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An $8 Billion Push to Cool the Globe Has Poor Countries Steaming

Thursday, 19 Mar 2015 06:41 AM

A quarter-century after the world banned the chemical compounds blamed for chewing a hole in the ozone layer, the solution to that problem has been tagged as a main instigator of global warming.

HFCs, synthetic refrigerants developed in the 1990s as an ozone-friendly alternative, have now emerged as one of the most potent greenhouse gases, a problem unforeseen by their inventors two decades ago. They can be thousands of times stronger than fossil fuel emissions at trapping heat.

Pushed by the U.S., global negotiators are again discussing a phase-out of the chemicals used in refrigerators, cars and air-conditioners worldwide. That's creating a lucrative, if ironic, opportunity for the companies that pioneered HFCs, including Honeywell International Inc., which now sees an $8 billion-a-year market for their replacement. At the same time, the issue has opened another front in the environmental tensions between industrialized and developing nations.

Eliminating the chemicals would be a major step in the climate fight, said Paul Bledsoe, a senior energy fellow at the German Marshall Fund of the United States, a research group in Washington. "If your concern is near-term climate relief, an HFC phase-down has got to be a priority."

Winning a global agreement is proving tricky. Talks stalled last year as developing nations including India and Saudi Arabia raised concerns about the cost and reliability of replacements for HFCs, technically called hydrofluorocarbons. Negotiations resume in Bangkok April 20 but hopes of a deal in 2015 are fading.

Environmentalists had hoped an agreement would boost broader talks on cutting greenhouse gases scheduled for this December in Paris.

"It's become a sensitive issue because the chemical companies are charging a lot for the alternatives," said Durwood Zaelke of the Institute for Governance & Sustainable Development, a Washington-based group that's championed action on HFCs. "You have some countries wondering if they are being charged a fair price."

A shift in the refrigeration market would come at a fortuitous time for chemical companies.

As patents on HFCs have expired, competition has increased and profit margins for the materials have fallen, said Ken Gayer, general manager of Honeywell's fluorine products division. Alternatives that are under patent protection into the next decade promise a "very nice" rebound for the business, Gayer said in an interview at Honeywell's Morris Township, New Jersey, headquarters.

The new options are more efficient, so customers will save on energy bills, not to mention the climate benefits, Gayer said. Nonetheless, worries over cost have left countries including India and the Persian Gulf states cautious about an agreement.

In November, developing nations led by the Saudis blocked efforts to move forward with formal negotiations. India's environment minister, Prakash Javadekar, while acknowledging the greenhouse threat from HFCs, called for more research on the viability of replacements in warm-latitude countries.

India's trying to balance the needs of a domestic HFC industry and appliance makers, a middle-class thirsty for conveniences like refrigerators and air-conditioning and action on climate change, said Arunabha Ghosh, a New Delhi-based sustainability expert.

"The general feeling is this transition will happen at one point or another," said Ghosh, chief executive officer at the Council on Energy, Environment & Water. "Is it worth investing in today's alternatives, or is it worth waiting to see where the market settles?" Messages seeking comment from India's Javadekar and Saudi officials weren't returned.

Montreal Protocol

That HFCs have joined the ecological rogues' gallery might surprise the architects of the Montreal Protocol. That 1989 treaty targeted an earlier generation of refrigerants known as chlorofluorocarbons, or CFCs, after scientists discovered they were burning a hole in the ozone layer shielding the Earth from harmful solar radiation.

HFCs were introduced as an ozone-friendly alternative in the 1990s, before their global warming potential was well understood. The compounds are less abundant than carbon dioxide from fossil fuels, but they're far more potent at trapping heat when they leak into the atmosphere -- as much as 10,000 times higher for some versions of the chemical, according to the U.S. Environmental Protection Agency.

In the U.S., President Barack Obama has made retiring HFCs a cornerstone of his climate change strategy. "It makes an enormous amount of sense," said Todd Stern, the U.S. envoy to global climate talks. "HFCs are pretty small in the grand scheme of things right now but they have an explosive growth path."

Obama's effort has gained traction among companies in the cooling business. In September, 19 of them joined a White House pledge to reduce HFCs, including soda makers Coca-Cola Co. and PepsiCo Inc., appliance manufacturer Carrier and Kroger Co., the biggest U.S. supermarket chain.

To win support globally, the U.S. and other developed nations are promising $508 million in aid over three years to help poorer countries make the switch. It's "an incredibly modest investment for the climate and ozone benefits we get," said Zaelke, of the Sustainable Development institute.

A United Nations report in October said the the transition may cost developing nations between $500 million and $3.2 billion, depending on how quickly new cooling technology is adopted.

Honeywell and DuPont Co. are betting that the technology leans heavily on replacement chemicals they've developed, known as hydrofluoroolefins, or HFOs.

Honeywell already has $2.3 billion worth of contracts to supply its Solstice brand of HFOs to customers, with another $1 billion under negotiation, said Gayer, the company executive. Worldwide, the market for refrigeration, insulation and other potential uses for the chemicals may total $8 billion a year, he said.

While Gayer wouldn't discuss specific prices, he said HFOs typically cost "several percent" to "several times" more than the chemicals they replace. That's made up through energy gains and innovations allowed by the more efficient chemicals, he said.

"This, to us, is a very good solution for the environment, a very good solution for our customers," Gayer said. "It's an area where everybody wins."

DuPont, for its part, expects HFC alternatives to generate $300 million to $500 million in annual sales, Executive Vice- President Mark Vergnano told investors during a 2013 conference. Janet Smith, a spokeswoman for the Wilmington, Delaware-based company, didn't return calls seeking comment.

Worries over cost have boosted interest in what proponents call "natural refrigerants," non-synthetic options that include propane, ammonia and even high-pressure CO2.

The alternatives face their own questions over safety and cost, said Keilly Witman, a former EPA regulator who now advises U.S. grocers. Still, they could threaten chemical makers' hold on the cooling market, she said by telephone.

"There's no doubt the chemical manufacturers make an awful lot of money from these transitions," Witman said. "When you only have a couple of sources, you're at the mercy of what industry wants to charge."

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A quarter-century after the world banned the chemical compounds blamed for chewing a hole in the ozone layer, the solution to that problem has been tagged as a main instigator of global warming.
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