclaimed HFC, ensure that it is sent to a recycling or reclamation facility.

Consumption Allowance for HFCs

Calculation of consumption allowance for HFCs

65.06 (1) The annual consumption allowance for an HFC set out in Table 4 of Schedule 1 to which a person is entitled is determined as follows:

(a) for each calendar year that falls within the period that begins on January 1, 2019 and ends on December 31, 2023, by multiplying the base consumption granted to that person by 90%;
(b) for each calendar year that falls within the period that begins on January 1, 2024 and ends on December 31, 2028, by multiplying the base consumption granted to that person by 60%;
(c) for each calendar year that falls within the period that begins on January 1, 2029 and ends on December 31, 2033, by multiplying the base consumption granted to that person by 30%;
(d) for each calendar year that falls within the period that begins on January 1, 2034 and ends on December 31, 2035, by multiplying the base consumption granted to that person by 20%; and
(e) as of January 1, 2036, by multiplying the base consumption granted to that person by 15%.

Calculation of base consumption

(2) The base consumption granted to a person is determined as follows:

C/D × E

where
C is the person’s average HFC consumption for 2014 and 2015, expressed in tonnes of CO₂ equivalent;
D is the average Canadian HFC consumption for 2014 and 2015, expressed in tonnes of CO₂ equivalent; and
E is 19 118 651 tonnes of CO₂ equivalent.

Permanent or temporary transfer

(3) If a transfer of a portion of the consumption allowance is approved in accordance with subsection 65.08(4), the transferred portion is subtracted from or added to the person’s annual consumption allowance, as the case may be,

(a) in the case of a permanent transfer, for every calendar year following the year of the transfer; and
(b) in the case of a temporary transfer, for the calendar year of the transfer.

Written notice

(4) The Minister must inform the person in writing of their consumption allowance.

Annual consumption allowance for HFCs not to be exceeded

65.07 (1) A person who is granted an annual consumption allowance must ensure that it is not exceeded by determining their calculated level of consumption for each HFC for a calendar year and then adding together all of their calculated levels of consumption.

Calculated level of consumption

(2) The calculated level of consumption for an HFC — excluding a recovered, recycled or reclaimed HFC that is imported or exported — that is manufactured, imported or exported during a calendar year must be determined using the following formula:

(M × GWP) + (I × GWP) – (E × GWP)

where
M is the quantity manufactured during the calendar year, other than the quantity manufactured for use as feedstock;
GWP is the global warming potential of the HFC;
I is the quantity imported during the calendar year; and
E is the quantity exported during the calendar year.

Prohibition — transfer without authorization

65.08 (1) It is prohibited for any person to transfer all or a portion of their annual consumption allowance of HFCs unless the Minister approves the transfer under subsection (4).

Temporary or permanent transfer

(2) A transfer is temporary if it applies to only one calendar year and it is permanent if it applies to all calendar years.

Application to Minister

(3) The transferor and transferee must submit an application for the transfer to the Minister that contains the information required by Schedule 4 and specifies whether the proposed transfer is temporary or permanent.

Conditions

(4) The Minister must approve the transfer if the transferor has an unused consumption allowance that is not less than the quantity of the proposed transfer.

Written notice

(5) The Minister must inform the transferor and transferee in writing of the decision concerning the application for a transfer and of their consumption allowances.

Grounds for refusal and cancellation

65.09 (1) The Minister may refuse to approve or may cancel a transfer if the Minister has reasonable grounds to believe that the transferee is not able to manufacture, use, sell, import or export an HFC in compliance with Canadian law.

Effect of cancellation

(2) If the Minister cancels a transfer, the transferee must, without delay, transfer back to the transferor any unused portion of the consumption allowance.

Retirement of consumption allowances

65.1 (1) A person may retire their consumption allowance by providing the Minister with a notice in writing to that effect containing the information required by Schedule 4.

Effect of retirement

(2) A person who has retired their consumption allowance is not entitled to any further consumption allowance.

(2) Paragraph 64.1(1)(c) of the Regulations is repealed.

12 Subsection 66(1) of the Regulations is replaced by the following:

Exceptions — essential purpose

66 (1) Despite subsection 13(1), sections 15 and 17, subsection 19(1), sections 40 and 41, subsections 42(1) and 43(1), sections 48 and 49, subsection 50(1), section 51, subsection 53(1), subsections 64.4(1), 64.5(1) and 64.6(1), sections 65.02 and 65.03 and subsection 65.04(1), a person may import, manufacture, use or sell a substance set out in Table 1, 3 or 4 of Schedule 1 or a product containing or designed to contain that substance if the substance or product will be used for an essential purpose and if a permit is specifically issued under these Regulations for that purpose.

13 Section 70 of the Regulations is replaced by the following:

Duration

70 (1) A permit is effective

(a) if the application is submitted for the current year, for the period beginning on the date of its issuance and ending on December 31 of the year in which it is issued; or
(b) if the application is submitted for the subsequent year, for the period beginning on January 1 and ending on December 31 of the year for which it is issued.

Essential purpose

(2) Despite subsection (1), a permit for an essential purpose may be issued for a period of up to 36 months.

14 (1) Schedule 1 to the Regulations is amended by replacing the references after the heading “SCHEDULE 1” with the following:

(Paragraph 3(a), section 5, paragraph 6(1)(c), section 8, subsection 9(1), section 10, paragraph 11(1)(b), subsection 13(1), sections 14 to 18, subsection 19(1), paragraphs 19(2)(b), 22(c), 24(b) and 32(b), sections 33, 35 and 36, paragraph 37(1)(b), section 41, subsections 42(1) and 43(1), sections 44, 45 and 49, subsection 50(1), sections 51 and 52, subsections 53(1), 54(1), 55(1), 56(2), 60(1) and 61(2), sections 63 and 64, paragraph 64.1(1)(c), section 64.2, subsections 64.4(1) and (3) and 64.5(1), sections 65 and 65.02, subsection 65.03(1), section 65.05 and subsections 65.06(1), 66(1) and 75(2))

(2) Schedule 1 to the Regulations is amended by replacing the references after the heading “SCHEDULE 1” with the following:

(Paragraph 3(a), section 5, paragraph 6(1)(c), section 8, subsection 9(1), section 10, paragraph 11(1)(b), subsection 13(1), sections 14 to 18, subsection 19(1), paragraphs 19(2)(b), 22(c), 24(b) and 32(b), sections 33, 35 and 36, paragraph 37(1)(b), section 41, subsections 42(1) and 43(1), sections 44, 45 and 49, subsection 50(1), sections 51 and 52, subsections 53(1), 54(1), 55(1), 56(2), 60(1) and 61(2), sections 63, 64 and 64.2, subsections 64.4(1) and (3) and 64.5(1), sections 65 and 65.02, subsection 65.03(1), section 65.05 and subsections 65.06(1), 66(1) and 75(2))

15 Table 4 of Schedule 1 to the Regulations is replaced by the following:

TABLE 4

Part 4 Substances

Item	Column 1 Substances	Column 2 Global Warming Potential (GWP)
1	HFCs:
	(a) Trifluoromethane (HFC-23)	14 800
	(b) Difluoromethane (HFC-32)	675
	(c) Fluoromethane (HFC-41)	92
	(d) 1,1,1,2,2-pentafluoroethane (HFC-125)	3 500
	(e) 1,1,2,2-tetrafluoroethane (HFC-134)	1 100
	(f) 1,1,1,2-tetrafluoroethane (HFC-134a)	1 430
	(g) 1,1,2-trifluoroethane (HFC-143)	353
	(h) 1,1,1-trifluoroethane (HFC-143a)	4 470
	(i) 1,2-difluoroethane (HFC-152)	53
	(j) 1,1-difluoroethane (HFC-152a)	124
	(k) 1,1,1,2,3,3,3-heptafluoropropane (HFC-227ea)	3 220
	(l) 1,1,1,2,2,3-hexafluoropropane (HFC-236cb)	1 340
	(m) 1,1,1,2,3,3-hexafluoropropane (HFC-236ea)	1 370
	(n) 1,1,1,3,3,3-hexafluoropropane (HFC-236fa)	9 810
	(o) 1,1,2,2,3-pentafluoropropane (HFC-245ca)	693
	(p) 1,1,1,3,3-pentafluoropropane (HFC-245fa)	1 030
	(q) 1,1,1,3,3-pentafluorobutane (HFC-365mfc)	794
	(r) 1,1,1,2,2,3,4,5,5,5-decafluoropentane (HFC-43-10mee)	1 640

16 The Regulations are amended by adding, after Schedule 1, the Schedule 1.1 set out in the schedule to these Regulations.

17 Schedule 4 to the Regulations is amended by replacing the references after the heading “SCHEDULE 4” with the following:

(Subsections 57(3), 59(1), 65.08(3) and 65.1(1))

18 The heading of Schedule 4 to the Regulations is replaced by the following:

Application for a Transfer of a Consumption Allowance for HCFCs or HFCs and Notice Retiring an Allowance — Information Required

19 Subparagraph 1(b)(ii) of Schedule 4 to the Regulations is replaced by the following:

(ii) the quantity of HCFCs or HFCs to be transferred.

20 (1) Paragraph 2(c) of Schedule 5 to the English version of the Regulations is replaced by the following:

(c) information respecting the source of the product: the name, civic and postal addresses, telephone number and, if any, email address and fax number of the manufacturer;

(2) The portion of paragraph 2(d) of Schedule 5 to the English version of the Regulations before subparagraph (i) is replaced by the following:

(d) information respecting the destination of the product:

Coming into Force

180 days after publication

21 (1) These Regulations, except subsections 11(2) and 14(2), come into force on the 180th day after the day on which they are published in the Canada Gazette, Part II.

January 1, 2019

(2) Subsections 11(2) and 14(2) come into force on January 1, 2019.

SCHEDULE

(Section 16)

SCHEDULE 1.1

(Subsections 64.4(1) and (2) and 65.02(1))

Products Containing or Designed to Contain an HFC Used as a Refrigerant

Item	Column 1 Product	Column 2 Use	Column 3 Date	Column 4 Global Warming Potential (GWP) Limit of Refrigerant Used in Product
1	Stand-alone medium-temperature refrigeration system: self-contained refrigeration system with components that are integrated within its structure and that is designed to maintain an internal temperature ≥ 0°C	(a) Commercial or industrial	January 1, 2020	1 400
		(b) Residential	January 1, 2025	150
2	Stand-alone low-temperature refrigeration system: self-contained refrigeration system with components that are integrated within its structure and that is designed to maintain an internal temperature < 0°C but < -50°C	(a) Commercial or industrial	January 1, 2020	1 500
		(b) Residential	January 1, 2025	150
3	Centralized refrigeration system: refrigeration system with a cooling evaporator in the refrigerated space connected to a compressor rack located in a machinery room and to a condenser located outdoors, and that is designed to maintain an internal temperature at ≥ -50°C	Commercial or industrial	January 1, 2020	2 200
4	condensing unit: refrigeration system with at a cooling evaporator in the refrigerated space connected to a compressor and condenser unit that are located in a different location, and that is designed to maintain an internal temperature at ≥ -50°C	Commercial or industrial	January 1, 2020	2 200
5	chiller: refrigeration or air-conditioning system that has a compressor, an evaporator and a secondary coolant, other than an absorption chiller	Commercial or industrial	January 1, 2025	750
6	mobile refrigeration system: refrigeration system that is normally attached to or installed in, or operates in or with a means of transportation	Commercial or industrial	January 1, 2025	2 200

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Executive summary

Issues: Hydrofluorocarbons (HFCs) are chemicals widely used in refrigeration and air-conditioning equipment and foam manufacturing. They are also greenhouse gases (GHGs), and short-lived climate pollutants (SLCPs), most with global warming potentials hundreds to thousands of times more potent than carbon dioxide (CO₂). GHG emissions are contributing to a global warming trend associated with climate change. Without immediate action, annual GHG emissions from HFCs in Canada are projected to increase from 9 megatonnes (Mt) CO₂-equivalent (CO₂e) in 2014 to 19 Mt in 2030.

Description: The Regulations Amending the Ozone-depleting Substances and Halocarbon Alternatives Regulations (the Amendments) will control HFCs through the phase-down of consumption of bulk HFCs complemented by controls on specific products containing or designed to contain HFCs, including refrigeration and air-conditioning equipment, foams and aerosols. (see footnote 2)

Cost-benefit statement: Between 2018 and 2040, the Amendments are expected to result in cumulative GHG emission reductions from HFCs of about 168 Mt CO₂e. The benefits of these GHG emission reductions are valued at about $6.2 billion. Compliance costs incurred by industry are estimated at almost $2.2 billion, which are partially offset by related cost savings of almost $48 million. The net benefit of the Amendments is estimated to be about $4 billion (in present value terms, discounted at 3% per year to 2017).

“One-for-One” Rule and small business lens: The Amendments will result in a net decrease in average annual administrative burden costs of around $1,100, or about $60 per business per year. The Amendments are therefore considered to be an “OUT” under the Government of Canada’s “One-for-One” Rule.

The small business lens applies and, after industry consultations, various flexibilities were incorporated into the Amendments to address the concerns of small businesses. These flexibilities are expected to reduce the cost of the proposal for small business, relative to the initial option considered, by $9.8 million, or $980 000 per small business over 23 years.

Domestic and international coordination and cooperation: The Amendments are consistent with the October 2016 Kigali Amendment to the Montreal Protocol and put Canada in a position to ratify this amendment. The Amendments are also consistent with Canada’s commitments under the Pan-Canadian Framework on Clean Growth and Climate Change, in which Canada resolved to implement its commitment under the Paris Agreement, to take action to reduce HFC use and emissions. The Amendments complement existing provincial and territorial measures, which aim to minimize and reduce HFC emissions from existing equipment.

Background

Hydrofluorocarbons (HFCs) are manufactured chemicals that were introduced on the global market as replacements for ozone-depleting substances, such as chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs). HFCs are not manufactured in Canada, but are imported in bulk and found in imported and manufactured products, such as domestic appliances, refrigeration and air-conditioning systems, motor vehicle air-conditioning systems, foam products, and aerosols. HFCs enter the environment due to leakage during assembly, usage, and disposal of these products. (see footnote 3)

Although HFCs are not ozone-depleting and have proven to be suitable cost efficient alternatives for ozone-depleting substances they replace, they are (like many CFCs and HCFCs) potent greenhouse gases (GHGs) with global warming potentials hundreds to thousands of times greater than carbon dioxide (CO₂). (see footnote 4)

GHG emissions are contributing to a global warming trend that is associated with climate change, which is projected to lead to both changes in average conditions and in extreme weather events. The impacts of climate change are expected to become more negative as the global average surface temperature becomes increasingly warmer. Climate change impacts are of major concern for society: changes in temperature and precipitation can impact natural habitats, agriculture and food supplies, and rising sea levels can threaten coastal communities. (see footnote 5)

Most HFCs are Short-lived Climate Pollutants (SLCPs) that have a relatively short lifespan in the atmosphere compared to CO₂and other longer-lived GHGs. Atmospheric levels of HFCs thus respond relatively quickly to changes in emissions since they are removed quickly from the atmosphere. As a result of the potency and short lifespan of HFCs, reducing emissions has the potential to bring significant near-term climate benefits. Canada is committed to reducing HFC emissions both domestically and by supporting international actions, including as a founding member of the Climate and Clean Air Coalition, an international voluntary initiative aimed at improving air quality and protecting the climate by reducing SLCPs, including HFCs.

