Phasedown of Hydrofluorocarbons (HFCs): Issuing Allowance Allocations for 2023
What is the AIM Act?
The American Innovation and Manufacturing (AIM) Act was enacted on December 27, 2020. The AIM Act directs the U.S. Environmental Protection Agency (EPA) to address HFCs. Specifically, the AIM Act directs EPA to phase down production and consumption[1] of HFCs to 15% of their baseline levels in a stepwise manner by 2036 through an allowance allocation and trading program.
How do Allowances Work?
EPA uses an allowance as the unit of measure that controls production and consumption. EPA will issue allowances that will be valid between January 1 and December 31 of a given year, known as a “calendar-year allowance.” A calendar-year allowance represents the privilege granted to an entity to produce or import regulated substances in that year.
Entities will need to expend allowances in order to produce or import bulk HFCs. Producing HFCs will require expending both production allowances and consumption allowances. Importing HFCs will require expending only consumption allowances. A third category of allowances called “application-specific allowances” can be used to either produce or import HFCs for use in the six applications listed in the AIM Act.
EPA has developed a calculator to help allowance holders understand how allowances translate to quantities of various HFCs they intend to produce or import.
Under the HFC Allocation Framework Rule, EPA can issue administrative consequences for activities including, but not limited to, submitting false, inaccurate, or misleading information; importing HFCs without expending the requisite number of allowances; and failing to report required information. Under these provisions (see 40 CFR 84.35), EPA may retire, revoke, or withhold the allocation of HFC allowances or ban a company from receiving future allowances.
Issuance of 2023 HFC Allowances
How do Entities Receive Allowances for 2023?
EPA issued allowances to entities that produced and/or imported HFCs in 2020, based on the three highest non-consecutive years of production or import between 2011-2019. EPA has also issued allowances to entities that were previously granted new market entrant status consistent with 40 CFR 84.15. EPA also issued “application-specific allowances” directly to the entities, including the U.S. Department of Defense, that operate within the six applications listed in the AIM Act. These entities will be able to confer their allowances to producers or importers to acquire needed HFCs.
The following notice, "Phasedown of Hydrofluorocarbons: Notice of 2023 Allowance Allocations for Production and Consumption of Regulated Substances under the American Innovation and Manufacturing Act of 2020," was published in the Federal Register on October 11, 2022.
- Federal Register link to HFC Allowance Allocations for 2023
- Overview of Allowances and Exchange Values (pdf)
- Prior year allocations
Application-Specific Allowance Allocations
The figure and table below illustrate the application-specific allowances allocated to each entity for 2023. In the figure, click on an application (i.e., inner slice) to view all entities allocated allowances for that application along with their respective allowances. Click the inner circle again to return to the full figure. Hover over any slice to view the allowances allocated for that entity or application.
Distribution of Application-specific HFC Allowances for 2023
Application-specific Allowance Allocations for 2023
The table below illustrates the application-specific allowances allocated to each entity for 2023.
