# Phasedown of Hydrofluorocarbons: Establishing the Allowance Allocation and Trading Program Under the American Innovation and Manufacturing Act > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2021-21030 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** October 5, 2021 - **Citation:** 86 FR 55116 ## Text ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 9 and 84 [EPA-HQ-OAR-2021-0044; FRL-8458-02-OAR] RIN 2060-AV17 Phasedown of Hydrofluorocarbons: Establishing the Allowance Allocation and Trading Program Under the American Innovation and Manufacturing Act AGENCY: Environmental Protection Agency (EPA). ACTION: Final rule. SUMMARY: The Environmental Protection Agency is issuing regulations to implement certain provisions of the American Innovation and Manufacturing Act, as enacted on December 27, 2020. This Act mandates the phasedown of hydrofluorocarbons, which are highly potent greenhouse gases, by 85 percent over a period ending in 2036. The Act directs the Environmental Protection Agency to implement the phasedown by issuing a fixed quantity of transferrable production and consumption allowances, which producers and importers of hydrofluorocarbons must hold in quantities equal to the amount of hydrofluorocarbons they produce or import. To establish the allowance allocation program, this rulemaking determines the hydrofluorocarbon production and consumption baselines, from which allowed production and consumption will decrease consistent with the statutory phasedown schedule; provides an initial approach to allocating calendar-year allowances and allowing for the transfer of those allowances; establishes provisions for the international transfer of allowances; and establishes recordkeeping and reporting requirements. Additionally, it establishes provisions to support implementation, compliance with, and enforcement of, statutory and regulatory requirements under the Act's phasedown provisions. Over the time period from 2022-2050, this rulemaking will avoid cumulative emissions of 4,560 million metric tons of exchange value equivalent of HFCs in the United States with a present value of cumulative net benefits of $272.7 billion. DATES: Effective dates: This rule is effective on November 4, 2021, except for amendatory instruction 3 adding 40 CFR part 84, which is effective on October 5, 2021. Operational dates: For operational purposes under the American Innovation and Manufacturing Act of 2020 (AIM Act or the Act), the regulatory text established in amendatory instruction 3, is operational as of September 23, 2021, and effective as of October 5, 2021. The remainder of this rule, and its associated regulatory text outlined in amendatory instructions 1, 2, and 4 through 10, is effective November 4, 2021. ADDRESSES: EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2021-0044. All documents in the docket are listed on the http://www.regulations.gov website. Although listed in the index, some information is not publicly available, e.g., Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the internet and will be publicly available only in hard-copy form. Publicly available docket materials are available electronically through http://www.regulations.gov. FOR FURTHER INFORMATION CONTACT: Andy Chang, U.S. Environmental Protection Agency, Stratospheric Protection Division, telephone number: 202-564-6658; email address: chang.andy@epa.gov . You may also visit EPA's website at https://www.epa.gov/climate-hfcs-reduction for further information. SUPPLEMENTARY INFORMATION: Effective dates: Portions of this rule are effective less than 30 days from publication in the Federal Register . Section 553(d) of the Administrative Procedure Act (APA), 5 U.S.C. chapter 5, generally provides that rules may not take effect earlier than 30 days after they are published in the Federal Register . As further discussed in Section II.B, this rule is covered by the rulemaking procedures in section 307(d) of the Clean Air Act (CAA). See CAA section 307(d)(1)(I); AIM Act subsection (k) (providing that section 307 of the CAA “shall apply to . . . any rule, rulemaking, or regulation promulgated . . . pursuant to the [AIM Act] as though [the AIM Act] were expressly included in title VI” of the CAA). Section 307(d)(1) of the CAA states that: “The provisions of section 553 through 557 . . . of Title 5 shall not, except as expressly provided in this section, apply to actions to which this subsection applies.” Thus, section 553(d) of the APA does not apply to this rule. EPA is nevertheless acting consistently with the policies underlying APA section 553(d) in making a portion of the revisions finalized in this rule effective immediately, while the remainder of the rule will be effective 30 days after publication. The purpose of the general rule in section 553(d) of the APA that 30 days must be provided between publication and the effective date is to “give affected parties a reasonable time to adjust their behavior before the final rule takes effect.” Omnipoint Corp. v. Fed. Commc'n Comm'n, 78 F.3d 620, 630 (D.C. Cir. 1996); see also United States v. Gavrilovic, 551 F.2d 1099, 1104 (8th Cir. 1977) (quoting legislative history). Accordingly, in determining if there is “good cause” to forgo the 30-day delayed effective date per the exception at section 553(d)(3), an agency should “balance the necessity for immediate implementation against principles of fundamental fairness which require that all affected persons be afforded a reasonable amount of time to prepare for the effective date of its ruling.” Gavrilovic, 551 F.2d at 1105. Here, EPA has determined that the portions of this rule that are effective less than 30 days from publication in the Federal Register are not binding on any third parties, and therefore the above-stated purpose of the 30-day effective date delay is not relevant to the consideration here. The provisions of the rule taking immediate effect are only binding on the Agency in how it will determine allowance allocations, and the AIM Act establishes a deadline for these determinations, namely that by October 1 of each calendar year EPA must calculate and determine the quantity of production and consumption allowances for the following year. In addition, having these provisions become operational immediately upon signature will allow EPA to make determinations regarding allowance allocations earlier than if the effective date were delayed, which in turn will facilitate earlier notification to regulated entities about what their allowance allocation will be and provide them more time to plan accordingly. Thus, EPA's action is consistent with the APA's provision for an effective date of less than 30 days where an agency demonstrates good cause to do so. Accordingly, it is in keeping with the policy underlying the APA for regulatory text in 40 CFR 84.3, 84.7, 84.9, 84.11, 84.13, 84.15, and 84.31(h)(2) and (3), to take effect immediately. Finally, this rule undertaken in accordance with section 307(d) of the CAA is promulgated upon signature and widespread dissemination. For operational purposes under the AIM Act, EPA is making the regulatory text established in 40 CFR 84.3, 84.7, 84.9, 84.11, 84.13, 84.15, and 84.31 (h)(2) and (3) operational as of September 23, 2021, which is the date of signature. Acronyms and Abbreviations. Throughout this document, whenever “we,” “us,” “the Agency,” or “our” is used, we mean EPA. Acronyms that are used in this rulemaking that may be helpful include: AD/CVD—Anti-Dumping/Countervailing Duties AIM Act—American Innovation and Manufacturing Act of 2020 ANPRM—Advanced Notice of Proposed Rulemaking APA—Administrative Procedure Act CAA—Clean Air Act CBI—Confidential Business Information CBP—Customs and Border Protection CFC—Chlorofluorocarbon CO 2 —Carbon Dioxide CVD—Chemical Vapor Deposition DRE—Destruction and Removal Efficiency ECHO—Enforcement and Compliance History Online e-GGRT—Electronic Greenhouse Gas Reporting Tool EFCTC—European FluoroCarbons Technical Committee EPA—Environmental Protection Agency EVe—Exchange Value Equivalent GHG—Greenhouse Gas GHGRP—Greenhouse Gas Reporting Program GWP—Global Warming Potential HCFC—Hydrochlorofluorocarbon HFC—Hydrofluorocarbon HFO—Hydrofluoroolefin IPCC—Intergovernmental Panel on Climate Change IWG—Interagency Working Group MDI—Metered Dose Inhaler MMTCO 2 eq—Million Metric Tons of Carbon Dioxide Equivalent MMTEVe—Million Metric Tons of Exchange Value Equivalent MT—Metric tons MTCO 2 eq—Metric Tons of Carbon Dioxide Equivalent MVAC—Motor Vehicle Air Conditioning NAICS—North American Industry Classification System NATA—National Air Toxics Assessment NODA—Notice of Data Availability NPRM—Notice of Proposed Rulemaking NRC—National Research Council ODP—Ozone Depletion Potential ODS—Ozone-Depleting Substances RACA—Request for Additional Consumption Allowance RIA—Regulatory Impact Analysis RSEI-GM—Risk-Screening Environmental Indicators Geographic Microdata SC-GHG—Social Cost of Greenhouse Gases SC-HFCs—Social Costs of Hydrofluorocarbons TRI—Toxics Release Inventory TSCS—Toxic Substances Control Act UNFCCC—United Nations Framework Convention on Climate Change USGCRP—United States Global Change Research Program WMO—World Meteorological Organization This supplementary information section is arranged as follows: I. Executive Summary A. Purpose of the Regulatory Action B. Summary of the Major Provisions of the Regulatory Action C. Costs and Benefits II. General Information A. Does this action apply to me? B. What is the Agency's authority for taking this action? III. Background A. What are HFCs? B. How do HFCs affect public health and welfare? IV. How is EPA considering environmental justice? V. What definitions is EPA establishing to implement the AIM Act? VI. How is EPA establishing the HFC production and consumption baselines? A. What are the components of the production and consumption baselines? 1. How is EPA determining the HFC component of the production and consumption baselines? 2. What is the HFC component of the production and consumption baselines? 3. What are the HCFC and CFC components of the production and consumption baselines? B. What are the final HFC production and consumption baselines? VII. How is EPA establishing allowances? A. What is an allowance? B. How is EPA determining allowance allocations? 1. Which years is EPA issuing allowances for? 2. Which companies is EPA issuing allowances to? 3. What is EPA's framework for determining how many allowances each company receives? 4. What is EPA's framework for issuing allowances? 5. What process is EPA using to respond to requests for additional consumption allowances? C. What is the process for issuing application-specific allowances? 1. Who is EPA issuing application-specific allowances to? 2. How is EPA addressing transfers of application-specific allowances? 3. What criteria is EPA using to evaluate application-specific allowance requests? 4. How is EPA issuing application-specific allowances for mission-critical military end uses? D. What are the provisions for transferring allowances? E. How is EPA establishing the set-aside pool of allowances? 1. Who is eligible for allowances in the set-aside pool? a. Application-Specific End Users b. Previously Unidentified Importers c. New Market Entrants d. Suggested Additional Entities Eligible for Set-Aside Allowances 2. How large is the set-aside pool, and what are the applicable limits for applicants? 3. How will transfers and unused allowances be treated in the set-aside pool? 4. What is the deadline to apply for allowances from the set-aside pool, and what information is required? VIII. What other elements of the AIM Act is EPA addressing in this rulemaking? A. How is EPA addressing international trades or transfers of HFC allowances? B. What HFC destruction technologies is EPA approving? C. What is EPA requiring for HFC-23 emission controls? IX. What enforcement and compliance provisions is EPA finalizing? A. What potential administrative consequences are available to EPA with respect to allowances? 1. What are the administrative consequences? 2. What action could merit an administrative consequence? 3. How would EPA apply the administrative consequences? 4. What is the process for notifying and responding to proposed administrative consequences? B. How is EPA transitioning to refillable cylinders? 1. Background 2. What is EPA's authority for prohibiting disposable cylinders? 3. How is EPA implementing the transition to refillable cylinders? 4. What are the costs of prohibiting disposable cylinders? 5. What are the additional benefits of transitioning to only refillable cylinders? 6. How is EPA responding to public comments? 