The Montreal Protocol

The Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol) is an international treaty designed to protect the ozone layer. Originally signed by Canada in 1987, the Montreal Protocol obligates Parties to phase out the manufacture and consumption of those substances known to be responsible for ozone depletion. The phase-out is achieved through a legally binding timetable established by the Parties with the ultimate goal of complete elimination. The Montreal Protocol is widely recognized as one of the most successful international environmental treaties, with significant reductions in ozone-depleting substances contributing to the expected recovery of the ozone layer by mid-century. In addition, given that many ozone-depleting substances are also potent greenhouse gases, the Montreal Protocol has, as a secondary accomplishment, contributed to climate change mitigation by averting the emissions of 135 billion tonnes of CO₂e.

Current domestic measures

Canada’s obligations under the Montreal Protocol were implemented by the Ozone-Depleting Substances Regulations, 1998, which replaced three regulations controlling ozone-depleting substances and products containing them. The Ozone-Depleting Substances Regulations, 1998 phased out the manufacture and consumption of CFCs and HCFCs. As a first step to more comprehensive measures on HFCs, the Government of Canada introduced, in 2016, the Ozone-depleting Substances and Halocarbon Alternatives Regulations (the Regulations), which repealed and replaced the Ozone-Depleting Substances Regulations, 1998 and introduced a permitting and reporting system to monitor quantities of HFCs imported, manufactured, and exported, with reporting to begin in 2018 for activities that took place in the 2017 calendar year. (see footnote 6)

Currently, there are federal, provincial, and territorial regulations in place to limit emissions from existing equipment that use HFCs. These regulations include the Federal Halocarbon Regulations, 2003, which aim to minimize and reduce HFC emissions from equipment owned by the Crown or a federal work or undertaking or from equipment located on Aboriginal lands or federal lands. These regulations aim to reduce HFC emissions by requiring regular equipment maintenance and recovery of refrigerants during equipment maintenance and at end-of-life. These regulations do not control bulk HFCs. In addition, the provinces and territories are responsible for controlling the sale, handling, use, recovery and recycling of ozone-depleting substances and their halocarbon alternatives used in equipment that falls under their jurisdiction. Almost all Canadian provinces and territories have now implemented legislation for the recovery of ozone-depleting substances and HFCs. Notwithstanding these federal and provincial measures, the use of HFCs will still result in leakage from equipment and products that contain them.

In recognition of the risks of HFC use, a notice of intent was published in the Canada Gazette, Part I, in December 2014, announcing Canada’s intention to develop regulatory measures to control the manufacture, import, and use of HFCs. This notice affirmed Canada’s intention to align its measures with those of the United States, to the extent possible, and to continue to work with international partners to globally phase down HFCs. (see footnote 7)

International and domestic commitments

At the United Nations Framework Convention on Climate Change (UNFCCC) conference in December 2015, the international community, including Canada, adopted the Paris Agreement, an accord intended to reduce global greenhouse gas emissions with a long-term goal of limiting the rise in global average temperature to less than 2°C above pre-industrial levels and to aim to limit the increase to 1.5°C. As part of its Nationally Determined Contribution (NDC) commitment under the Paris Agreement, Canada pledged to reduce national GHG emissions by 30% below 2005 levels by 2030, including a commitment to gradually phase down HFCs. (see footnote 8) The Department of the Environment (the Department) currently estimates that annual emission reductions of 219 megatonnes (Mt) will be required in 2030 to deliver on this commitment. (see footnote 9)

In October 2016, Parties to the Montreal Protocol, including Canada, adopted an HFC phase-down amendment (the Kigali Amendment) wherein developed countries will begin in 2019 to gradually phase down HFCs to 15% of calculated baseline levels by 2036. Developing countries will take their first step to control HFCs in 2024 or 2028, phasing down to 15% or 20% of baseline levels by 2046.

On December 9, 2016, Prime Minister Trudeau, along with most first ministers of Canada, agreed to the Pan-Canadian Framework on Clean Growth and Climate Change (Pan-Canadian Framework). (see footnote 10) The Pan-Canadian Framework was developed to establish a path forward to meet Canada’s commitments under the Paris Agreement. Within the Pan-Canadian Framework, the Government of Canada committed to various climate actions, including regulatory measures to reduce HFC emissions.

Issues

GHG emissions, including HFCs and CO₂, are contributing to a global warming trend that is associated with climate change. HFCs have global warming potentials hundreds to thousands of times greater than those of CO₂. HFC emissions are projected to increase at a faster rate than economic growth due to increased use as they replace ozone-depleting substances that have been phased out under the Montreal Protocol. Without immediate action, annual HFC emissions in Canada are projected to increase from 9 Mt of CO₂e emissions per year in 2014 to 19 Mt per year in 2030, which is underlining the significant need for action on HFCs.

Current measures do not control the import of bulk HFCs or the import and manufacture of equipment and products that contain HFCs. While measures are in place to limit emissions from HFC-containing products, they cannot eliminate all emissions that occur from leakage during the life cycle of these products.

Parties to the Montreal Protocol, including Canada, have adopted the Kigali Amendment to phase down the production and consumption of HFCs. In order to ratify the Kigali Amendment, the Department needs to put regulatory measures in place that will allow Canada to meet its obligations to phase down HFCs as set out in the aforementioned amendment.

Objectives

The Regulations Amending the Ozone-depleting Substances and Halocarbon Alternatives Regulations (the Amendments) aim to reduce the supply of HFCs that enter into Canada and the demand for HFCs in manufactured products, thereby averting future HFC releases to the environment. This will reduce Canadian GHG emissions, in order to help limit increases in global average temperatures and contribute to Canada’s international obligations to combat climate change. Additionally, the Amendments aim to allow Canada to ratify the Kigali Amendment to the Montreal Protocol.

Description

The Amendments

control the amount of HFCs available for use through the phase-down of bulk HFCs;
introduce controls on specific products containing HFCs, including air-conditioning and refrigeration equipment, foams and aerosols; and
make minor modifications to the HCFC provisions in the Regulations.

These provisions will directly impact

bulk importers of HFCs, who import HFCs in bulk quantities for sale to, or use by manufacturers;
manufacturers of air-conditioning and refrigeration equipment, foams and aerosols; and
one HCFC manufacturer.

Accompanying the Amendments are consequential amendments to the Regulations Designating Regulatory Provisions for Purposes of Enforcement (Canadian Environmental Protection Act, 1999) [Designation Regulations]. (see footnote 11) The Designation Regulations designate the various provisions of regulations made under the Canadian Environmental Protection Act, 1999 (CEPA) that are linked to a fine regime following the successful prosecution of an offence involving harm or risk of harm to the environment, or obstruction of authority. The Regulations are listed in the Designation Regulations, which will need to be amended to reflect the addition of new offences pertaining to the import, manufacture and export of HFCs (e.g. import of non-compliant products containing HFCs).

1. Phase-down of consumption of bulk HFCs

HFCs are commonly imported into Canada in bulk for use in the manufacture, servicing and maintenance of refrigeration and air-conditioning equipment, and in the manufacture of foam-blowing products. Reducing quantities of HFCs imported into Canada will encourage manufacturers of products containing HFCs to transition to alternative substances, as the supply of HFCs will decrease.

Under the Amendments, overall “baseline” levels of HFC consumption will be calculated using consumption (defined as the sum of quantities manufactured and imported minus quantities exported) of HFCs from 2011 to 2013, plus 15% of Canada’s HCFC consumption baseline (expressed in tonnes CO₂e). All importers of bulk HFCs will receive an individual consumption allowance, which when added together will total Canada’s consumption baseline. These consumption allowances will be distributed based on the individual importer’s share of Canada’s total HFC consumption in 2014 and 2015. The Department collected this information through mandatory surveys conducted from 2014 through 2016. Following the phase-down schedule in the Amendments (see Table 1), the quantity of HFCs authorized for import under consumption allowances will decrease over time, while individual shares of this decreasing number will remain constant. Individual allowances could be partially or fully transferred to other parties, subject to the written approval of the Minister.

Table 1: Canada’s HFC consumption phase-down

Year	Reduction from Baseline (%)	Canada’s Maximum Allowable HFC Consumption (tonnes CO₂e)
2019	10	17,206,786
2024	40	11,471,191
2030	70	5,735,595
2034	80	3,823,730
2036	85	2,867,798
Note: The baseline level of HFC consumption is 19,118,651 tonnes CO₂e.

HFCs contained in imported pre-charged equipment such as cars, air-conditioning systems, refrigeration systems and domestic appliances will not be included in the phase-down provisions, but will be subject to the product-specific controls.

2. Product-specific controls

The Amendments introduce product-specific controls that will prohibit the import and manufacture of products and equipment that contain or are designed to contain any HFC, or any blend that contains an HFC, with a global warming potential greater than the designated limit. The product-specific controls will apply to the refrigeration and air conditioning, foam, mobile air-conditioning, and aerosols sectors. Unique global warming potential (GWP) limits and prohibition dates will be applied to different product types within each sector.

The product-specific controls provide exceptions for a number of technical and medical aerosol products, such as certain cleaning products for electronics and metered-dose inhalers, for which alternatives do not yet exist. (see footnote 12) In addition, the Amendments will allow for exceptions, with the approval of the Minister of the Environment, if

the product is necessary for health and safety or is critical for the good functioning of society; and
there are no technically and economically feasible alternatives.

The Amendments will not prevent the use and sale of products manufactured or imported before the date of prohibition.

3. Minor HCFC amendments

The changes to the HCFC provisions include the introduction of measures that will allow Canada’s sole manufacturer of HCFCs to manufacture additional quantities of HCFCs when necessary to support other countries. These measures are consistent with the provisions in the Montreal Protocol and allow the Minister to track, via a permitting system, any such quantities produced. Changes also include corrections to the English version of one provision to ensure consistency between the English and the French versions of the regulatory text.

Notable changes from the proposed Amendments as published in the Canada Gazette, Part I (CG-I)

Of the above described elements of these Amendments, the following notable areas were revised after the publication of the proposed Amendments in CG-I:

The determinants of the consumption allowance, such as phase-down schedule and base consumption calculations, were changed to align with the Kigali Amendment to the Montreal Protocol, which was adopted after publication in CG-I.
The GWP threshold for stand-alone medium temperature refrigeration systems and centralized refrigeration systems was increased from 700 to 1 400 and 1 500 to 2 200, respectively; additionally, the threshold for chillers was increased from 700 to 750. These changes were made to allow for more replacement refrigerants to be used and to more closely align with U.S. measures.
Exemptions were extended to include the import and manufacture of certain products containing HFCs for personal use; military, space or aeronautical applications; and automobiles that are subsequently destined for export.
The definitions of centralized refrigeration system, condensing unit and chiller were changed to provide clarification of the intended systems targeted by the measures.
Foam products were grouped into one category to minimize confusion due to overlap in foam categories.

Regulatory and non-regulatory options considered

With the coming into force of the Ozone-depleting Substances and Halocarbon Alternatives Regulations, the Government of Canada has begun regulating the manufacture and consumption of HFCs through the introduction of a permitting and reporting system; however, this system does not impose limits to the quantities of HFCs that can be consumed in Canada. The Government of Canada also seeks to minimize and reduce HFC emissions, through the Federal Halocarbon Regulations, 2003, from equipment owned by the Crown or a federal work or undertaking or from equipment located on Aboriginal or federal lands. Similar to these federal measures, provinces and territories have legislation in place that aims to minimize and reduce emissions of HFCs used in equipment under provincial/territorial jurisdiction. Other major industrialized countries have also enacted regulations to limit growth in emissions of HFCs and avoid future emissions. When considering how to address the public policy issue, the Government of Canada considered three options: maintaining the regulatory status quo; updating the regulatory requirements to control specific products; or implementing an approach with a phase-down of bulk HFCs, plus product-specific controls to increase GHG emission reductions and better align with similar U.S. measures.

Status quo approach

Without the Amendments, no measures will be in place to ensure reductions in HFC consumption in Canada, which is expected to increase in the future, as HFCs replace the ozone-depleting substances (such as HCFCs) currently being phased out. Although some reductions in HFC use may occur due to measures in other countries (e.g. measures in the United States may reduce HFC content in imported products), the Department anticipates the status quo approach would result in increasing HFC use, and a risk that Canada could become a dumping ground for products containing HFCs. Additionally, while federal and provincial measures are in place to limit emissions of HFC from equipment, they do not control the import, manufacture, export or use of HFCs and do not eliminate all HFC emissions. Given that the status quo approach would result in increased HFC use and emissions, contribute to global warming, and undermine Canada’s international obligations to combat climate change (Paris Agreement) and phase down HFC consumption (Kigali Amendment), this option was rejected.

Regulatory approach — Product-specific controls with no bulk HFC phase-down

In 2014, the Department proposed to take domestic action on HFCs through a notice of intent to align measures with those of the United States to the extent possible. The current U.S. approach, under the Significant New Alternatives Policy (SNAP) Program, prohibits the use of specific HFCs in certain end-use equipment/products, but does not include a phase-down. (see footnote 13) During consultations, stakeholders expressed a strong desire to include a phase-down component, in addition to the product-specific prohibitions outlined in the Notice of Intent. This approach is similar to the one used to successfully phase-out ozone-depleting substances such as CFCs and HCFCs in Canada. Further, excluding the phase-down would limit Canada’s potential GHG reductions under the Amendments. After these consultations took place, the Kigali Amendment was adopted by Parties to the Montreal Protocol, including Canada, thus committing the Government of Canada to implement a bulk HFC phase-down. In order to ensure Canada meets its international obligations and given stakeholder feedback, this option was rejected.

Regulatory approach — Product-specific controls plus bulk HFC phase-down

The Government of Canada has committed to reduce HFC use to avoid subsequent GHG emissions. Additionally, Canada has committed to phase-down HFC use under the Kigali Amendment. Thus, the Amendments will include a phase-down of bulk HFC consumption, allowing Canada to ratify the Kigali Amendment to the Montreal Protocol. In addition to ensuring Canada meets its international obligations, the phase-down will lead to meaningful GHG emission reductions.

The Amendments also include product-specific controls similar to those currently in place in the U.S. For the product-specific controls, the Amendments do not prescribe the specific HFCs prohibited or the alternatives allowed in each of the equipment and product types. Instead, the Amendments establish Global Warming Potential limits for a variety of products, and provide stakeholders flexibility on how best to comply. The Global Warming Potential limits are designed to allow for the same alternatives to be used in both Canada and the United States as well as prohibit the same HFCs, and will also prevent the introduction of high Global Warming Potential substitutes from being used. The timing of the introduction of product-specific HFC controls was designed to align with the timing of enacted measures in the U.S. to the extent possible. These approaches are based on consultation with industry regarding the availability of technologies and the implementation challenges.

