Building momentum towards stronger global action on climate change, India's Union Cabinet—the highest decision-making body of government—approved the ratification of the Paris climate agreement. This paves the way for Prime Minister Narendra Modi to announce that India will formally join the Paris Agreement on 2 October—Mahatma Gandhi's birthday. This is huge news. With India's ratification, it is very likely that the Paris Agreement could enter into force in 2016. Next month also presents a major opportunity for equally important climate cooperation through the Montreal Protocol. Like the Paris Agreement, India's progressive participation and leadership are critical to halting the surge in hydrofluorocarbons (HFCs)—super-potent greenhouse gases that are currently the fastest growing climate pollutants.
Achieving a favourable Montreal Protocol HFC agreement is a major opportunity for Indian companies to look ahead and avoid obsolete technology...
HFCs—used mostly in air conditioning and refrigeration, for making insulating foams, and in some aerosol products—pack thousands of times the heat-trapping punch of carbon dioxide. Though accounting for only 1-2% of total warming now, HFCs are the fastest growing climate pollutants because of the skyrocketing demand for air conditioning in developing markets. HFCs could raise global temperatures by as much as 0.5˚C by 2100 if growth continues unabated, dramatically reducing chances of achieving the Paris Agreement target of limiting global warming to 1.5˚C. Addressing HFCs under the Montreal Protocol is the single largest step to protect the planet from climate change. Early action on HFCs is especially crucial considering the devastating impacts of climate change—from massive flooding to deadly heat waves—on vulnerable communities in India and other nations.
All countries support a global agreement under the Montreal Protocol for phasing down HFCs. During the June 2016 US-India Summit, Prime Minister Modi and President Obama pledged to achieve an HFC phase down agreement at the Kigali meetings in early October. Several other world leaders have also promised support for an agreement.
The momentum is growing. Last week during the meeting of the United Nations General Assembly in New York, countries, business leaders, subnational governments, and philanthropists united for strong action under the Montreal Protocol. A total of 105 countries – including the Africa Group, Pacific Island countries, leading Latin American and Caribbean countries, the United States, European Union, Japan, and other developed countries sent a clear signal that they want a strong agreement. Countries are calling for an agreement with "an early freeze date" and "ambitious phase down schedule" to significantly cut future HFC growth. To support an early start, major governments and private foundations promised $80 million in new funding in 2017, focused on developing markets for "fast-start support for implementation and energy efficiency improvements" – critical to growing markets grappling with energy scarcity.
The World Sustainable Development Summit in Delhi... is an opportunity to build on the momentum from India joining the Paris Agreement and pave the way for a big climate win in Kigali.
In efforts to work towards an agreement, the Indian government is engaging in a series of stakeholder discussions. One of the key issues is the selection of baseline and freeze years for phasing down HFCs for developing countries. Current options on the table diverge by over 10 years. The difference between the least and most ambitious proposal is nearly 50 gigatonnes of CO2 emissions—equivalent to emissions from the entire global economy for five full years. In current negotiations, India is proposing 2031 before freezing HFC use. China and Pakistan propose 2025, and the majority of developing and developed countries, including the African group, Pacific Island countries, Latin America countries, North America and the European Union, are proposing 2021 as the freeze year for HFC use. Central to the start date (freeze year) discussions are industry views and the cost of an HFC phasedown and environmental benefits.
Leading industry voices in India
Leading businesses in India are supportive of early action to phase down HFCs. Companies such as Godrej, Daikin, Ingersoll Rand, Unilever are leaders in their segments and are moving forward with environmentally friendly and more energy efficient alternatives. The automobile industry is phasing down HFCs internationally, signalling opportunities for the export market. Achieving a favourable Montreal Protocol HFC agreement is a major opportunity for Indian companies to look ahead and avoid obsolete technology while covering transition costs from the Montreal Protocol's Multilateral Fund and spurring use of energy-efficient appliances.
