While the Biden administration’s reentry into the Paris Accord received most of the attention, another climate-related international measure also got a jump start after stalling for four years under President Trump—the Kigali Amendment to the Montreal Protocol on Substances that Deplete the Ozone Layer. This provision would commit the U.S. to measures that will boost the cost of air conditioning and refrigeration and hand a competitive advantage to China and other industrial competitors around the world. The president announced that the State Department will initiate the process of preparing the Kigali Amendment for transmittal to the Senate for the required ratification vote.
Specifically, the Kigali Amendment would restrict future production of hydrofluorocarbons (HFCs) on the grounds that they contribute to climate change. HFCs are the refrigerants used in hundreds of millions of home and vehicle air conditioners, and are also used in millions of businesses from the refrigeration equipment in food stores and restaurants to the industrial process refrigeration systems required in many manufacturing processes. Under Kigali, repairs of this equipment will become more expensive as HFC supplies dwindle and prices rise. New equipment will also rise in price as it will have to be redesigned to use one of the environmentally acceptable alternative refrigerants, many of which cost considerably more.
Not surprisingly, Honeywell and Chemours, two companies that have patented a number of HFC substitutes, have joined environmental activists in lobbying hard for the Kigali Amendment. One such substitute, called HFO-1234yf, costs nearly 10 times more than the HFC it would replace in vehicle air conditioners and other equipment.
Kigali’s winners and losers are clear. Many of the companies in the air conditioning and refrigeration equipment sector that expect to charge more for their products will come out ahead, but they do so at the expense of the far larger number of consumers and businesses that rely on such equipment and will bear the higher costs.
Unfortunately, Congress recently committed to domestic restrictions on HFCs that are nearly identical to those in the Kigali amendment. They did so as part of the massive year-end spending/COVID relief package. This lame duck measure was slipped in with virtually no debate.
Nonetheless, there are reasons why ratification of the overlapping international obligations under the Kigali amendment would make matters worse. As it is, when Congress starts to hear from angry homeowners, car owners, and businesses about rising air conditioning and refrigeration costs, they may choose to modify the domestic HFC measures to provide some relief, if not scrap them entirely. However, ratification of the Kigali Amendment puts the United Nations in charge of the policy and thus makes any such relief difficult if not impossible.
Beyond costs, the Kigali Amendment also gives an unfair advantage to China and other industrial competitors of the U.S. China is classified as a developing nation under Kigali, and as such it is subject to much more lenient treatment. For example, developing nations can continue producing HFCs for a decade longer than the U.S. and other developed nations. This includes their use in industrial processes that give manufacturers in China an edge over their American-based counterparts. Developing nations are also eligible for financial assistance to help comply with the Kigali Amendment from a special U.N. fund set up for that purpose. The U.S. is the single largest contributor to that fund, so it is likely that China will be the recipient of millions of dollars in foreign aid from the U.S. under Kigali.
Despite the costs and the fairness issues, stopping the Kigali Amendment faces an uphill battle in the Senate, where it needs 67 votes to pass. Likely joining Democrats are 13 Republican Senators who have thus far expressed support for HFC restrictions. Many have been convinced by far-fetched claims that these measures will create more American jobs by increasing exports, though net jobs losses are much more likely.
First of all, domestic manufacturers who believe there is a global market for these new environmentally friendly products are free to cater to that demand, and they can do so with or without the Kigali Amendment. These provisions create no new export opportunities and only serve to limit what can be sold in the United States.
Furthermore, many developing nations—where most of the refrigeration and air conditioning demand growth is expected to occur—are on record that they plan to continue using the more affordable HFCs for the foreseeable future and are in no hurry to switch to pricier alternatives.
Additionally, most of these companies making promises of American manufacturing jobs have in reality been aggressively outsourcing these jobs, and this trend is unlikely to reverse upon passage of the Kigali amendment. In truth, restrictions on HFCs have nothing to do with increasing jobs and exports and everything to do to with creating a captive market in the U.S. for more expensive air conditioning and refrigeration.
The schedule for submitting the Kigali Amendment to the Senate is yet to be set. Until then, it is a race against time to get these Senators to realize what they would be voting for.