Kigali Amendment to Have Net Positive Impact on HVAC Industry

Kigali Amendment to Have Net Positive Impact on HVAC Industry

In 1985, an enormous hole in the ozone layer appeared over Antarctica, allowing dangerous ultraviolet (UV) radiation to penetrate the earth’s atmosphere.

The Montreal Protocol on Substances that Deplete the Ozone Layer was drafted in 1987 and signed by the US and other industrialized nations in reaction to this environmental crisis. Underlying the protocol was a body of scientific research proving that refrigerant chemicals used in air conditioners, as well as refrigerators and aerosol cans, drove ozone depletion.

Under the Montreal Protocol, signatory nations pledged to phase out the use of chlorofluorocarbons (CFCs), including the hydrochlorofluorocarbon (HCFC) R-22, previously used in many refrigeration and air conditioning systems. Many nations switched instead to the use of hydroflurocarbons (HFCs), which are safe for the ozone, but are a powerful greenhouse gas and therefore contribute to global warming – an elusive consideration in 1980s environmental policy.

While the hole in the ozone layer appears to be on the road to recovery, nations demonstrated their commitment to addressing anthropogenic climate change in 2016, when the landmark Kigali amendment to the Montreal Protocol was passed.

The Kigali Amendment & Its Implications on the HVAC Equipment Industry

Negotiated on October 15, 2016 and ratified in November 2017, the Kigali amendment aims to eliminate 90% of HFCs worldwide via the gradual reduction in HFC use in signee countries beginning in January 2019. While developed nations have committed to an accelerated schedule – freezing production and consumption of HFCs by 2019 and reducing HFCs to 15% of 2012 levels by 2036 – developing nations will have a more lenient timetable, with a production freeze in 2024 and production and consumption levels reduced through 2045. A third group of nations, with among the world’s highest temperatures, will freeze HFC use by 2028 and reduce production and consumption through 2047.

The amendment is expected to cut global warming by up to 0.9 degrees Fahrenheit through the end of the century.

As a result of the Kigali amendment, HVAC equipment producers will increasingly turn to hydrofluoro olefins (HFOs) or natural refrigerants (such as R-717, R-744, propane, and butane).

In the meantime, as the industry transitions, the creation of hybrid refrigerants that combine HFCs and HFOs to meet regulatory needs without requiring installed HVAC equipment to be retrofitted or prematurely replaced will be critical to the success of suppliers worldwide.

Environmentalism Versus the Trump Administration

President Trump and his administration have been nothing if not antagonistic and dismissive of environmental concerns, as evidenced by the president’s 2017 decision to withdraw the US from the Paris Accord.

It remains to be seen whether the president will take a similar stand regarding the Kigali amendment, which big business in the US supports due to its potential to create jobs domestically and continue the US’ dominance in HVAC equipment R&D worldwide. Given the president’s vehement rhetorical support for US job creation and the leading role US companies have traditionally held in the development of refrigerant products used in air conditioning and other appliances, the administration’s stance toward implementation of the Kigali amendment remains unclear.

Nevertheless, in April 2018, the Air-Conditioning, Heating, & Refrigeration Institute (AHRI) and the Alliance for Responsible Atmospheric Policy published a report detailing the benefits the US will reap from the Kigali amendment, including:

  • an estimated 33,000 additional jobs by 2027
  • $12.5 billion in annual economic output solely as a result of ratifying the amendment

To Find Out More

Need more information? For historical demand data and forecasts by product, region, and vehicle segment, see The Freedonia Group’s Global HVAC Equipment study. This study also covers market environment factors, industry structure, company market share, and leading companies.