| Entity | Application | Number of Application-specific Allowances Issued (MTEVe) |
|---|---|---|
| Total | All | 5,426,319.9 |
| Analog Devices | Semiconductors | 28,852.2 |
| Apple | Semiconductors | 1,033.8 |
| Armstrong Pharmaceuticals | Metered Dose Inhalers | 157,231.4 |
| ASML US | Semiconductors | 1,237.2 |
| AstraZeneca Pharmaceuticals | Metered Dose Inhalers | 4,652.7 |
| Aurobindo Pharma USA | Metered Dose Inhalers | 65,427.9 |
| Broadcom | Semiconductors | 834.7 |
| Compsys | Structural Composite Foam | 14,152.8 |
| Defense Technology | Defense Sprays | 9,366.7 |
| Diodes Incorporated | Semiconductors | 3,667.1 |
| GlaxoSmithKlinea | n/a | |
| GlobalFoundries | Semiconductors | 177,721.8 |
| Hitachi High-Tech America | Semiconductors | 1,064.4 |
| IBM Corporation | Semiconductors | 533.5 |
| Intel Corporation | Semiconductors | 746,212.5 |
| InvaGen Pharmaceuticals | Metered Dose Inhalers | 74,380.1 |
| Jireh Semiconductor | Semiconductors | 5,787.8 |
| Keysight Technologies | Semiconductors | 538.8 |
| Kindeva Drug Delivery | Metered Dose Inhalers | 408,952.0 |
| Lupin | Metered Dose Inhalers | 24,098.0 |
| Medtronic | Semiconductors | 637.6 |
| Microchip Technology | Semiconductors | 31,266.7 |
| Micron Technology | Semiconductors | 42,600.7 |
| Newport Fab DBA TowerJazz | Semiconductors | 8,042.3 |
| NXP Semiconductors | Semiconductors | 86,878.8 |
| Odin Pharmaceuticals | Metered Dose Inhalers | 1,708.5 |
| Polar Semiconductor | Semiconductors | 13,446.4 |
| Proteng Distribution | Onboard Aerospace Fire Suppression | 4,060.4 |
| Qorvo Texas | Semiconductors | 1,237.2 |
| Raytheon Technologies | Onboard Aerospace Fire Suppression | 952.6 |
| Renesas Electronics America | Semiconductors | 4,445.5 |
| Samsung Austin Semiconductor | Semiconductors | 384,969.7 |
| Security Equipment Corporation | Defense Sprays | 63,889.9 |
| Semiconductor Components Industries DBA ON Semiconductor | Semiconductors | 38,821.5 |
| SkyWater Technology | Semiconductors | 17,549.8 |
| Skyworks Solutions | Semiconductors | 4,652.3 |
| Texas Instruments | Semiconductors | 194,744.9 |
| The Research Foundation for The State University of New York | Semiconductors | 159.9 |
| Tokyo Electron America | Semiconductors | 558.8 |
| Tower Semiconductor San Antonio | Semiconductors | 4,948.7 |
| TSMC Arizona Corporation | Semiconductors | 32,632.0 |
| UDAP Industries | Defense Sprays | 110,727.8 |
| Wabash National Corporation | Structural Composite Foam | 73,543.0 |
| WaferTech | Semiconductors | 22,355.4 |
| Wolfspeed | Semiconductors | 36,114.7 |
| X-FAB Texas | Semiconductors | 5,076.0 |
| Zarc International | Defense Sprays | 1,384.1 |
| Department of Defense | Mission-critical Military End Uses | 2,513,169.3 |
Note: Numbers may not sum due to rounding. These numbers reflect allowances that were issued on September 30, 2022.
a Consistent with 40 CFR 84.13(c)(3), GlaxoSmithKline only received consumption allowances in 2023 because their calculated level of application-specific allowances was less than their calculated level of consumption allowances based on their historic imports.
Consumption Allowance Allocations
The figures and table below illustrate the consumption allowances allocated to each entity for 2023. The first figure shows allowances for entities receiving greater than 0.5% of all consumption allowances and aggregates those entities receiving fewer than 0.5% of all consumption allowances. The second figure shows allowances for entities receiving less than 0.5% of all consumption allowances (i.e., those aggregated in the first figure). In the figures, hover over an entity (i.e., slice) to view its allowances. Click on an entity in the legend to hide it from the pie chart, and click it again to add it back.
Distribution of HFC Consumption Allowances for 2023, with Entities Receiving <0.5% Aggregated
Distribution of HFC Consumption Allowances for 2023, Showing Only Entities Receiving <0.5%
Consumption Allowance Allocations for 2023
The table below illustrates the consumption allowances allocated to each entity for 2023.