Canada’s Amendments are also similar to regulatory controls implemented in the European Union and Japan, and the approach being considered by Australia, which include both a phase-down of HFCs and product-specific controls.

Benefits and costs

Between 2018 and 2040, the Amendments are expected to result in cumulative GHG emission reductions of about 168 Mt CO₂e. The benefits of these GHG emission reductions are valued at about $6.2 billion. There will be compliance costs incurred by industry of about $2.2 billion, in addition to related cost savings of almost $48 million. The net benefits of the Amendments are estimated to be about $4 billion (in present value terms, discounted at 3% per year to 2017).

As shown in Figure 1 below, costs and benefits increase significantly post-2029 as the bulk phase-down schedule increases in stringency. While costs remain relatively constant post-2036, emission reductions continue to increase as the stock of in-service equipment still containing HFCs is retired over time.

Figure 1: Baseline and policy HFC emissions and compliance costs by year

Graph - Detailed information can be found in the surrounding text.

Analytical framework

TBS guidance: The impacts of the Amendments have been assessed in accordance with the Treasury Board Secretariat (TBS) Canadian Cost-Benefit Analysis Guide. (see footnote 14) Regulatory impacts have been identified, quantified and monetized where possible, and compared incrementally to a non-regulatory scenario. The analysis has estimated these impacts over a sufficient time period to demonstrate whether there is likely to be a net benefit.

Key impacts: The key expected impacts of the Amendments are demonstrated in the logic model (Figure 2) below: a phase-down of HFC consumption, in addition to Global Warming Potential limits for certain HFC-containing products, will lead to the adoption of alternative substances with lower Global Warming Potential, resulting in decreased emissions of high Global Warming Potential HFCs. Compliance with the Amendments will also lead to capital and operating costs for industry, with associated cost savings for some firms as a result of the lower price of replacement substances.

Figure 2: Logic model for the analysis of the Amendments

Logic model for the analysis of the Amendments
Phase-down of bulk HFCs	→	Reduction in supply of HFCs for use in products	→	Adoption of low Global Warming Potential alternatives	→	Reduction in emissions of high Global Warming Potential HFCs	→	Reduction in climate change impacts
Phase-down of bulk HFCs	→	Reduction in supply of HFCs for use in products	→		→	Capital and operating costs	→	Reduction in climate change impacts
Global Warming Potential limits for certain products	→	Increase in demand for HFC alternatives for use in products	→		→	Capital and operating costs	→	Net costs to industry
Global Warming Potential limits for certain products	→	Increase in demand for HFC alternatives for use in products	→		→	Operating cost savings	→	Net costs to industry

Comparative scenarios: The analysis compares the expected impacts of the Amendments (the regulatory scenario) to a non-regulatory scenario that assumes the Amendments are not implemented (the baseline scenario). This baseline scenario assumes that if the Amendments are not implemented, then HFC use in domestic manufacturing and servicing would remain unchanged relative to projected levels. The incremental impacts (benefits and costs) between the two scenarios are then attributed to the Amendments.

Time frame of analysis: The time frame considered for this analysis is 2018–2040. This time frame captures costs up to the point they reach their maximum value in 2037. GHG reductions are expected to increase beyond 2040, as the stock of equipment using HFCs is replaced with new equipment using low Global Warming Potential alternatives. Benefits exceed costs in any given year beyond 2021. Therefore, the 2018–2040 time frame was considered sufficient for estimating whether the proposal will result in a net benefit.

Monetary results: All monetary results are shown in 2016 Canadian dollars after inflating any prices that are not from 2016. (see footnote 15) When shown as present values, future year impacts have been discounted at 3% per year to 2017 (the year of the analysis), as per TBS guidance.

Updates to the analysis following the publication of the proposed Amendments in the Canada Gazette, Part I (CG-I)

Various updates were made to the analysis following the publication of the proposed Amendments in the Canada Gazette, Part I. As a result of these modifications, the estimated costs attributable to the Amendments have increased from $686 million to $2,236 million, while the estimated benefits have changed from $6,787 million to $6,239 million. The change in these estimates is due largely to updated information received from stakeholders through consultations after the CG-I comment period. However, the Department’s updated analysis indicates that the Amendments will result in significant net benefits. The updates to the analysis are discussed below.

Regulatory updates: Based on the comments received following the publication of the proposed Amendments in the Canada Gazette, Part I, minor modifications have been made to the Amendments. The Global Warming Potential thresholds have been amended for centralized refrigeration systems, chillers, and stand-alone medium temperature refrigeration systems. Additionally, the phase-down schedule has been amended to ensure Canada’s obligations under the Kigali Amendment are met. The analysis has therefore been updated to account for these changes, which are expected to have negligible impacts.

Consultation updates: Comments received following the publication of the proposed Amendments included feedback from stakeholders regarding the Regulatory Impact Analysis Statement. Most notably, comments were made regarding the accuracy of price estimates of alternative substances assumed to replace HFCs and the feasibility of assumed alternatives. In reaction to these comments the following substantive changes have been made to the assumptions, which have led to changes in the results: (a) prices of alternatives, particularly HFOs and blends containing them, have been revised upward; (b) the assumed alternative for extruded polystyrene (XPS) foam has been changed from hydrocarbons to HFO-1234ze leading to increased costs due to higher blowing agent prices; and (c) only the largest supermarkets are now assumed to install “transcritical” CO₂ systems. Additionally, the incremental capital cost of these systems has been revised upward.

General updates: The modifications to the analysis include updating price levels, exchange rates, substance prices and projections of baseline HFC consumption to align with the most up-to-date information. The base year used to discount costs and benefits to present value has been updated to 2017.

Analysis of regulatory coverage and compliance

To estimate the incremental benefits and costs of the Amendments, the analysis considered who will be affected (regulatory coverage) and how they will most likely respond (their compliance strategies), as described below.

Regulatory coverage

Several industry groups that use HFCs will either be directly or indirectly affected by the Amendments; others are not expected to be affected in a material way.

HFC recyclers and reclaimers: These will not be directly regulated nor will they be affected. Federal and provincial governments have initiatives to mandate and encourage the responsible management of recovered HFCs. This will increase the supply of HFCs, as HFCs from retired equipment are recovered and subsequently recycled or reclaimed. These quantities of recycled/reclaimed HFCs could be used to service existing equipment in years in which demand for HFCs exceeds the quantity of virgin HFCs that can be imported. These recycled/reclaimed quantities were not considered in this analysis, as it is expected that imported HFCs necessary to service and maintain legacy equipment will be available in sufficient quantities.

Companies servicing new equipment with HFC alternatives: These will not be directly regulated but will be required to obtain alternative substances. In cases where equipment requires regular maintenance, it is expected that any incremental maintenance costs due to higher alternative substance prices will be passed on to end-users.

Importers of HFC-containing products: These will be regulated, but it is expected they will not be affected. It is assumed products manufactured outside of Canada will be already meeting the product-specific standards in the absence of the Amendments, as they will likely need to meet similar regulatory measures already in place in the United States, European Union, and Japan. Therefore, it is expected there will be no incremental impacts from imported manufactured goods.

Importers of bulk HFCs: These will be regulated and will need to reduce the quantity of imported HFCs. It is expected that the import of specific alternative substances will be driven by demand from manufacturers and end-users, and any costs due to higher substance prices will be passed on to these groups.

Manufacturers of products containing HFCs: The manufacturers within each sub-sector will be regulated and will transition to alternative substances with Global Warming Potentials below the required threshold, being motivated by product-specific controls and a reduced availability of HFCs due to the bulk phase-down. Table 2 below outlines the primary characteristics of the affected sub-sectors as well as the Global Warming Potential thresholds under the product-specific controls and the coming-into-force dates.

Table 2: Description and product-specific controls by end-use

End-use	Description	Global Warming Potential Threshold	Coming into Force
Stand-alone refrigeration	Stand-alone refrigeration systems use HFCs as refrigerants in self-contained systems generally used in supermarkets and convenience stores to store and display perishable foods, beverages and frozen foods.	1 400 (medium temperature 1 500 (low temperature)	2020
Centralized refrigeration	Centralized refrigeration systems are generally used for storing and displaying food, beverages, and other perishables in convenience stores and supermarkets, using HFCs as refrigerants.	2 200	2020
Chillers	Chillers using HFCs as refrigerants are generally used to provide air-conditioning for large commercial buildings or refrigeration in industrial settings.	750	2025
Mobile refrigeration	Mobile refrigeration systems use HFCs as refrigerants to provide refrigeration during the shipping of food and beverage products (e.g. refrigerated trucks).	2 200	2025
Domestic air conditioning	Domestic air conditioners use HFCs as refrigerants and are found in residential and small commercial buildings.	Not applicable (affected by phase-down only)
Domestic refrigeration	There are no known domestic manufacturers of domestic refrigeration equipment in Canada.	150	2025
Extruded polystyrene (XPS) foam	HFCs with a Global Warming Potential of 1 430 are used as a blowing agent in the manufacture of XPS foam used for wall, roof, and floor insulation. (see footnote 16)	150	2021
Rigid polyurethane (PU) foam	HFCs are used as blowing agents in rigid PU foam products in the manufacture of insulation products for appliances, pipes, and buildings.	150	2021
High pressure polyurethane spray foam	HFCs are used as a blowing agent in high pressure PU spray foam products for the installation of wall, roof, and floor insulation.	150	2021
Low pressure polyurethane spray foam	HFCs are used as a blowing agent in low pressure PU spray foam products for the installation of wall, roof, and floor insulation.	150	2021
Motor vehicle air-conditioning (MVAC)	Motor vehicle air-conditioners typically contain HFCs as refrigerants.	150	2021 model year vehicles
Aerosols	HFCs are used in aerosol products as propellants in a range of personal care, household, and cleaning products.	150	2018

Compliance strategies for manufacturers of products with HFCs

As bulk importers comply with the phase-down schedule in the Amendments, the annual supply of HFCs for domestic consumption will be reduced. As manufacturers comply with the product-specific controls on HFC use in the Amendments, they are also expected to respond to the reduced supply of HFCs. Both the regulatory controls on HFC-containing products and the reduced supply of HFCs will encourage manufacturers to choose alternatives with lower Global Warming Potentials.

In choosing alternatives that comply with the Amendments, manufacturers of products with HFCs will have to consider technical feasibility, safety, and economic feasibility. For the purposes of this analysis, the alternative substances assumed to replace HFCs for each end-use were selected based on three main criteria:

Technical feasibility: The substance is a technically feasible alternative with the chemical properties needed for the specific end-use.

Safety: The alternative substance has been proven to be safe to use in a given application. Some alternatives to HFCs are flammable, and precautions must be taken when in use for safety reasons. These alternatives include hydrocarbons such as propane. However, flammable refrigerants and foam blowing agents can be used in systems and products designed for them. When possible, it is assumed that alternatives with similar flammability properties to the HFC being replaced will be chosen. Alternatives with higher flammability have only been chosen in cases where they have been proven to be safe for use.

Economic feasibility: The relative costs of potential alternatives and the associated capital costs were assessed for substances that were both technically feasible and safe for use. From the set of feasible alternatives, it is assumed that the least costly alternative will be chosen, unless industry consultation has stated otherwise.

When determining likely strategies to comply with the product-specific controls and the bulk HFC phase-down, domestic consumption of HFCs and alternatives are modelled in two steps:

Manufacturers of products subject to product-specific controls (grouped by “end-use”) are assumed to use an alternative substance below the required product-specific Global Warming Potential limits in the same quantities. Products manufactured with these alternative substances will then be serviced and maintained with the same substances.
In the years in which reductions of HFC use (in CO₂e) from the product-specific controls alone are insufficient to meet the bulk phase-down requirements, it is assumed each end-use will further reduce HFC use by the same proportion. To achieve these reductions, some manufacturers will transition production to an alternative with a lower Global Warming Potential than that used to comply with these controls. (see footnote 17) In certain cases where the reduction in CO₂e from transitioning to the first phase-down alternative is insufficient to meet the phase-down schedule, a second phase-down alternative is used. It is assumed that substances are imported in quantities to meet demand from manufacturers and servicing, subject to the supply constraint imposed by the phase-down. Therefore, the impacts of the phase-down are attributed to manufacturers and end-users of HFC-containing products.

The alternative assumptions in this analysis were determined for the purposes of quantifying compliance costs and GHG reductions. These assumptions are not intended to represent the entirety of available alternatives, or to imply that other viable alternatives cannot or should not be used. For the purposes of modelling, the phase-down was assumed to affect all sub-sectors proportionately. In reality, it is likely that some sub-sectors and certain small businesses will have more challenges than others in transitioning to low-Global Warming Potential alternatives. Therefore, the reductions will not be equally distributed.

Table 3: Compliance assumptions for the baseline and regulatory scenario: product-specific controls

End-use	Baseline Scenario (Global Warming Potential)	Product-specific Controls Alternative (Global Warming Potential)	Phase-down Alternative #1 (Global Warming Potential)	Phase-down Alternative #2 (Global Warming Potential)
Stand-alone refrigeration	R-404A/R-507A (3 922/3 985)	R-290 (propane) (3)	No Change (3)	N/A
	R-404A/R-507A (3 922/3 985)	R-448A/R-449A (1 387)	R-455A/R-454C (148)	N/A
	R-407A (2 107)	R-290 (propane) (3)	No Change (3)	N/A
	HFC-134a (1 430)	R-290 (propane) (3)	No Change (3)	N/A
Centralized refrigeration (87% of total volume)	R-404A/R-507A (3 922/3 985)	R-407A (2 107)	R-448A/R-449A (1387)	HFO/HFC Blend (<300)
	R-407A (2 107)	No Change (2 107)	R-448A/R-449A (1387)	HFO/HFC Blend (<300)
	HFC-134a (1 430)	No Change (1 430)	R-450A/R-513A (604/631)	HFO/HFC Blend (<300)
Centralized refrigeration (13% of total volume)	R-404A/R-507A (3 922/3 985)	R-407A (2 107)	R-744 (CO₂) (1)	N/A
	R-407A (2 107)	No Change (2 107)
	HFC-134a (1 430)	No Change (1 430)
Chillers	HFC-134a (1 430)	R-450A/R-513A (604/631)	HFO-1234ze (6)	N/A
	HFC-245fa (1 030)	HFO-1233zd/ HFO-1336mzz (5/9)	No Change (1 387)	N/A
	R-407C (1 774)	R-450A/R-513A (604/631)	No Change (604/631)	N/A
	R-404A/R-507A (3 922/3 985)	R-448A/R-449A (1387)	No Change (1 387)	N/A
Mobile refrigeration	R-404A/R-507A (3 922/3 985)	R-452A (2 140)	R-448A/R-449A (1 387)	HFO/HFC Blend (<300)
Domestic air conditioning	R-410A (2 088)	Not Affected by Product-Specific Controls	R-32 (675)	HFO/HFC Blend (<300)
Domestic air conditioning	R-407C (1 774)	Not Affected by Product-Specific Controls	R-32 (675)	HFO/HFC Blend (<300)
Domestic refrigeration	Not manufactured in Canada
Extruded polystyrene foam	HFC-134a (1 430)	R-450A (604)	HFO-1234ze (6)	N/A
Rigid polyurethane foam	HFC-245fa (1 030)	HFO-1233zd/ HFO-1336mzz (5/9)	No Change	N/A
Rigid polyurethane foam	HFC-365mfc/227ea (1 150)	HFO-1233zd/ HFO-1336mzz (5/9)	No Change	N/A
High pressure polyurethane spray foam	HFC-245fa (1 030)	HFO-1233zd/ HFO-1336mzz (5/9)	No Change	N/A
High pressure polyurethane spray foam	HFC-365mfc/227ea (1 150)	HFO-1233zd/ HFO-1336mzz (5/9)	No Change	N/A
Low pressure polyurethane spray foam	HFC-134a (1 430)	R-450A (604)	HFO-1234ze (6)	N/A
Motor vehicle air-conditioning (MVAC)	HFC-134a (1 430) (Prior to 2021)	HFCs not expected to be used post-2021	HFO-1234yf (4)	N/A
Aerosols	HFC-152a (124)	No Change (124)	HFO (6)	N/A
Note: Subsectors which are assumed to transition to an alternative that does not contain HFCs to comply with the product-specific controls are not affected by the phase-down.

