Explanatory Memorandum to COM(2022)150 - Fluorinated greenhouse gases - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2022)150 - Fluorinated greenhouse gases. |
|---|---|
| source | COM(2022)150  |
| date | 05-04-2022 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The European Green Deal launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. In response to the urgency for climate action, the EU increased its climate ambition through Regulation (EU) 2021/1119 (the European Climate Law) 1 , which was adopted in 2021. The climate law establishes a binding net GHG reduction target of at least 55% by 2030 compared to 1990 and EU climate neutrality at the latest by 2050. The EU has also enhanced its initial Nationally Determined Contribution under the Paris Agreement on Climate Change from at least 40% greenhouse gas emissions reductions by 2030, to at least 55% net greenhouse gas emissions reductions. Achieving those objectives, and having a chance to keep global average temperature within 1.5°C, requires reinforcing all instruments relevant for the decarbonisation of EU’s economy; the F-gas Regulation is a key instrument with respect to emissions of fluorinated greenhouse gases (F-gases).
F-gases are human-made chemicals that are very strong greenhouse gases (GHG), often several thousand times stronger than carbon dioxide (CO2). Together with carbon dioxide, methane and nitrous oxide, they belong to the group of GHG emissions covered under the Paris Agreement on Climate Change. Today F-gas emissions amount to 2.5 % of EU’s total GHG emissions but doubled from 1990 to 2014 in contrast to other GHG emissions, which fell. This is because F-gases in the past typically replaced ozone-depleting substances in areas where the latter became prohibited to use in the EU to protect the stratospheric ozone layer, as required under the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer (‘the Protocol’).
Regulation (EU) No 517/2014 on fluorinated greenhouse gases 2 (‘the F-gas Regulation’) was adopted to reverse the increase in F-gas emissions. Hydrofluorocarbons (HFCs) are the most important group of F-gases in terms of emissions relevant for the climate and the main novelty of the F-gas Regulation was the establishment of an ‘EU HFC phase-down’, namely a quota system to implement a gradual reduction schedule of the amount of HFCs that importers and producers may place on the market every year.
The EU F-gas policy must be seen in the context of the recent IPCC Special report 3 . Pathways to limit global warming at 1.5 °C require emission decreases for F-gases of up to 90% by 2050 globally compared to the year 2015.
With a view to reversing rising HFC emissions and their climate impact, and even though HFCs do not deplete the ozone layer, Parties to the Protocol decided in 2016 with the Kigali Amendment to implement a global HFC phase-down which will reduce HFC production and consumption by more than 80 % over the next 30 years at global level. This implies that each Party must comply with an HFC consumption and production reduction schedule as well as licensing import/export and reporting on HFCs. Scientists have estimated that the Kigali Amendment alone will save up to 0.4°C of additional warming by the end of the century.
As concluded by the evaluation prepared by the Commission 4 , the F-gas Regulation has led to a reverse and year-on-year decrease of F-gas emissions starting in 2015. Moreover, the EU market supply of HFCs declined by 37 % in metric tonnes and 47 % in terms of tonnes CO2 equivalent from 2015 until 2019. There has been a clear shift to the use of alternatives with lower global warming potential (hereafter ‘GWP’) including natural alternatives (e.g. CO2, ammonia, hydrocarbons, water) in many types of equipment that used F-gases traditionally. However, the emission savings envisaged by 2030 will not be fully achieved and there is an unused potential to save more emissions. Furthermore, while the F-gas Regulation was adopted ahead of the Kigali Amendment and while it was instrumental in achieving this global agreement, the Regulation cannot fully ensure compliance with all the obligations (notably beyond 2030).
Finally, the years of experience gained in the implementation of the Regulation as well as the feedback received from stakeholders confirm the need to address a number of challenges to the quota system. These range from illegal activities including smuggling and rogue traders with purely speculative motives to the lack of skilled technicians. There are also certain monitoring gaps to be addressed, the efficiency of the reporting and verification activities to be improved and several existing rules to be further clarified, as most stakeholders from industry, NGOs and authorities have highlighted this as an important objective for the review. It was thus clear that the main elements of the Regulation should be maintained but there was a need to fine-tune and add several provisions.
The general objectives of the EU F-gas policies are to:
Prevent additional F-gas emissions, thereby contributing to EU climate objectives
Ensure compliance with the Protocol as regards obligations related to hydrofluorocarbons (‘HFCs’).