7. Treatment of Small Cans With Self-Sealing Valves 8. Compliance Dates C. What are the labeling requirements? D. What is EPA requiring for auditing? E. Petitions To Import HFCs as a Feedstock or for Destruction F. What other limitations are there on imports of HFCs? 1. Ban on Importing Feedstock HFCs in Cylinders 2. Imports of Heels 3. Transhipments G. How is EPA tracking the movement of HFCs? H. What reporting is required to support real-time review of imports? X. What are the recordkeeping and reporting requirements? A. What are the generally applicable recordkeeping and reporting provisions? B. How is EPA responding to comments on the proposed recordkeeping and reporting provisions? C. How will EPA treat HFC data collected under the AIM Act? 1. Which specific data elements are not entitled to confidential treatment? 2. Which data elements has EPA determined are entitled to confidential treatment? 3. How will EPA aggregate data for release? XI. What are the costs and benefits of this action? XII. Statutory and Executive Order Review I. Executive Summary A. Purpose of the Regulatory Action EPA is issuing regulations to implement certain provisions of the American Innovation and Manufacturing (AIM) Act, as enacted on December 27, 2020. The Act mandates the phasedown of hydrofluorocarbons (HFCs), which are highly potent greenhouse gases (GHGs), by 85 percent over a period ending in 2036. The Act directs EPA to implement the phasedown by issuing a fixed quantity of transferrable production and consumption allowances, which producers and importers of HFCs must hold in quantities equal to the amount of HFCs they produce or import. To establish the allowance allocation program, this rulemaking establishes HFC production and consumption baselines, codifies the statutory phasedown schedule of allowed production and consumption relative to the baseline level, provides an initial approach to allocating calendar-year allowances and allowing for the transfer of those allowances, establishes provisions for the international transfer of allowances, and establishes recordkeeping and reporting requirements. Additionally, it establishes provisions to support implementation, compliance with, and enforcement of, statutory and regulatory requirements under the AIM Act's phasedown provisions. The AIM Act directs EPA to issue a final rule accomplishing these Congressionally directed tasks by September 23, 2021. Additionally, under the AIM Act, by October 1 of each calendar year EPA must calculate and determine the quantity of production and consumption allowances for the following year. EPA intends to issue allowances for the 2022 calendar year no later than October 1, 2021, using the procedure established through this rulemaking, and intends to issue individual allowances for the 2023 calendar year no later than October 1, 2022, using the procedure established through this rulemaking. The AIM Act further directs EPA to issue a final rule by September 23, 2021, governing the transfer of production and consumption allowances. The AIM Act also directs EPA to issue regulations by December 27, 2021, related to the international transfer of production allowances. This final rule addresses these statutory directives as well. B. Summary of the Major Provisions of the Regulatory Action Baselines: This rule establishes the HFC production and consumption baselines from which the phasedown steps are measured. Using the equation provided in the AIM Act, and based on the data available to the Agency through the Greenhouse Gas Reporting Program (GHGRP) and outreach conducted for this rulemaking, EPA determines that the production baseline is 382.6 Million Metric Tons of Exchange Value Equivalent (MMTEVe) and the consumption baseline is 303.9 MMTEVe. Allocation: The total annual allocations for 2022 and 2023 are 344.3 MMTEVe of production allowances and 273.5 MMTEVe of consumption allowances. EPA intends to issue allowances for 2022 by October 1, 2021, according to the framework and procedure established through this rulemaking. Company production and consumption allowance allocations are based on the three highest years (not necessarily consecutive) of production or consumption between 2011 and 2019. EPA is issuing allowances to active HFC producers and importers operating in 2020 and is giving individualized consideration to circumstances of historical importers that were not active in 2020. EPA is establishing the allowance allocation framework for two years and intends to undertake a subsequent rulemaking to govern allocations for calendar years 2024 and beyond. Application-specific Allowances: EPA is issuing “application-specific allowances” to end users in six applications established by the AIM Act: Propellants in metered dose inhalers (MDIs), defense sprays, structural composite preformed polyurethane foam for marine use and trailer use, etching of semiconductor material or wafers and the cleaning of chemical vapor deposition (CVD) chambers within the semiconductor manufacturing sector, mission-critical military end uses, and onboard aerospace fire suppression. The rule details the framework for how many allowances are issued for each end use. End users within a specific application may transfer their allowances only with another end user in that same application. Allowances may also be conferred, as frequently as needed, to effectuate the production or import of HFCs for that specific use. Set-Aside Allowances: EPA is establishing a set-aside pool of 7.5 MMTEVe (less than 3 percent of allowances to be allocated for 2022) that is available to three groups of companies: (1) End users in application-specific sectors that EPA has not yet identified or verified by the date of the final rule, (2) importers that otherwise would have qualified for consumption allowances but are not yet identified or verified by the date of the final rule, and (3) importers that are new market entrants. Companies seeking to receive allowances via the set-aside should submit applications by November 30, 2021. HFC-23 Controls: By the established compliance date, entities that create HFC-23 must capture the HFC-23 and either (1) expend production and consumption allowances for the amounts sold for consumptive uses and/or (2) timely destroy the captured HFC-23 using a technology approved by the Administrator. As compared with the amount of chemical intentionally produced on a facility line, no more than 0.1 percent of HFC-23 created on the line may be emitted after the compliance date. Enforcement and Compliance: EPA is finalizing a multifaceted approach to deter, identify, and penalize illegal activity. These tools include administrative consequences for allowance holders, requiring use of refillable cylinders, increased oversight of imports including transhipments and HFCs imported for transformation, comprehensive tracking of containers of HFCs as they are imported, sold and distributed, and third-party auditing. EPA has also determined that much of the quarterly production and consumption data provided to the Agency will not be provided confidential treatment and will be affirmatively released without further process. This data transparency will incentivize compliance and allow the public and competing companies to identify and report noncompliance to EPA. C. Costs and Benefits EPA has estimated the costs and benefits of this action to provide the public with information and to comply with executive orders. EPA estimates that in 2022 the annual net benefits of this rule are $1.7 billion, reflecting compliance costs associated with recordkeeping and reporting and refillable cylinders and cost savings due to lower refrigerant replacement costs and reduced energy consumption of $300 million and social benefits of $1.4 billion. In 2036, when the final phasedown step is reached at 15 percent of the statutorily defined HFC baseline, the estimated annual net benefits of this rule are $16.4 billion. The present value of cumulative net benefits evaluated from 2022 through 2050 is $272.7 billion at a three percent discount rate or $260.9 billion at a seven percent discount rate. Over the same time period the equivalent annualized value (EAV) of benefits is $13.6 billion when using a 3 percent discount rate; the EAV of costs is negative $0.6 billion when using a 3 percent discount rate and negative $0.5 billion when using a 7 percent discount rate; and the EAV of cumulative net benefits over the period 2022-2050 is $14.2 billion when using a 3 percent discount rate and $14.1 billion when using a 7 percent discount rate. 1 The present value of net benefits is calculated over the 29-year period from 2022-2050 to account for additional years that emissions will be reduced following the consumption reductions from 2022-2036. 1 All values for costs and benefits in this section are given in 2020 dollars and are calculated by discounting future costs and benefits to 2022 using a three percent discount rate. Calculations using other discount rates and discussion of the impact of the discount rate are found in the Regulatory Impact Analysis. Table 1—Summary of Annual Values, Present Values, and Equivalent Annualized Values for the 2022-2050 Timeframe for Estimated Abatement Costs, Benefits, and Net Benefits for the Final Rule [Billions of 2020$, discounted to 2022] a b Year Climate benefits (3%) c d Costs c 3% 7% Net benefits 3% 7% Present Value $260.9 −$11.8 −$6.4 $272.7 $267.4 Equivalent Annualized Value 13.6 −0.6 −0.5 14.2 14.1 a Rows may not appear to add correctly due to rounding. b The annualized present value of costs and benefits are calculated over a 29-year period from 2022 to 2050. c The costs presented in this table are consistent with the costs presented in RIA Chapter 3, Table 3-6. d Climate benefits are based on changes (reductions) in HFC emissions and are calculated using four different estimates of the SC-HFCs (model average at 2.5 percent, 3 percent, and 5 percent discount rates; and 95th percentile at 3 percent discount rate). The IWG emphasized, and EPA agrees, on the importance and value of considering the benefits calculated using all four estimates. As discussed in the Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive Order 13990 (IWG 2021), a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, are also warranted when discounting intergenerational impacts. Over the 15-year period of the phasedown of HFCs, at a three percent discount rate, the present value of cumulative compliance costs is negative $5.4 billion, or $5.4 billion in savings; the present value of cumulative social benefits is $94.8 billion; and the present value of cumulative net benefits is $100.2 billion. Evaluated at a seven percent discount rate, the present value of cumulative compliance costs is negative $3.7 billion, or $3.7 billion in savings, and the present value of cumulative net benefits is $98.5 billion. Over the time period of 2022-2036 the EAV of benefits is $7.9 billion when using a 3 percent discount rate; the EAV of costs is negative $0.5 billion when using a 3 percent discount rate and negative $0.4 billion when using a 7 percent discount rate; and the EAV of cumulative net benefits is $8.4 billion when using a 3 percent discount rate and $8.3 billion when using a 7 percent discount rate. EPA estimates that for the years 2022-2036 this action will avoid cumulative consumption of 3,152 MMTEVe of HFCs in the United States. The annual consumption avoided is estimated at 42 MMTEVe in the year 2022 and 282 MMTEVe in 2036. In order to calculate the climate benefits associated with consumption abatement, the consumption changes were expressed in terms of emissions reductions. EPA estimates that for the years 2022-2050 this action will avoid emissions of 4,560 MMTEVe of HFCs in the United States. The annual avoided emissions are estimated at 22 MMTEVe in the year 2022 and 171 MMTEVe in 2036. Climate benefits are based on changes (reductions) in HFC emissions and are calculated using four different estimates of the social costs of HFCs (SC-HFCs) (model average at 2.5 percent, 3 percent, and 5 percent discount rates; and 95th percentile at 3 percent discount rate). The SC-HFCs estimates used in this analysis were developed using methodologies consistent with the methodology underlying the Interagency Working Group on the Social Cost of Greenhouse Gases' (IWG) interim estimates of the social cost of other greenhouse gases (social cost of carbon SC-CO 2 , social cost of methane SC-CH 4 , and social cost of nitrous oxide SC-N 2 O) that were developed over many years, using a transparent process, peer-reviewed methodologies, the best science available at the time of that process, and with input from the public. The benefits presented in this paragraph are the benefits associated with the average SC-HFCs at a 3 percent discount rate, but the Agency does not have a single central SC-HFCs point estimate. The IWG emphasized the importance and value of considering the benefits calculated using all four estimates. As summarized further in Section XI of the preamble and described more fully in the Regulatory Impact Analysis (RIA), EPA's analysis indicates the principal costs (or savings) result from industry transitioning to substitute chemicals and technology. The principal benefits result from a decrease in emissions of HFCs into the atmosphere and the corresponding effects on global warming. The benefits are monetized by using the SC-HFCs. SC-HFCs is estimated using a method consistent with the method used to estimate the Social Cost of Greenhouse Gases (SC-GHGs). An alternative method was also considered that estimates SC-HFCs by using the global warming potential (GWP) (or exchange value) of HFCs and scaling to the known social cost of another GHG, e.g., CO 2 , CH 4 , or N 2 O. II. General Information A. Does this action apply to me? You may be potentially affected by this action if you produce, import, export, destroy, use as a feedstock, reclaim, package, or otherwise distribute HFCs. You may also be potentially affected by this rule if you use HFCs to manufacture products, such as refrigeration and air conditioning systems, foams, aerosols, and fire suppression systems, or use HFCs in one of the six applications eligible for an allocation under section (e)(4)(B)(iv) of the AIM Act. Potentially affected categories, by North American Industry Classification System (NAICS) code, are included in Table 2. Table 2—NAICS Classification of Potentially Affected Entities NAICS code NAICS industry description 211120 Crude Petroleum Extraction. 