Trilateral Amendment Proposal for HFC Phasedown Under the Montreal Protocol

1. HFC Phasedown Under the Montreal Protocol OZONACTION NETWORK FOR LATIN AMERICA AND THE CARIBBEAN OCTOBER 6-8 2010 Mexico, D.F. Canada, Mexico and The United States

2. Scope of Presentation Trilateral Amendment Proposal Overview Legal Aspects Policy Rationale Comparisons Benefits Financial Assistance Path Forward HFC-23 By-Product Emissions From HCFC-22 Production Questions and Comments

3. Trilateral Amendment Proposal Canada, Mexico & United States Proposal • Phasedown, not Phaseout of HFCs • Phases Down to 15% of Baseline • Phasedown is GWP-Weighted • Covers 20 HFCs, Including 2 known as HFOs • Limits By-Product Emissions of HFC-23 • Leaves UNFCCC Obligations Unchanged • Supports Global Efforts to Reduce GHGs • MLF eligibility for Production & Consumption and HFC-23 By-Product Reductions

4. Montreal Protocol has Mandate with respect to HFCs • Vienna Convention Article 2 provides scope to address HFCs • HFCs result in adverse effects resulting from ozone layer protection, so Parties can harmonize approaches to reduce impacts • Trilateral HFC proposal includes provisions confirming obligations relating to HFC emissions continue unchanged under UNFCCC/Kyoto Protocol • Complements but does not replace existing UNFCCC obligations • Addresses consumption and production to assist in reductions of emissions • Similar to aviation and maritime bunker emissions to be addressed by ICAO and IMO

5. Mandate of Montreal Protocol with Respect to HFCs: Policy Aspects (1) • Given HFC growth results from ODS phaseout, Montreal Protocol has special responsibility to address HFCs • Montreal Protocol has long history of concern with HFCs: • MOP Decision X/16 (1998): convened workshop, in collaboration with UNFCCC, with view to assisting establishment of information on HFCs and PFCs and potential ways to limit their emissions • MOP Decision XIV/10 (2002): called on TEAP to collaborate with IPCC to develop report: Safeguarding the Ozone Layer and the Global Climate System; Issues Related to HFCs and PFCs • MOP Decision XX/8 (2008): called for report and workshop on high-GWP alternatives, principally HFCs, to ODS • ExCom Decision 60/44 (2010): allows for 25% funding increment, above cost-effectiveness thresholds, when needed for climate benefits, mainly to avoid selection of high-GWP HFCs

6. Mandate of Montreal Protocol with Respect to HFCs: Policy Aspects (2) • While Montreal Protocol has not controlled HFCs, historically, it has taken key steps developing information and understanding on HFC use and emissions at global level • Montreal Protocol has built world’s widest body of experience and expertise on sectors using HFCs • Therefore, it is not only appropriate, but incumbent on Montreal Protocol to take action on HFCs • In collaboration with UNFCCC/Kyoto Protocol • Ultimately, atmosphere will not care if HFCs have been reduced through Montreal Protocol, UNFCCC/Kyoto Protocol or both

7. Trilateral Proposal Phasedown Schedule

8. Federated States of Micronesia HFC Amendment Proposal: Differences A5 Country baseline established with different methodology Article 5 average 2007-2009 HCFC Schedule differs Reductions every 3 years until 2028, then plateau established in 2030 Plateaus at 10% of baseline Includes by-product control provisions starting in 2013

9. Proposed HFC Reduction Steps for Article 5 and Non-Article 5 Countries

10. Overview of HFC Proposals

11. Non-Article 5 Parties Estimated HFC Consumption & Benefits from Phase Down Projected HFC Consumption First Effective Year of Consumption Cap Climate Benefits 90% of Baseline 80% of Baseline First Compliance Obligation 2010 2014

12. Estimated First Effective Year of Proposed Phase Down for Article 5 Parties First Effective Year of Consumption Cap 90% of Baseline First Compliance Obligation Projected HFC Consumption 2017 2018

13. Substantial Climate Benefits Global Trilateral Proposal Cumulative Benefits: • ~3,000 MMTCO2eq* through 2020 • Non-Article 5 Parties = 3,000 MMTCO2eq • Article 5 Parties = 150 MMTCO2eq • ~88,000 MMTCO2eq through 2050 • Non-Article 5 Parties = 43,000 MMTCO2eq • Article 5 Parties = 45,000 MMTCO2eq FSM Proposal cumulative benefits: • ~4,000 MMTCO2eq through 2020 • ~93,000 MMTCO2eq through 2050 EPA’s Analysis of HFC Production and Consumption Controls: http://www.epa.gov/ozone/downloads/Analysis_of_HFC_Production_and_Consumption_Controls.pdf *MtCO2eq

14. Trilateral Proposal Benefits in Context consumption reductions emission reductions emissions MMTCO2eq

15. Financial Assistance to Article 5 Parties • Ensure timely financial assistance through MLF to address HFCs before huge growth takes place • Waiting longer makes it more difficult and costly to phase down HFCs see HCFC challenge • Waiting also increases damage to climate system • Effective incremental cost model of MLF can address HFCs • Many countries indicated preference for MLF model in various international environmental forums and negotiations • Allows short-term HFC growth to replace HCFCs when no other cost-effective alternatives are available • Most Article 5 countries would not actually need to reduce HFC consumption or production until 2018 at earliest • Recognizes short-term focus must be on HCFC phase-out

16. HFC-23 By-Product Emissions Background: • HFC-23 is a by-product of producing HCFC-22 • HFC-23 has highest GWP of all HFCs • Controlled HFC-23 emissions are decreasing but uncontrolled HFC-23 emissions are increasing, in Article 5 Countries (Montzka, et al) • CDM projects cover <50% HFC-23 emissions in Article 5 Parties Amendment Controls By-Product Emissions • Covers Emissions from HCFC-22 Production Facilities • Makes By-Product Obligations Eligible for MLF Funding • Would cover facilities not covered by CDM • Additional Benefits from HFC-23 Mitigation ~6,000 MMTCO2eq by 2050

17. Separate Decision on HFC-23 By-Product Emissions Recognizes HFC emissions covered by Kyoto Protocol to UNFCCC Requests ExCom of MLF to: • Update Information on Article 5 HCFC-22 Facilities, Including whether CDM-Covered • Develop Capital & Operational Cost Estimates • Formulate Guidelines by 64th ExCom Meeting • Facilitate Implementation of Projects Request TEAP/SAP to: • Study Costs and Environmental Benefits

18. Summary HFC amendment proposals provide meaningful real opportunities for near-term climate benefits Montreal Protocol appropriate vehicle for HFC Phasedown amendment Successful experience Effective financial mechanism Sector expertise HFCs used tied to ODS phaseout