Proposed Regulation for Prohibitions on Use of Certain High Global Warming Hydrofluorocarbons in Stationary Refrigeration Equipment and Foams Slide 1: Title Slide Thank you, Mr. Corey. Good morning Chair Nichols, and Members of the Board. Today, we will present Board Item 18 dash 2 dash 9; a Proposed Regulation for Prohibitions on Use of Certain Hydrofluorocarbons in Stationary Refrigeration and Foam End-Uses. The intent of the regulation is to preserve and continue in California some of the U.S. EPA’s prior prohibitions on high-global warming hydrofluorocarbons. Last year, a decision by the D.C. Circuit Court of Appeals limited EPA’s authority in this area. ADVANCE SLIDE March 23, 2018

Overview Background Proposed Regulation Staff Recommendation Slide 2: Overview In today’s presentation: We will provide background information on the need for regulatory action, Describe the proposed regulation, And conclude with our recommendation for 15-day changes. ADVANCE SLIDE

Background Slide 3: Background – Transition Slide First, some background on hydrofluorocarbons and their emissions. ADVANCE SLIDE

Why Regulate Hydrofluorocarbons (HFCs)? Potent short‐lived climate pollutants (SLCPs) High global warming potentials (GWPs) Lower-GWP alternatives commercially available Just 1 pound of R-404A = 3,922 pounds of CO2  4,200 vehicle miles Slide 4: Why Regulate Hydrofluorocarbons (HFCs)? Hydrofluorocarbons, or HFCs, are potent short-lived climate pollutants, with global warming potentials hundreds to thousands of times greater than carbon dioxide. For example, just one pound of R-404A, an HFC refrigerant used in supermarkets, has the global warming potential of almost two tons of CO2, equivalent to driving a car more than four thousand miles. Fortunately, alternatives with lower global warming potentials are commercially available, with some in very wide usage. ADVANCE SLIDE (GWP of 3922)

Fastest Growing Source of Greenhouse Gases Estimated Emissions in CA Currently 4% of California GHG emissions Emissions projected to double over 20 years SB 1383 reduction goal: 40% below 2013 levels by 2030 Business-as-Usual Slide 5: Fastest Growing Source of Greenhouse Gases Currently, HFCs comprise four percent of all greenhouse gas emissions in California. However, they’re the fastest growing source of greenhouse gases in our State and throughout the world. Without further controls, HFC emissions will double in 20 years. In 2016, SB 1383, authored by Senator Lara, established a goal to reduce HFC emissions 40 percent below 2013 levels by 2030. ADVANCE SLIDE SB 1383 Target

HFC Emission Sources in California (2030) Slide 6: HFC Emission Sources in California (2030) In 2030, under business-as-usual conditions without further regulations, we estimate that almost 80 percent of emissions will be from stationary refrigeration and air conditioning. Including mobile AC and transport refrigeration, refrigerants make up more than 90 percent of all HFC emissions. To a lesser extent, HFC emissions also come from aerosol propellants, foams, solvents, and fire suppressants. ADVANCE SLIDE Business-as-Usual 27 MMTCO2E (100-year GWP)

SLCP Strategy for HFC Reductions Slide 7: SLCP Strategy for HFC Reductions This chart summarizes the Short-Lived Climate Pollutant Strategy for HFC reductions adopted by the Board last March. The chart shows business-as-usual emissions at about 27 million metric tonnes of CO2-equivalents in 2030. The SB 1383 goal shown in green means that California must emit no more than 10 million metric tonnes of CO2-equivalents by 2030. Attaining this goal is 10 percent of the entire greenhouse gas reduction strategy described in the Scoping Plan adopted by the Board last year. The top of the bar chart, shaded light blue, shows potential reductions of 26 percent that can be achieved by the international Kigali Amendment, if ratified by the United States. An additional 24 percent reduction was expected for the U.S. EPA’s SNAP Rules, shown in orange. The remaining emission reductions, shaded in pink, must be achieved by additional CARB regulations. Now we’ll update you on these three strategies. ADVANCE SLIDE

International HFC Phasedown The “Kigali Amendment” to the Montreal Protocol is a global HFC production phasedown Begins January 1, 2019 for developed countries Amendment must be ratified by the U.S. Senate, followed by legislation or rulemaking by U.S. EPA Slide 8: International HFC Phasedown International efforts to reduce HFCs will be achieved by the “Kigali Amendment” to the Montreal Protocol to phase down the production of HFCs, eventually applying to all countries. The first step of the phasedown applies to developed countries, and begins next January. The United States signed the Kigali Amendment in November 2016 but has not taken action to ratify it through the U.S. Senate. And if ratified, it would need to be implemented by the U.S. EPA. Although the Kigali Amendment should significantly reduce HFC emissions by 2050, it will not be sufficient by itself to help California achieve its SB 1383 reduction goal in 2030. ADVANCE SLIDE

