The EU Quota System How it works and

The EU Quota System – How it works and why you need to switch Arno Kaschl DG CLIMA – European Commission Dublin, 4 December 2017

Rationale Gas GWP Fgas Emissions 1990 – 2015 (EU) (AR 4, 100 year) CO 2 Methane Nitrous Oxide 1 25 298 HFC 134 a 1 430 HFC 404 A 3 922 HFC 410 A 2 088 HFC 125 3 500 PFC 14 7 390 SF 6 22 800 Source: EEA

The chosen mechanism

Characteristics of phase-down • Fast inital slope 2015: freeze @ 2009 -2012 levels • 2016: 93% • 2017: pre-charged equipment covered by quota system (>10% of market of top of phase-down step) • 2018: 63% plus pre-charged equipment

Phase-down quota system Upstream Market Measure: Reduce HFCs imports and production (measured in CO 2 eq. !) in 3 year steps by 80% (2030) Ø Companies importing or producing HFCs (bulk!) get HFC quota every year (in CO 2 eq) more metric tonnes for climatefriendlier substances can be sold Ø A company can only place quantities of HFCs on the EU market up to their quota limit Ø All HFCs in Precharged RAC equipment need to be accounted for in the quota system from 2017

Theory behind "phase-down" • Quotas • Scarcity • Rising Prices • Incentive to use clima-friendly technologies, reclaim gases, prevent leakage… • All sectors are in the same boat • innovation takes place where easiest, cheapest • complancency by some will affect all • softness of the landing determined by the sum of all actions of market players GWP-metric High GWP gases will be most strongly affected by price increase

Facing the Phase-down • Prices for high GWP gases rise if users do not switch to low GWP equipment quickly enough The initial slope is rather steep! Changes will be noticeable quickly! • Today: GWPaverage= 2000 2030: GWP 400 (21%) i. e. a GWP 700 solution is in principle not sufficient to comply with the phase-down in the long run… • There is lots of potential to reduce the use of GWP > 2500 (404 A, 507) 407 c, f; 448 A/449ª; CO 2 transcritical, cascade systems Operators investing in new equipment must seek good guidance!

Prohibitions Lots of attention by stakeholders has been on the prohibitions are an absolute endpoint ("red light"), but action is often possible much earlier and is necessary/makes economic sense under the scenario of a phase-down Two important bans: - Ban on servicing Ban on supermarket centralised systems

Gas Prices

Gas Prices (2)

Phase-Down Compliance • Source: Upcoming EEA Report - Fluorinated GHG 2016

Quota Allocation

Implementation • Fgas Portal: company registration, HFC quotas, authorisations for precharged RAC equipment • Ex post company reporting by 31 March • Checking compliance and border controls • Guidance

F-gas Portal Registration in the F-gas Portal is required for… • all companies concerned by the reporting obligations (Art. 19) including equipment importers and destruction compnanies • all companies wishing to ask for quota [HFC Registry] • all companies receiving or supplying exempted gases (import for destruction, feedstock, direct export, military use, semiconductor production or MDI production) [HFC Registry] How to register? http: //ec. europa. eu/clima/policies/f-gas/reporting/docs/guidance_registration_f-gases_portal_en. pdf

Pre-charged equipment Ø From 2017, pre-charged RAC equipment can only be placed on the market, if the HFC charge is covered by quota! How? • Filling in the EU (or even outside the EU), with HFCs bought in the EU, or • authorisation to use quota from a quota holder (producer/importer of bulk HFCs) for HFCs bought outside the EU • Need for a Declaration of Conformity http: //ec. europa. eu/clima/policies/f-gas/docs/guidance_equipment_importers_en. pdf 16

SME importers of equipment • Less admin burden: • (i) pooling system: • An equipment manufacturer, eg. an "authorisation manager", can obtain a larger amount of authorisations, and redistribute ("delegate") these to its importers • (ii) de minimis: • Joint workshop of customs and Fgas experts concluded that the yearly de minimis of 100 t CO 2 eq would also apply to equipment (same treatment as bulk imports)

Yearly Company Reporting Ø Entrance gateway is the F-gas Portal Ø Companies must fill in an electronic reporting template. Relevant for: Ø Ø Producers/Importers/Exporters of bulk Fgases Undertakings destroying Fgases Feestock users Importers of precharged equipment Ø Deadline is 31 March each year! Verification: Companies have an obligation to have their reports verified by an independent auditor

BREXIT

Take home messages The driver is the phase-down quota system Price signal shows phase-down mechanism is working and is ambitious 2018 -20 is crunchtime What you can do Switching to low GWP alternatives whereever and whenever possible is the smart thing to do Installing new equipment today with high GWP refrigerant would be a huge mistake Reducing leakage and reclaiming gas pays off! Energy efficiency gains We will monitor the market developments

To know more. . http: //ec. europa. eu/clima/policies/f-gas/index_en. htm Legislation: http: //ec. europa. eu/clima/policies/f-gas/legislation/index_en. htm https: //ec. europa. eu/clima/policies/f-gas/legislation_en#tab-0 -1 Quota Allocation & Reporting: http: //ec. europa. eu/clima/policies/f-gas/reporting/index_en. htm Alternatives: http: //ec. europa. eu/clima/policies/f-gas/alternatives/index_en. htm Guidance documents: https: //ec. europa. eu/clima/policies/f-gas_en#tab-0 -1 Clima-hfc-registry@ec. europa. eu DG Climate Action, European Commission

CO 2 metric Converting tons CO 2 equivalents to metric kilograms Rules are less strict for users of low GWP technology