221210 Natural Gas Distribution. 236118 Residential Remodelers. 236220 Commercial and Institutional Building Construction. 238220 Plumbing, Heating, and Air-Conditioning Contractors. 238990 All Other Specialty Trade Contractors. 311351 Chocolate and Confectionery Manufacturing from Cacao Beans. 322299 All Other Converted Paper Product Manufacturing. 325120 Industrial Gas Manufacturing. 325180 Other Basic Inorganic Chemical Manufacturing. 325199 All Other Basic Organic Chemical Manufacturing. 325211 Plastics Material and Resin Manufacturing. 325320 Pesticide and Other Agricultural Chemical Manufacturing. 325412 * Pharmaceutical Preparation Manufacturing. 325414 * Biological Product (except Diagnostic) Manufacturing. 325992 Photographic Film, Paper, Plate and Chemical Manufacturing. 325998 All Other Miscellaneous Chemical Product and Preparation Manufacturing. 326150 * Urethane and Other Foam Product. 331420 Copper Rolling, Drawing, Extruding, and Alloying. 332312 Fabricated Structural Metal Manufacturing. 332313 Plate Work Manufacturing. 333132 Oil and Gas Field Machinery and Equipment Manufacturing. 333314 Optical Instrument and Lens Manufacturing. 333316 Photographic and Photocopying Equipment Manufacturing. 333413 Industrial and Commercial Fan and Blower and Air Purification Equipment Manufacturing. 333415 Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing. 333611 Turbine and Turbine Generator Set Unit Manufacturing. 333996 Fluid Power Pump and Motor Manufacturing. 334413 * Semiconductor and Related Device Manufacturing. 334419 * Other Electronic Component Manufacturing. 334515 Instrument Manufacturing for Measuring and Testing Electricity and Electrical Signals. 334516 Analytical Laboratory Instrument Manufacturing. 334613 Blank Magnetic and Optical Recording Media Manufacturing. 336212 * Truck Trailer Manufacturing. 336214 * Travel Trailer and Camper Manufacturing. 336411 * Aircraft Manufacturing. 336510 Railroad Rolling Stock Manufacturing. 336611 * Ship Building and Repairing. 336612 * Boat Building. 336992 * Military Armored Vehicle, Tank, and Tank Component Manufacturing. 339999 * All Other Miscellaneous Manufacturing. SIC 373102 * Military Ships, Building, and Repairing. 423120 Motor Vehicle Supplies and New Parts Merchant Wholesalers. 423450 Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers. 423460 Ophthalmic Goods Merchant Wholesalers. 423730 Warm Air Heating and Air-Conditioning Equipment and Supplies Merchant Wholesalers. 423740 Refrigeration Equipment and Supplies Merchant Wholesalers. 423830 Industrial Machinery and Equipment Merchant Wholesalers. 423860 * Transportation Equipment and Supplies (except Motor Vehicle) Merchant Wholesalers. 423990 * Other Miscellaneous Durable Goods Merchant Wholesalers. 424210 Drugs and Druggists' Sundries Merchant Wholesalers. 424410 General Line Grocery Merchant Wholesalers. 424610 Plastics Materials and Basic Forms and Shapes Merchant Wholesalers. 424690 Other Chemical and Allied Products Merchant Wholesalers. 424910 Farm Supplies Merchant Wholesalers. 441310 Automotive Parts and Accessories Stores. 443141 Household Appliance Stores. 443142 Electronics Stores. 444130 Hardware Stores. 446191 Food (Health) Supplement Stores. 452311 Warehouse Clubs and Supercenters. 453998 All Other Miscellaneous Store Retailers (except Tobacco Stores). 454110 Electronic Shopping and Mail-Order Houses. 481111 Scheduled Passenger Air Transportation. 482111 Line-Haul Railroads. 488510 Freight Transportation Arrangement. 493110 General Warehousing and Storage. 522293 International Trade Financing. 523130 Commodity Contracts Dealing. 531110 Lessors of Residential Buildings and Dwellings. 531120 Lessors of Nonresidential Buildings (except Miniwarehouses). 532420 Office Machinery and Equipment Rental and Leasing. 541330 Engineering Services. 541519 Other Computer Related Services. 541715 Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology). 561210 Facilities Support Services. 561910 Packaging and Labeling Services. 561990 All Other Support Services. 562920 Recovery and Reclamation. 722511 Full-Service Restaurants. 811219 Other Electronic and Precision Equipment Repair and Maintenance. 811412 Appliance Repair and Maintenance. 922160 * Fire Protection. * Codes marked with an asterisk may apply to sectors that receive application-specific allowances under the AIM Act. This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities that EPA is now aware could potentially be regulated by this action. Other types of entities not listed in the table could also be regulated. To determine whether your entity is regulated by this action, you should carefully examine the regulatory text at the end of this notice. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the FOR FURTHER INFORMATION CONTACT section. B. What is the agency's authority for taking this action? On December 27, 2020, the AIM Act was enacted as section 103 in Division S, Innovation for the Environment, of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260). 2 The AIM Act directs EPA to address HFCs by providing new authorities in three main areas: Phasing down the production and consumption of listed HFCs; managing these HFCs and their substitutes; and facilitating the transition to next-generation technologies by restricting use of these HFCs in the sector or subsectors in which they are used. This rulemaking focuses on the first area: The phasedown of the production and consumption of HFCs. 2 EPA interprets the phrase “under this section” in the AIM Act to refer to section 103 of the Consolidated Appropriations Act, 2021, and thus to mean “under the AIM Act.” This approach would be consistent with the language included in the Act, such as subsection (a) which states that “[t]his section may be cited as American Innovation and Manufacturing Act of 2020.” Subsection (e) of the AIM Act gives EPA authority to phase down the production and consumption of listed HFCs through an allowance allocation and trading program. The Act uses the term “produce” to mean “the manufacture 3 of a regulated substance from a raw material or feedstock chemical,” but excludes from that definition the destruction of HFCs using approved technologies; reclamation, reuse, or recycling of HFCs; and HFCs for transformation. 4 The Act uses the term “consumption” to refer to the amount of HFCs produced in and imported to the United States, subtracting the amount exported. 3 While the AIM Act and the definition in this rule use the term “manufacture” in defining the term “produce,” in implementing EPA's CAA title VI programs, the Agency has historically used the term “production” when referring to the manufacture of chemicals and “manufacture” when referring to the manufacture of equipment. EPA intends to continue using this framing when describing production of chemicals and manufacture of equipment under the AIM Act to help distinguish between the two activities. 4 The AIM Act uses the phrase “a regulated substance that is used and entirely consumed (except for trace quantities) in the manufacture of another chemical” instead of “transformation” in this definition. The quoted phrase mirrors the definition used in 40 CFR part 82, subpart A for the term “transform.” The AIM Act subsequently uses the terms “transformation” and “use as a feedstock” interchangeably. EPA interprets the use of these two terms in the statute as being intended to have the same meaning and accordingly EPA will use them interchangeably. The Act lists 18 saturated HFCs, and by reference any of their isomers not so listed, that are covered by the statute's provisions, referred to as “regulated substances” under the Act. Congress also assigned an “exchange value” 5 6 to each regulated substance (along with other chemicals that are used to calculate the baseline). The table in subsection (c)(1), reproduced here in Table 3, lists the 18 regulated substances and their exchange values. 5 EPA has determined that the exchange values included in subsection (c) of the AIM Act are identical to the GWPs included in IPCC (2007). EPA uses the terms “global warming potential” and “exchange value” interchangeably. One MMTEVe is therefore equivalent to one MMTCO 2 e. 6 IPCC (2007): Solomon, S., D. Qin, M. Manning, R.B. Alley, T. Berntsen, N.L. Bindoff, Z. Chen, A. Chidthaisong, J.M. Gregory, G.C. Hegerl, M. Heimann, B. Hewitson, B.J. Hoskins, F. Joos, J. Jouzel, V. Kattsov, U. Lohmann, T. Matsuno, M. Molina, N. Nicholls, J. Overpeck, G. Raga, V. Ramaswamy, J. Ren, M. Rusticucci, R. Somerville, T.F. Stocker, P. Whetton, R.A. Wood and D. Wratt, 2007: Technical Summary. In: Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [Solomon, S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M. Tignor and H.L. Miller (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. Available at https://www.ipcc.ch/report/ar4/wg1. Table 3—List of Regulated Substances and Their Exchange Values Chemical name Common name Exchange value CHF 2 CHF 2 HFC-134 1,100 CH 2 FCF 3 HFC-134a 1,430 CH 2 FCHF 2 HFC-143 353 CHF 2 CH 2 CF 3 HFC-245fa 1,030 CF 3 CH 2 CF 2 CH 3 HFC-365mfc 794 CF 3 CHFCF 3 HFC-227ea 3,220 CH 2 FCF 2 CF 3 HFC-236cb 1,340 CHF 2 CHFCF 3 HFC-236ea 1,370 CF 3 CH 2 CF 3 HFC-236fa 9,810 CH 2 FCF 2 CHF 2 HFC-245ca 693 CF 3 CHFCHFCF 2 CF 3 HFC-43-10mee 1,640 CH 2 F 2 HFC-32 675 CHF 2 CF 3 HFC-125 3,500 CH 3 CF 3 HFC-143a 4,470 CH 3 F HFC-41 92 CH 2 FCH 2 F HFC-152 53 CH 3 CHF 2 HFC-152a 124 CHF 3 HFC-23 14,800 The AIM Act requires EPA to phase down the consumption and production of the statutorily listed HFCs on an exchange value-weighted basis according to the schedule stated in (e)(2)(C) as shown in Table 4. The phasedown schedule begins on January 1 of each year. Table 4—Phasedown Schedule Date Percentage of production baseline Percentage of consumption baseline (percent) 2020-2023 90 90 2024-2028 60 60 2029-2033 30 30 2034-2035 20 20 2036 and thereafter 15 15 The AIM Act requires that the EPA Administrator ensure the annual quantity of all regulated substances produced or consumed 7 in the United States does not exceed the applicable percentage listed for the production or consumption baseline. 