U.S. EPA SNAP HFC Reduction Rules U.S. EPA Significant New Alternatives Policy (SNAP) regulates ozone-depleting substances and their replacements (HFCs) Prohibited high-GWP HFCs as viable alternatives became available U.S. EPA cannot require replacement of HFCs in many circumstances because of a recent federal court decision Slide 9: U.S. EPA SNAP HFC Reduction Rules EPA’s Significant New Alternatives Policy, known as SNAP, implements Section 612 of the amended Clean Air Act of 1990, which requires EPA to evaluate replacements for ozone-depleting substances to reduce overall risk to human health and the environment. These replacements include HFCs. EPA applied this authority to prohibit high-GWP HFCs in new equipment and materials as viable, lower GWP alternatives became available. However, last year the federal D.C. Circuit Court of Appeals decided that EPA cannot require replacement of HFCs in many circumstances. CARB staff would support EPA reading the decision narrowly and adopting national HFC rules under their other existing authorities. ADVANCE SLIDE

Emissions Impact of Court Decision Needed Reductions Kigali Phasedown (26%) New CARB Regulations (45%) Slide 10: Emissions Impact of Court Decision California was relying on the SNAP Rules to meet 24 percent of our overall HFC reduction goal, leaving us with an emission reduction gap of more than 4 million metric tonnes of CO2-equivalents. ADVANCE SLIDE Other (5%)

Preserving SNAP Benefits SB 1013, Lara – Backstop all SNAP HFC prohibitions into State law CARB’s Proposed Regulation – Preserves emission reductions from sectors with past or shortly upcoming effective dates CARB’s Future Rulemaking – Will cover additional measures identified in the SB 1383 SLCP Strategy approved by Board last year Slide 11: Preserving SNAP Benefits SB 1013, “The California Cooling Act”, authored by Senator Lara is currently awaiting hearing in the Senate Environmental Quality Committee, and would place all of the SNAP HFC prohibitions into state law. In contrast, the proposed regulation under consideration today would preserve emission reductions from select sectors with past or shortly upcoming effective dates, but does not backstop all the potential losses due to the court ruling. A future HFC rulemaking will cover additional measures identified in the SB 1383 Short Lived Climate Pollutant Strategy approved by the Board last year. ADVANCE SLIDE

Refrigeration Technology Goes Green Olefins (HFOs) HCFCs HFCs   Less Ozone- Depleting Global Warming   Non-Ozone- Depleting Low-Global Warming CFCs  Ozone-Depleting Global Warming “Natural” Refrigerants: Non-Ozone-Depleting, Low-GWP Slide 12: Refrigeration Technology Goes Green Fortunately, the HFC reductions needed are achievable because refrigeration technology has become increasingly green. Refrigerants have transitioned from ozone-depleting and high global warming, to non-ozone depleting and low global warming. These low-GWP refrigerants include hydrofluoro-olefins, or HFOs; and natural refrigerants such as carbon dioxide, ammonia, and hydrocarbons. Natural refrigerants have been in use since the 1800s and are used in thousands of retail food stores today. ADVANCE SLIDE Carbon Dioxide (GWP = 1) Ammonia (GWP = 0) Hydrocarbons: Propane, Isobutane (GWP < 4) Used in Thousands of Retail Food Stores Worldwide Today

The global transition is underway... European Union currently implementing more ambitious HFC reduction measures than SNAP Canada recently adopted HFC reduction measures similar to SNAP Australia and Japan also have HFC reduction programs Affected industries serve global market and are preparing for one solution Many manufacturers/users in U.S. have already adopted lower GWP technologies Slide 13: The global transition to low‐GWP refrigerants is underway... The global transition to low-GWP refrigerants is well under way. The European Union is currently implementing more ambitious HFC reduction measures than those proposed here. Canada recently adopted measures similar to the aforementioned bill, SB 1013. Australia and Japan also have HFC reduction programs. Most affected industries serve a global market and are preparing for one low-GWP solution. And many manufacturers and users in the U.S. have already adopted lower GWP technologies ADVANCE SLIDE

Proposed Regulation Slide 14: Proposed Regulation – Transition Slide Now I’ll describe the proposed regulation. ADVANCE SLIDE