Three key signals show that Indian industry is ready for an early start:
- Leading companies active in India, including Daikin, Godrej Group, Ingersoll Rand, Danfoss, Dell, Hewlett Packard, Johnson Controls, Microsoft, and many more joined over 500 global companies and associations in calling for an aggressive phase down of HFCs this year. Specifically, industry leaders said in a statement:
"Today, we call upon world leaders to adopt in October an ambitious amendment to the Montreal Protocol, including an early first reduction step for [non-Article 5] countries and a freeze date for Article 5 countries that is as early as practicable, and we declare our intent to work to reduce the use and emissions of high-global-warming-potential HFCs and transition over time to more sustainable alternatives in a manner that maintains or increases energy efficiency."
- Jamshyd Godrej, Chairman of India's Godrej & Boyce, said a phase-out of HFCs would provide India with "significant energy and financial savings for consumers, industry and government." Godrej & Boyce has a production line in India of room air conditioners with R-290, a hydrocarbon based air conditioner using natural refrigerants. These innovative air conditioning units have very low global warming potential and high energy efficiency.
- Navin Chemicals and SRF, India's top two chemical manufactures, can now produce HFOs (HFC alternatives) domestically. Navin Chemicals announced a licensing agreement with Honeywell for production of HFO-1234yf in India, and is expected to begin production in early 2017. SRF, the market leader, is setting up a new pilot plant for domestic production and has significant expertise leveraging domestic R&D for developing alternative chemical production processes. In addition, a range of new, climate-friendly refrigerant alternatives are entering the market and patents for some key low-GWP alternatives are set to expire by mid-2025 or earlier. Indian companies have R&D opportunities to pursue alternative manufacturing processes, as well as energy efficient innovations with the new funding announcement.
Cost Analysis for Montreal Protocol
The United Nation's Technical and Economic Assessment Panel (TEAP) released a new study this month examining the "climate benefits and costs" of reducing HFCs through the four main country proposals. It finds that benefits are much larger than the costs even in the most aggressive scenario, and early action is better. The Multilateral Fund can supports industries in developing markets for transitioning away from HFCs by paying the agreed incremental cost (loss of profits) for companies to convert. The TEAP analysis finds that earlier freeze dates combined with lower baseline values provide larger climate benefits. It calculates costs on basis of installed manufacturing capacity in the year the freeze commences. It also estimates total costs for manufacturing conversion, for servicing and for HFC production phase-down. Although costs are dependent on the baseline levels selected, the report finds that they are lower the earlier the freeze date sets in.
The central question for productive discussions to achieve an agreement is to examine the costs for companies to transition away from HFCs. While other analyses, such as economy wide scenarios, are informative, they do not provide a basis for transition costs needed that would help the Multilateral Fund determine the amount for companies to transition to better alternatives. The new TEAP report, as demonstrated in the graph below, shows both the transition costs and the environmental benefits for Article 5 parties under each of the four main proposals.
According to the TEAP analysis, the cost for phasing down HFCs in A5 countries under the Island States proposal with a 2020 freeze date ranges from $7.4 to $4.5 billion, and similarly the North America proposal with a 2021 freeze date ranges from $6.5 to $4.3 billion. Phasedown costs for A5 countries under the European Proposal with a 2019 freeze date ranges from $8.2 to $5.3 billion, and the India proposal with a 2031 free date ranges from $14.2 to $9.2 billion. The environmental benefits inversely related showing that with an earlier freeze date the climate benefit is greater. The earlier that short-lived climate pollutants, such as HFCs with more than 10,000 times the global warming potential of carbon dioxide, are removed from the atmosphere, the much greater the climate benefit – underscoring the compelling need for fast and early action. Further, maturity of the technology determines the cost and therefore the non-A5 schedule is critical to driving economies of scale.
Next week, during the World Sustainable Development Summit in New Delhi hosted by The Energy and Research Institute (TERI), the Indian government, business leaders, key experts, and civil society will come together to discuss new and emerging technology, days before the Montreal Protocol discussions begin in Kigali. The Summit is an important opportunity to build on the momentum from India joining the Paris Agreement and pave the way for a big climate win in Kigali.