7 In the context of allocating and expending allowances, EPA interprets the word “consume” as the verb form of the defined term “consumption.” For example, subsection (e)(2)(A) states the phasedown consumption prohibition as “no person shall . . . consume a quantity of a regulated substance without a corresponding quantity of consumption allowances.” While a common usage of the word “consume” means “use,” EPA does not believe that Congress intended for every possible use of an HFC to require the expenditure of allowances. For example, we do not believe that Congress intended everyone who charges an appliance or fills an aerosol can with an HFC to expend allowances for that use. In order to execute this statutory directive, EPA must determine both a production and consumption baseline from which the yearly targets are calculated. The AIM Act provides formulas for how to set a baseline. The equations are composed of an HFC component, a hydrochlorofluorocarbon (HCFC) component, and a chlorofluorocarbon (CFC) component. Specifically, EPA is directed to calculate the production baseline by adding: (i) The average annual quantity of all regulated substances produced in the United States from January 1, 2011, through December 31, 2013, and (ii) 15 percent of the production level of HCFCs in calendar year 1989, and (iii) 0.42 percent of the production level of CFCs in calendar year 1989. EPA is directed to calculate the consumption baseline by adding: (i) The average annual quantity of all regulated substances consumed in the United States from January 1, 2011, through December 31, 2013, and (ii) 15 percent of the consumption level of HCFCs in calendar year 1989, and (iii) 0.42 percent of the consumption level of CFCs in calendar year 1989. To implement the directive that the production and consumption of regulated substances in the United States does not exceed the statutory targets, the AIM Act in subsection (e)(3) requires EPA to issue regulations within 270 days of the Act's enactment establishing an allowance allocation and trading program to phase down the production and consumption of the listed HFCs. These allowances are limited authorizations for the production or consumption of regulated substances. Subsection (e)(2)(D) directs EPA to “determine the quantity of allowances for the production and consumption of regulated substances that may be used for the following calendar year” by October 1 each year. Subsection (e)(2) of the Act has a general prohibition that no person 8 shall produce or consume a quantity of regulated substances in the United States without a corresponding quantity of allowances. Also, within 270 days, EPA is directed in subsection (g) to establish regulations governing the transfer of production and consumption allowances. Subsection (e)(2)(A) provides that no person shall hold, use, or transfer an allocated production or consumption allowance except in accordance with the transfer regulations. Under subsection (g), the transfer regulations are to use the applicable exchange values and “ensure that the transfers . . . will result in greater total reductions” in production and consumption “than would occur during the year in the absence of the transfers.” 8 Under the Act's term, this general prohibition applies to any “person.” Because EPA anticipates that the parties that produce or consume HFCs—and that would thus be subject to the Act's production and consumption controls—are companies or other entities, we frequently use those terms to refer to regulated parties. Using this shorthand, however, does not alter the applicability of the Act's requirements and prohibitions. Subsection (e)(4)(B)(iv) of the Act requires EPA to allocate allowances sufficient to meet the full quantity needed for production and consumption for six specific applications for five years following enactment. EPA is to determine the necessary allowance amount for these applications “based on projected, current, and historical trends.” The six statutorily listed applications are: Propellants in metered dose inhalers; defense sprays ( e.g., bear spray); structural composite preformed polyurethane foam for marine use and trailer use; etching of semiconductor material or wafers and the cleaning of CVD chambers within the semiconductor manufacturing sector; mission-critical military end uses; and onboard aerospace fire suppression. The allowances EPA allocates for these applications are for the “exclusive use” in one of the six applications. Subsection (j) of the AIM Act speaks to international cooperation. Of particular relevance to this rulemaking, subsection (j)(4) requires EPA to promulgate a rule by December 27, 2021, to carry out the subsection. The AIM Act contains several restrictions and requirements governing international transfers of production allowances in subsections (j)(1) and (j)(2) and also provides some discretionary authority to EPA in (j)(3) regarding the effect of such transfers on production limits. In subsection (k)(1)(A), the AIM Act provides EPA with the authority to promulgate necessary regulations to carry out EPA's functions under the Act, including its obligations to ensure that the Act's requirements are satisfied. Subsection (k) of the AIM Act explicitly makes certain sections of the CAA applicable to the AIM Act and regulations promulgated under its authority, stating “Sections 113, 114, 304, and 307 of the Clean Air Act (42 U.S.C. 7413, 7414, 7604, 7607) shall apply to this section and any rule, rulemaking, or regulation promulgated by the Administrator pursuant to this section as though this section were expressly included in title VI of that Act (42 U.S.C. 7671 et seq. ).” Accordingly, this rulemaking is subject to CAA section 307(d) (42 U.S.C. 7607(d)(1)(I)), which provides that CAA section 307(d) applies to “promulgation or revision of regulations under subchapter VI of this chapter (relating to stratosphere and ozone protection)” ( i.e., title VI of the CAA)). Violation of the requirements established in this rulemaking is subject to federal enforcement and the penalties laid out in CAA section 113 including, but not limited to, the penalties in section 113(b) for civil judicial enforcement and section 113(c) criminal penalties. In addition, although there is limited legislative history available on the AIM Act, Congress is generally presumed to legislate with an awareness of the existing law that is pertinent to enacted legislation. Given the similarities in the text, structure, and function of the production and consumption phasedown provisions of the AIM Act and EPA's program phasing out ozone-depleting substances (ODS) under title VI of the CAA, 9 EPA finds it reasonable to build on its experience phasing out ODS when developing the AIM Act's HFC allowance allocation and trading program, while also recognizing that there are areas where the AIM Act's requirements diverge from the text and framework of title VI of the CAA. There are many instances where the definitions and structure are either identical or have only slight differences. For example, the definitions of “import” in the AIM Act and CAA section 601 are materially similar though they have slightly different phrasing. In at least some instances, Congress adopted language in the AIM Act that matches EPA's implementation approach for ODS production and consumption controls under CAA title VI as reflected in 40 CFR part 82, subpart A. For example, the definition for “produce” in the AIM Act mirrors the parallel definition in CAA section 601 in many respects, but in contrast to the CAA definition, the AIM Act explicitly excludes the destruction of regulated substances using technologies approved by the Administrator from being counted in production. While the CAA definition does not explicitly exclude destruction from production, EPA's regulatory definition for “production” in 40 CFR 82.3 does exclude destruction from being counted as production. Throughout this rulemaking, EPA explains how the Agency is relying on and building from its experience implementing the ODS phaseout provisions in the CAA and its implementing regulations where such considerations are relevant to creating the framework structure for the AIM Act's required HFC allowance allocation and trading program. Given EPA's extensive experience phasing out ODS under similar CAA authority for a regulated community that bears marked resemblance to entities that could be impacted by this rulemaking, reliance on EPA's expertise will help achieve the goals required by Congress in implementing the AIM Act. 9 EPA's well-established regulatory program at 40 CFR part 82, subpart A, provides for the allocation of ODS production and consumption allowances, implementing the ODS production and consumption controls of title VI of the CAA and facilitating an orderly phaseout. III. Background A. What are HFCs? HFCs are anthropogenic 10 fluorinated chemicals that have no known natural sources. HFCs are used in the same applications that ODS have historically been used in, such as refrigeration and air conditioning, foam blowing agents, solvents, aerosols, and fire suppression. HFCs are potent GHGs with 100-year GWPs (a measure of the relative climatic impact of a GHG) that can be hundreds to thousands of times more potent than carbon dioxide (CO 2 ). 10 While the overwhelming majority of HFC production is intentional, HFC-23 can be a byproduct associated with the production of other chemicals, including but not limited to HCFC-22. Although HFCs represent a small fraction (~1.5 percent) of the current total GWP-weighted amount of GHG emissions, 11 their use is growing worldwide due to the global phaseout of ODS under the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol), and the increasing use of refrigeration and air conditioning equipment globally. HFC emissions had previously been projected to increase substantially over the next several decades, but global adherence to the Kigali Amendment to the Montreal Protocol (Kigali Amendment) would substantially reduce future emissions, leading to a peaking of HFC emissions before 2040. 12 11 World Meteorological Organization (WMO), Scientific Assessment of Ozone Depletion: 2018, World Meteorological Organization, Global Ozone Research and Monitoring Project—Report No. 58, 588 pp., Geneva, Switzerland, 2018. Available at https://ozone.unep.org/sites/default/files/2019-05/SAP-2018-Assessment-report.pdf. 12 Ibid. Atmospheric observations of most currently measured HFCs confirm their amounts are increasing in the global atmosphere at accelerating rates. Total emissions of HFCs increased by 23 percent from 2012 to 2016 and the four most abundant HFCs in the atmosphere, in GWP-weighted terms, are HFC-134a, HFC-125, HFC-23, and HFC-143a. 13 13 Ibid. In 2016, HFCs accounted for a radiative forcing of 0.025 W/m 2 , not including additional forcing from HFC-23 of 0.005 W/m 2 : This is a 36 percent increase in total HFC forcing relative to 2012. This radiative forcing was projected to increase by an order of magnitude to 0.25 W/m 2 by 2050, not including additional forcing from HFC-23. In 2016, in Kigali, Rwanda, countries agreed to adopt an amendment to the Montreal Protocol, known as the Kigali Amendment, which provides for a global phasedown of the production and consumption of HFCs. If the Kigali Amendment were to be fully implemented, it would be expected to reduce the future radiative forcing due to HFCs (excluding HFC-23) to 0.13 W/m 2 in 2050: A reduction of about 50 percent compared to the radiative forcing projected in the business-as-usual scenario of uncontrolled HFCs. 14 A global HFC phasedown consistent with the Kigali Amendment to the Montreal Protocol is expected to avoid up to 0.5 °C of warming by 2100. 15 14 Ibid. 15 Ibid. There are hundreds of possible HFC compounds. The 18 HFCs listed as regulated substances by the AIM Act are some of the most commonly used HFCs and have high impacts as measured by the quantity emitted multiplied by their respective GWPs. These 18 HFCs are all saturated, meaning they have only single bonds between their atoms and therefore have longer atmospheric lifetimes. In the United States, HFCs are used primarily in refrigeration and air conditioning equipment in homes, commercial buildings, and industrial operations (~75 percent of total HFC use in 2019) and in air conditioning in vehicles and refrigerated transport (~8 percent). Smaller amounts are used in foam products (~11 percent), aerosols (~4 percent), fire protection systems (~1 percent), and solvents (~1 percent). 16 16 Calculations are based on EPA's Vintaging Model, which estimates the annual chemical emissions from industry sectors that historically used ODS, including refrigeration and air-conditioning, foam blowing, solvents, aerosols, and fire suppression. The model uses information on the market size and growth for each end use, as well as a history and projections of the market transition from ODS to alternatives. The model tracks emissions of annual “vintages” of new equipment that enter into operation by incorporating information on estimates of the quantity of equipment or products sold, serviced, retired, or converted each year, and the quantity of the compound required to manufacture, charge, and/or maintain the equipment. Information on these estimates is available in U.S. EPA, April 2016, EPA Report EPA-430-R-16-002. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2014. Available at https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2014. EPA considered the emissions reductions from an HFC consumption phasedown in the United States and presented the results in the 2016 Biennial Report to the United Nations Framework Convention on Climate Change (UNFCCC). 17 At that time, EPA provided a reductions estimate of 113 million metric tons of carbon dioxide equivalent (MMTCO 2 e) of reduced HFC emissions in the United States associated with the implementation of an amendment proposal submitted in 2015 by the United States, Canada, and Mexico that was under consideration by the parties to the Montreal Protocol and was very similar to the Kigali Amendment. While the Kigali Amendment ultimately adopted under the Montreal Protocol has certain marked differences from the AIM Act, given that the two documents have a nearly identical list of HFCs to be phased down following the same schedule, the 2016 Biennial Report provides useful information. The Biennial Report included estimates for HFC actions under CAA section 612 modeled in the 2016 Current Measures scenario. HFC emissions reductions through additional measures in 2020 and 2025 relative to the 2016 Current Measures scenario were presented under the Additional Measures scenario and included both options for continued action under the CAA and the implementation of an HFC phasedown in the United States, which is similar to the requirements of the AIM Act with an earlier start date. 18 The emissions reductions for the Additional Measures scenario were estimated to be 63 MMTCO 2 e in 2020 and 113 MMTCO 2 e in 2025. 17 U.S. Department of State. Second Biennial Report of the United States of America Under the United Nations Framework Convention on Climate Change. Washington, DC, 2016. Available at http://unfccc.int/national_reports/biennial_reports_and_iar/submitted_biennial_reports/items/7550.php. 18 The Current Measures scenario in the Biennial Report included HFC reductions estimated under a rule EPA issued on July 20, 2015, under section 612 of the CAA, which, among other things, changed listings under the Significant New Alternatives Policy program for certain HFCs and blends from acceptable to unacceptable in various end uses in the aerosols, refrigeration and air conditioning, and foam blowing sectors. The Additional Measures scenario in the Biennial Report included additional actions that EPA anticipated under a proposed amendment to the Montreal Protocol to phase down HFC production and consumption, some of which were included in a rule EPA issued on December 1, 2016, under section 612 of the CAA. Since the 2016 Biennial Report, after a challenge to the 2015 rule, the U.S. Court of Appeals for the D.C. Circuit (“the court”) issued a partial vacatur of the 2015 rule “to the extent [it] requires manufacturers to replace HFCs with a substitute substance,” and remanded the rule to EPA for further proceedings. Later, the court issued a similar decision on portions of the rule issued December 1, 2016. See Mexichem Fluor, Inc. v. EPA, 760 F. App'x 6 (D.C. Cir. 2019) (per curiam). B. How do HFCs affect public health and welfare? As EPA has previously recognized, elevated concentrations of GHGs including HFCs have been warming the planet, leading to changes in the Earth's climate including changes in the frequency and intensity of heat waves, precipitation, and extreme weather events; rising seas; and, retreating snow and ice. Similarly, EPA has previously recognized that the changes taking place in the atmosphere are a result of the well-documented buildup of GHGs due to human activities and are changing the climate at a pace and in a way that threatens human health, society, and the natural environment. While EPA is not statutorily required to make any particular scientific or factual findings in order to regulate HFCs under the AIM Act's phasedown provisions, in this section EPA is providing some scientific background on climate change to offer additional context for this rulemaking and to help the public understand the environmental impacts of GHGs such as HFCs. Extensive additional information on climate change is available in the scientific assessments and the EPA documents that are briefly described in this section, as well as in the technical and scientific information supporting them. One of those documents is EPA's 2009 Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the CAA (74 FR 66496, December 15, 2009). 19 In the 2009 Endangerment Finding, the Administrator found under section 202(a) of the CAA that elevated atmospheric concentrations of six key well-mixed GHGs—CO 2 , CH 4 , N 2 O, HFCs, perfluorocarbons (PFCs), and sulfur hexafluoride (SF 6 )—”)—“may reasonably be anticipated to endanger the public health and welfare of current and future generations” (74 FR 66523, December 15, 2009). The 2009 Endangerment Finding, together with the extensive scientific and technical evidence in the supporting record, documented that climate change caused by human emissions of GHGs (including HFCs) threatens the public health of the population of the United States. It explained that by raising average temperatures, climate change increases the likelihood of heat waves, which are associated with increased deaths and illnesses (74 FR 66497, December 15, 2009). It noted that while climate change also increases the likelihood of reductions in cold-related mortality, evidence indicates that the increases in heat mortality will be larger than the decreases in cold mortality in the United States (74 FR 66525, December 15, 2009). The 2009 Endangerment Finding further explained that compared with a future without climate change, climate change is expected to increase tropospheric ozone pollution over broad areas of the United States, including in the largest metropolitan areas with the worst tropospheric ozone problems, and thereby increase the risk of adverse effects on public health (74 FR 66525, December 15, 2009). Climate change is also expected to cause more intense hurricanes and more frequent and intense storms of other types and heavy precipitation, with impacts on other areas of public health, such as the potential for increased deaths, injuries, infectious and waterborne diseases, and stress-related disorders (74 FR 66525 December 15, 2009). Children, the elderly, and the poor are among the most vulnerable to these climate-related health effects (74 FR 66498 December 15, 2009). 19 As noted in the NRPM for this action, in describing the 2009 Findings in this rulemaking, EPA is neither reopening nor revisiting them (see 86 FR 27516, May 19, 2021). The 2009 Endangerment Finding also documented, together with the extensive scientific and technical evidence in the supporting record, that climate change touches nearly every aspect of public welfare 20 in the United States with resulting economic costs, including: changes in water supply and quality due to changes in drought and extreme rainfall events; increased risk of storm surge and flooding in coastal areas and land loss due to inundation; increases in peak electricity demand and risks to electricity infrastructure; and the potential for significant agricultural disruptions and crop failures (though offset to some extent by carbon fertilization). These impacts are also global and may exacerbate problems outside the United States that raise humanitarian, trade, and national security issues for the United States (74 FR 66530, December 15, 2009). 20 The CAA states in section 302(h) that “[a]ll language referring to effects on welfare includes, but is not limited to, effects on soils, water, crops, vegetation, manmade materials, animals, wildlife, weather, visibility, and climate, damage to and deterioration of property, and hazards to transportation, as well as effects on economic values and on personal comfort and well-being, whether caused by transformation, conversion, or combination with other air pollutants.” 42 U.S.C. 7602(h). In 2016, the Administrator similarly issued Endangerment and Cause or Contribute Findings for greenhouse gas emissions from aircraft under section 231(a)(2)(A) of the CAA (81 FR 54422, August 15, 2016). 21 In the 2016 Endangerment Finding, the Administrator found that the body of scientific evidence amassed in the record for the 2009 Endangerment Finding compellingly supported a similar endangerment finding under CAA section 231(a)(2)(A), and also found that the science assessments released between the 2009 and the 2016 Findings “strengthen and further support the judgment that GHGs in the atmosphere may reasonably be anticipated to endanger the public health and welfare of current and future generations” (81 FR 54424, August 15, 2016). 21 As noted in the NRPM for this action, in describing the 2016 Findings in this rulemaking, EPA is neither reopening nor revisiting them (see 86 FR 27516, May 19, 2021). Since the 2016 Endangerment Finding, the climate has continued to change, with new records being set for several climate indicators such as global average surface temperatures, greenhouse gas concentrations, and sea level rise. Additionally, major scientific assessments continue to be released that further improve our understanding of the climate system and the impacts that GHGs have on public health and welfare both for current and future generations. According to the IPCC's Sixth Assessment Report, “it is unequivocal that human influence has warmed the atmosphere, ocean and land. Widespread and rapid changes in the atmosphere, ocean, cryosphere and biosphere have occurred.” These updated observations and projections document the rapid rate of current and future climate change both globally and in the United States. 22 23 24 25 22 USGCRP, 2018: Impacts, Risks, and Adaptation in the United States: Fourth National Climate Assessment, Volume II [Reidmiller, D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K. Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research Program, Washington, DC, USA, 1515 pp. doi: 10.7930/NCA4.2018. Available at https://nca2018.globalchange.gov. 23 IPCC, 2021: Summary for Policymakers. In: Climate Change 2021: The Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [Masson-Delmotte, V., P. Zhai, A. Pirani, S.L. Connors, C. Péan, S. Berger, N. Caud, Y. Chen, L. Goldfarb, M.I. Gomis, M. Huang, K. Leitzell, E. Lonnoy, J.B.R. Matthews, T.K. Maycock, T. Waterfield, O. Yelekçi, R. Yu and B. Zhou (eds.)]. Cambridge University Press. In Press. 24 National Academies of Sciences, Engineering, and Medicine, 2019. Climate Change and Ecosystems. Washington, DC: The National Academies Press. Available at https://doi.org/10.17226/25504. 25 NOAA National Centers for Environmental Information, State of the Climate: Global Climate Report for Annual 2020, published online January 2021. Available at https://www.ncdc.noaa.gov/sotc/global/202013. IV. How is EPA considering environmental justice? Executive Order 12898 (59 FR 7629, February 16, 1994) and Executive Order 14008 (86 FR 7619, January 27, 2021) establish federal executive policy on environmental justice. Executive Order 12898's main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States. EPA defines environmental justice as the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies. 26 Meaningful involvement means that: (1) Potentially affected populations have an appropriate opportunity to participate in decisions about a proposed activity that will affect their environment and/or health; (2) the public's contribution can influence the regulatory agency's decision; (3) the concerns of all participants involved will be considered in the decision-making process; and (4) the rule-writers and decision-makers seek out and facilitate the involvement of those potentially affected. 27 The term “disproportionate impacts” refers to differences in impacts or risks that are extensive enough that they may merit Agency action. In general, the determination of whether there is a disproportionate impact that may merit Agency action is ultimately a policy judgment which, while informed by analysis, is the responsibility of the decision-maker. The terms “difference” or “differential” indicate an analytically discernible distinction in impacts or risks across population groups. It is the role of the analyst to assess and present differences in anticipated impacts across population groups of concern for both the baseline and proposed regulatory options, using the best available information (both quantitative and qualitative) to inform the decision-maker and the public. 28 26 See, e.g., Environmental Protection Agency. “Environmental Justice.” Available at https://www.epa.gov/environmentaljustice. 