Purpose of Proposed Regulation: Backstop Partially Vacated SNAP Rules Focus on “end-uses” with past and shortly upcoming compliance dates (an end-use is a specific type of equipment or material) Prevent backsliding—most of these end-uses have already transitioned to low-GWP Make SNAP prohibitions enforceable in California 3.4 MMTCO2E reduction annually by 2030 Slide 15: Purpose of Proposed Regulation: Backstop Partially Vacated SNAP Rules The proposed regulation focuses on commercial refrigeration equipment and foam types with past and shortly upcoming compliance date under the vacated SNAP Rules, and will prevent backsliding of manufacturers to start using high-global warming HFCs again. Most manufacturers have already transitioned, or begun the transition, to lower global warming alternatives. The regulation would make the vacated SNAP prohibitions enforceable in California, with an estimated 3.4 million metric tonnes of CO2-equivalent reductions annually by 2030. ADVANCE SLIDE

Who is Affected? Applies mainly to equipment manufacturers Refrigerated Food Processing & Dispensing Equipment Supermarket Refrigeration & Remote Condensing Units Slide 16: Who is Affected? The proposed regulation applies mainly to equipment manufacturers. Prohibited HFCs may not be placed into new equipment and materials that are sold, used, or entered into commerce in California for the following end-uses: Supermarkets and Remote Condensing Units, which are small refrigeration systems used by convenience stores, Refrigerated Food Processing & Dispensing Equipment, for example Slurpee machines and frozen yogurt dispensers, Stand-alone, or small self-contained refrigeration units, Refrigerated vending machines, And foams used in buildings and other uses. ADVANCE SLIDE Stand-alone Refrigeration Units Refrigerated Vending Machines Foams

First Prohibitions Apply Starting this Year End-Use (Equipment or Material) Prohibition Date for New Equipment and Retrofits Current Industry Status Supermarket Refrigeration & Remote Condensing Units September 1, 2018 (Federal prohibition date was January 1, 2016 - 2018) Industry has already transitioned Stand-Alone Refrigeration Units January 1, 2019 - 2020 Approved alternatives are currently in use in some applications Refrigerated Vending Machines January 1, 2019 Approved alternatives available now; preferred alternative not currently allowed in some locations Refrigerated Food Processing & Dispensing Equipment January 1, 2021 Approved alternatives are available now Foams (certain uses) (Federal prohibition date was January 1, 2017) Industry has already transitioned Slide 17: First Prohibitions Apply Starting this Year This chart shows the end-uses from the previous slide, and lists the HFC prohibition date, along with the current industry status for HFC replacements. All of the end-uses have available alternatives. The preferred alternative for vending machines is propane refrigerant, which is not allowed in some locations. ADVANCE SLIDE

Rule Requirements Listed HFCs are prohibited in new and retrofit equipment and materials Manufacturer recordkeeping Disclosure statement certifying that the product uses only compliant substances Slide 18: Rule Requirements The requirements of the regulation are largely the responsibility of the manufacturers, who cannot use prohibited HFCs in new refrigeration equipment or foams. Recordkeeping of the types and numbers of equipment entering California are required of the manufacturers. A disclosure statement must certify that the product uses only compliant refrigerants or foam expansion agents. ADVANCE SLIDE

Cost Impacts Total statewide cost of $4.25 million over 20 years Annual cost of $210,000 across all affected manufacturers Less than $1.00/MTCO2E reduction Slide 19: Cost Impacts The total cost of the regulation statewide is estimated at 4.25 million dollars over 20 years; or about 210,000 dollars per year across all manufacturers to comply with the HFC prohibitions, as well as the record-keeping and disclosure statement requirements. The greenhouse gas reduction cost is less than one dollar per metric tonne of CO2-equivalent reduction. ADVANCE SLIDE

Key Themes of Stakeholder Input Support Provides more industry certainty Many manufacturers have already made investments Recommend adopting SNAP Rules in their entirety Concerns Clarify recordkeeping requirements Clarify effective date of HFC prohibitions - applies to date of manufacture Minor clarifying edits Some manufacturers want additional time Slide 20: Key Themes of Stakeholder Input Stakeholders generally support CARB’s efforts to preserve the SNAP prohibitions because it provides more certainty to industry. Many manufacturers have already made significant investments in using alternatives to high-global warming HFCs. Some stakeholders would like CARB to adopt all the SNAP prohibitions. We focused on the past and shortly upcoming prohibitions; SB 1013 would cover the entire program. Other stakeholders expressed concerns. Several requested clarification that record-keeping requirements only apply to the original equipment manufacturer, and that the effective date of the HFC prohibitions applies to the date of manufacture. These were always our intent, and these and other clarifying edits will be added through 15-day changes. Additionally, some manufacturers wanted additional time to comply. However, approved refrigerants are available today. ADVANCE SLIDE

Staff’s Recommendation Approve proposed regulation with 15-day changes Slide 21: Staff’s Recommendation Staff recommends approval of this proposal with 15-day changes. This concludes the staff presentation. We will happy to answer any questions from the Board.