In specific cases, the choice of alternatives will depend on the size of the facility. The largest supermarkets (about 1 100 stores over the period of analysis) are assumed to transition to transcritical CO₂ systems, which require large upfront capital costs, in response to a decreased supply of R-407A. (see footnote 18) Most supermarkets are expected to respond to the bulk phase-down by transitioning to HFO/HFC blends, such as R-448A or R-449A, to avoid these capital costs.

Chiller manufacturers, with the exception of a small number of low-pressure centrifugal chiller manufacturers (using HFC-245fa), are expected to transition to substances containing HFCs to comply with the product-specific controls. However, due to uncertainty surrounding secondary alternatives for some cases, only manufacturers currently using HFC-134a are assumed to be affected by the phase-down.

Domestic air-conditioning manufacturers are assumed to transition to R-32. Although R-32 is a mildly flammable refrigerant, it has been safely used in domestic air-conditioning units in other countries. (see footnote 19) However, safety standards in Canada would need to be amended to allow its use. For the purposes of this analysis, it is assumed this change will take place as it would be consistent with regulatory safety regimes in other countries. The domestic air-conditioning sector is not expected to be significantly affected until 2024, leaving adequate time to amend these standards, if appropriate.

Due to existing provisions in the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, motor vehicle manufacturers are expected to have completely phased out HFC use by model year 2021. Adoption of HFO-1234yf is expected to increase relative to the baseline for 2019 and 2020 model year vehicles due to the bulk phase-down, thus resulting in incremental costs and benefits attributable to the Amendments. The product-specific controls, which come into effect in 2021, are not expected to result in incremental costs or benefits.

GHG emission reduction benefits

The Amendments will phase down bulk imports of HFCs and control the use of HFCs in specified products that contain them, both reducing the supply of HFCs and restricting their use by product manufacturers. As the manufacturing of products containing HFCs shifts to HFC alternatives with lower Global Warming Potential, a reduction in GHG emissions (in CO₂-equivalent) from HFCs is expected.

GHG emissions modelling

Historic HFC quantities for each end-use are estimated using bulk HFC import volume data and in-product HFC survey data. Future HFC use is then projected forward using the Department of Finance Canada’s gross domestic product growth rates, taking into consideration the continued replacement of phased-out HCFCs with HFC substitutes. The baseline scenario does not take into consideration the future adoption of recently introduced low Global Warming Potential alternatives, such as hydrofluoroolefins (HFOs), which may be adopted by domestic manufacturers in the absence of the Amendments.

To estimate future emissions attributable to HFC use, baseline leak rates were applied to estimated future quantities of HFCs used. Each end-use was assigned three life phases, with associated leak rates for each life phase: assembly, usage, and end-of-life disposal. These leak rates were developed from a survey performed by Environmental Health Strategies Inc.; they were then finalized in accordance with the quality control and verification guidelines of the Intergovernmental Panel on Climate Change (IPCC).

The Global Warming Potential for each HFC substance is used in order to calculate its CO₂ equivalence (CO₂e). Consistent with IPCC guidance, these CO₂e estimates are calculated using a 100-year time frame for each HFC substance. (see footnote 20) Global Warming Potential estimates were provided by the IPCC in its Fourth Assessment Report and have been used in this analysis.

The baseline estimates are consistent with the Department’s National Inventory Report and Canada’s 2016 Greenhouse Gas Emissions Reference Case. (see footnote 21), (see footnote 22) The following data sources were used to project future HFC consumption and the resultant emissions:

Environment and Climate Change Canada — Bulk HFC import section 71 survey data (2008–2015);
Environment and Climate Change Canada — In-product HFC survey data (2005–2010); and
Environment and Climate Change Canada — National Inventory Report (1990–2015).

This same emission estimation process was applied to the regulatory scenario, with the same leak rates and life-cycle assumptions. Therefore, emission reductions attributable to the Amendments are driven by the reduction in Global Warming Potential of the substances used in the regulatory scenario.

GHG emission results

The Amendments will reduce emissions of the HFCs with the largest climate impacts by requiring their replacement with alternatives that have lower Global Warming Potentials. The cumulative incremental GHG emission reductions are estimated to be approximately 168 Mt CO₂e over the time frame of analysis (2018–2040), a 34% decrease relative to the baseline scenario.

The Department’s central estimate of the social cost of carbon (SCC) was used to estimate the monetized value of reducing CO₂e emissions under the Amendments. The SCC represents an estimate of the economic value of avoided climate change damages at the global level for current and future generations as a result of reducing CO₂ emissions. The incremental GHG reductions (in megatonnes CO₂e) for each year were valued using annual SCC values (in 2016 dollars per tonne of CO₂e) over the time frame of analysis. These SCC values increase over time, from $45 in 2018 to $67 in 2040 per tonne of CO₂e. (see footnote 23) This method may underestimate the benefits of reducing SLCPs, such as HFCs, which have greater climate impacts (in present value terms) than those derived using CO₂e estimates based on 100-year Global Warming Potentials.

The central SCC value used in this cost-benefit analysis may not fully capture potential low-probability, high-impact outcomes due to climate change. To address this concern, the Department publishes a 95th percentile SCC value for sensitivity analyses, which attempts to capture the costs associated with low-probability, high-impact outcomes, including potential catastrophic impacts of climate change. (see footnote 24)

Table 4: Incremental GHG emission reductions (in megatonnes CO₂e and in millions of dollars)

	2018 to 2020	2021 to 2025	2026 to 2030	2031 to 2035	2036 to 2040	Total
GHG emission reductions (Mt CO₂e)	2	10	24	52	79	168
Present value of GHG emission reductions — Central case SCC	86	437	953	1,949	2,766	6,191
Note: Totals may not sum due to rounding.

For the purposes of this analysis, emission reductions are quantified and monetized up to 2040. However, there will be emission reductions beyond 2040 attributable to industry actions with upfront costs incurred before 2040, as emissions occur throughout the useful life of HFC-containing products.

Contribution to Paris Agreement commitment (emission reductions in 2030)

Canada has made commitments to reduce GHG emissions by 30% below 2005 levels by 2030 under the Paris Agreement. The Department estimates that annual emission reductions of 219 Mt CO₂e will be required in 2030 to deliver on this commitment. GHG reductions from the Amendments (7 Mt) will deliver a 3% contribution to Canada’s GHG emissions reduction target (219 Mt) under the Paris Agreement. (see footnote 25)

For the Amendments, the cumulative GHG emission reductions between 2018 and 2030 are estimated to be 37 Mt CO₂e (due to rounding, the values in Table 4 only add to 36). Without the Amendments, annual GHG emissions from HFCs in Canada were projected to increase from 9 Mt CO₂e in 2014 to 19 Mt in 2030. GHG emission reductions attributable to the Amendments are expected to reach 7 Mt in 2030, reducing HFC emissions to 12 Mt. (see footnote 26)

Contribution to Pan-Canadian Framework

The Pan-Canadian Framework was developed to establish a comprehensive plan to meet Canada’s commitments under the Paris Agreement. The Pan-Canadian Framework proposed a range of complementary climate actions to support pricing carbon pollution in reducing GHG emissions. The Amendments are one such measure that reduce GHG emissions in a complementary fashion to carbon pricing mechanisms, as these measures do not cover most HFC emissions.

Costs (and cost savings)

Compliance with the Amendments will lead to incremental costs and cost savings to industry. Adopting HFC alternatives will lead to changes in substance costs and, in some cases, capital costs to allow the use of these alternatives. Using HFC alternatives may be more or less expensive than using HFCs, resulting in an operating cost or savings, and may require changes in products or equipment, resulting in a capital cost.

In addition to industry consultation, the following key data sources were used for estimating compliance costs (and savings):

U.S. Environmental Protection Agency (EPA) — SNAP Rule 20 Analyses: https://www.regulations.gov/docket?D=EPA-HQ-OAR-2014-0198;
U.S. Environmental Protection Agency (EPA) — SNAP Rule 21 Analyses: https://www.regulations.gov/docket?D=EPA-HQ-OAR-2015-0663;
U.S. EPA — Global Mitigation of Non-CO₂ Greenhouse Gases: 2010-2030. September 2013: https://www.epa.gov/global-mitigation-non-co2-greenhouse-gases;
IHS Chemical — Chemical Economics Handbook: Fluorocarbons (543.7000) by Aida Jebens with Thomas Kalin, Yuko Yamaguchi and Yi (Eve) Zhang. February 2014: www.ihs.com/chemical;
UNEP — Calculation of the Incremental Capital Costs and Incremental Operating Costs for Foam Sector Alternatives (Decision 75/28). April 2016: http://www.multilateralfund.org/76/English/1/7658.pdf;
UNEP — Low-GWP Alternatives in Commercial Refrigeration: Propane, CO₂ and HFO Case Studies: http://www.unep.fr/ozonaction/information/mmcfiles/7806-e-Lower-GWP_Alternatives_in_Commercial_and_Transport_Ref.n.pdf; and
California Air Resource Board — SLCP Reduction Strategy, Appendix F: Supporting Documentation for the Economic Assessment of Measures in the SLCP Strategy. March 2017: https://www.arb.ca.gov/cc/shortlived/meetings/03142017/appendixf.pdf.

The analysis presents the cost impacts for each of the end-uses, which are grouped into four sectors: refrigeration and air conditioning, foams, mobile air conditioning, and aerosols.

Refrigeration and air-conditioning sector

Refrigeration and air-conditioning manufacturers are expected to incur operating and/or capital costs to comply with the Amendments (refer to Table 5). Upfront costs would be incurred in some cases, attributable to increased equipment costs necessary to operate equipment safely and efficiently with new refrigerants. In most cases, operating costs are expected to be incurred due to the increased cost of alternative refrigerants. Operating cost savings may be achieved in cases where alternative refrigerant prices are lower than the refrigerants used in the baseline. These cost savings are expected to be accompanied by higher upfront costs.

If the substitutes assumed to be used to comply with the product-specific controls contain HFCs, the manufacturers are expected to be affected by the bulk phase-down. Domestic air-conditioning is not covered under the product-specific controls and therefore will only be affected by the phase-down. There are no known manufacturers of domestic refrigeration equipment in Canada. Therefore, no capital or operating costs are expected to be incurred by this sub-sector.

In specific cases, the choice of alternatives will depend on the size of the facility. The largest supermarkets (about 1 100 stores) are assumed to transition to transcritical CO₂ systems (which use CO₂ in place of HFCs) in response to a decreased supply of R-407A, which will lead to an incremental increase in capital costs but lower operating costs. Most supermarkets are expected to respond to the bulk phase-down by transitioning to HFO/HFC blends. As a result, they will incur higher operating costs due to increased refrigerant costs in order to avoid incremental capital costs. Additionally, it is expected that some supermarkets will perform retrofits in order to use lower GWP refrigerants in response to decreased HFC supply. These supermarkets are expected to incur increased refrigerant costs, in addition to a one-time labour cost of $500 per supermarket to perform the retrofit.

Over the period of analysis, total costs, which include net operating costs and capital costs, will be approximately $1,040 million for the refrigeration and air-conditioning sector (refer to Table 5 below for costs by end-use and replacement substance).

Table 5: Refrigeration and air-conditioning sector compliance costs (dollars)

End-use	Replacement Substance	Refrigerant Price Change From Baseline ($ per kg)	Total quantity of refrigerant replaced (in kg)	Incremental Upfront Cost ($ per Facility) (see footnote 27)	Total Cost
Stand-alone refrigeration	R-290	−5 to −8	349,000	474,000	9,459,000
	R-448A/R449A	9 to 12	721,000	—
	R-455A/R-454C	14 to 17	779,000	—
Centralized refrigeration (New)	R-407A	No change			591,841,000
	HFC-134a	No change
	R-744 (CO₂)	−9 to −12	6,830,000	291,000
	R-448A/R449A	9 to 12	70,045,000	—
	R-455A/R454C	14 to 17	2,759,000	—
Centralized refrigeration (Retrofit)	R-407a	No change	842,000	500
Centralized refrigeration (Retrofit)	R-448A/R449A	9 to 12	13,560,000	500
Chillers	R-450A/R-513A	9 to 12	4,953,000	—	64,957,000
	R-448A/R-449A	9 to 12	1,637,000	—
	HFO-1233zd/ HFO-1336mzz	13 to 16	4,000	75,000
	HFO-1234ze	13 to 16	4,688,000	—
Mobile refrigeration	R-452A	16	84,000	—	1,505,000
Mobile refrigeration	R-448A/R-449A	12	67,000	—	1,505,000
Domestic A/C	R-32	—	13,279,000	110 to 550 per unit	371,553,000
Domestic Refrigeration	No impacts expected
Note: These assumptions are not intended to represent the entirety of available alternatives, or to imply that other alternatives are not available.

Foam sector

Foam manufacturers are expected to incur upfront and operating costs (refer to Table 6). Upfront costs will be incurred due to formulation and compliance testing to ensure the necessary insulation properties of the resultant foam are attained. In addition, new equipment and training costs will be incurred to allow for the safe use of mildly flammable blowing agents in some cases. It is expected that foam manufacturers will transition to alternatives that do not contain HFCs, and thus will not be affected by the bulk phase-down. There are no known manufacturers of one-component PU spray foam in Canada. Therefore, no capital or operating costs are expected for this sub-sector.

Over the period of analysis, total costs, which include operating costs and upfront costs, will be approximately $1,053 million for the foam sector (refer to Table 6 below for costs by end-use and replacement substance).