27 The criteria for meaningful involvement are contained in EPA's May 2015 document “Guidance on Considering Environmental Justice During the Development of an Action.” Environmental Protection Agency, 17 Feb. 2017. Available at https://www.epa.gov/environmentaljustice/guidance-considering-environmental-justice-during-development-action. 28 The definitions and criteria for “disproportionate impacts,” “difference,” and “differential” are contained in EPA's June 2016 document “Technical Guidance for Assessing Environmental Justice in Regulatory Analysis.” Available at https://www.epa.gov/sites/production/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf. A regulatory action may involve potential environmental justice concerns if it could: (1) Create new disproportionate impacts on minority populations, low-income populations, and/or indigenous peoples; (2) exacerbate existing disproportionate impacts on minority populations, low-income populations, and/or indigenous peoples; or (3) present opportunities to address existing disproportionate impacts on minority populations, low-income populations, and/or indigenous peoples through the action under development. Executive Order 14008 calls on agencies to make achieving environmental justice part of their missions “by developing programs, policies, and activities to address the disproportionately high and adverse human health, environmental, climate-related, and other cumulative impacts on disadvantaged communities, as well as the accompanying economic challenges of such impacts.” Executive Order 14008 further declares a policy “to secure environmental justice and spur economic opportunity for disadvantaged communities that have been historically marginalized and overburdened by pollution and under-investment in housing, transportation, water and wastewater infrastructure, and health care.” Further, under Executive Order 13563 (76 FR 3821, January 18, 2011), federal agencies may consider equity, human dignity, fairness, and distributional considerations, where appropriate and permitted by law. Likewise, the Presidential Memorandum on Modernizing Regulatory Review calls for procedures to “take into account the distributional consequences of regulations, including as part of any quantitative or qualitative analysis of the costs and benefits of regulations, to ensure that regulatory initiatives appropriately benefit and do not inappropriately burden disadvantaged, vulnerable, or marginalized communities.” 29 EPA also released its June 2016 “Technical Guidance for Assessing Environmental Justice in Regulatory Analysis” (2016 Technical Guidance) to provide recommendations that encourage analysts to conduct the highest quality analysis feasible, recognizing that data limitations, time and resource constraints, and analytic challenges will vary by media and circumstance. 30 29 See https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/modernizing-regulatory-review. 30 See https://www.epa.gov/sites/default/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf. As described elsewhere in this preamble, this rule establishes the framework for the United States' phasedown of HFCs, which will achieve significant benefits by reducing production and consumption of certain chemicals with high GWPs. Section III.B of this rule briefly summarizes the public health and welfare effects of GHG emissions (including HFCs) as documented in EPA's 2009 and 2016 Endangerment Findings. As part of these Endangerment Findings, the Administrator considered climate change risks to minority populations and low-income populations, finding that certain parts of the population may be especially vulnerable based on their characteristics or circumstances, including the poor, the elderly, the very young, those already in poor health, the disabled, those living alone, and/or indigenous populations dependent on one or limited resources due to factors including but not limited to geography, access, and mobility. More recent assessment reports by the United States Global Change Research Program (USGCRP), the Intergovernmental Panel on Climate Change (IPCC), and the National Research Council (NRC) of the National Academies demonstrate that the potential impacts of climate change raise environmental justice issues. 31 These reports concluded that low-income communities can be especially vulnerable to climate change impacts because they tend to have more limited capacity to bear the costs of adaptation and are more dependent on climate-sensitive resources such as local water and food supplies. In corollary, some communities of color, specifically populations defined jointly by both ethnic/racial characteristics and geographic location, may be uniquely vulnerable to climate change health impacts in the United States. Native American tribal communities also possess unique vulnerabilities to climate change, particularly those impacted by degradation of natural and cultural resources within established reservation boundaries and threats to traditional subsistence lifestyles. The Technical Support Document for the 2009 Endangerment Finding also specifically noted that Southwest native cultures are especially vulnerable to water quality and availability impacts, and Native Alaskan communities are already experiencing disruptive impacts, including coastal erosion and shifts in the range or abundance of wild species crucial to their livelihoods and well-being. 31 Supra footnotes 22, 23, and 24. See also EPA. 2021. Climate Change and Social Vulnerability in the United States: A Focus on Six Impacts. U.S. Environmental Protection Agency, EPA 430-R-21-003. This rulemaking, as part of the phasedown of HFCs in the United States, achieves significant benefits associated with reducing emissions of potent GHGs. However, as described in the RIA and summarized below, there is significant uncertainty about how the phasedown of HFC production and the issuance of allowances by themselves, as well as the interactions with market trends independent of this rulemaking, could affect production of HFCs and HFC substitutes—and associated emissions—at individual facilities, particularly in communities that are disproportionately burdened by air pollution. In its proposed rulemaking, EPA solicited comment, data, and other information that could be helpful to EPA in future rulemaking actions in analyzing and, as appropriate, reducing the potential for inadvertent or unexpected distributional effects from this program, including the potential for environmental justice concerns due to the release of toxic chemicals that are feedstocks, catalysts, or byproducts in the production of HFCs or HFC substitutes. Information provided in response to this solicitation is available in the docket for this rulemaking, and EPA intends to take it into account, as appropriate, as the Agency moves forward in implementing the AIM Act. A reasonable starting point for assessing the need for a more detailed environmental justice analysis is to review the available evidence from the published literature and from community input on what factors may make population groups of concern more vulnerable to adverse effects ( e.g., cumulative exposure from multiple stressors), including but not limited to the 2009 and 2016 Endangerment Findings and the reports from USGCRP, IPCC, and NRC. It is also important to evaluate the data and methods available for conducting an environmental justice analysis. EPA's 2016 Technical Guidance does not prescribe or recommend a specific approach or methodology for conducting an environmental justice analysis, though a key consideration is consistency with the assumptions underlying other parts of the regulatory analysis when evaluating the baseline and regulatory options. The environmental justice analysis performed to support this rulemaking is described in the associated RIA and is based on public data from the Toxics Release Inventory (TRI), GHGRP, EJSCREEN (an environmental justice mapping and screening tool developed by EPA), Enforcement and Compliance History Online (ECHO), and Census data. In addition, this analysis integrates suggestions received during the public comment period to the extent possible. Where applicable and practicable, the Agency examined certain metrics for an environmental justice analysis comprising more than just climate change effects, including: The proximity of companies receiving allowances to populations disaggregated by race and ethnicity, low-income populations, and/or indigenous peoples; the number of companies receiving allowances that may be adversely affecting population groups of concern; the nature, amounts, and location of regulated HFC production that may adversely affect population groups of concern; and potential exposure pathways associated with the production of the regulated HFCs or with chemicals used as feedstocks, catalysts, or byproducts of HFC production unique to particular populations ( e.g., workers). The environmental justice analysis also contains information on non-production releases (as defined by TRI), water releases, and offsite disposal for chemicals used in HFC production. The analysis of potential environmental justice concerns focused mainly on characterizing baseline emissions of air toxics that are also associated with chemical feedstock use for HFC production. As noted in the RIA, there is uncertainty around the role that HFC production plays in emissions of these air toxics. In addition, EPA conducted a proximity analysis to examine community characteristics within one and three miles of these facilities. The Agency also explored larger radii (five and 10 miles) in response to public comments that releases from these facilities may travel longer distances. The relatively small number of facilities directly affected by this rule enabled EPA to assemble a uniquely granular assessment of the characteristics of these facilities and the communities where they are located. Overall, this rule reduces GHG emissions, which will benefit populations that may be especially vulnerable to damages associated with climate change. However, the manner in which producers transition from high-GWP HFCs could drive changes in future risk for communities living near facilities that produce HFCs and HFC substitutes, to the extent the use of toxic feedstocks, byproducts, or catalysts changes and those chemicals are released into the environment with adverse local effects. The environmental justice analysis, which examined racial and economic demographic and health risk information, found heterogeneity in community characteristics around individual facilities. The analysis showed that the total baseline cancer risk and total respiratory risk from air toxics (not all of which stem from HFC production) varies, but is generally higher, and in some cases much higher, within one to ten miles of an HFC production facility. The analysis also found that higher percentages of low-income and Black or African-American individuals live near several HFC production facilities compared with the appropriate national and state level average. EPA noted in the proposed rulemaking, and reiterates here, that it is not clear the extent to which these baseline risks are directly related to HFC production, but some feedstocks, catalysts, and byproducts are toxic, particularly with respect to potential carcinogenicity ( e.g., carbon tetrachloride, tetrachloroethylene, and trichloroethylene). All HFC production facilities are near other industrial facilities that could contribute to the cumulative National Air Toxics Assessment (NATA) cancer and respiratory risk; the number of neighboring TRI facilities within one mile of an HFC production facility ranges from two to 14, within three miles there are two to 19 neighboring TRI facilities, within five miles there are two to 34 neighboring TRI facilities, and within 10 miles there are six to 66 neighboring TRI facilities. At this time, it is not clear how emissions related to HFC production compare to other chemical production at the same or nearby facilities. Additionally, some HFC alternatives, such as hydrofluoroolefins (HFOs), use the same chemicals as feedstocks in their production or release the same chemicals as byproducts, potentially raising concerns about local exposure. Emissions from production facilities manufacturing non-fluorinated substitutes ( e.g., hydrocarbons, ammonia) could also be affected by the phasedown of HFCs. However, given limited information regarding where substitutes will be produced and what other factors might affect production and emissions at those locations, it is unclear to what extent this rule may affect baseline risks from hazardous air toxics for communities living near HFC production facilities. Further, the HFC phasedown schedule prescribed by Congress—with a 10 percent reduction by 