| Entity | Number of Consumption Allowances Issued (MTEVe) |
|---|---|
| Application-specific allowancesa | 5,426,319.9 |
| Total | 273,498,315.0 |
| A.C.S. Reclamation & Recovery (Absolute Chiller Services)* | 200,000.0 |
| Ability Refrigerants* | 200,000.0 |
| ACT Commodities* | 77.8 |
| Advance Auto Parts* | 190,699.1 |
| Advanced Specialty Gases | 285,314.5 |
| AFK & Co.* | 193,335.9 |
| AFS Cooling* | 200,000.0 |
| A-Gas | 3,209,232.5 |
| Air Liquide USA | 498,530.3 |
| AllCool Refrigerant Reclaim* | 200,000.0 |
| Altair Partners | 2,918,730.4 |
| American Air Components* | 200,000.0 |
| Arkema | 31,075,488.7 |
| Artsen | 1,027,571.2 |
| Automart Distributors DBA Refrigerant Plus* | 200,000.0 |
| AutoZone Parts | 2,486,664.3 |
| AW Product Sales & Marketing | 194,505.7 |
| Bluon | 33,459.8 |
| CC Packaging* | 194,000.0 |
| Certified Refrigerant Services* | 200,000.0 |
| Chemours | 33,382,686.1 |
| Chemp Technology* | 200,000.0 |
| Combs Gas | 1,287,918.3 |
| ComStar International | 374,063.9 |
| Creative Solution* | 200,000.0 |
| Cross World Group* | 200,000.0 |
| Daikin America | 3,120,932.2 |
| EDX Industry* | 200,000.0 |
| Electronic Fluorocarbons | 104,289.0 |
| Fireside Holdings DBA American Refrigerants* | 199,978.5 |
| First Continental International | 769,838.0 |
| FluoroFusion Specialty Chemicals | 2,552,532.6 |
| Freskoa USA* | 200,000.0 |
| GlaxoSmithKline | 536,367.9 |
| Golden Refrigerant* | 200,000.0 |
| Harp USA | 765,574.0 |
| Honeywell International | 82,497,424.7 |
| Hudson Technologies | 2,988,057.5 |
| Hungry Bear* | 200,000.0 |
| ICool USA | 3,406,995.9 |
| IGas Holdings | 25,944,614.3 |
| Iofina Chemical | 1,264.9 |
| Kidde-Fenwal* | 200,000.0 |
| Lenz Sales & Distribution | 1,110,319.3 |
| Lina Trade* | 200,000.0 |
| Linde | 532,503.3 |
| Meraki Group* | 200,000.0 |
| Metalcraft * | 161,000.0 |
| Mexichem Fluor DBA Koura | 25,479,884.3 |
| Mondy Global | 318,706.9 |
| National Refrigerants | 19,806,810.9 |
| Nature Gas Import and Export | 819,624.4 |
| North American Refrigerants* | 200,000.0 |
| O23 Energy Plus* | 200,000.0 |
| Perfect Score Too DBA Perfect Cycle* | 37,876.0 |
| Reclamation Technologies* | 200,000.0 |
| Refrigerants, Inc. | 26,550.9 |
| RMS of Georgia | 1,621,276.8 |
| RTR Suppliers* | 198,000.0 |
| Saalok* | 200,000.0 |
| Sciarra Laboratories* | 8,700.0 |
| SDS Refrigerant Services* | 200,000.0 |
| Showa Chemicals of America | 73,466.6 |
| Solvay Fluorides | 1,102,459.2 |
| Summit Refrigerants* | 200,000.0 |
| SynAgile Corporation* | 1,125.1 |
| Technical Chemical | 974,140.0 |
| TradeQuim* | 200,000.0 |
| Transocean Offshore Deepwater Drilling | 16.8 |
| Tulstar Products | 734,110.9 |
| Tyco Fire Products* | 200,000.0 |
| USA United Suppliers of America DBA USA Refrigerants* | 200,000.0 |
| USSC Acquisition Corp* | 131,451.0 |
| Walmart | 2,280,583.0 |
| Waysmos USA | 634,504.6 |
| Weitron | 6,338,344.6 |
| Wesco HMB* | 200,000.0 |
| Wilhelmsen Ships Service | 40,392.5 |
* Entity received allowances as a new market entrant from the set-aside pool allocated on March 31, 2022 in accordance with 40 CFR 84.15. Consistent with the provisions in 40 CFR 84.15(e)(3) and clarified in the HFC Allocation Framework Rule, these entities were issued the same number of allowances for 2023 as they were for 2022. Under the regulatory provisions in 40 CFR 84.15(f)(1), allowances allocated to these entities may not be transferred.
a See Application-specific Allowance Allocations.
Note: Numbers may not sum due to rounding. These numbers reflect calendar year 2023 allowances that were issued on September 30, 2022.
