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The High Cost Of Cool: The Economic Impact of the CFC Phaseout

Issue Analysis

Title

The High Cost Of Cool: The Economic Impact of the CFC Phaseout

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Chlorofluorocarbons (CFCs) are an important class of compounds. They have an impact on the life of nearly every American. Yet, as a result of environmental fears, their production will soon be eliminated - by the year 1996. In making this decision, little consideration was given to the costs of eliminating such a widely used class of compounds over a relatively short period of time.

This study examines the probable economic cost of the CFC phaseout on the refrigeration and air conditioning sector in the United States. The estimated cost of the CFC phaseout is $44.5 to $99.4 billion over the next decade. This estimate breaks down as follows (figures in billions):

  • Vehicle air conditioners — $28.0 - $42.0
  • Energy consumption — $ 0 - $32.1
  • Domestic refrigeration — $ 4.0 - $ 8.0
  • Commercial refrigeration — $ 3.0 - $ 5.4
  • Chillers — $ 4.4 - $ 5.0
  • HCFCs & HCFC Equipment — $ 5.1 - $ 6.9

Compliance with the law will impose large up-front costs on businesses and individuals. Much equipment will need to be replaced or modified (retrofitted).

After decades of fine-tuning and extensive field experience, air conditioning and refrigeration equipment using CFCs has become very reliable. In contrast, most CFC replacements are new, and manufacturers are still near the bottom of the learning curve in making the massive technological changes necessary.

Because of the accelerated phase-out, which provides a limited time frame in which to end dependence on CFCs, non-CFC systems are being rushed into use, despite many unsolved problems. In effect, a multi-billion dollar field test of experimental equipment is being conducted at consumer expense. The frequency of break downs, and the costs of repairs can be expected to increase for many applications.

The CFC phaseout may well be the single most expensive environmental measure taken to date. During the policy debate, the costs were underemphasized to the point that they never became an important factor. The impact on consumers was scarcely considered. It may be too late to reverse course on the CFC phaseout, but it can serve as a lesson for the future.