2022, a 40 percent reduction by 2024, a 70 percent reduction by 2029, an 80 percent reduction by 2034 and an 85 percent reduction by 2036—may also reduce the potential for a facility to increase emissions above current levels for a prolonged period. EPA requested commenters provide data or other information to help better characterize these changes and their implications for nearby communities. Several commenters asserted that the RIA for the proposed rulemaking overestimated the environmental justice benefits, in part because emissions at HFC production facilities have likely declined since the 2014 NATA that EPA relied upon in its analysis. EPA responds that the Agency relied on the 2014 NATA data as a proxy for cumulative exposure to air toxics near HFC production facilities, which is the most recent year of data available. EPA plans to use more recent NATA data in future analyses of potential environmental justice concerns as it becomes available. EPA has not quantitatively assessed the potential benefits in terms of reductions in risk or exposure to environmental justice communities from changes in HFC production resulting from the rule. The absence of this assessment is due to data constraints and uncertainty about where HFCs and HFC alternatives will be produced in the future and where some HFC alternatives are produced now ( e.g., for non-HFC technologies). EPA also lacks information on which alternative(s) or type(s) of alternative (fluorinated, non-fluorinated, etc.) will take the dominant market share for the current uses of HFCs. One commenter provided extensive suggestions for how EPA could augment and strengthen its environmental justice analysis for the final rulemaking. Suggested factors and metrics included increasing the area of analysis and integrating the Risk-Screening Environmental Indicators Geographic Microdata (RSEI-GM), which incorporates data from the TRI together with factors such as each chemical's fate and transport through the environment, each chemical's relative toxicity, and potential human exposure. One other commenter suggested that EPA use existing data available in EJSCREEN to identify whether certain communities should be prioritized by EPA in mitigating any adverse impacts, and also to serve as a benchmark for measuring the effects of this rule over time. EPA will explore opportunities to prioritize areas with environmental justice concerns, particularly those related to multiple or cumulative exposures to environmental hazards, and to improve environmental justice analysis in future rulemakings. Updates to the environmental justice analysis can be found in the RIA for this final rulemaking, and notably, EPA explored larger radii (five and 10 miles) from identified facilities. Results at these larger radii are similar to the average aggregate community characteristics near HFC production facilities at one- and three-mile distances contained in the proposed rulemaking RIA. To examine the potential exposure of nearby communities to all reported TRI air emissions from each HFC production facility, EPA extracted concentrations weighted by toxicity for chemicals emitted by each facility over a 50-kilometer radius from the RSEI-GM model. The one-, three-, five- and 10 mile-buffers are shown on these maps and indicate that the highest concentrations are immediately adjacent to the facilities ( i.e., within a mile). Toxicity-weighted concentrations decline further from the facility as these releases disperse. The area with moderate concentrations is mostly within the 10-mile buffer. However, because of prevailing wind directions, toxicity-weighted concentrations are not uniformly distributed around the facilities and, in some cases, communities outside of the 10-mile buffer are still exposed to elevated concentrations. Linking these toxicity-weighted concentrations with specific communities of concern is an area of investigation to improve environmental justice analyses. EPA will further consider use of RSEI-GM for future regulatory analyses. EPA also added information from EJSCREEN on wastewater discharges, proximity to hazardous waste, ground-level ozone concentrations, and particulate matter concentrations near HFC production facilities. The Agency reiterates, consistent with our view in the proposed rulemaking, that there is uncertainty around the role that HFC production plays in emissions of these air toxics, as well as the impact that this program will have on the location and amount of production of HFCs and their substitutes and any associated air pollution emissions. The environmental justice analysis is intended as a tool to inform potential concerns. While EPA finds evidence of environmental justice concerns near HFC production facilities from cumulative exposure to existing environmental hazards in these communities, at this early stage in the development of the HFC allowance allocation program, EPA cannot, on the basis of this analysis, determine the extent to which this rule will contribute to or reduce existing environmental justice concerns for communities of color, low-income people, and/or indigenous peoples. This is primarily due to uncertainty with regard to where and in what quantities substitutes for high-exchange-value HFCs will be produced. In the proposed rulemaking, EPA specifically sought comment on whether changes in emissions, particularly in communities that are already disproportionately affected by air pollution, could occur as the result of the HFC allowance allocation program, the associated ability to transfer allowances, or other unrelated changes in the market. EPA also sought comment on whether there are remedies that could be applied as part of the design of the program in the event the Agency determines such unintended distributional impacts exist. In addition, EPA solicited comment on whether other regulatory authorities would be more appropriate to address any inadvertent or unexpected distributional effects that are identified, for example, if a producer obtained allowances in sufficient quantities to increase HFC production, which could potentially increase air emissions at that location. EPA received comments in response to the question of what the Agency should consider for future rulemakings with respect to environmental justice. Several commenters noted that the AIM Act does not require EPA to consider environmental justice. Some commenters also noted that enforcing existing controls or limits promulgated under various other CAA authorities ( e.g., criteria pollutants and air toxics) or state and local regulations ( e.g., permitted air toxics limits) that would be applicable to HFCs and alternatives are sufficient to address any potential environmental justice concerns, and are also the most direct strategy for addressing such concerns. In response, EPA reiterates that Executive Order 12898 (59 FR 7629; February 16, 1994) and Executive Order 14008 (86 FR 7619, January 27, 2021) establish federal executive policy on environmental justice. As outlined at the beginning of this section, the main provision of Executive Order 12898 directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States. Additionally, Executive Order 14008 calls on agencies to make achieving environmental justice part of their missions “by developing programs, policies, and activities to address the disproportionately high and adverse human health, environmental, climate-related and other cumulative impacts on disadvantaged communities, as well as the accompanying economic challenges of such impacts.” Executive Order 14008 further declares a policy “to secure environmental justice and spur economic opportunity for disadvantaged communities that have been historically marginalized and overburdened by pollution and under-investment in housing, transportation, water and wastewater infrastructure, and health care.” Further, under Executive Order 13563 (76 FR 3821, January 18, 2011), federal agencies may consider equity, human dignity, fairness, and distributional considerations, where appropriate and permitted by law. In addition, the Presidential Memorandum on Modernizing Regulatory Review calls for procedures to “take into account the distributional consequences of regulations, including as part of a quantitative or qualitative analysis of the costs and benefits of regulations, to ensure that regulatory initiatives appropriately benefit, and do not inappropriately burden disadvantaged, vulnerable, or marginalized communities.” EPA has promulgated other regulations or limits under different authorities that may affect the facilities identified in the RIA and the surrounding communities, but EPA is also committed to taking a holistic view of facilities affected by these rulemakings pursuant to the two above-cited executive orders that direct EPA to make environmental justice part of its mission for any and all rulemaking processes. In such instances where other authorities may be a more appropriate avenue, EPA expects that effects on surrounding communities and associated mitigating solutions would be addressed through those regulatory processes and under commensurate timelines. Additionally, one commenter disagreed with assumptions underlying EPA's environmental justice analysis. First, the commenter asserted that Congress has previously recognized that feedstock emissions are too insignificant to be a concern and has already provided other authority to protect communities near industrial facilities ( i.e., standards for hazardous air pollutants contained in sections 112(d) and (f) of the CAA and codified in 40 CFR 63, specifically subparts F, G, H, and I). Second, the commenter asserted that the Toxic Substances Control Act (TSCA) risk evaluations are deficient and should not be used as a basis for environmental justice regulations. Lastly, the commenter asserted that more information is needed on background concentrations and sources. EPA continues to rely on the latest information available from the TSCA risk evaluation process to inform the potential for worker exposure from HFC feedstocks. These risk evaluations did not assess air, water, or disposal exposures to the general population when these exposure pathways are or can be regulated under other EPA-administered statutes. However, EPA recently announced plans to conduct additional analysis for the risk evaluations for seven of the first 10 chemicals evaluated under the amended TSCA to ensure that the risk evaluations did not overlook risk to fenceline communities ( i.e., communities near industrial facilities). EPA is also revisiting the assumptions from the risk evaluations regarding the assumed use of personal protective equipment for purposes of risk determination. Following these additional analyses, EPA will issue revised risk determinations on the whole chemical substance, rather than on each condition of use. This has the potential to change the unreasonable risk determinations under TSCA for some of the first 10 chemicals, including the four chemicals with risk evaluations completed in 2020 ( i.e., carbon tetrachloride, tetrachloroethylene, trichloroethylene, and methylene chloride). EPA is finalizing requirements for other provisions in this rule that are relevant for environmental justice. For example, as further explained in Section X.C.1, some commenters stated that providing facility-level chemical-specific production data would be beneficial to communities located adjacent to chemical manufacturing facilities. EPA is determining in this final rulemaking that facility-level production data is not entitled to confidential treatment, and EPA intends to release this information to the public. This additional transparency will allow neighboring communities to see how emissions from a particular facility compare to changes in HFC production levels. Finally, EPA received suggestions for additional ways that EPA could consider environmental justice in future rulemakings, including but not limited to: Considering indirect pollution effects, e.g., increased motor vehicle emissions; considering a comprehensive emissions and release evaluation approach for all facilities including all media and all applicable limits; integrating existing and newly deployed fenceline monitoring data; evaluating the effects of producing certain HFC substitutes on air and water quality; and evaluating how exports of products and equipment containing HFCs could affect other countries' environmental justice concerns. EPA acknowledges receipt of these various comments, and will consider them, as appropriate, as we develop future rulemakings. As noted in the proposed rule and reiterated here, EPA intends to develop another rule before allowances are allocated for calendar