Production Allowance Allocations
The figure and table below illustrate the production allowances allocated to each entity for 2023. In the figure, hover over an entity (i.e., slice) to view its allowances. Click on an entity in the legend to hide it from the pie chart, and click it again to add it back.
Distribution of HFC Production Allowances for 2023
Production Allowance Allocations for 2023
The table below illustrates the production allowances allocated to each entity for 2023.
| Entity | Number of Production Allowances Issued (MTEVe) |
|---|---|
| Application-specific allowancesa | 5,426,319.9 |
| Total | 344,299,157.0 |
| Arkema | 40,873,469.3 |
| Chemours | 75,703,417.3 |
| Honeywell International | 171,747,616.1 |
| Iofina Chemical | 1,758.6 |
| Mexichem Fluor DBA Koura | 50,546,575.8 |
a See Application-specific Allowance Allocations.
Note: Numbers may not sum due to rounding. These numbers reflect calendar year 2023 allowances that were issued on September 30, 2022.
Judicial Review
The AIM Act provides that certain sections of the Clean Air Act (CAA) “shall apply to” the AIM Act and actions “promulgated by the Administrator of [EPA] pursuant to [the AIM Act] as though [the AIM Act] were expressly included in title VI of [the CAA].” 42 U.S.C. § 7675(k)(1)(C). Among the applicable sections of the CAA is section 307, which includes provisions on judicial review. Section 307(b)(1) provides, in part, that petitions for review must only be filed in the United States Court of Appeals for the District of Columbia Circuit: (i) when the agency action consists of “nationally applicable regulations promulgated, or final actions taken, by the Administrator,” or (ii) when such action is locally or regionally applicable, but “such action is based on a determination of nationwide scope or effect and if in taking such action the Administrator finds and publishes that such action is based on such a determination.” For locally or regionally applicable final actions, the CAA reserves to the EPA complete discretion whether to invoke the exception in (ii).
The final action herein noticed is “nationally applicable” within the meaning of CAA section 307(b)(1). The AIM Act imposes a national cap on the total number of allowances available for each year for all entities nationwide. 42 U.S.C. § 7675(e)(2)(B)-(D). For 2023, there was a national pool of 344,299,157 production allowances and 273,498,315 consumption allowances available to distribute. The action noticed herein distributed that finite set of allowances consistent with the methodology EPA established in the nationally applicable framework rule. As such, the allowance allocation is the division and assignment of a single, nationwide pool of HFC allowances to entities across the country according to the uniform, national methodology established in EPA’s regulations. Each entity’s allowance allocation is a relative share of that pool; thus, any additional allowances awarded to one entity directly affects the allocations to others.
In the alternative, to the extent a court finds the final action to be locally or regionally applicable, the Administrator is exercising the complete discretion afforded under the CAA to make and publish a finding that the action is based on a determination of “nationwide scope or effect” within the meaning of CAA section 307(b)(1).[2] In deciding to invoke this exception, the Administrator has taken into account a number of policy considerations, including the judgment regarding the benefit of obtaining the D.C. Circuit’s authoritative centralized review, rather than allowing development of the issue in other contexts, in order to ensure consistency in the Agency’s approach to allocation of allowances in accordance with EPA’s national regulations in 40 CFR Part 84. The final action treats all affected entities consistently in how the Part 84 regulations are applied. The allowance allocation is the division and assignment of a single, nationwide pool of HFC allowances to entities across the country according to the uniform, national methodology established in EPA’s regulations, and each entity’s allowance allocation is a relative share of that pool; thus, any additional allowances awarded to one entity directly affect the allocations to others. The Administrator finds that national uniformity is desirable to take advantage of the D.C. Circuit’s administrative law expertise and facilitate the orderly development of the basic law under the AIM Act and EPA’s implementing regulations. The Administrator also finds that consolidated review of the action in the D.C. Circuit will avoid piecemeal litigation in the regional circuits, further judicial economy, and eliminate the risk of inconsistent results for different regulated entities. The Administrator also finds that a nationally consistent approach to the allocation of allowances constitutes the best use of agency resources. The Administrator is hereby posting on this site the finding that the action is based on a determination of nationwide scope or effect and will publish such finding in a notice in the Federal Register.