The prevention of emissions can be done in two ways: by avoiding that F-gases are used in the first place (i.e. reduce the demand for F-gases) and by ensuring that there are measures to prevent emissions or leaks when the gases are produced, used and disposed of (“containment”). Therefore, the F-gas policy has the specific objectives to:
·Discourage the use of F-gases with high Global Warming Potential and encourage the use of alternative substances or technologies when they result in lower GHG emissions without compromising safety, functionality and energy efficiency;
·Prevent leakage from equipment and proper end of life treatment of F-gases in applications;
·Enhance sustainable growth, stimulate innovation, and develop green technologies by improving market opportunities for alternative technologies and gases with low GWP.
On the basis of the conclusions of an evaluation of the Regulation the Commission has the following objectives for the review:
Achieve additional F-gas emission reductions to contribute to reaching the 55% of emissions reductions by 2030 and net carbon neutrality by 2050.
Fully align with the Protocol.
Facilitate enhanced implementation and enforcement on matters of illegal trade, the functioning of the quota system and the training needs on F-gas alternatives.
Improve monitoring and reporting to fill existing gaps and improve process and data quality for compliance.
Improve clarity and internal coherence to support better implementation and understanding of the rules.
The initiative contributes to the 2030 Agenda for Sustainable Development and its Sustainable Development Goals, most prominently to “fight climate change”.
• Consistency with existing policy provisions in the policy area
To achieve the legally binding climate targets in the European Climate Law the Commission has proposed to strengthen Member States’ emission reduction targets for 2021 to 2030 in an amendment to the so-called Effort Sharing Regulation. The Effort Sharing Regulation covers emissions from sectors not covered by the existing EU Emissions Trading System (ETS) 5 and F-gas emissions represent almost 5% of the emissions covered by that Regulation. Member States’ individual targets relate to this overall basket of GHGs. Consequently, the EU or the Member States do not have any binding targets specific to F-gas emissions. However, it is crucial that F-gas emissions are principally reduced through the F-gas Regulation because such action has proven to be effective as well as cost-efficient to do at European level. Such action will complement additional measures to reduce F-gases that are better taken at national level in line with the principle of subsidiarity, for example additional waste policy measures, more stringent oversight of the sectors or financial incentives for alternatives. Together, the measures taken at Union and national level relating to all types of emissions must ensure that each Member State can reach its national greenhouse gas emission targets, as defined by the Effort Sharing Regulation, in an effective manner.
The F-gas Regulation covers all sectors from which F-gas emissions are relevant, but it is complemented by Directive 2006/40/EC 6 on mobile air-conditioning (MAC) which specifically prohibits the use of refrigerants with a GWP higher than 150 in new passenger cars since 2017. Prior to this prohibition, the refrigerant used was an HFC with a GWP of 1430.
• Consistency with other Union policies
The proposed Regulation (as well as the current F-gas Regulation) has many similarities with Regulation (EC) 1005/2009 on substances that deplete the ozone layer 7 (the ODS Regulation), which is being revised in parallel. These two Regulations must jointly ensure that the Union complies with its obligations relating to HFCs and ODS under the Protocol. While the two reviews do not directly impact each other, they do affect similar stakeholders and sectors, as well as similar activities (trade, equipment use etc.) and they use similar control measures, including a trade licencing system as required by the Protocol. Both industry and authorities have therefore called for their relevant rules to be closely aligned (e.g. regarding custom controls, leakage rules, definitions etc.).
The contribution of the revised F-Gas Regulation to reaching GHG targets at Member States level under the Effort Sharing Regulation is complemented by the revision of the Industrial Emissions Directive (IED: Directive 2010/75/EU) which will cover activities responsible for around 15% of overall EU emissions of GHG emissions not covered by the ETS. The focus of the IED is primarily on emissions of pollutants and emissions of GHGs from industrial sources that are not covered by the EU ETS 8 . By contrast, the ODS and F-Gas Regulations mainly, but not exclusively, focus on placing on the market and use of ozone-depleting substances and fluorinated gases in order to prevent emissions of those chemicals which are very potent GHGs. The IED offers the opportunity for a systematic consideration of F-gas emissions as a key environmental parameter in the development of best available technique reference documents for industry sectors. The latter constitute the basis for the setting of emission limit values for industrial installations to limit their emissions of F-gases and ODS. Furthermore, the E-PRTR Regulation (Regulation (EC) No 166/2006) will be modernised to improve reporting, and public availability of information, on emissions of both pollutants and greenhouse gases and should in the future allow for more granularity on emissions data of F-gases and ODS from such installations.
