HFC PILOT

SCHEME

The viability and benefits of the initiative’s approach and the Climate Moonshot can be demonstrated through a pilot scheme with a more limited scope. Focusing the scheme on hydrofluorocarbon (HFC) emissions means faster and more straightforward implementation.

Background on HFCs

HFCs are industrial gases and represent one of the fastest growing greenhouse gases in much of the world, increasing at a rate of 10-15% per year. They have a very high global warming potential compared to CO2 ranging from 50-14,800 CO2 equivalent.

On 15 October 2016, participating countries agreed the Kigali Amendment to the Montreal Protocol. The aim of the Kigali Amendment is to limit and eventually reduce emissions of HFCs differentiated across countries. It puts more stringent requirements on developed countries, which are required to start reduction from 2019 onwards. Most developing countries are required to cut HFC use from 2029 with some countries starting reductions in 2032. The initially reduction requirement is followed by a 15-17 year period, during which consumption of countries needs to gradually decline to a long-term cap of 15-20% of their baseline level.

The phasedown of HFCs mandated by the Kigali Amendment is projected to prevent around 70-130 GtCO2e emissions by 2050, and avoid up to 0.5°C global warming by 2100. In addition, an HFC phasedown is expected to catalyse significant energy efficiency gains in air conditioning and refrigeration systems, and as a result significantly reduce indirect CO2 emissions.

HFC emission reductions are a very cost-effective approach to limit global warming. The cost of abating HFC emissions is estimated to be in the range of $0.05 - $0.54 / CO2e per ton even without assuming significant technological advances. This implies a cost that is roughly two orders of magnitude lower than the cost of reducing CO2 emissions through cutting fossil fuel consumption.

While the Kigali Amendment represents an important success on the road to climate change mitigation, it does not require a complete and rapid phase-out of HFCs. Significant further climate benefits could be realized by speeding up cuts or by achieving a more complete elimination of HFC emissions. A rapid phase-out by 2020 is estimated to reduce greenhouse gas emissions by a further 50-80 GtCO2e.

The Pilot Scheme

Applying the framework proposed by our Initiative to HFC emissions represents a very attractive opportunity to secure emission reduction beyond the levels agreed in the Kigali Amendment. In a nutshell, a new financing mechanism and international fund could be created that offers countries a financial incentive for reducing emissions below the their respective emission caps under the Kigali Amendment. As an example, a cash payment of $1/tCO2e for every ton of emission reduction would provide a very strong incentive for governments to cut HFC use considering the much lower cost of switching to existing alternatives. This could lead to much faster and stronger HFC consumption cuts. At the same time, $1/CO2e ton would be a very low-cost way to reduce greenhouse gas emissions.

 

In addition to the very significant and direct climate benefits, the HFC Pilot Scheme could demonstrate the viability and advantages of the approach relying on financial incentives provided to governments. Hence, it could contribute to the implementation of the Climate Moonshot. HFC emissions are an ideal area for a pilot scheme for the following reasons:

  • There is already a strong international political commitment to reduce HFC emission as evidenced by the Kigali Amendment.

  • As the Kigali Amendment does not require full and rapid phase-out of HFCs, further emission reductions could be the target of a pilot. The HFC Pilot Scheme could in its own right deliver very significant climate benefits.

  • The Kigali Amendment prescribes emission limits for countries, which could be used as the benchmarks against which the performance of countries is assessed. Hence, there is no need to negotiate an agreement on emission levels that serve as the basis for the financial incentives offered.

  • Reducing HFC emissions is a very cost efficient way of reducing greenhouse gas emissions, which makes it a low hanging fruit for climate change mitigation.

  • Thanks to its more limited scope and the cost-efficiency of HFC reduction, the financing requirement of the HFC Pilot Scheme would be much smaller than of the Climate Moonshot. As a result, implementation of the pilot would be more straightforward and faster.

The lower financing requirement presents a further opportunity for the financing of the HFC Pilot Scheme.  Unilateral donations or investments, which could come from governments, businesses or other organizations, could be used to fund the pilot. This would accelerate its implementation even more, as it would avoid the need to secure the financial backing of participating countries. The HFC Pilot Scheme could offer countries an upside-only opportunity: being paid for reducing HFC emissions faster than the current requirement.

In return for their funding of the HFC Pilot Scheme, donors could be offered carbon credit at a relatively low price. For instance, $1/CO2e ton is lower than most other sources of carbon credits. Certain governments have a track record of participating in similar voluntary financing mechanisms and an increasing number of corporations and industries have made voluntary commitments to reduce or offset emissions beyond legal or regulatory requirements. An example is the airline industry’s recent offset commitment for emission growth beyond 2020. All these represent potential financing sources for the Pilot Scheme.

 

In summary, the HFC Pilot Scheme offers vast potential climate benefits, the mobilisation of private and public resources, building the case for the Climate Moonshot and a relatively fast route to implementation.