Thus, the final action of the Agency allocating hydrofluorocarbon allowances to entities located throughout the country is nationally applicable or, alternatively, the Administrator is exercising the complete discretion afforded to him by the CAA and finds that the final action is based on a determination of nationwide scope or effect for purposes of CAA section 307(b)(1) and is publishing that finding in the Federal Register.
Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the District of Columbia Circuit within 60 days after the notice is published in the Federal Register.
Issuance of 2022 HFC Allowances
What is the Methodology for Issuing 2022 General Pool Production and Consumption Allowances?
EPA describes the approach for allocating general pool allowances in Section VII of the final rule published October 5, 2021 (see the Federal Register Notice). The regulation also includes regulatory text at 40 CFR 84.9 and 84.11 describing the framework for issuing allowances. The methodology EPA employed for allowances issued on October 1, 2021, includes the following steps.
Step 1: EPA retrieved data reported to EPA’s Greenhouse Gas Reporting Program (GHGRP). Under Subpart OO of the GHGRP, facilities[3] that import, export, or destroy more than 25,000 metric tons of carbon dioxide equivalent annually in fluorinated greenhouse gases, and all those that produce or transform fluorinated greenhouse gases, are required to submit annual reports to EPA detailing this activity. Facilities upload these annual reports using EPA’s “electronic Greenhouse Gas Reporting Tool,” or e-GGRT and certify the accuracy of the submissions.
Data that are submitted under Subpart OO in e-GGRT undergo a variety of verification checks during and after report submission. Facilities are sent messages about potential errors in their report; they can either reply, explaining the unusual values, or they can resubmit their report to correct any errors and certify the accuracy of the submission.
Step 2: EPA compared import data submitted to GHGRP to import data from U.S. Customs and Border Protection (Customs). Import data for all facilities that reported in 2020 and had not previously reported to e-GGRT were compared to Customs records. For any facility that reported data to e-GGRT between 2011 and 2019, import data were compared to Customs records. If the sum of metric tons of HFCs reported to e-GGRT diverged significantly from the sum of metric tons of imports under HFC-related HTS codes in Customs records, these submissions were flagged for possible issues.
Step 3: EPA reached out to facilities flagged as having potential issues after comparing GHGRP and Customs data. EPA contacted each facility that was flagged requesting that they either:
- Provide documentation (bills of lading, invoices, and/or U.S. Customs Entry Forms) substantiating their imports if the company stated data available in GHGRP was correct, or
- Resubmit their report to GHGRP to correct potential errors that would account for why the reported GHGRP data did not more closely align with data reported to Customs.
EPA staff reviewed resubmitted reports and supporting documentation. Any issues found in the documentation review resulted in additional messages sent to the facility.
EPA staff also searched the Chemical Data Reporting system (CDR) for entities that reported HFC import or production that did not appear in the GHGRP data and in limited instances compared reported data in CDR to data provided to EPA.
Step 4: EPA updated a master sheet to reflect the new data and corrected data submitted to GHGRP in steps 1 through 3 above.
Step 5: EPA assured the quality of the AIM-related data in EPA’s master sheet. Every AIM-related data element in the master sheet relevant to allocation decisions was manually checked by EPA to ensure that the chemical-specific quantities in the master spreadsheet reflected the Subpart OO report most recently submitted to e-GGRT. Each entry was manually verified at least once, with a selection of these entries verified multiple times.
Step 6: EPA grouped related e-GGRT facilities into single entities where appropriate consistent with EPA’s final regulations.[4] Some entities have ownership over multiple production, transformation or destruction facilities that are required to report to e-GGRT individually. These facilities were grouped together with the controlling entity. Although imports and exports are required to be reported at the corporate level, several companies had acquired, spun-off or merged with other entities over time, leaving records from multiple facilities applying to just one potential allowance holder.
In e-GGRT, each facility has a reported “parent company” and a reported “owner.” Those data fields were EPA’s starting place in determining facility ownership. Where EPA determined there were potential issues surrounding the reported ownership of one or multiple e-GGRT facilities, facility owners were contacted to verify ownership. EPA also referred to comments submitted by stakeholders, web research, and the Dun & Bradstreet’s Hoovers corporate database. Where EPA had sufficient evidence that facilities were under “shared corporate or common ownership or control,” the data for the relevant facilities were grouped together into one entity.