Table 6: Foam sector compliance costs (dollars)

End-use	Replacement Substance	Refrigerant Price Change From Baseline ($ per kg)	Total quantity of blowing agent replaced (in kg)	Incremental Upfront Cost ($ per Facility)	Total Cost (Savings)
XPS foam	HFO-1234ze	16	61,490,000	3,466,000	241,958,000
Rigid PU foam	HFO-1233zd/ HFO-1336mzz	11 to 12	49,730,000	284,000	380,308,000
High-Pressure PU spray foam	HFO-1233zd/ HFO-1336mzz	11 to 12	49,730,000	352,000	404,122,000
Low-Pressure PU spray foam	HFO-1234ze	16	3,242,919	776,000	26,593,000
Note: These assumptions are not intended to represent the entirety of available alternatives, or to imply that other alternatives are not available.

Other sectors

Motor vehicle air-conditioning: Due to existing provisions in the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, motor vehicle manufacturers are expected to have completely phased out manufacturing with HFCs by model year 2021. Therefore, the product-specific controls are not expected to result in cost impacts. The reduction in available quantities of HFC-134a due to the bulk phase-down is expected to increase the adoption of HFO-1234yf relative to the baseline for model year 2019 and 2020 vehicles. Therefore, some manufacturers will incur incremental costs in these years. The estimated incremental cost of installing an HFO-1234yf air-conditioning unit is approximately $79 per vehicle, including the increased refrigerant cost. (see footnote 28) Over the period of analysis, total costs incurred by the motor vehicle sector are estimated to be $56 million.

Aerosols: There is no known Canadian manufacturer of non-exempt aerosol products containing HFCs with Global Warming Potentials beyond the threshold allowed by the product-specific controls in Canada. Therefore, the product-specific controls are not expected to affect aerosol manufacturers. It is expected that the phase-down will reduce the availability of HFC-152a, causing some manufacturers to transition to HFOs. (see footnote 29) Over the period of analysis, total costs incurred by the aerosol sector are estimated to be $39 million.

Table 7: Compliance costs for other sectors (dollars)

End-use	Replacement Substance	Refrigerant Price Change From Baseline ($ per kg)	Total quantity of HFC replaced (in kg)	Incremental Upfront Cost ($)	Total Cost (Savings)
MVAC	HFO-1234yf	included in equipment cost	615,000	79 (per vehicle)	55,725,802
Aerosols	HFO	20	3,948,000	—	38,815,031
Note: These assumptions are not intended to represent the entirety of available alternatives or to imply that other alternatives are not available.

Summary of industry compliance costs (and savings)

Capital costs were estimated at $605 million over the 2018–2040 time frame. In addition, the operating costs have been estimated at $1,648 million, with operating cost savings of $48 million. Total net costs for industry are expected to be $2,187 million. Estimates of total industry capital and operating costs as well as cost savings are shown in Table 8 below.

Table 8: Industry capital and operating costs and savings (millions of dollars)

	2018 to 2020	2021 to 2025	2026 to 2030	2031 to 2035	2036 to 2040	Total Incremental Costs
Capital costs	75	28	88	189	206	587
Operating costs	45	278	363	452	510	1,648
Total costs	120	306	452	641	717	2,235
Operating cost savings	0	1	6	17	24	48
Net costs (savings)	120	304	445	624	69*	2,187
Note: Monetary values discounted to present value using a 3% discount rate. Totals may not sum due to rounding.

Many of the substances expected to replace HFCs are relatively new to the market. As production of these alternative substances increases, it is expected that prices will change over time. However, it is difficult to predict the magnitude or direction of these future price changes. For the purposes of this analysis, it is assumed current prices will remain constant over time.

After 2040, there will be some ongoing additional reformulation costs as alternatives continue to replace current HFCs as equipment is retired. However, GHG reduction benefits generated from the lower Global Warming Potentials of the alternative substances are expected to outweigh the associated costs.

Administrative costs to ensure compliance

Under the Regulations, there are both industry and government costs necessary to ensure compliance. Under the Amendments, there will be some reduction in industry administrative costs and some additional government administrative costs to ensure compliance with the Amendments.

Industry administrative cost savings

The Amendments are expected to result in a small incremental net decrease in administrative costs of $22,000 as most importers of HFCs will be issued allowances based on historic consumption (i.e. manufactured, imported and exported HFCs) data, which was collected by the Department through a mandatory survey. Therefore, they will no longer have to apply for permits under the Amendments. As reporting requirements are already in place under the Regulations, the Amendments will not impose a new administrative burden.

Government administrative costs

To ensure compliance with the Amendments, there will be incremental federal government costs for regulatory compliance promotion and administration beginning in 2018. These costs were estimated to average $9,800 per year over a 23-year time frame. One-time costs attributable to enforcement training, assessment, and preparation are expected to be incurred of $263,000 in 2018. Additional incremental costs incurred for enforcement over the 2018 to 2040 time frame were estimated at $441,000 per year. The present value of these government costs for the 2018 to 2040 time frame was thus estimated at $7,670,000.

Table 9: Administrative cost impacts for industry and Government (dollars)

	2018 to 2020	2021 to 2025	2026 to 2030	2031 to 2035	2036 to 2040	Incremental Total Costs
Industry administrative cost savings	(3,812)	(5,648)	(4,872)	(4,202)	(3,625)	(22,159)
Government administrative costs	1,537,181	1,887,772	1,628,409	1,404,679	1,211,689	7,669,730
Note: Monetary values discounted to present value using a 3% discount rate.

In the summary of benefits and costs (Table 10), the total industry administrative cost savings (0.02 million dollars) are included in industry cost savings (48 million dollars).

Non-monetized impacts

Health: Hydrocarbons, which generate volatile organic compound (VOC) emissions, are expected to be substitutes for some HFCs in the regulatory scenario. VOCs contribute to the formation of ground-level ozone and particulate matter, which are the main constituents of smog. Smog is known to have adverse effects on human health and the environment. However, a U.S. EPA study on hydrocarbon refrigerant impacts on ground level ozone concluded that the impacts on health of these emissions were not significant. (see footnote 30) Additionally, it is expected that most end-uses will not use hydrocarbons as alternatives to HFCs, and thus the quantities emitted will be small. Thus, health impacts were not quantified or monetized for this analysis.

Safety: Hydrocarbons are flammable and precautions must be taken for safety reasons when they are in use. However, flammable refrigerants and foam blowing agents can be safely used in systems and products designed for them. Similarly, products can be safely manufactured with hydrocarbons, if the manufacturing facility is designed to meet safety standards. In cases where hydrocarbons are used in consumer products such as domestic appliances, the refrigerant charge sizes are sufficiently small to pose no safety risk. The U.S. EPA has deemed hydrocarbon refrigerants and blowing agents to be acceptable for use under its SNAP program after extensive study to ensure flammability risks will not pose significant threats to safety. Furthermore, hydrocarbons have been safely used in the European Union (EU) and Japan since the early 2000s. (see footnote 31)

Energy efficiency benefit: Refrigeration and air-conditioning systems using HFOs have been shown to provide increased energy efficiency. (see footnote 32) Use of these systems will likely provide cost savings to industry and reductions in climate change impacts due to lower energy consumption. However, this has not been quantified and monetized due to the high uncertainty surrounding the quantification of these energy efficiency improvements.

Summary of benefits and costs

Between 2018 and 2040, the Amendments are expected to result in cumulative GHG emission reductions from HFCs of about 168 Mt CO₂e. Using the social cost of carbon (SCC), the benefits of these GHG reductions are valued at about $6.2 billion. There are compliance costs to industry estimated at $2.2 billion, in addition to related cost savings of almost $48 million. The net benefits of the Amendments are estimated at about $4 billion.

Table 10: Summary of benefits and costs (millions of dollars)

Monetized Impacts	2018 to 2020	2021 to 2025	2026 to 2030	2031 to 2035	2036 to 2040	Total
Societal benefits
Climate change benefits	86	437	953	1,949	2,766	6,191
Industry cost savings	0	1	6	17	24	48
Total benefits	86	438	959	1,965	2,790	6,239
Societal costs
Industry costs	120	306	452	641	717	2,236
Government administrative costs	2	2	2	2	1	8
Total costs	122	308	453	642	718	2,243
Societal net benefits	(36)	131	506	1,323	2,072	3,996
GHG reductions (Mt CO₂e)	2	10	24	52	79	168
Non-quantified impacts: negligible negative health impacts due to a slight increase in VOC emissions negligible impacts on safety due to the flammability of certain HFC substitutes positive environmental impacts and cost savings from the increased energy efficiency of the replacement refrigeration and air-conditioning systems
Notes: Values are rounded and shown as zero if less than 0.5; therefore, totals may not sum due to rounding. Monetized values are discounted to present value using a 3% discount rate.

Cost per tonne of GHG emission reductions from HFCs

Cost-per-tonne estimates were derived to compare the costs imposed on industry relative to the GHG emission reductions achieved. These costs-per-tonne results reflect discounted industry costs and cost savings to reduce tonnes of GHG emissions from HFCs.

The Amendments are expected to achieve a 37 Mt CO₂e cumulative reduction in GHG emissions by 2030, which will contribute to the fulfillment of Canada’s international commitments. To achieve these GHG emission reductions, industry is expected to bear compliance costs of $878 million, although there are also expected to be industry cost savings of $8 million over the same time frame (2018–2030). Overall, as indicated in Table 11, these anticipated GHG emission reductions will be achieved at a net cost per tonne of $24.

As part of Canada’s Paris Agreement commitment, the Government of Canada submitted Canada’s Mid-Century Long-Term Low-Greenhouse Gas Development Strategy (Mid-Century Strategy) to the UNFCCC. The Mid-Century Strategy examines an emissions abatement pathway consistent with net emissions falling by 80% in 2050 from 2005 levels. (see footnote 33) In order to assess the cost effectiveness of the Amendments’ contribution to this goal, the analysis was extended to 2050, and a cost per tonne was determined for this time frame. Over this period, the Amendments are expected to achieve a 386 Mt CO₂e cumulative reduction in GHG emissions with net industry costs of $3,508 million. Thus, as indicated in Table 11, these GHG emission reductions will be achieved at a net cost per tonne of $9.

Table 11: Cost per tonne of GHG emission reductions from HFCs

Type of Cost per Tonne	Costs (Millions of Dollars)	GHG Emission Reductions (Mt of CO₂e)	Cost per Tonne of GHG Emission Reductions from HFCs
2018-2030 (Paris Agreement commitment)
Cost per tonne	878	37	24
Net cost per tonne	870	37	24
2018-2050 (Mid-century Strategy)
Cost per tonne	3,603	386	9
Net cost per tonne	3,508	386	9
Note: Results may not sum due to rounding.

These results do not account for when the emission reductions occur or the value society may place on the avoided damages. Given that the majority of GHG emission reductions attributable to action taken before 2030 occur beyond this time frame, choosing a longer time frame results in cost-per-tonne estimates that are more reflective of the overall costs, net costs and emission reductions attributable to the Amendments.

Distributional impacts

The analysis was conducted from a national societal viewpoint, but incremental cost impacts may not be distributed uniformly, so the analysis also considered how these might affect industry sectors, industry competitiveness and consumer prices.

Impacts by sector

The compliance costs associated with the Amendments will vary by sector. Costs are largely driven by the feasibility of various HFC alternatives for a given end-use, causing some sectors to bear higher costs. A breakdown of costs and savings by sector is presented below in Table 12.

Table 12: Annualized monetized impacts by sector (millions of dollars)

Sector	Total Costs	Total Cost Savings	Net Costs	Annual Sales (see footnote 34) (2016)
Refrigeration and air conditioning manufacturers	28	-	28	3,459
Supermarkets	36	3	34	89,896
Foam	62	-	62	1,891
MVAC	3	-	3	66,622
Aerosols	2	-	2	327

Note: Annualized values calculated using a 3% discount rate.

It is expected that the foam sector will bear the most significant increase in costs due to the Amendments. Assuming annual sales are constant over time, the compliance costs to this sector constitute about 3% of annual sales. Canadian foam manufacturers are located in Ontario and Quebec, while the North American foam sector is highly integrated, with multinational manufacturers operating in both Canada and the United States. In 2015, more than 75% of foam product exports (by value) were destined for the United States, constituting about 5% of total sales. (see footnote 35) While there is currently uncertainty about the future of regulatory measures in the United States, it is not anticipated that Canadian foam manufacturers will be unduly affected by the Amendments (see Regulatory Cooperation section below for further details).

Competitiveness impacts

The Amendments will impose net compliance costs of $2.2 billion on the sectors discussed previously that could affect their profitability. As noted above, these costs constitute about 3% of annual industry sales for the foam sector and less than 1% of annual industry sales for all other sectors. Although impacts on the international competitiveness of the Canadian industry are anticipated to be small, the Amendments have allowed for the possibility of exceptions to be granted, with the approval of the Minister of the Environment, if there are no economically feasible alternatives available to comply with the product-specific controls. Additionally, the product-specific controls will apply to both domestic and imported products. Therefore, imported products will have to comply with the same standards as products manufactured in Canada.

Potential competitiveness concerns posed by the Amendments are expected to be offset by similar measures being implemented internationally. Canada’s international partners have agreed to implement a phase-down of HFC consumption under the Kigali Amendment. In addition, many countries have controls on HFCs in place, including restrictions on products that contain HFCs. (see footnote 36)

Consumer impacts

It is expected that some of the costs to industry will be passed on to consumers. In particular, consumers purchasing products directly affected by the Amendments, such as home-air-conditioning units and insulation foams, are likely to see some costs passed on to the prices of final goods. The extent to which the consumer product sectors are able to pass on the incremental costs to consumers through higher prices will determine the ultimate distribution of costs between manufacturers and consumers. Although some costs may be passed on to Canadian consumers, it is expected that the overall impact will be small (1 to 3%).

Uncertainty of impact estimates

The results of this analysis are based on key parameter estimates, which could be higher or lower than indicated by available evidence. Given this uncertainty, sensitivity analyses were conducted to assess the impact of changes to these parameters on the expected net benefits of the Amendments, where possible.

TBS recommends a 7% discount rate for cost-benefit analyses in most cases, but when a regulatory proposal has impacts occurring over a long time horizon, a lower discount rate (3%) is appropriate. A sensitivity analysis was done to compare the central case (3%) to the higher discount rate (7%), which still yields an expected net benefit, as shown in Table 13.