There are also close synergies with energy policies, in particular the Directive 2009/125/EC on eco-design 9 , given the relevance of indirect emissions from energy use of F-gas equipment. The proposal follows the “energy efficiency first principle” by only taking into account alternatives that are being at least as energy efficient as equipment using a traditional F-gas. Special attention has also been paid to the fact that the decarbonisation of the energy system will require high growth rates for heat pumps that currently are marketed with F-gases in the Union. This is in particular due to the recent geopolitical developments requiring a higher growth in heat pumps to reduce dependence on oil and gas as outlined in the Communication RePowerEU 10 . In order to reach climate neutrality, it is important to have policies in place that increase the energy efficiency as much as possible and that limit direct emissions from F-gases. This is particularly important since any heat pump equipment with F-gases that is put into operation today will lead to direct GHG emissions for many years into the future due to leakage, necessary servicing with more F-gases and possible emissions when the equipment entered the waste stream. Where possible this should be avoided, which is why specific product bans are included. Overall, it is estimated that the proposed review of the quota system, following the preferred option of the impact assessment, has sufficient buffer to allow for such growth in heat pump deployment.
As regards the import and reporting provisions there are synergies with the REACH Legislation 11 , as importers of fluorinated gases are affected by both. The more granular data collected, and the stringent import requirements related to the quota system in the F-gas Regulation could be used to improve overview and compliance on REACH registration obligations as pointed out by the chemical industry.
The reviewed proposal strongly reinforces the links to customs, market surveillance, environmental crime and whistleblowing by spelling out the concrete obligations of economic operators and the competent authorities to reduce illegal activities including smuggling and safeguard the environmental integrity of the Regulation.
Furthermore, there are direct links with waste policy, as the end-of-life is a crucial phase where many emissions occur if the existing obligations are not complied with. The recovery obligations in the F-gas Regulation are complemented by references in the relevant waste legislation (e.g. WEEE Directive 12 and Waste Shipment Directive 13 ). Reinforced producer responsibility schemes as promoted by the F-gas Regulation could make a significant contribution to improve current practices and reduce end-of-life emissions. This is an opportunity in light of the on-going revision of the Waste Framework Directive.
Last but not least, the continuous and timely updating of safety standards as well as codes and legislation at all levels, European, national, regional and local, is crucial to keep pace with the rapid development of technologies and to ascertain that the use of climate-friendly refrigerants can be maximised without compromising safety.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
This proposal is based on Article 192(1) of the Treaty on the Functioning of the European Union, in line with the objective to preserve, protect and improve the quality of the environment; protect human health; and to promote measures at international level to deal with climate change.
• Subsidiarity
The proposal complements EU legislation that has existed at EU level since 2006 and it clearly complies with the subsidiarity principle for the following reasons:
Firstly, protecting the climate system is a cross-border issue and the scale of the problem demands action worldwide. Secondly, the most effective measures are prohibiting or restricting the use or placing on the market of F-gases or F-gas products and equipment. For the functioning of the EU internal market and the free movement of goods, it is highly preferably if such measures are taken at EU level. Thirdly, the Protocol considers the EU as a regional economic integration organisation (REIO) and the EU must therefore comply with the Protocol’s obligations at Union level (e.g. reporting, licensing system, consumption phase-down). This requires relevant legislation at the same level; it would be very difficult if not infeasible to achieve compliance through 27 different national systems. The only exception to the REIO clause is the Protocol’s HFC production phase-down schedule, which requires compliance at Member States level. 14 Still some Member States have requested that production is also regulated at EU level as this would increase the flexibility for the companies concerned.
• Proportionality
The proposal complies with the proportionality principle. The proposal ensures that F-gas emissions will be further reduced and that the EU continues to comply with its international obligations under the Protocol to phase down the production and consumption of HFCs. The proposed measures are based on a thorough assessment of their cost-efficiency that shows that the marginal emission abatement costs for any sector are within the range that other sectors in the economy are expected to face to ensure the needed transition towards climate neutrality by 2050. Moreover, in the long term the mitigation measures will result in overall cost savings. Some measures will slightly increase the administrative burden on industry but some of them are essential for compliance with the Protocol and others are needed to facilitate appropriate enforcement of the rules as well as monitoring future threats. None of the latter measures involve high costs. No detailed provisions are proposed in areas where the objectives might be better achieved by action in other policy areas, for example legislation on waste. The level of benefits achieved by these measures could not have been achieved as cost efficiently for industry and Member States by introducing 27 different additional F-gas policies in Member States.