Step 7: EPA reviewed requests for “special consideration” for entities that did not import in 2020, but wanted to receive allowances based on historic activity. If an entity did not import in 2020, general pool allowances were generally not allocated based on historic activity. However, entities were able to request special consideration if they notified EPA during the comment period on the rule, and EPA reviewed all such requests. EPA reviewed these entities’ historical HFC imports in e-GGRT and held meetings with the relevant stakeholders. If EPA could determine that the entity was still active in the market, EPA allocated allowances.
Step 8: EPA determined which entities were eligible for allowances based on the conditions established in the Final Rule. Entities that produced and imported and entities that imported more (in EVe terms) than they exported, transformed, and/or destroyed were eligible for production and/or consumption allowances. Entities that did not have 2020 imports or production, and did not receive “special consideration,” did not receive general pool allowances. Entities that did not have imports or production in 2011-2019, or had production and imports that were less than the amount exported, transformed, and/or destroyed, did not receive general pool allowances. In other words, companies who had negative calculated levels of production or consumption in all years were not issued allowances.
Step 9: EPA calculated annual production for entities potentially receiving allowances. For each entity potentially receiving allowances, EPA summed exchange value equivalent amounts from the AIM HFCs master sheet for production minus destruction minus production for transformation for each year between 2011 and 2019.
Step 10: EPA calculated annual consumption for entities potentially receiving allowances. For each entity potentially receiving allowances, EPA summed exchange value equivalent amounts from the AIM HFCs master sheet for production minus destruction minus transformation plus imports minus exports for each year between 2011 and 2019. For entities potentially receiving allowances that were associated with multiple facilities, yearly facility HFC activity was summed to get a year-by-year total of HFC production and consumption in metric tons of exchange value equivalent (MTEVe) at the level of the entity.
Step 11: EPA determined average high three-year levels for each entity potentially receiving allowances. EPA identified the three years with the highest production or consumption levels across 2011 through 2019 for each entity potentially receiving allowances—these years did not need to be consecutive. The highest years of production were identified separately from highest years of consumption (i.e., the three years need not match). The highest three years of production and consumption between 2011 and 2019 for every entity potentially receiving allowances were averaged to get a single pair of MTEVe values, one value for production and one for consumption, where relevant. If an entity only had one or two years of positive HFC production or consumption, EPA took that one year or the average of those two years, respectively, rather than treating the missing year(s) of data as zero in the average calculation.
Step 12: EPA determined allocations for each entity. All entity production averages were added together for an industry-wide production total of 357,838,394 MTEVe. The same was done for consumption averages to determine a consumption total of 383,412,342 MTEVe. Each entity’s production and consumption average was divided by these industry-wide totals, respectively, to determine a relative percentage of production and consumption allowances. This percentage was then multiplied by the amount of production or consumption allowances available in 2020, less the set-aside and application-specific allowance amounts, to get entity-specific production and consumption allocations in MTEVe. Allocations were rounded to the one-tenth of a MTEVe after all calculations were completed.
The entity level allowance calculations were performed separately by three different EPA employees, one using the R statistical programming language and two using Excel formulas. The results of all three analyses were compared to ensure consistency. Additional spot checks were conducted to ensure the accuracy of the data.
What was the Methodology for Issuing 2022 Application-specific Allowances?
EPA describes the approach for allocating application-specific allowances in Section VII of the final rule published October 5, 2021 (see the Federal Register Notice, particular Section VII.C). The regulation also includes regulatory text at 40 CFR 84.13 describing the process and criteria for issuing allowances. The methodology EPA employed for allowances issued on October 1, 2021, includes the following steps.
Step 1: In order to calculate application-specific allowance quantities for each entity, EPA looked to verified data. Specifically, EPA considered data verified based on submitted consumption data, invoices, shipping documentation, purchase orders, purchase receipts, goods receipts, sales data, or units/quantities received from manufacturers or suppliers multiplied by the amount of HFCs in each unit of that product (e.g., the number of MDIs acquired in a given year multiplied by the average quantity and type of HFC in each unit).
