The EU Quota System – How it works and why you need to switch

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

2. Rationale Fgas Emissions 1990 – 2015 (EU) Source: EEA

3. The chosen mechanism

4. Characteristics of phase-down • Fastinitalslope 2015: freeze @ 2009-2012 levels • 2016: 93% • 2017: pre-chargedequipmentcovered by quota system (>10% of market of top of phase-down step) • 2018: 63% plus pre-chargedequipment

6. Phase-down quota system Upstream Market Measure: Reduce HFCs imports and production (measured in CO2eq.!) in 3 year steps by 80% (2030) • CompaniesimportingorproducingHFCs (bulk!) getHFC quotaeveryyear (in CO2eq)  more metrictonnesforclimate-friendliersubstances can be sold • A company can only place quantities of HFCsonthe EU market up totheirquotalimit • All HFCs in Precharged RAC equipment need to be accounted for in the quota system from 2017

7. Theory behind "phase-down" • Quotas •  Scarcity •  Rising Prices •  Incentive touseclima-friendlytechnologies, reclaimgases, preventleakage… • All sectorsare in the same boat •  innovationtakesplacewhereeasiest, cheapest •  complancencybysome will affect all •  softnessofthelandingdeterminedbythesumof all actionsofmarketplayers GWP-metric High GWP gases will bemoststronglyaffectedbypriceincrease

8. Facing the Phase-down • Pricesforhigh GWP gases riseifusers do notswitch to low GWP equipmentquicklyenough The initial slope is rather steep!  Changes will be noticeable quickly! • Today: GWPaverage= 2000  2030: GWP 400 (21%) • i.e. a GWP 700 solutionis in principlenotsufficienttocomplywiththephase-down in thelongrun… • Thereislots of potential to reduce the use of GWP > 2500 (404A, 507)  407c,f; 448A/449ª; CO2 transcritical, cascadesystems •  Operatorsinvesting in new equipmentmustseekgoodguidance!

9. Prohibitions Lots of attention by stakeholders has been on the prohibitions • prohibitions are an absoluteendpoint ("red light"), but action isoften possible muchearlier and isnecessary/makeseconomicsenseunder the scenario of a phase-down • Twoimportant bans: • Ban on servicing • Ban on supermarketcentralisedsystems

10. Gas Prices

11. Gas Prices (2)

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

13. Quota Allocation

14. 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

15. F-gas Portal Registration in the F-gas Portal isrequiredfor… • allcompaniesconcernedbythereportingobligations (Art. 19) includingequipmentimportersand destructioncompnanies • allcompanieswishingtoaskforquota [HFC Registry] • allcompaniesreceivingorsupplyingexempted gases (importfordestruction, feedstock, directexport, military use, semiconductor productionor MDI production) [HFC Registry] Howtoregister? http://ec.europa.eu/clima/policies/f-gas/reporting/docs/guidance_registration_f-gases_portal_en.pdf

16. Pre-charged equipment • 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 DeclarationofConformity http://ec.europa.eu/clima/policies/f-gas/docs/guidance_equipment_importers_en.pdf

17. 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 100t CO2eq would also apply to equipment (same treatment as bulk imports)

18. Yearly Company Reporting • Entrancegatewayisthe F-gas Portal • Companiesmustfill in anelectronicreportingtemplate. Relevantfor: • Producers/Importers/Exporters of bulkFgases • UndertakingsdestroyingFgases • Feestockusers • Importers of prechargedequipment • Deadlineis 31 Marcheachyear! Verification: Companieshaveanobligation to havetheirreportsverifiedbyanindependent auditor

19. BREXIT

20. Take home messages  The driveristhephase-down quotasystem  Price signalshowsphase-down mechanismisworkingandisambitious • 2018-20 iscrunchtime  Whatyoucan do  Switchingtolow GWP alternatives whereeverandwheneverpossibleisthe smart thingto do  Installingnewequipmenttodaywith high GWP refrigerantwouldbe a hugemistake • Reducingleakageandreclaiming gas pays off! Energyefficiencygains  We will monitorthemarketdevelopments

21. 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

22. CO2 metric Converting tons CO2 equivalents to metric kilograms  Rules are less strict for users of low GWP technology