On September 21, 2022, the Senate passed the Kigali Amendment to the 1987 Montreal Protocol by a vote of 69 to 27. While many have described the passage as largely symbolic it re-affirms the US’s commitment to the hydrofluorocarbon (“HFC”) phasedown, the implementation of which is already causing shifts in import and export markets, as well as the consumer market.
The Kigali amendment compels signatories to phase out the use of HFCs by 85% over the next 15 years. HFCs are commonly used in air conditioning and refrigeration but are also potent greenhouse gases. Former President Obama originally signed on to the Kigali Amendment in 2016. Environmental groups supported the passage as an effort to reduce global warming while some republicans and domestic manufacturers urged passage as a means to protect and help domestic companies, which may be uniquely poised to manufacture HFC alternatives.
Despite these unusual alliances and the fact this is the first climate treaty passed in decades, coverage has been limited and many have called the move largely symbolic, in part because the U.S. is already committed to an aggressive HFC phase down. In December 2020, Congress, via the American Innovation and Manufacturing Act (“AIM Act”), mandated the Environmental Protection Agency (“EPA”) implement a phasedown of HFCs by issuing production and consumption allowances to importers and producers. In response, EPA passed a comprehensive rule in October 2021, which provided a detailed framework for achieving the HFC phasedown targets outlined in the AIM Act. EPA issued its first company-specific allowance allocations under the program in October 2021 for calendar year 2022 and has since developed an interagency task force focused on illegal HFC trade, which has been very active.
The ratification of the Kigali Amendment speaks to widespread commitment by the Biden Administration to HFC reduction despite rising unintended consequences. Many predict consumers will bear the cost of the HFC phasedown as supply becomes increasingly limited (few alternatives are currently available). Additionally, the ratification may offer some relief to importers who have already been heavily impacted by the HFC Phasedown as a failure to ratify would have resulted in future trade restrictions.
If your company has questions on how to navigate the impact of the ratification of the Kigali Amendment; the HFC Phasedown process, or importing and exporting regulations associated with HFC’s please contact Husch Blackwell’s International Trade and Supply Chain or its Environmental Group for assistance.