Could Brexit disrupt HFC phase down?26th July 2016
UK: Concerns have been raised regarding the phase-down of HFC refrigerants following the UK’s decision to quit the European Union.
The F-gas regulation has been adopted into UK law and therefore, without a change to that law, the provisions in it will still apply to the UK even after Brexit. The European HFC phase-down, however, is based on a reducing refrigerant volume quota system imposed on EU member states and based on HFCs placed on the EU market.
Refcom, the BESA subsidiary and government appointed body operating the UK’s F-gas certification scheme observed: “For purposes of the phase down, the amount of HFC refrigerant is calculated on CO2 equivalent global warming impact and the restrictions only apply to the EU market. So, if the UK is no longer in that market, the target would no longer apply.”
It would also have a wider potential impact. “There would also be a potential impact on the EU market itself as it would be smaller due to the departure of the UK and, therefore, the amount of refrigerant allowed would be proportionately larger for each remaining member. This would, in theory, allow EU members to lengthen the phase down process,” Refcom said.
“There is unlikely to be any immediate impact,” commented BESA senior mechanical engineer Graeme Fox. “It is more a case of watch this space. However, this is potentially significant and we will be seeking an early indication from the government how it intends to play this.”
The UK is currently tied into a programme that sees a reduction this year to 93% of the amount of HFCs that were placed on the market in 2015 falling steeply to just 63% of the 2014 figure by the end of 2017. By that time the UK’s departure from the EU should be well advanced prompting some observers to question what will happen then. Will the UK be excluded from the quota system?
“However, until Article 50 of the Lisbon Treaty is triggered, formally signalling the UK’s intention to leave, nothing changes,” Graeme Fox pointed out.
Of more immediate concern could be the impact on the price of HFC refrigerants, which will start to rise quite rapidly as the market anticipates the changes. As production of HFCs falls in line with the phase down, so the price will rise and a devalued pound will add further cost pressures on imported refrigerant supplies.
“Ultimately, the market will drive this,” said Mr Fox. “The UK may decide to impose its own phase down schedule as part of the Brexit process, but any attempt to put the brakes on would be an abdication of its environmental responsibility to tackle global warming.”
No immediate change
Many market observers are reticent to speculate at such an early stage.
Murli Sukhwani, regional business and market manager at Chemours Fluorochemicals, said that his company was committed to supporting the UK market in meeting its climate change goals, adding: “Chemours does not expect any immediate or future changes in compliance with the EU F-gas regulation and EU MAC Directive as a result.
“It is our view that the UK has always been a leader in climate action among western countries and there is broad societal and industrial consensus about the fight against climate change,” he added. “It is our understanding that even outside the EU, the UK would still be subject to international conventions such as the recent Paris agreement, which imposes obligations for which they will need appropriate regulations including those inherited from the EU legal system. Multiple regulatory options could be considered including participating in the regulations as they stand or developing very similar regulations for the UK.”
John Ormerod, managing director of refrigerant supplier A-Gas, was another who envisaged no changes to the F-gas regulation, unless there were moves to repeal it.
“I personally can’t see that happening as it would be a retrograde step from an environmental perspective,” he said. “Also, with the moves afoot to incorporate an HFC phase-out/phase-down under the Montreal Protocol, this is the direction the world is moving in, so I can’t see the UK swimming against the tide.”
However, like others, he was unsure exactly how the quota mechanism would be managed under a Brexit scenario.
“The difficulty here is that the quotas were allocated on the basis of the single market, ie there is no UK-specific quota,” he observed. “This will be the tricky bit to unravel, because for the UK market to function, some sort of quota allowance will need to be established specifically for the UK market. Whether this is some proportion of the overall EU allowance, or via some other mechanism is anybody’s guess.”
But while the phase down and volatility of the sterling exchange rates were likely to see increasing refrigerant costs, John Ormerod said he did not foresee specific problems in the supply chain arising from the referendum outcome.
“Our supply chain is protected by supply contracts and our own sources of reclaimed refrigerant place us in a good position to continue to meet our clients’ requirements,” he said.
Another industry watcher, who chose to remain nameless, maintained that much will depend on how UK decides to work with EU. If the UK pursues the Norwegian model nothing would change but if not then the EU would have to re-calculate its targets/baselines. Allowing anything “extra” for the other EU members would be unlikely.