• Choice of the instrument
The legal instrument chosen is a Regulation because the proposal aims to replace and improve the F-gas Regulation while maintaining its general structure on control measures. The F-gas Regulation has proven to be effective. Since the proposal includes several amendments as well as adaptations to the structure of the F-gas Regulation, the F-gas Regulation should be repealed and replaced with a new Regulation to ensure legal clarity. Any major changes (i.e. repeal, or turning it into a Directive) would unduly burden Member States and create additional uncertainty for the undertakings active in this sector.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluation
The Commission carried out an evaluation of the F-gas Regulation in line with the Better regulation requirements, and responded to Article 21(2) of the F-gas Regulation, which requires the Commission to publish a comprehensive report on its effects no later than 31 December 2022.
The evaluation concludes that the F-gas Regulation has been mostly effective in meeting its original objectives of both reducing F-gas emissions and being instrumental in obtaining an international agreement to reduce HFCs. Furthermore, the individual measures were found to work well together to meet these objectives. As a direct result of the legislation, F-gas emissions have decreased year-on-year starting in 2015 after a decade of rising amounts. These emission savings were achieved at very low abatement costs linked to technological change (i.e. 6 € per tonne CO2e on average), and without reducing energy efficiency of the equipment concerned. The F-gas Regulation has safeguarded high environmental ambition by maintaining the same obligations across the EU, while also ensuring a level-playing field in the internal market concerned industries and undertakings.
At the same time, the evaluation concludes that since the adoption of the Regulation a number of important developments (notably the European Green Deal, and a changed international policy environment with the Paris Agreement and the Kigali Amendment) have changed the relevant policy framework, implying that the EU F-gas Regulation is not fully fit-for-purpose, in terms of both exploiting the unused potential for achieving additional emission reductions and ensuring future compliance with the Protocol. Modelling indicates that the F-gas emission reductions in 2030 will be lower than expected in the 2012 impact assessment 15 that had the objective to contribute to reaching the previous 2030 climate target (at least -40% compared to 1990). Also, some sectors continue to use and emit highly warming F-gases, where this could be avoided (e.g. in the light of technological progress) and there are emissions from sectors or substances not currently included under the scope of the Regulation.
The evaluation also identifies other challenges, including illegal imports of HFCs that circumvent the quota system and “rogue traders” (a multiplication of bulk importers often without connection to the sector that enter the market for speculative reasons and/or benefit disproportionately from the quota system). Moreover, the uptake of climate friendly alternatives is being hindered by a lack of personnel that have skills to install and maintain equipment with climate-friendly alternatives as well as safety standards that are not fully updated according to technological progress. Better emission control could also address some of the concerns about possible eco-toxicological consequences of atmospheric breakdown products of HFC and hydro(chloro)fluoroolefins (H(C)FOs). Furthermore, certain gaps in the substances and activities covered by monitoring and reporting measures could be avoided. In addition, a few obligations linked to the reporting and verification obligations could be made more efficient. Finally, it was perceived as a threat that there is currently no flexibility to quickly react in case of undesirable effects of the quota system such as significant lack of HFC supply.
In general, the F-gas Regulation was found to be externally consistent and coherent with other interventions that have similar objectives, although there are areas that have led to some incoherencies that should be addressed. An important area is customs law, where synergies with the EU Single Window Environment for Customs should be exploited and efficient border controls facilitated to stop illegal activities. Another important synergy is with the REACH Regulation where Member States-led efforts are underway to look into the relevance of persistent degradation products from H(C)FOs. Internal consistence of the Regulation is good, but some clarifications and alignments are needed.
On the basis of these findings the five review objectives mentioned in section 1 were identified.
• Stakeholder consultations
The Commission carried out a broad consultation with stakeholders. The consultation on the review roadmap from 29 June 2020 to 7 September 2020 and the online public consultation from 15 September 2021 to 29 December 2021 provided an opportunity for all stakeholders to contribute views on the F-gas Regulation, irrespective of the respondents’ level of familiarity with the Regulation. These activities received 76 and 241 responses respectively. The individual responses and a summary are publicly available on the Commission “Have your say” website 16 . A targeted consultation, involving 34 semi-structured interviews tailored to competent F-gas authorities, customs authorities, NGOs, EU business associations and organisations, as well as several individual companies was carried out. An open stakeholder workshop was held on 6 May 2021 attended by 355 participants, where the preliminary results of the evaluation and the impact assessment were presented. The agenda, background briefing material and the presentation delivered at the workshop are available on DG CLIMA’s website 17 .