Directly modelled monetary estimates of the climate change impacts of HFC emissions are not currently available. As an alternative method to valuing HFC emission reductions, the Global Warming Potential for each HFC gas is used to obtain a CO₂-equivalent (CO₂e) and the SCC is used to estimate the value of these CO₂e reductions. The warming effect of HFCs is estimated over a 100-year time-frame relative to CO₂. However, most HFCs have a lifespan in the atmosphere that is significantly shorter. Due to discounting, this methodology underestimates the present value of these impacts. Direct modelling to estimate the climate change impacts of emissions for each HFC gas would likely yield higher monetary values. (see footnote 37)

The estimated prices of HFCs and their substitutes may be higher or lower than estimated. Future prices of these substances are subject to various market forces that are difficult to predict with certainty. Additionally, current prices can vary significantly by volume and location, and substantially across supply chains. Future emission reductions may also be higher or lower than estimated, as projections of future emissions are based on estimates of equipment leak rates and lifespan, which are subject to some uncertainty. Another key driver of uncertainty is which HFC alternatives will actually be used, as there are a wide range of alternatives. This uncertainty affects both costs (given the relative prices of alternatives) and benefits (given the relative GWP of alternatives). Therefore, it is possible that costs are higher (or lower) than estimated and benefits are lower (or higher) than estimated, which would lower (or raise) the estimated net benefits.

Over the analytical time frame, estimated benefits were greater than costs (a benefit-to-cost ratio of 3:1 in the central case). Therefore, even if benefits were much smaller or costs much larger than estimated, there will still be an expected net benefit. The Department has typically considered uncertainty ranges 50% higher or lower than the central case. Sensitivity analyses were done to consider these scenarios, which still yield expected net benefits in every scenario except the case where costs are 50% higher and benefits are 50% lower. This scenario yields a net loss of $234 million, as shown in Table 13 below.

Table 13: Sensitivity analyses (millions of dollars)

Alternate Impact Analysis Estimates	Benefits (B)	Costs (C)	Net Benefits (B − C)	Benefit-Cost Ratio (B/C)
Central case (from Table 10)	6,239	2,243	3,996	2.8:1
Benefits and costs discounted at 7% per year	3,359	1,322	2,036	2.6:1
Costs 50% higher than central case	6,239	3,364	2,874	1.9:1
Benefits 50% lower than central case	3,120	2,243	876	1.4:1
Costs 50% higher and benefits 50% lower	3,120	3,364	−246	0.9:1

Note: Values discounted to present value using a 3% discount rate, except when a 7% rate is used.

In this analysis it is assumed that the impacts (benefits and costs) occur because regulatees will not change their behaviour and choose the identified GHG reduction strategies in the absence of the Amendments. There may be some adoption of these GHG reduction strategies even without the Amendments, given global regulatory trends, shifting consumer preferences and the potential for some industry cost savings. To the degree that alternatives would have been chosen in the absence of the Amendments, the estimated benefits and costs attributable to the Amendments would be proportionally lower, while still yielding an expected net benefit.

“One-for-One” Rule

The Amendments are considered to be an “OUT” under the Government of Canada’s “One-for-One” Rule. It is projected that the regulatory changes will result in a net decrease in annualized average administrative burden costs of around $1,100, or $60 per importer of bulk HFCs. (see footnote 38)

The Amendments will reduce administrative burden by removing the requirement for regulatees to apply for permits to import and manufacture HFCs. Instead, allowances will be issued proactively under the Amendments and will serve as authorization to import and manufacture HFCs. It is assumed that companies currently applying for permits will save an average of two hours per year. It is estimated a total of 19 companies would apply for permits in the absence of the Amendments. Annual reporting under the Regulations will continue to be required. However, this administrative cost is not considered as additional to the Regulations.

All other administrative requirements will remain the same as stipulated in the Regulations, and therefore impose no additional administrative burden. These assumptions on administrative burden were published in the Canada Gazette, Part I. No comments were received during the post CG-I comment period and, therefore, the “One-for-One” analysis has not been modified.

Small business lens

It is estimated that there are 66 manufacturers of products and bulk importers affected by the Amendments. Of these, 8 manufacturers of products and 2 bulk importers are small businesses. Prior to the publication of the proposed Amendments in CG-I, the Department engaged in four consultations with industry stakeholders, including small businesses, to receive feedback after providing an initial policy proposal. Stakeholders were concerned with the early start dates and low Global Warming Potential limits of this initial proposal, which was revised by the Department to include various regulatory flexibilities in the Amendments.

The in-product controls were redesigned with start dates and Global Warming Potential limits that provide sufficient transition times and allow the use of various acceptable alternatives that will allow for investment decisions that are feasible for small businesses. Furthermore, the allowance system was revised to allow the two small businesses that started importing HFCs after 2013 to maintain their share of the import market and continue importing HFCs after the phase-down is in place. The Amendments will also reduce administrative burden for small businesses importing bulk HFCs by removing the requirement to apply for permits to import and manufacture HFCs.

The Amendments do not provide additional flexibilities to small businesses, such as exceptions, for a variety of reasons. An exception for small businesses with respect to the phase-down would allow small businesses to import larger quantities of bulk HFCs indefinitely, which will reduce the associated climate change mitigation benefits, and could place Canada in non-compliance with its obligations under the Kigali Amendment once it enters into force. Furthermore, exceptions for small businesses could encourage companies to split into smaller entities to avoid future compliance costs, which would create an uneven playing field domestically.

The adjustments made to the Amendments after consultation with industry are analyzed in the Regulatory Flexibility Analysis Statement below (Table 14). The initial option estimates the cost to small businesses of the standards presented to industry during consultations in March 2015. The flexible option estimates the costs to small businesses under the Amendments.

Table 14: Regulatory flexibility analysis statement

	Initial option (standards set based on 2015 policy presented to stakeholders)		Flexible option (standards set based on feedback received after consultation with industry, including small business)
Number of small businesses affected	10		10
	Annualized value	Present value	Annualized value	Present value
Compliance costs	$3 447 000	$60 025 000	$2 882 000	$50 185 000
Administrative costs	$ -	$ -	−$178	−$2 900
Total costs	$3 447 000	$60 025 000	$2 881 822	$50 182 100
Total cost per small business	$344 700	$6 002 500	$288 182	$5 018 210
Risk considerations	No incremental risks exist under the initial option.		No incremental risks exist under the flexible option.

Note: The values in this table are calculated using 2016 Canadian dollars and an analytical time frame of 2018 to 2040.

The table above demonstrates the reduced cost impacts to small businesses due to the changes made to the Amendments after industry consultations. The flexibilities incorporated into the Amendments are estimated to result in a decrease in costs to small businesses, relative to the initial option, of $9,843,000, or $984,300 per small business over a time frame of 2018 to 2040.

During the consultation period following the publication of the Amendments in CG-I, stakeholders from the aerosol industry expressed concerns regarding the timeline and alternatives required by the product-specific controls, specifically in regards to small and medium enterprises. However, the Department does not anticipate significant impacts attributable to the aerosol product controls, as non-compliant HFCs are typically only used in the manufacturing of exempt products.

Consultation

Consultations prior to the publication of the proposed Amendments in the Canada Gazette, Part I

Since the publication of a notice of intent to regulate HFCs in December 2014, stakeholders representing all sectors from both Canada and the United States have been actively engaged in consultations. Stakeholders include industry, environmental non-governmental organizations (ENGOs), other government departments, and industry and trade associations. Through constructive and productive dialogue with stakeholders, the advantages of a domestic approach that includes both a phase-down and product-specific controls to regulate HFCs, as described above, have been expressed.

The four rounds of consultations, which consisted of electronic and face-to-face meetings in 2015 and 2016, presented opportunities for stakeholders to provide information to the Department on the availability of technologies and implementation challenges of the Amendments. The Department’s consultation documents were sent to over 150 stakeholders. Approximately 80 stakeholders participated in these consultations and over 150 sets of comments were received by the Department. Information and feedback from stakeholders have assisted the Department in proposing a phase-down and product-specific controls that will be achievable, effective, and timely.

Industry

Many stakeholders have stated that the phase-down schedule included in the domestic approach is necessary to allow market forces to determine the lowest cost path to achieve the required HFC reductions. Diminishing quantities of HFCs will drive the price of HFCs higher, making the cost of climate-friendly alternatives more attractive. At the same time, given that the phase-down component does not target specific types of HFCs, companies will be provided with the flexibility to choose the most cost-effective alternatives that best meet their needs.

Some stakeholders stressed the importance of ensuring that Canadian regulatory measures are aligned with U.S. regulations to avoid potential market disruption and trade restrictions, as the affected sectors are well integrated with the U.S. market. However, full Canada–United States regulatory alignment strictly based on product-specific controls at this stage would not provide stakeholders with the flexibility to choose the HFCs they want to eliminate based on the most cost-effective commercially available alternatives. The Canadian-specific approach does not strictly align product-specific controls with those of the United States. This approach allows the use of any substance below a specified Global Warming Potential threshold, while the U.S. approach is more prescriptive, prohibiting some substances, and specifically allowing the use of others. However, in the sectors where Canada is moving forward with such controls, the Global Warming Potential limits and timing of the controls are aligned with current measures in the United States, to the extent possible, to minimize the potential for market disruption. The product-specific controls will enter into force at the same time or shortly after U.S. measures: a fact that was met with positive feedback from stakeholders. Other stakeholders have expressed a strong interest in a more flexible approach that is more in line with the approach used to phase out CFCs and HCFCs, which included both a bulk phase-down and product-specific controls. Therefore, they have indicated that absolute alignment with U.S. regulatory measures is not critical.

Non-governmental organizations

ENGOs have expressed support for the regulatory approach during stakeholder consultations and the need to move expeditiously to introduce measures to control HFCs. In particular, ENGOs welcomed the phase-down, as it provides a more comprehensive approach to controlling HFCs.

Provincial and territorial governments

The Amendments will complement existing provincial and territorial measures, which aim to minimize and reduce HFC emissions from existing equipment but do not reduce HFC consumption in products and equipment. Provincial governments have generally expressed support for federal regulatory measures on HFCs.

Consultations following the publication of the proposed Amendments in the Canada Gazette, Part I

The publication of the proposed Amendments in CG-I on November 26, 2016, initiated a 75-day comment period where interested parties were invited to submit their written comments. The proposed Amendments were posted on the Department’s CEPA Environmental Registry website to make them broadly available to interested parties. The Department also distributed an email to interested parties to inform them of the formal consultation process. In addition, following the adoption of the Kigali Amendment, the Department communicated with stakeholders and indicated its intent to revise the baseline calculation and phase-down schedule in the proposed Amendments to align them with those adopted in the Kigali Amendment. The Department invited stakeholders to provide comments in this regard. During the comment period, the Department held multiple meetings with individual stakeholders to answer questions regarding the proposed Amendments to discuss the comments. The Department received over 30 written submissions from a range of stakeholders, including from chemical manufacturers, products and systems manufacturers, and industry associations.

Comments received during the public comment period expressed general support for the Amendments. Stakeholders believe that a phase-down component aligned with the Kigali Amendment will allow market forces to determine the lowest cost to achieve the required reductions of HFCs.

Environmental non-governmental organizations welcomed the phase-down and more comprehensive measures to control HFCs. Other stakeholders expressed a strong interest in a more flexible approach that is more in line with the approach used to phase out CFCs and HCFCs. That approach included both a phase-down of consumption in bulk and product-specific prohibitions, similar to the Amendments.

Feedback was received regarding the assumptions and cost estimates in the “Costs and Benefits” section of the Regulatory Impact Analysis Statement (RIAS). In response to this feedback, the Department consulted with industry stakeholders to ensure a clear understanding of the appropriate parameters to be used in the analysis. Updates and clarifications on information related to HFC alternatives, such as their availability and cost, are included in the final version of the RIAS in response to stakeholder concerns.

Some industry stakeholders did request changes to elements of the proposed Amendments to increase alignment with the measures in the U.S., to address unique Canadian considerations, or to modify the regulatory text for improved clarity concerning definitions or other administrative provisions. As well, some industry stakeholders requested clarifications regarding the regulatory text and its applicability.

The Department has addressed most of these comments and concerns by providing detailed explanations to stakeholders or by making modifications to the regulatory text. The following paragraphs summarize the major issues raised by interested parties with respect to the proposed Amendments and the Department’s consideration of these issues in the development of the Amendments.

Comments and responses related to the regulatory requirements

Technical and economic barriers to adopting alternatives

Comment: Some stakeholders indicated that product-specific controls are not warranted at this time due to uncertainty surrounding choice and availability of alternatives, as well as the timing of changes to standards for flammable refrigerants. More specifically, one stakeholder raised concerns that certain alternative refrigerants are not widely available and accessible at competitive prices since patents currently protect many of these substances.

Response: To address stakeholders’ concerns, the Department has modified certain GWP limits that allow for the use of a broader range of refrigerants. The Amendments allow for exemptions to be granted for a period of up to thirty-six months if feasible alternatives are unavailable, which can be renewed. However, the Department disagrees that alternative substances will not be available to meet the regulatory requirements, as written.

Comment: Stakeholders expressed concerns regarding the premature implementation of certain lower GWP alternatives which are likely to require the use of substances with a certain flammability classification (ASHRAE 2L). Debates in the industry continue around the precise limits and if HFC-32, a leading alternative to R-410A, should be reclassified (ASHRAE 2). While these issues will ultimately be resolved, they will likely take several years.

Response: The Department designed the product-specific controls with this issue in mind. As an example, domestic air-conditioning is not covered by these controls, as there is uncertainty surrounding suitable alternatives. Although the bulk phase-down will impact all manufacturers of HFC-containing products, the timelines of this phase-down provide adequate time for necessary changes to safety standards and development of new alternatives.

Comment: One stakeholder expressed concerns regarding the transition to certain HFO/HFC blend refrigerants. The stakeholder indicated that existing equipment cannot directly switch to these alternative refrigerants due to mechanical or chemical compatibility issues. The replacement of existing refrigerants with these alternatives could reduce the efficiency of certain equipment currently in operation and could force their replacement to remain compliant with energy efficiency requirements.

Response: The Amendments do not require existing equipment to transition to lower GWP refrigerants. The product-specific controls only require the manufacturing of new equipment to be used with alternative refrigerants. Although some existing systems may be impacted by the bulk phase-down, it is expected that only systems where it is feasible to transition to these alternatives will do so.

Comments: One stakeholder commented that the chemical composition of R-450A and R-448A could change during a leak as the individual gases in those mixtures may escape at different rates. This could negatively affect equipment performance.

Response: The Department does not agree that this is a concern unique to low GWP alternatives. The changing chemical composition of mixtures during leaks is not specific to mixtures that are alternatives to high-GWP HFCs. Industry has been dealing with this issue in existing mixtures.

Product-specific controls in the foam sector

Comment: One stakeholder requested increasing the GWP limit for foam products to 600 to allow for an emerging blend to be used in the future. Concerns were raised regarding the availability of alternative blowing agents for certain product types. Additionally, some stakeholders requested a later prohibition date.

Response: The Department believes necessary quantities of alternative blowing agents will be available to allow manufacturers to comply with the Amendments. Thus, the GWP limit has been maintained at 150 for foam products with a prohibition date for all foam products set at January 1, 2021. However, the Amendments provide for an exception should the transition not be feasible in some sub-sectors or various applications. A permit could be issued to allow for the import and manufacture of products with an HFC with a GWP above the limit should it be demonstrated that the criteria established in the regulations are met. Such a permit could be issued for a period up to 36 months, and there is no limit on the number of items one may apply for a permit.

