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Businesses Critical of Costly Climate Bill Finally Get to Weigh In

The American Manufacturing and Innovation (AIM) Act (S. 2754) would limit the production of hydrofluorocarbons (HFCs), the class of chemicals used as refrigerants in most air conditioning and refrigeration equipment, as well as for other purposes. It would do so on the grounds that HFCs contribute to climate change. The Senate Committee on Environment and Public Works, in lieu of a cancelled March 25 hearing on the bill, allowed for written comments from interested parties, all of which can be found here. The Competitive Enterprise Institute’s comment can be found here.

As can be seen from a number of comments, the bill is supported by a powerful coalition of environmental groups and rent-seeking corporations that want a captive market for more expensive refrigerants and equipment. They are led by Honeywell, which has patented a number of replacements for HFCs that already carry a cost premium that would likely rise further once HFCs are pushed out of the marketplace. These supporters of the AIM Act claim near-universal support within in the business community. However, a surprisingly large number of industry commenters were critical of the bill’s provisions, and this was their first real chance to weigh in on them.

Perhaps most significant are the comments from manufacturers. Many supporters of the AIM Act repeated their claim that it would benefit American manufacturers and create 33,000 jobs, so it is noteworthy how many manufacturers see the bill as a potential jobs killer. This includes the National Environmental Development Association (NEDA), which represents a range of manufacturers in the aerospace, pharmaceuticals, petrochemicals, and home-care products industries. NEDA commented that many members rely on HFCs in industrial process chillers as well as other equipment. For these companies, the bill would raise repair costs and could necessitate premature replacements with costly systems designed to run on substitutes. NEDA was particularly concerned about the provision allowing the Environmental Protection Agency (EPA) to ban HFC production in as little as four years.

The Industrial Energy Consumers of America (IECA), which represents energy-intensive manufacturers, echoed many of these concerns and noted that the replacement equipment designed to run on HFC substitutes is both more expensive and less energy efficient. Thus, the bill would not only raise costs for American manufacturers, but may actually increase their greenhouse gas emissions. IECA further points out that the AIM Act’s provisions would put domestic manufacturers at a disadvantage against competitors in nations like China that do not face the same restrictions.

IECA also draws the important distinction between the manufacturers of refrigerants and cooling equipment, who want higher prices and thus stand to gain from the bill, and the larger number of manufacturers who are the users of such equipment and would be harmed by it. The former have loudly supported the bill since its introduction, but the latter have now begun to make their concerns known.

The largest individual company to raise concerns was aerospace giant Boeing. Its comment concedes that substitutes for HFCs are adequate for many applications, but asserts that HFCs are still needed in several key on-board applications, including fire extinguishers. Boeing focused on the safety concerns surrounding several substitutes, which, unlike HFCs, are classified as flammable and thus are of limited use in aircraft. Beyond Boeing, the Aerospace Industries Association raised the same issues on behalf of the companies it represents, suggesting that an exemption should be given to the sector. The current version of the bill allows only very limited exemptions and none prior to year 2034.

The safety concerns extend to the ground as well. For example, the National Automatic Merchandising Association, which represents the vending machine industry, notes that the use of flammable replacement refrigerants often runs up against building code issues, especially those applicable to public spaces where vending machines are located. Other commenters raised their own flammability concerns.

Motor vehicle air conditioners are also impacted, both the 150 million or more existing vehicles reliant on HFC-134a, as well as new ones using its replacement. The National Automobile Dealers Association warns of higher repair costs under the AIM Act. This includes higher HFC prices to fix leaks in current vehicles, higher costs of the replacement refrigerants in new systems, and potentially costly new equipment and time-consuming procedures in the repair process. They also joined many other commenters in complaining that the bill contains no state preemption provisions and thus could lead to both federal requirements as well as conflicting state ones. The Alliance for Automotive Innovation and Truck Engine Manufacturers Association raised similar concerns.

Even among manufacturers of air conditioning and refrigeration equipment, there were dissenting voices who found particular provisions poorly drafted or unnecessarily expansive.

The Association of Home Appliance Manufacturers (AHAM), which represents the makers of most domestic refrigerators and room air conditioners, raised concerns about the wording of the provision that, separate from the restrictions on production of HFCs, also allows the EPA to ban their use in any category of new equipment. AHAM also stated that the bill’s HFC restrictions may complicate compliance with other federal regulations impacting the same equipment, particularly the Department of Energy’s efficiency standards for appliances.

Commercial refrigeration equipment maker Illinois Tool Works pointed out that the bill’s open- ended provisions may lead to excessive EPA regulation of HFC substitutes.

The National Electrical Manufacturers Association, which makes many of the electronic components in air conditioning and refrigeration equipment, emphasized the need for sufficient time to make the transition and for any federal HFC standards to preempt a potential patchwork of conflicting state requirements.

Beyond cooling applications, HFCs have many specialized uses in sectors dominated by small manufacturers. For example, they are necessary for the manufacture of lightweight composite materials widely used in the boating industry and for other purposes. That is why the National Marine Manufacturers Association, which represents most of America’s boat builders, believes the industry needs to be exempted from the AIM Act. NMMA points that, without HFCs, boats would have to be built with heavier materials and thus be less energy efficient, which is counterproductive from a greenhouse gas emissions standpoint. Many individual boat and boat components makers in this small business-dominated sector also weighed in, including Grady-White Boats, Compsys, Structural Composites, and HCB Center Console Yachts. Wabash National raised the same issues regarding lightweight components used in truck trailers.

The bill threatens other specialty uses. For example, Iofina Chemical and Air Liquide, which produce an HFC used in the semiconductors industry, believe the bill as written would greatly jeopardize their business. Safariland and Security Equipment Corporation use HFCs as propellants in defense sprays. The Society of Chemical Manufacturers and Affiliates represents many companies using HFCs for numerous non-refrigerant purposes, and believes the bill needs to be revised to protect them.

The bill strongly favors large chemical companies at the expense of their smaller competitors. The New Era Group, which represents several small HFC manufacturers, criticized provisions that give away the valuable rights to produce the limited supply of future HFCs to a few major players based on historical production. ComStar International is one such small business HFC producer that feels disadvantaged by these provisions.

Granted, the beneficiaries of the AIM Act commented as well, and many maintained the façade that the business community speaks with one voice in support. But the large number of critical comments from a wide variety of businesses show that there are number of problems with the bill that need to be addressed.