These consultations gathered views on the achievements of the Regulation to date with respect to its relevance, effectiveness, efficiency, EU added value and internal and external coherence. In addition, feedback was also gathered on potential measures and their likely environmental, economic and social impacts, taking into account the European Green Deal and its more ambitious targets and the obligations on hydrofluorocarbons under the Protocol.
Stakeholders generally agreed that the F-gas Regulation was very successful but that it could and should be improved. Moreover, it was clearly noted that objectives of the Regulation could not be better achieved by action at Member State level (rather than EU-level).
Most stakeholders, and competent authorities in particular, stated that the Regulation needs to be aligned with the Protocol after 2030 to ensure future coherence and compliance. While some industry and businesses stakeholders commonly working with F-gases in the refrigeration, air-conditioning and heat-pump sector did not want to raise the ambition level of the current F-gas Regulation further, manufacturers of equipment using alternative refrigerants and NGOs strongly supported higher ambition. Across all consultation activities, industrial stakeholders showed strong support for various measures aimed at tackling illegal trade and challenges to the quota system, reflecting that they consider this a key issue for improving the Regulation (while different measures received different levels of support). These stakeholders also showed a high level of support for additional training and certification of technicians on F-gas alternatives, highlighting that this is a key barrier to the uptake of alternatives.
• Collection and use of expertise
The Commission has gathered extensive technical advice from a number of expert studies, including Commission reports 18 on air conditioning, switchgear, availability of HFCs, commercial refrigeration, quota allocation, safety standards and training for service personnel. In addition, a comprehensive preparatory study was carried out for the review of the Regulation by external consultants, which included a detailed bottom-up stock model of the F-gas using sectors (AnaFgas model) in order to calculate demand and emission scenarios for F-gases, for the baseline and the policy options, as well as energy use of the relevant equipment, for the EU27+UK in the period of 2000 to 2050. An attached cost module allows quantification of related costs to the operators of equipment relying on F-gases or their alternatives. Macroeconomic effects were modelled using the Joint Research Centre’s GEM-E3 model 19 . This preparatory study and its annexes (Öko-Recherche et al., 2021) with the underlying data, assumptions and detailed results are made public on DG CLIMA’s website. The industry sector, Member States authorities and civil society provided extensive input and technical support for the study.
• Impact assessment
The Commission carried out an impact assessment analysing three policy options in terms of their effectiveness in achieving the objectives sought as well as their environmental, economic and social impacts. For each review objective, a series of measures were identified. The measures, which are complementary and not mutually exclusive, were grouped into three policy options on the basis of their expected (abatement) costs:
All three options include the improvements seeking to clarify the rules or make them more coherent. The three options are as follows:
·Option 1: Align with the Protocol - low cost measures. It includes all measures to ensure long-term compliance with the Protocol. This option also includes any beneficial measures on all objectives that were expected to result in very low costs and effort, if any.
·Option 2: Proportionate emission reductions and implementation improvement. In addition to Option 1, it includes measures that achieve emission reductions and implementation improvements at moderate costs and effort, to the point where a sub-sector would not have to pay more than marginal sectoral abatement costs expected for the economy overall to reach carbon neutrality in 2050. The HFC quota levels are therefore more restrictive than in Option 1 and additional F-gas prohibitions with specific GWP limits and dates complement the phase-down. The option also includes more measures to improve enforcement and monitoring, as long as they do not imply high costs.
·Option 3: Maximum feasibility and implementation improvements. Option 3 is a high cost option. In addition to all previous measures in Options 1 and 2, Option 3 will include those that seek to achieve the maximum GHG emission reductions based on today’s technical feasibility while taking into account energy efficiency and safety aspects, but regardless of what it would cost. This option has the steepest quota system. All measures to improve enforcement and monitoring that were considered feasible are also included in this option.