Product-specific controls in the refrigeration and air-conditioning sector

Comment: Stakeholders requested an increase of the GWP limit for commercial stand-alone medium temperature refrigeration systems to allow for the use of R-448A and R-449A & R-449B. One stakeholder indicated that these refrigerants have not been approved for these systems by the United States Environmental Protection Agency (U.S. EPA) and the Significant New Alternative Policy (SNAP) Program. However, industry is actively pursuing their approval under the SNAP Program.

Response: The Department has taken stakeholders’ feedback into consideration and has raised the GWP limit to 1 400 for commercial stand-alone medium temperature refrigeration systems. This is due to R-448A and R-449A & B offering an alternative to the high-GWP refrigerants R-404A in specific equipment.

Comment: Certain stakeholders requested an earlier prohibition date of 2020 or 2021 for residential refrigeration on the basis that most of the world has already transitioned to low-GWP refrigerants. The availability of HFO-1234yf will simplify the transition.

Response: The Department will maintain the 2025 prohibition date. This timeline is designed to take into account the time required to revise the standards in Canada and the U.S. to allow a maximum charge size of 150 grams for A3 refrigerants in residential refrigeration systems. This will also allow for the harmonization with the maximum charge size allowed in Europe and Asia.

Comment: Stakeholders have raised concerns regarding the GWP limits and prohibition dates for centralized refrigeration systems. A number of stakeholders requested that the GWP limit be raised to allow the use of R-407A, R-407C and R-407F. These refrigerants existed for years and are proven alternatives to R-404A. These stakeholders also indicated that an increased GWP limit would allow harmonization with the U.S. EPA SNAP rules. Other stakeholders supported the GWP limit but requested a later prohibition date of 2021 or 2025 to provide additional transitional time.

Response: The Department has taken stakeholders’ feedback into consideration and has raised the GWP limit for centralized refrigeration systems to 2 200. The modification was implemented to allow the use of R-407 refrigerants and to improve harmonization with the SNAP rules in the U.S. As it is expected that transitioning to R-407 refrigerants will be straight-forward, the prohibition date remains unchanged at January 1, 2020.

Comment: Stakeholders agreed with the GWP limit proposed for chillers but suggested earlier prohibition dates. Additionally, one stakeholder proposed lower GWP limits for certain types of chillers.

Response: The Department has maintained the prohibition date of January 1, 2025 with a GWP limit of 750 for all chillers to allow for a range of alternatives to be used in the various types of chillers. The Amendments already contain a provision to allow exceptions to the prohibition. These exceptions can be exercised when there is a lack of technically or economically feasible alternatives and when products are deemed necessary for the health and safety or the good functioning of society.

Definitions

Comment: Stakeholders requested that the HFC propellant in the pressurized container be the target of the GWP limit and not the whole product.

Response: The Department has taken stakeholders’ feedback into consideration and has modified the Amendments to target HFC propellants in the pressurized container, not the whole product. Furthermore, targeting the propellant aligns with the measures taken by the U.S. EPA under their SNAP Program to prohibit the use of certain HFCs as propellants in aerosol products.

Comment: Stakeholders requested clarifying the definitions for centralized refrigeration systems and condensing units. A stakeholder recommended that centralized refrigeration systems and condensing units be combined into one category and that both systems be subject to the same GWP limit of 1 500. The stakeholder suggested that the combined category be defined as “refrigeration system operating with one or more compressor(s) installed in a separate machinery room, with a refrigerant that circulates from the machinery room to the refrigerated area and designed to maintain an internal temperature ≥ -50°C.”

Response: The Department has taken stakeholders’ feedback into consideration and has revised the definitions of centralized refrigeration systems and condensing units based on the suggestions received. Centralized refrigeration systems and condensing units remain as separate categories taking into account their different and distinct features.

Comment: A number of suggestions were made to improve the definition of chiller, from removing “air conditioning” to suggesting the following alternative definition: “a system that has a compressor, an evaporator and a secondary coolant, other than an absorption chiller.”

Response: The Department agrees and has revised the definition of chillers as suggested.

Comment: Stakeholders requested clarification on the definition of foam products and the categorization of foam products. Some suggested simplifying the categories to avoid confusion.

Response: The Department has taken stakeholders’ feedback into consideration and the Amendments have been modified to only include one category of foam products. This category includes both “plastic foam” and “rigid foam products”, which are terms already defined in the Regulations. This approach will simplify the Amendments and avoid confusion regarding the categorization of products.

Comment: A stakeholder recommended that product categories be reduced to minimize confusion due to the overlap in categories. Stakeholders suggested contacting companies affected by this issue for recommendations regarding the best way to approach such categories.

Response: The Department has taken stakeholders’ feedback into consideration and has modified certain definitions for the refrigeration and air-conditioning sectors, based on stakeholders’ recommendations. Furthermore, the foam categories have been combined into one category to avoid confusion.

Requests for exemptions from product-specific controls

Comment: One stakeholder requested an exemption from the prohibition to manufacture or import foam products for military applications.

Response: The Department has taken stakeholders’ feedback into consideration and the Amendments have been modified to include an exception for military, space or aeronautical applications from the foam products controls.

Comment: Stakeholders requested that the exemptions provided for the pressurized containers align with the exemptions provided by the U.S. EPA under their SNAP Program.

Response: The Department has taken stakeholders’ feedback into consideration and the Amendments have been modified to align the exceptions to the prohibition on pressurized containers with the exemptions under the U.S. EPA SNAP rule.

Comment: One stakeholder requested an exemption be provided to allow for the manufacture and import of vehicles with HFC air-conditioning systems destined for the export market. The stakeholder indicated that the Department has already agreed to this exemption during the consultations.

Response: The Department confirms that it has agreed to this exemption during the consultations. Therefore, the Amendments have been modified to include an exemption for the manufacture and import of vehicles with HFC air-conditioning systems destined for the export market.

Bulk HFC phase-down requirements

Comment: One stakeholder requested that the Department consider allowing for the production of low-GWP HFCs for use beyond feedstock.

Response: The Department maintains its position. Under the Amendments, no future production of HFCs is allowed. Historically, there has not been any HFC production in Canada and thus, compliance with the Kigali Amendment requires HFC production to be capped at zero.

Comment: One stakeholder requested that the Department adopt a phase-down schedule that reduces quantities of HFC every two years rather than following the schedule adopted in the Kigali Amendment to the Montreal Protocol.

Response: The baseline calculation and the phase-down schedule in the Amendments have been aligned with those adopted in the Kigali Amendment. Alignment with the Kigali Amendment will ensure a global level playing field.

Distribution of consumption allowances

Comment: Stakeholders requested that the Department consider adding a new entrants provision for the allowance system while others requested that producers and importers that have participated in the Canadian market in the past are best placed to receive allowances and enable/support the phase-down of HFCs.

Response: The Department received a broad range of comments on the distribution of allowances. It was felt that distributing the allowances to those companies that imported HFCs in 2014 and 2015 provides an opportunity for companies that entered the market later to introduce alternatives to HFCs. This approach provides a balance between issuing the allowances to only historic importers, and having a new entrants provision.

Comment: Stakeholders requested that the Department consider a two-sector approach to distributing allowances. This means that a percentage of the total quantity distributed should go to the cooling sector and the remaining quantity will be distributed to all other uses. Furthermore, transfers of allowances between the two sectors should be prohibited. Stakeholders indicated that this system was used effectively for the phase-out of HCFCs.

Response: The Department believes that, at this stage, it is necessary to allow free market access to the consumption allowances. This is necessary to establish a clear pattern of HFC use in Canada under restricted access. In the future, the Department may consider distributing consumption allowances into two sectors and restricting the transfer of the allowances into the other sector.

Comment: One stakeholder requested that the Department allow access to any unassigned consumption allowances.

Response: Canada’s total allowable consumption will be distributed under the allowance provisions in the Amendments, and therefore there will not be any unassigned consumption allowances. In the future, the Department may consider a provision to allow access to consumption allowances that have been permanently retired.

Comments and responses related to the methodology for assessing costs and benefits

Accuracy of substance and capital cost inputs

Comment: Industry stakeholders requested adjustments to the cost analysis to reflect more accurate cost estimates for alternatives and incremental capital costs of converting refrigeration systems. Stakeholders recommended contacting interested parties to thoroughly survey assumptions on prices and costs.

Response: The Department has worked with stakeholders to develop a comprehensive understanding of the costs and prices of alternatives and the potential capital costs that will be incurred by affected parties. During and subsequent to the CG-I consultation period, stakeholders were contacted to provide feedback regarding the assumptions made in the cost analysis. In this regard, the cost analysis has been adjusted to incorporate stakeholders’ feedback and reflect more realistic assumptions and estimates.

Assumed alternative refrigerants in centralized refrigeration systems

Comment: Feedback from stakeholders indicated that only large supermarkets in colder locations will convert their centralized refrigeration systems to transcritical CO₂ systems.

Response: Assumptions regarding the conversion volume of centralized refrigeration systems have been modified to reflect up-to-date information, as well as feedback provided by stakeholders during the CG-I consultation period. The modified analysis now estimates that only the largest supermarkets will convert to transcritical CO₂ over the time frame of the analysis in reaction to reduced supply of HFCs due to the bulk phase-down. Furthermore, it is now assumed that most supermarkets will switch to R-407A to comply with the product-specific controls, and HFO-HFC blends in reaction to reduced supply of HFCs.

Assumed alternative blowing agent in XPS foam

Comment: Stakeholders requested clarifications regarding the assumption that all XPS foam manufacturers are converting to hydrocarbons. Stakeholders stated that not all XPS foam manufacturing will transition to hydrocarbons as there are other alternatives available.

Response: Feedback received from stakeholders expressed uncertainty regarding specific blowing agents likely to be chosen by XPS manufacturers. To reflect stakeholders concerns and feedback, the analysis assumes production will transition to HFO-1234ze to reflect an upper bound on blowing agent costs to be incurred by these manufacturers.

Misinterpretation of modelled alternatives as recommended alternatives

Comment: Multiple stakeholders raised concerns regarding the mention of alternatives that have not been fully tested, have not been discussed with industry members, and are not widely accessible at competitive prices. Furthermore, stakeholders requested increasing the list of alternatives mentioned in the RIAS and recommended the inclusion of specific products. This is due to concerns that the mention of specific alternatives might be misunderstood as endorsements of specific products or as the only viable alternatives.

Response: In order to transparently assess the costs and benefits, various alternatives are assumed to be adopted to comply with the Amendments. These alternatives were chosen based on technical feasibility, safety, and economic feasibility. The alternatives assumed are only used for modelling purposes to conduct the cost and benefit analysis. They are neither the only alternative available nor are they the ideal alternative in all circumstances. The choice of alternatives for the analysis is not an endorsement by the Department of a specific substance. The Department has taken stakeholders’ feedback into consideration and has modified the text to clearly indicate that any mention of alternatives is only meant for the purposes of estimating costs and benefits.

Calculation of MVAC costs on per vehicle basis

Comment: Some stakeholders noted inconsistencies in the volumes used for calculating total costs and savings. For example, most applications in Table 5 use current annual consumption values to calculate the cost differences when moving to alternatives, while MVAC costs are calculated on a per vehicle basis.

Response: Due to available sources of cost estimates for the MVAC sector, costs are calculated on a per vehicle basis. When estimating the cost difference associated with transitioning to alternatives, volumes used for calculating the costs and savings were converted to the vehicle equivalent assuming 0.77 kg per vehicle. The Department has maintained the proposed CG-I estimates of the volumes used for calculating total costs in the MVAC sector.

MVAC reductions attributable to the Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emissions Regulations

Comment: A stakeholder requested that the estimates of costs and benefits be amended to take into consideration the costs of the current transition away from HFCs incurred by the MVAC sector attributable to the Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emissions Regulations.

Response: The Department recognizes HFC emission reductions from the MVAC sector resulting from the Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations. These emission reductions have been included in the calculations of the baseline scenario used in the cost and benefit analysis of the Amendments. This approach was applied to provide accurate and transparent estimates that ensure emission reductions attributed under other regulations are not credited to the Amendments.

VOC emissions from foam blowing industry

Comment: One stakeholder indicated that the impacts of VOC emissions in the foam sector will be more significant than the refrigeration sector. Through the use of hydrocarbons as foam expansion aids, VOCs will be highly emissive, produced in large quantities, and the resulting health impacts will not be negligible.

Response: The Department recognizes emissions of VOCs can affect air quality leading to health and environmental impacts. However, after consulting with stakeholders it’s no longer expected that hydrocarbons will be used in the foam sector. Therefore, the magnitude of the VOC emissions anticipated as a result of the Amendments is small enough to reasonably expect any resulting health impacts to be negligible.

Regulatory cooperation

At the October 2016 Meeting of the Parties to the Montreal Protocol in Kigali, Rwanda, the Parties adopted the Kigali Amendment to the Montreal Protocol that will require the phase-down of HFC consumption and production. It is anticipated that at least 20 parties to the Montreal Protocol will ratify the Kigali Amendment, allowing it to enter into force by January 1, 2019 (the earliest date possible). (see footnote 39) A domestic approach to regulating HFCs that includes a phase-down component was chosen, in part to put in place the domestic framework to ensure compliance with a global phase-down under the Montreal Protocol, which allows Canada to ratify the Kigali Amendment. The Amendments are also consistent with Canada’s commitments under the Pan-Canadian Framework on Clean Growth and Climate Change, in which Canada resolved to implement its commitment under the Paris Agreement, to take action to reduce HFC use and emissions.

The Amendments include product-specific controls similar to those in the U.S. EPA’s SNAP program. For these product-specific controls, the Canadian approach does not prescribe the specific HFCs prohibited or the alternatives allowed in each of the equipment and product types. Instead, the Amendments establish Global Warming Potential limits for a variety of products, and provide stakeholders flexibility on how best to comply. This approach was designed to allow for the same alternatives to be used in both Canada and the United States as well as prohibit the same HFCs, and will prevent the introduction of high Global Warming Potential substitutes from being used. The timing of the introduction of product-specific HFC controls was designed to align with the timing of enacted measures in the U.S. to the extent possible. These approaches are based on consultation with industry regarding the availability of technologies and the implementation challenges.

The U.S. Court of Appeals ruled on August 8, 2017, that the EPA’s SNAP rules pertaining to HFCs exceeded its statutory authority as written under the Clean Air Act. This decision is subject to challenge, and, therefore, the future of these rules is uncertain. In spite of this uncertainty, product-specific controls on HFCs in Canada are warranted and necessary to achieve meaningful GHG emission reductions in a cost-effective manner, in line with Canada’s domestic and international commitments. In the event that the U.S. does not have product-specific controls in place, it is not anticipated that the competitiveness of Canadian industry would be unduly affected, as imported products will also need to comply with the Amendments and most affected goods manufactured in Canada are destined for Canadian customers. Additionally, many companies operating in both Canada and the U.S. have already begun to transition away from HFCs in anticipation of product specific controls as well as a future phase-down of bulk HFCs. Therefore, Canadian consumers are not expected to be faced with diminished product availability if the U.S. does not have similar product-specific controls in place.

