Freeze Date for Coolants: 2019

Disruptive innovation works in mysterious ways.

A climate agreement this past weekend in Rwanda–an extension of the 29-year-old Montreal Protocol that banned the use of ozone-layer depleting chlorofluorocarbons–will force a world-wide phase-out of chemicals in gas form known as hydrofluorocarbons, coolants used in air conditioners and refrigerators. Everywhere.

The housing connection is profound, impacting among the biggest brands in consumer appliances, HVAC systems, and insulation. On another level, however, there’s an object lesson for builders and developers on the design, development, distribution, and construction side of things when it comes to disruptive innovation, its sources and causes.

HFCs–doing business under names like R-134a, R-410A, and R-404A–are a No. 1-type offender among gases that accelerate global warming. Offending trappers of greenhouse gases are benchmarked with a measure called a Global Warming Potential or GWP, with Carbon Dioxide as the baseline index. CO2 has a GWP of 1 while the HFC R-134a has a GWP of 1,320.

The freeze date in the United States, an inflection point at which manufacturers have to stop increasing the use of HFCs as refrigerants and start increasing the use of climate-friendly ones, is 2019. And the United States Department of Environmental Protection Agency has set 2021 as a deadline for new non-HFC coolants in new AC and refrigerator units.

What’s happened here is that the Kigali meeting initiative has separated the market for air conditioners, refrigerators and other products into two types of incumbent, mostly successful companies.

One type will start investing in new research, supply chain sourcing, product design and engineering, and manufacturing processes to meet the new deadlines, which have the weight of law behind them. That’s going to be expensive, and the question among some industry observers is who will bear that cost.

Wall Street Journal staffers Andrew Tangel and Ted Mann note that appliance manufacturers are already on the hook to meet tougher energy-use hurdles, and are asking for more time before the “freeze date” on HFCs because the 2021 deadline will mean they’ll have to re-tool twice. Here, they quote Joe McGuire, chief executive of the Association of Home Appliance Manufacturers:

“Meeting the 2021 refrigerator deadline, instead of the 2024 date the industry proposed, could collectively cost manufacturers an additional $230 million, he added.”

The other “type” of company is already “there,” or capable of producing its product lines with coolant gases other than HFCs. They’ve been investing in understanding and producing alternative coolants, such as hydrofluoro-olefin (HFO)-based refrigerants. Honeywell, with its Solstice line of HFO coolants, and DuPont spin-off company Chemours-which is breaking ground as we speak on a $230 million plant investment in Ingleside, Tx, to produce its Opteon HFO portfolio–are among the first out of the gate in a big way.

So, it happens that the companies that have raced ahead in the development of HFC alternative coolants were also among the most enthusiastic backers of the rule change. They understand that this demand-driven “discontinuity”–a globally mandated cutover to a new portfolio of HFO and other chemical coolants–gives them a period of competitive advantage over those who will only now get started with their R&D.

New York Times staffers Hiroko Tabuchi and Danny Hakim write:

“They learned that without a rule change, their new products couldn’t compete,” said David Doniger, director of the Climate and Clean Air Program at the Natural Resources Defense Council, based in New York. “They woke up and said, ‘The science is real.’”

“We wanted them restricted for purely environmental reasons. The companies wanted them restricted for many other reasons,” including profit, Mr. Doniger said. “But the point is that they had a certain common interest with the international community.”

The chemical industry’s response stands in stark contrast to the foot-dragging, and in many cases the outright obstruction of climate regulations, by the big oil companies.

So, just like that, the 1987 Montreal Protocol has the clout and the teeth to serve as a global supply chain pivot point around a fundamental set of chemical ingredients used ubiquitously.

The fact that the moment–far from unexpected–has come and has created a gulf between companies who have anticipated it and invested in transformations that comply with or exceed its imperatives, applies to other areas closer to home.

Code and law around the safety–for people and the planet–of materials and what they add up to are ever-so-gradually catching up to where they need to to protect humans from themselves and their nearer-term self-interests. It’s only a matter of time before environmental law applies and gets enforced to attempt to protect future generations, and future capacity to generate healthy life on the planet.

And here we see fine examples of organizations who push for rule-changes that alter their own business models toward the interests of both the future health of people and the planet and the nearer-term profit opportunity for their stakeholders.

As Jacob Atalla, vp of sustainability at KB Home reminded us recently, Abraham Lincoln said, “The best way to predict your future is to create it.”