While all options would safeguard full compliance with the Protocol, the detailed impact assessment clearly shows that Option 2 will result in the most appropriate cost-benefit balance, achieving a very substantial amount of additional emissions to the current Regulation (i.e. the baseline) at a modest price tag and avoiding undue hardship for any affected sectors. In the 2030 context, the proposed Regulation is estimated to result in additional savings of cumulatively 40 MtCO2e. It is important to keep in mind that these savings will come on top of the 430 MtCO2e estimated to result from the current Regulation. By 2050 the additional savings of Option 2 will be ca. 310 MtCO2e. This means that the residual annual F-gas emissions in 2050 are estimated to be only 14 MtCO2e. Option 2 is thus considered to be compatible with reaching net climate neutrality by 2050, reducing the need for carbon-removal policies to compensate for emissions that cannot be avoided in 2050 to achieve net climate neutrality.
The necessary technological adjustment leads to cost savings overall and in many sub-sectors, due to lower energy costs for the users. However, there are some costs for end-users who do not switch to alternatives as a result of higher prices of HFCs under a reinforced quota system. Nonetheless, in the longer turn some sectors of the economy will profit from the technology conversion, leading to higher output, innovation and employment. Option 2 is therefore the most coherent with the objectives of the European Green Deal, as well as the “Do No Significant Harm”-principle. As confirmed by stakeholders the types of measures in Option 2 have EU added value. Consequently, the level of benefits achieved could not have been achieved as cost efficiently for industry and Member States by introducing 27 different additional F-gas policies in Member States. It turns out that Option 1 does not achieve any additional cumulative emission savings compared to the current Regulation and considering the savings potential shown in Option 2 and 3, Option 1 would simply be less adequate in the light of the EU’s ambitious climate targets. Option 3, on the other hand, would achieve marginally higher emission savings compared to Option 2 but those additional savings would come at the expense of very high costs for some sectors (marginal sectoral abatement costs by 2050 of up to of 2,111 €/t CO2e for Option 3, compared to maximally 336 €/tCO2e in Option 2; technological adjustment costs for all sectors of 113 million € per year for Option 3 compared to 12 million € per year for Option 2) and it is preferable to seek other ways to contribute to the achievement of the national greenhouse gas emission reduction targets.
Option 2 will also ensure better control at a moderate increase in administrative burden for industry and authorities (Total net costs were estimated as 7.6 million € for industry as recurrent yearly costs, in addition to one-off costs of € 3 million). These changes should allow for an effective enforcement, tackling the identified existing challenges, in particular those linked to illegal trade. Furthermore, the monitoring rules will become more streamlined and comprehensive by covering new aspects that have become relevant. The detailed results of environmental, economic and social impacts are presented in the impact assessment.
A number of simplifications are achieved in the area of monitoring. These include savings from changes to the quota declaration process (€1.2 million of costs saved yearly), aligning reporting and authorisation thresholds for equipment importers (€0.09 million yearly), relaxing the verification threshold for equipment importers (€1.7 million yearly) and digitising the verification process (€1.5 million yearly).
The Regulatory Scrutiny Board issued a positive opinion with reservations on the impact assessment on 25 February 2022. The final recommendations to better explain the links to the Effort Sharing Regulation, the need to raise ambition, a more detailed description of the methodology and spelling out the success parameters were addressed in a revised text of the impact assessment. All detailed comments of the Board and how they were addressed are given in the impact assessment. This full impact assessment and a summary version are available on DG CLIMA’s website.
• Fundamental rights
The proposed rules of this initiative ensure the full respect of the rights and principles set out in the Charter of Fundamental Rights of the European Union.
4. BUDGETARY IMPLICATIONS
This proposal includes a fixed quota price for a large part of the HFC quota that is allocated to importers and producers each year. The maximum annual revenue is shown in the table below.
million €/year
Contents
However, the further development, operation, maintenance and IT security of the HFC quota system and the F-gas and ODS licencing system required under the Montreal Protocol as well as necessary links to the EU Single Window Environment for Customs and facilitation of better enforcement will require additional resources. Therefore, it is proposed, that the quota sale revenue is being used to cover costs related those activities and that the remaining quota sale revenue will flow into the EU Budget as general revenue.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
Future monitoring and evaluation of the Regulation can rely on the Regulation’s annual company reporting data that is collected and aggregated by the European Environment Agency each year. 20 The agency prepares a report on F-gas related activities for Member State representatives and the Commission (DG CLIMA), which includes inter alia data on imports, exports, production, destruction, and reclamation relevant to bulk F-gases and equipment containing such gases. Furthermore, to comply with the Protocol, the Commission is using the data to report annually on HFC production, feedstock, destruction, imports and exports to the Protocol’s Ozone Secretariat on behalf of the EU. In addition, there is a public version of the report in the form of a web-based F-gas indicator published and updated regularly by the EEA. The measures proposed on reporting and monitoring would improve this data basis further in the future.