Step 2: EPA converted the HFCs in kg to exchange value-weighted quantities and calculated sums of annual verified quantities for each entity and across applications.
Step 3: EPA calculated application-wide average annual growth rates (AAGRs) based on verified data in 2018 through 2020. In order to do this, first EPA removed chemical-specific HFC data from application-wide totals for entities where supporting documentation for their data was not provided or was incomplete (e.g., an entity was only able to provide some of its invoices in a given year). Inclusion of data that was incomplete would skew the average annual growth rates by creating the appearance of an artificially low number in one year—resulting in a higher growth rate than was actually realized. If EPA confirmed that an entity purchased zero HFCs, the zero value was kept in the application-wide totals.
EPA then summed all exchange value-weighted HFC quantities by application for each year. In order to calculate an application-wide AAGR, EPA used the following formula:
Step 4: EPA used the following formula to calculate entity-specific average annual growth rates for each entity with verified data for 2018, 2019, and 2020:
For entities that failed to provide supporting documentation to allow EPA to verify data for all three years, whether fully or partially, based on comparisons to the information they submitted in their questionnaire or from correspondence, EPA applied the application’s AAGR between 2018-2020 to the 2020 purchase value.
For entities that were missing data or provided incomplete data in any year, EPA applied the application’s AAGR between 2018-2020 to the 2020 verified value. If EPA verified that a company had zero HFCs in any year for all HFCs, the Agency was unable to calculate an entity-specific growth rate for them using the above formula (i.e., a growth rate cannot be calculated when there is a zero in the denominator).
Step 5: To determine an individual entity’s allocation, EPA generally multiplied the entity’s 2020 data by the higher of the entity’s average annual growth rate or the application’s average annual growth rate, after squaring that growth rate to account for two years of growth (between 2020 and 2022).
If a company was only able to provide data for 2020, EPA multiplied their 2020 HFC purchases by the square of the application AAGR.
If the average annual growth rate was negative for an entity and for the application, EPA allocated allowances equal to the highest quantity of HFCs reported over the three years between 2018-2020. EPA applied the same approach to a company that did not provide supporting documentation for HFC purchases for 2020 or 2018, but provided an explanation that they continue to use HFCs and purchase HFCs irregularly (e.g., every other year).
Step 6: As described in the final rule, EPA also considered individual unique circumstances that may merit an increased allocation beyond historical growth rates if sufficiently documented. In this allocation, EPA considered the following circumstances as meriting additional allowances:
- Demonstrated increases in manufacturing projected for the next calendar year; or
- The acquisition of another domestic manufacturer or its manufacturing facility or facilities.
Some entities requested allowances additional to their historic growth rate because of new manufacturing plants or expanded manufacturing lines scheduled to come online within the next calendar year. In such situations, EPA requested projections of quantities of additional HFCs needed by month and estimated start dates. EPA required that entities provide sufficient documentation to show this increased manufacturing capacity, and accepted documentation such as news articles and building permits.
Similarly, some entities requested additional allowances for new products that they expect to produce in 2022 beyond what would be calculated from historic growth rates.
For entities that made an allowance level request based on acquiring another entity, EPA accepted supporting documentation such as an SEC 8-K filing and confirmed with the acquired entity that all of its manufacturing facilities had been acquired. EPA relied on data from the acquired entity to determine allowances that were allocated to the current owner.
Step 7: For final allowance calculations, EPA did the following:
- For entities requesting additional allowances due to the construction of a new facility or manufacturing capacity, EPA calculated an allocation based on average growth rate, as outlined in Steps 2, 3, and 4, and added additional allowances to account for new construction if verified.
- For entities requesting additional allowances for new products that they expect to produce in 2022, EPA added to quantities calculated in steps 2, 3, and 4 based on their requests in the same manner as reviewing data on new manufacturing capacity.
- For entities requesting additional allowances due to the acquisition of another entity that also submitted data, EPA combined their values from Step 2 before calculating their AAGRs.
- For all other entities, except the Department of Defense (DOD), EPA calculated final quantities as outlined in Step 5.
- EPA did not include entities that do not use HFCs in one of the applications included in subsection (e)(4)(B)(iv).