Additionally, the Amendments are similar to regulatory controls implemented in the European Union and Japan, and the approach being considered by Australia, which include both a phase-down of HFCs and product-specific controls.

Rationale

GHG emissions, including HFCs and CO₂, are contributing to a global warming trend that is associated with climate change. HFCs have Global Warming Potentials hundreds to thousands of times greater than those of CO₂. HFC emissions are projected to increase at a faster rate than economic growth due to increased use, as they replace HCFCs that have been phased out under the Montreal Protocol. Without immediate action, annual HFC emissions in Canada are projected to increase from 9 Mt of CO₂e emissions per year in 2014 to 19 Mt per year in 2030, underlining the significant contribution of HFCs to global warming. (see footnote 40)

Global action to reduce HFC emissions can prevent up to 0.5°C of global warming due to the high Global Warming Potential of these chemicals. (see footnote 41) In October 2016, Parties to the Montreal Protocol, including Canada, adopted the Kigali Amendment to phase-down HFC consumption and production. As a result of the Amendments, manufacturers of products containing HFCs will adopt alternative substances with lower Global Warming Potentials and ensure that consumption of HFCs (in CO₂e) is reduced by 85% from an established baseline level by 2036. By introducing a phase-down of HFCs in Canada, the Amendments will allow Canada to ratify and meet its obligations under the Kigali Amendment, which could enter into force on January 1, 2019. (see footnote 42)

The Amendments implement both a phase-down of bulk HFC imports and controls on specific products containing or designed to contain HFCs. This approach was used successfully to phase out ozone-depleting substances, such as CFCs and HCFCs. The preceding analysis estimates that the Amendments will lead to a 168 Mt reduction in CO₂e emissions from 2018–2040, including a 7 Mt reduction in 2030. The Amendments will therefore contribute to Canada’s international commitments made under the Paris Agreement relating to GHG emission reductions, while contributing to the mitigation of the effects of long-term climate change by reducing GHG emissions from HFCs in Canada.

Further, the Amendments support an important pillar of the Pan-Canadian Framework on Clean Growth and Climate Change by reducing GHG emissions in a complementary fashion to the Government of Canada’s commitments to implement economy-wide carbon pricing. As carbon pricing cannot be applied to all emissions, coverage gaps will exist without additional policy measures. In this regard, the Amendments constitute a complementary policy to carbon pricing that contributes to GHG emission reductions in a cost-effective manner.

Consultations with stakeholders, including industry, provincial and territorial governments, and environmental non-governmental organizations confirmed support for this approach. There is a broad consensus among these stakeholders that reducing HFC emissions is necessary to curb future climate change impacts, while allowing Canada to meet its international commitments.

Between 2018 and 2040, the Amendments are expected to result in cumulative GHG emission reductions from HFCs of 168 Mt CO₂e. Based on the social cost of carbon, the benefits of these GHG reductions are valued at about $6.2 billion. There are compliance costs incurred by industry of about $2.2 billion, in addition to related cost savings of almost $48 million. The net benefits of the Amendments are estimated to be about $4 billion.

Strategic environmental assessment

The Amendments have been developed under the Pan-Canadian Framework on Clean Growth and Climate Change. A strategic environmental assessment (SEA) was completed for this framework in 2016. The SEA concluded that proposals under the framework will reduce GHG emissions and are in line with the 2016–2019 Federal Sustainable Development Strategy.

Implementation, enforcement and service standards

The Amendments will come into force six months following the date on which they are published in the Canada Gazette, Part II. The Amendments will be made under CEPA, so enforcement officers will, when verifying compliance, apply the Compliance and Enforcement Policy for CEPA. (see footnote 43)

The compliance promotion approach for the Amendments will be similar to that taken for the Regulations, which includes developing compliance promotion material to explain provisions of the Regulations, maintaining a presence on the Department’s website and responding to inquiries from stakeholders. Furthermore, the Department will undertake outreach activities to raise stakeholder awareness of the new regulatory requirements.

The service standards relating to the issuance of permits for the import, export, manufacture and certain uses of ozone-depleting substances and HFCs under the Regulations will continue to apply to the issuance of permits for the import of HFCs under the Amendments, when permits are issued. The service standards for permits have been in place since April 1, 2014. (see footnote 44) Once the Department receives all of the information that is required for a permit to be approved, the permit is issued within 10 working days. This standard will be maintained for the issuance of permits under the Amendments.

Performance measurement and evaluation

The Amendments will be evaluated within the existing domestic performance measurement framework of the Ozone-depleting Substances and Halocarbon Alternatives Regulations. Specific outcomes (immediate, intermediate, and final) have been developed as part of the implementation strategy for the Regulations. The expected immediate outcome is awareness by the regulatees of their obligations under the Amendments. Expected intermediate outcomes of the Regulations include the phase down of HFC consumption, and compliance by regulatees with the regulatory requirements. The expected final outcome is the reduction of GHG and SLCP emissions.

Quantitative indicators and targets, where applicable, have been defined for each outcome and will be tracked annually through reporting requirements and enforcement activities. For bulk importers of HFCs, these performance indicators include annual reporting of bulk HFC import quantities to the Department.

The performance of the Regulations will be evaluated according to the program evaluation plan annually. Regular review and evaluation of these performance indicators will allow the Department to detail the impacts of the Amendments on regulated parties, and to evaluate the performance of the Amendments in reaching the intended targets.

Contacts

Nathalie Morin
Director
Chemical Production Division
Department of the Environment
351 Saint-Joseph Boulevard, 19th Floor
Gatineau, Quebec
K1A 0H3
Email: ec.gestionhalocarbures-halocarbonsmanagement.ec@canada.ca

Matthew Watkinson
Director
Regulatory Analysis and Valuation Division
Department of the Environment
200 Sacré-Cœur Boulevard
Gatineau, Quebec
K1A 0H3
Email: ec.DARV.RAVD.ec@canada.ca

Footnote a
S.C. 2004, c. 15, s. 31
Footnote b
S.C. 1999, c. 33
Footnote c
S.C. 2015, c. 3, par. 172(d)
Footnote d
S.C. 1999, c. 33
Footnote 1
SOR/2016-137
Footnote 2
For the purposes of the Amendments, consumption is defined as the sum of substances imported plus substances manufactured minus substances exported.
Footnote 3
The Department of the Environment’s National Inventory Report estimates emissions from HFCs based on studies commissioned by the Department, consistent with the Intergovernmental Panel on Climate Change (IPCC) guidelines. See “Benefits and Costs” section for more details. The 2017 submission to the United Nations Framework Convention on Climate Change can be found at https://www.ec.gc.ca/ges-ghg/default.asp?lang=En&n=83A34A7A-1.
Footnote 4
IPCC, Fourth Assessment Report: Climate Change 2007 (AR4). Available at http://www.ipcc.ch/publications_and_data/ar4/syr/en/contents.html.
Footnote 5
Environment and Climate Change Canada, Facts on Climate Change: http://www.climatechange.gc.ca/default.asp?lang=En&n=F2DB1FBE-1.
Footnote 6
See the Canada Gazette, Part II, June 29, 2016. Available at http://www.gazette.gc.ca/rp-pr/p2/2016/2016-06-29/pdf/g2-15013.pdf.
Footnote 7
Notice of intent to regulate hydrofluorocarbons published by the Department of the Environment on December 6, 2014, in Part I of the Canada Gazette: http://www.gazette.gc.ca/rp-pr/p1/2014/2014-12-06/html/notice-avis-eng.php.
Footnote 8
Canada’s Intended Nationally Determined Contribution (INDC) submission to the UNFCCC (2015): http://www4.unfccc.int/submissions/INDC/Published%20Documents/Canada/1/INDC%20-%20Canada%20-%20English.pdf.
Footnote 9
Canada’s 2016 greenhouse gas emissions Reference Case: https://www.ec.gc.ca/GES-GHG/default.asp?lang=En&n=1F24D9EE-1.
Footnote 10
Pan-Canadian Framework on Clean Growth and Climate Change: https://www.canada.ca/en/services/environment/weather/climatechange/pan-canadian-framework.html.
Footnote 11
Regulations Designating Regulatory Provisions for Purposes of Enforcement (Canadian Environmental Protection Act, 1999), Canada Gazette, Part I. Available at https://www.ec.gc.ca/lcpe-cepa/eng/regulations/detailReg.cfm?intReg=206.
Footnote 12
Although the Ozone-depleting Substances and Halocarbon Alternatives Regulations use the term exception, the Ozone-Depleting Substances Regulations, 1998 refers to such exceptions as exemptions.
Footnote 13
The current U. S. approach under the SNAP Program is the subject of a court decision: Mexichem Fluor, Inc. v. Environmental Protection Agency, a decision of the United States Court of Appeals for the District of Columbia Circuit, August 8, 2017. This decision is subject to appeal.
Footnote 14
TBS Canadian Cost-Benefit Analysis Guide can be found at http://www.tbs-sct.gc.ca/rtrap-parfa/analys/analystb-eng.asp.
Footnote 15
The exchange rate used is 1.00 USD = 1.33 CAD.
Footnote 16
A blowing agent is used in foam manufacturing to produce a cellular structure in the foam product.
Footnote 17
If a sub-sector is affected by the phase-down prior to the implementation of product-specific controls, it is assumed some production will transition to the product-specific control alternative early.
Footnote 18
Establishments with more than 100 employees were assumed in this category: https://www.ic.gc.ca/app/scr/app/cis/businesses-entreprises/44511.
Footnote 19
UNEP Report of the Technology and Economic Assessment Panel May 2017 – Progress Report (Volume 1): http://conf.montreal-protocol.org/meeting/oewg/oewg-39/presession/Background-Documents/TEAP-Progress-Report-May2017.pdf.
Footnote 20
Global warming potential is a relative measure of how much heat a greenhouse gas traps in the atmosphere relative to carbon dioxide (whose global warming potential is standardized to 1). A global warming potential is presented over a specific time interval, in this case 100 years, and represents the total energy absorbed over the interval relative to carbon dioxide. U.S. EPA, Understanding Global Warming Potentials: https://www.epa.gov/ghgemissions/understanding-global-warming-potentials.
Footnote 21
The Department of the Environment’s National Inventory Report 1990–2014 provides an inventory of historical GHG emissions in Canada: http://www.publications.gc.ca/site/eng/9.506002/publication.html.
Footnote 22
Canada’s 2016 Greenhouse Gas Emissions Reference Case provides an estimate of future GHG emissions in Canada: https://www.ec.gc.ca/indicateurs-indicators/default.asp?lang=en&n=CCED3397-1.
Footnote 23
Note that SCC estimates are rounded and converted to 2016 dollars for the analysis. Further information regarding the social cost of carbon can be found in the Technical Update to Environment and Climate Change Canada’s Social Cost of Greenhouse Gas Estimates at http://www.ec.gc.ca/cc/default.asp?lang=En&n=BE705779-1.
Footnote 24
Technical Update to Environment and Climate Change Canada’s Social Cost of Greenhouse Gas Estimates.
Footnote 25
Canada’s 2016 Greenhouse Gas Emissions Reference Case.
Footnote 26
This analysis does not attribute reductions in HFCs from imported products to the Amendments. Therefore, this estimate of future HFC emissions is higher than that which will occur when accounting for emissions from imported products.
Footnote 27
Unless stated otherwise.
Footnote 28
The analysis assumes an average refrigerant charge of 0.77 kg per vehicle.
Footnote 29
Due to uncertainty around the most likely alternative, a generic HFO substance has been assumed for the purposes of analysis.
Footnote 30
Assessment of the Potential Impact of Hydrocarbon Refrigerants on Ground Level Ozone Concentrations, February 2014, and Follow-on Assessment of the Potential Impact of Hydrocarbon Refrigerants on Ground Level Ozone Concentrations, March 2016: https://www.regulations.gov/document?D=EPA-HQ-OAR-2015-0663-0030.
Footnote 31
European Union, “Climate-friendly alternatives to HFCs and HCFCs”: http://ec.europa.eu/clima/policies/f-gas/alternatives/index_en.htm.
Footnote 32
Low-GWP Alternatives in Commercial Refrigeration: Propane, CO2 and HFO Case Studies: http://www.ccacoalition.org/en/resources/low-Global Warming Potential-alternatives-commercial-refrigeration-propane-co2-and-hfo-case-studies.
Footnote 33
Canada’s Mid-Century Long-Term Low-Greenhouse Gas Development Strategy: http://unfccc.int/files/focus/long-term_strategies/application/pdf/canadas_mid-century_long-term_strategy.pdf.
Footnote 34
Statistics Canada: Manufacturers’ sales, inventories, orders and inventory to sales ratios, by North American Industry Classification System (NAICS), Table 304-0014. Supermarket sales data: Statistics Canada: Retail trade, sales by the North American Industry Classification System (NAICS), Table 080-0020. Aerosols sales data was compiled using company level data from Hoover’s: http://www.hoovers.com/.
Footnote 35
Innovation, Science, and Economic Development Canada, Trade Data Online: https://www.ic.gc.ca/app/scr/tdst/tdo/crtr.html?&productType=HS6&lang=eng.
Footnote 36
The United States, European Union and Japan have restrictions in place on products that contain HFCs. The U.S. Court of Appeals ruled on August 8, 2017, that the EPA’s SNAP rules pertaining to HFCs exceeded its statutory authority. This decision is subject to challenge, and the future of these rules is therefore uncertain.
Footnote 37
The limitations of this approach are addressed in more detail in the Technical Update to Environment and Climate Change Canada’s Social Cost of Greenhouse Gas Estimates.
Footnote 38
As per the Red Tape Reduction Regulations, these values are calculated using a 10-year time frame, discounted at 7% in 2012 dollars. The non-rounded decrease in administrative costs was estimated at $1,095, or $58 per importer. The wage rate was assumed to be around $45 per hour in all cost calculations (weighted hourly average).
Footnote 39
One hundred and ninety-seven parties, many of which are significant trading partners with Canada, agreed to the phase-down of HFCs under the Kigali Amendment.
Footnote 40
Canada’s 2016 greenhouse gas emissions Reference Case
Footnote 41
Frequently asked questions related to the Kigali Amendment to the Montreal Protocol: https://ec.europa.eu/clima/sites/clima/files/faq_kigali_amendment_en.pdf.
Footnote 42
The Kigali Amendment will enter into force on January 1, 2019, provided that it is ratified by at least 20 Parties, or 90 days after ratification by the 20th party, whichever is later).
Footnote 43
The Department’s Compliance and Enforcement Policy is available at www.ec.gc.ca/alef-ewe/default.asp?lang=en&n=AF0C5063-1.
Footnote 44
Environment and Climate Change Canada, Service Standards and Performance Targets for permits issued under the Ozone-depleting Substances and Halocarbon Alternatives Regulations: http://www.ec.gc.ca/default.asp?lang=En&n=2019647B-1.