The changes to the reporting scope (new substances; recipients of exempted quota; reclamation facilities) will complete the picture on relevant gases and uses. The emission reporting databases will improve the knowledge on emissions and thus the impact of the F-gas sector as well as better data quality reported to the United Nations Framework Convention on Climate Change (UNFCCC). The streamlining of reporting and verification rules should also help in achieving better data quality more efficiently.
Moreover, the Commission will continue to closely monitor prices, the workings of the quota system and other market developments of the sector on the basis of contracts with external experts. Member States regularly update on relevant activities carried out such as (i) the collection and use of data to determine emissions, (ii) producer responsibility schemes, (iii) enforcement and other measures taken on illegal activities including penalties to the Implementation Committee established in the Regulation.
Finally, the Commission will monitor the implementation of the proposed measures. In this context, the Commission will cooperate closely with national authorities e.g. the national experts on ozone depleting substances, customs authorities and market surveillance authorities. The committee referred to in the proposal will assist the Commission in its work and will discuss questions on the harmonised enforcement of the proposed rules where appropriate. The development of the relevant case-law of the Court of Justice of the European Union will also be monitored, as well as any decision by the Implementing Committee of the Montreal Protocol regarding compliance of the EU and its Member States.
A good performance of the Regulation would mean that:
·Emissions of F-gases should fall as predicted by the modelling carried out under the accompanying impact assessment, i.e. in 2030 annual emissions should be 37 MtCO2e.
·There should be no compliance issues with the Montreal Protocol regarding obligations on HFCs.
·Smooth implementation of the quota system and reduction of illegal trade to avoid harm in environmental, economic or reputational terms.
·The monitoring and reporting supports policy evaluation and compliance checking in a more effective but also efficient way.
The impacts of the Regulation should be evaluated regularly; the first evaluation, based on these data, should be published by 2033. In this context, an expert study would be needed to estimate the progress made on foam banks. The evaluation should also examine the developments in administrative costs.
• Detailed explanation of the specific provisions of the proposal.
The measures established under the F-gas Regulation to reduce emissions of fluorinated greenhouse gases are not put into question in the current proposal. The proposal mainly ensures that the proposed Regulation will be aligned with the ambitious EU climate objectives and that long-term compliance with international obligations will be guaranteed. Existing rules are clarified and strengthened to ensure better enforcement.
The proposal establishes the subject-matter and scope of the Regulation and includes the necessary definitions.
The proposal includes rules on containment (prevention of emissions, leakage checks, leakage detection system and rules on recovery). Prevention of emissions covers F-gases listed in Annexes I and II, and is imposed on all relevant actors during the production, storage, transport, manufacturing and operation of F-gases and the equipment containing them. Leak checks and record keeping also covers gases listed in Annex II Section I. Recovery obligations of fluorinated greenhouse gases is extended to also cover foams in sandwich panels and laminated boards when removed from buildings. The proposal also establishes training and certification obligations that also include tasks in relation to equipment that contain gases used as substitutes to fluorinated greenhouse gases (alternative gases) to promote their safe use and handling. The training and certification programmes should also cover energy efficiency aspects.
The proposal includes restrictions and prohibitions on the placing on the market of F-gases and the concerned products and equipment. It clarifies that products and equipment placed unlawfully on the market cannot be used or further supplied. For products and equipment lawfully placed on the market, their further supply as of two years following the prohibition deadline is allowed only if evidence is provided of their (initial) lawful placing on the market. Non-refillable containers shall be prohibited from entering the customs territory and further used or supplied.
The proposal also includes labelling requirements for the placing on the market of F-gases in containers and in certain equipment. These requirements include hydrofluorocarbons that are exempted from the quota requirements to enable enforcement of those exemptions. The proposal also prohibits specific uses of certain F-gases.
The proposal establishes a production reduction schedule for HFCs, following the binding rules of the Montreal Protocol. Productions that maintain production today will receive rights based on the historic baseline of 2011 to 2013, while the Commission may, at the request of a Member State and within that State’s production limits set by the Protocol, allocate additional rights to new entrants. The latter does not exempt HFCs exported inside of products and equipment.
The proposal also establishes a reduction schedule for the placing on the market of HFCs by establishing individual quantitative limits (quotas) for producers and importers. Importers and producers must ensure that they have sufficient quota to cover the quantities of HFCs placed on the market, at the moment the placing on the market occurs (i.e. for importers at the time of release for free circulation). HFCs for certain uses are exempted from the quota requirements. However, the exemption from the phase-down of metered dose inhalers (MDIs) for pharmaceutical use is removed to align with the consumption phase-down schedule of the Montreal Protocol, where the latter products are not exempted. The use of HFCs as propellants for MDIs is fully emissive, i.e. the whole HFC quantity filled into these products will eventually end up in the atmosphere, and has grown by 45% between 2015 and 2019. Even though two suitable climate-friendly alternatives are available that would not require any adaptation for the MDIs use by patients and that the approval process by the medical authority (EMA) is under way, the industry expects a slow market uptake in the absence of a policy signal. By including MDIs under the quota system, a significant amount of emissions can be saved by 2050, at very little costs to manufacturers and the patients. 21
Quotas are allocated every year to new entrants exclusively on the basis of a declaration and to historic importers and producers (incumbents) on the basis of their reference values (and on the basis of a declaration if made). Certain conditions apply for the allocation of quotas to all importers and producers, including the payment of an allocation amount. Importers and producers that share the same beneficial owner(s) shall be considered as one undertaking for the purpose of the determination of reference values and the allocation of quotas. HFCs charged in certain equipment should also be accounted for in the quota system.
Importers and producers that have a reference value may transfer some or all of their allocated quota to another undertaking for the purpose of placing HFCs on the market in bulk and may also authorise the use of all or some of their quota to another undertaking for the purpose of placing equipment charged with HFCs on the market.
The proposal also envisages the operation of the F-gas Portal for the implementation of the quota allocation system, licensing and reporting obligations and its inter-connection with the EU Single Window for Customs. Registered importers and producers have access to their individual quota allocations, penalties, quantities placed on the market as reported, as well as transfers and authorisations to use quota recorded by these undertakings. Alleged clerical errors in the recording of information by undertakings and in their reported data must be substantiated by evidence and must be timely presented to the Commission.
The proposal imposes as a condition to trade, a valid license to be presented to customs authorities in cases of import and export.
The proposal also clarifies the role of customs authorities and market surveillance authorities in enforcing the controls on trade envisaged therein. The information that should be provided in cases of imports and exports is listed as well as what customs authorities should check in particular during customs controls carried out on a risk basis. Non-refillable containers should be confiscated or seized or taken out of the market. For other goods, customs and market surveillance authorities shall take all necessary measures, including confiscation or seizure where needed, to enter that prohibited goods do not re-enter the market from another EU customs office. Re-export of unlawful gases or products covered under the Regulation shall be prohibited. Only designated or approved places and customs offices shall be allowed to handle cases of imports and exports of F-gases; only these designated offices and places shall be allowed to open or close a transit procedure.
Finally, the proposal imposes a ban on the trade of HFCs with non-Parties to the Protocol, in line with the obligations set out in the Protocol as from 2028.
The proposal establishes reporting obligations in particular for producers, importers of gases in bulk as well as charged in products and equipment, exporters, feedstock users, destruction and reclamation facilities and undertakings that received hydrofluorocarbons that fall under the exemptions from the quota rules. The reporting is done electronically via the F-gas Portal. Verification, subject to quantitative limits, of reported data shall also be done via the F-gas Portal.
The proposal requires Member States to collect emission data electronically where possible.
The proposal specifies the cases where exchange of information and cooperation with competent authorities within a Member State, as well as amongst Member States and with competent authorities of third countries is required.
The proposal also establishes the obligation for competent authorities to check on the compliance of undertakings with the Regulation on a risk basis and where concrete evidence are available.
The proposal also ensures that reports by whistle-blowers in relation to infringements of the Regulation benefit from the level of protection envisaged under Directive (EU) 2019/1937.
Finally, the proposal establishes that the level and type of administrative penalties for infringements of the Regulation must be effective, dissuasive and proportionate and shall also take into account relevant criteria (such as the nature and gravity of the infringement). In particular, it proposes an administrative fine to be imposed in cases of illegal production, use or trade of gases and of the products and equipment covered under this Regulation. The proposed provisions are aligned, and compliment the Commission Proposal for a Directive of the European Parliament and of the Council on the protection of the environment through criminal penalties adopted on 15 December 2021 22 .
The proposal also establishes a consultation forum represented by Member States and representatives of civil society, including environmental organisations, representatives of manufacturers, operators and certified persons who will advise and provide expertise to the Commission in the implementation of this Regulation.