year 2024 that may alter the framework and procedure for issuing allowance allocations established in this rule. EPA will continue to monitor the impacts of this program on HFC and substitute production, and emissions in neighboring communities, as we move forward to implement this rule. EPA may consider taking appropriate action in the future—including action—under CAA authorities, in future HFC allocation rules, or under other relevant authorities, if we develop further information indicating there is a risk of disproportionate impacts. EPA notes that this rule affects a small number of entities through a unique phasedown and allocation program, and that these entities manufacture a wide variety of products and are subject to a number of distinct market and regulatory forces independent of this HFC program. As such, the issues and possible remedies identified here may not be broadly applicable or practicable in other rulemakings. V. What definitions is EPA establishing to implement the AIM Act? EPA is establishing definitions to implement the framework for the AIM Act generally and the allowance allocation and trading program specifically. EPA proposed to define new terms that arise from the text of the AIM Act. EPA also proposed to adopt existing definitions as written in 40 CFR part 82, subpart A, with modifications as needed to conform to differences in the AIM Act. EPA proposed this approach because these definitions are commonly understood by those familiar with the ODS phaseout experience. Many proposed definitions did not garner specific comment. EPA is finalizing them as proposed and further discussion of those terms can be found in the proposed rule. These terms are: Central Data Exchange, Consumption allowances, Destruction, Exporter, Facility, Foreign country, Importer, Individual shipment, Non-objection notice, Person, Production allowances, Production line, Transform, and Used regulated substances. The remainder of this section discusses comments received on the remaining proposed definitions. Allowance. The AIM Act defines allowance as a limited authorization for the production or consumption of a regulated substance established under subsection (e). EPA is adopting that definition and adding that an allowance allocated under this subsection does not constitute a property right as stated in subsection (e)(2)(D)(ii)(aa). The framework for issuing allowances is subject to change through notice and comment rulemaking. One commenter stated that the discretion to retire, revoke, or withhold allowances should not be within the definitions of allowance or application-specific allowance. EPA is removing this text from the regulatory definitions of allowance and application-specific allowance in this final rulemaking. While the Agency has the authority to adjust allowances and is finalizing regulatory text outlining the circumstances in which such adjustments may occur and a process for levying administrative consequences, reiterating a statement of that authority in the definitions is unnecessary. Bulk. EPA is defining this term as “a regulated substance of any amount that is in a container for the transportation or storage of that substance such as cylinders, drums, ISO tanks, and small cans. A regulated substance that must first be transferred from a container to another container, vessel, or piece of equipment in order to realize its intended use is a bulk substance. A regulated substance contained in a manufactured product such as an appliance, an aerosol can, or a foam is not a bulk substance.” The examples provided in the definition are not exclusive. This definition serves to distinguish between a regulated substance that is in a container from a regulated substance that is in a product or other type of use system. Imported equipment and products that contain HFCs are outside the scope of the allowance-based phasedown component of the AIM Act. One commenter requested that EPA clarify that the reference to small cans in the proposed definition does not include consumer products such as air conditioning recharge kits, drain cleaners, and other products that contain HFCs. The commenter expressed concern that requiring tracking of such products would impose significant regulatory burdens and costs. EPA responds that small cans of HFCs qualify as containers of bulk HFCs under this rule and the HFC allowance allocation program it establishes if the HFC must first be transferred from the small can to a piece of equipment in order to realize its intended use. Air conditioning recharge kits are small cans of refrigerant used to recharge motor vehicle air conditioners and would therefore qualify as a container of bulk HFC. Their size and intended customer do not change the fact that they are containers and not products for purposes of this program, notwithstanding the commenter's concern, which EPA acknowledges, that tracking such products could be burdensome. The fact that some HFCs are housed in small containers does not remove them from the total inventory of HFCs for which EPA must account in implementing the phasedown mandate prescribed in the AIM Act. Thus, under the structure being finalized in this rule, allowances will be needed to import these air conditioning recharge kits. Similarly, those that have provided data on historical imports of small cans of refrigerant are eligible to receive an allowance allocation from the Agency under the framework finalized here. Entities that have not reported previously have options to receive allowances under the set-aside discussed in section VII.E. Without more information on drain cleaners, EPA cannot confirm whether this would be a container of bulk HFCs. If it can realize its intended use ( e.g., cleaning drains) without the need to transfer HFCs from a container to a piece of equipment, it would likely not be a bulk container. One commenter argued that cylinders containing HFCs that are used in total flooding fire suppression systems are not bulk containers and so import of these cylinders would be considered as a “product containing” HFCs under the proposed rule. EPA disagrees. System cylinders are pressurized cylinders that contain a chemical (in this case an HFC), and therefore resemble other bulk chemicals. Regardless of its intended use, it is an HFC in a container that needs to be transferred to a piece of equipment to realize its intended purpose ( i.e., the extinguishant is incorporated into the total flooding system from these containers). Consistent with regulations under CAA title VI, EPA has treated pressurized system cylinders used in total flooding fire suppression systems differently than handheld, wheeled, and other fire suppression systems. The latter are self-contained, ready-to-use systems that can realize their intended use without transfer of the HFCs to another product or container. Fire suppression system cylinders must be connected to the rest of the fire suppression system to realize their intended use. EPA has previously considered whether system cylinders in total flooding applications were covered by the Nonessential Products Ban under section 610 of the CAA. The Agency stated: “EPA recognizes that total flooding agents contained in total fire suppression systems used to extinguish fires are different from a portable device used to extinguish fires.” The Agency went on to explain: “These total flooding systems differ from an aerosol product or pressurized dispenser in that total flooding systems are `systems' that are completely installed and can be triggered to be automatically activated during an emergency situation. The extinguishant is incorporated into the system from bulk containers. Accordingly, “such systems thus do not constitute a pressurized dispenser or aerosol product within the meaning of section 610. Portable fire extinguishers, on the other hand, do constitute a pressurized dispenser, as they provide the product and dispensing apparatus in a self-contained portable unit.” (58 FR 69647, December 30, 1993) Additionally, under the class I ODS phaseout regulations in 40 CFR part 82, subpart A, fire suppression system cylinders are treated as a bulk substance. Companies that import used halons must petition the Agency prior to import under 40 CFR 82.13, with the exception of halon aircraft bottles, and report these imports to EPA. Given fire suppression system cylinders using HFCs have the same function as those for ODS, EPA concludes that it is reasonable to treat system cylinders of HFCs as bulk substances under this rule and the HFC allowance allocation program it establishes. The fact that some HFCs are housed in fire suppression system cylinders does not remove them from the total inventory of HFCs for which EPA must account in implementing the phasedown mandate prescribed in the AIM Act. Chemical vapor deposition chamber cleaning. EPA proposed to define this term as “in the context of semiconductor manufacturing, a process type in which chambers used for depositing thin films are cleaned periodically using plasma-generated fluorine atoms and other reactive fluorine-containing fragments.” This definition is based closely on the source category definition for electronics manufacturing in the GHGRP (40 CFR 98.90(a)(2)). Some commenters suggested that EPA use the GHGRP term and definition for “chamber cleaning” from 40 CFR 98.98 for consistency with reporting under that program. EPA is defining “chemical vapor deposition chamber cleaning” in this rule because Congress provided that EPA allocate allowances necessary for “the etching of semiconductor material or wafers and the cleaning of chemical vapor deposition chambers within the semiconductor manufacturing sector” (emphasis added) in subsection (e)(4)(B)(iv). This is narrower than the term defined under GHGRP, which is “chamber cleaning.” The term “chamber cleaning” under the GHGRP is broader and contains more process types than chemical vapor deposition. EPA is not aligning the term with the term defined under GHGRP given the specific language of the AIM Act. EPA is, however, broadening the description of the process type to explicitly include chamber cleaning by thermally dissociated fluorine fragments. Confer. EPA is defining this term as “to shift unexpended application-specific allowances obtained in accordance with subsection (e)(4)(B)(iv) of the AIM Act from the end user allocated such allowances to one or more entities in the supply chain for the production or import of a regulated substance for use by the end user.” This term is intended to distinguish conferring an allowance from an allowance transfer. A company receiving conferred allowances may produce or import HFCs with those application-specific allowances on behalf of the conferrer rather than expending calendar year production or consumption allowances. There is no offset for the conferring of allowances. A few commenters stated that there may be more than one entity in the supply chain between the producer/importer and the application-specific end user, such as a purifier. In that instance, a commenter wanted EPA to allow for the re-conferral of application-specific allowances without the transaction being considered a transfer. EPA understands that the supply chains may be unique to each particular end use and is clarifying that application-specific allowances may be re-conferred as needed. EPA has amended the definition of “confer” finalized in this rulemaking to state that application-specific allowances may be conferred one or multiple times to entities in the supply chain. EPA is also amending the recordkeeping and reporting provisions to ensure that all entities in the conferral chain are identified. Consumption. With respect to the definition of “consumption,” commenters stated that the statutory definition of consumption in the AIM Act includes “all imports” and does not distinguish between imports of chemicals in large quantities for later use in a product manufactured in the United States and imports of the same chemical already contained in such a product manufactured abroad. The commenters disagreed with EPA excluding HFCs contained in imported products from the calculation of consumption, thereby excluding imported products containing HFCs from the calculation of the baseline and from the requirement to obtain and expend allowances. EPA responds that the Agency is finalizing its proposed reading of the definition of consumption, and in this context, the adopted reference of the term “import,” as being limited to bulk substances. In doing so, EPA is drawing a distinction between the import of bulk regulated substances and the import of regulated substances contained in products, and concludes, as explained below, that the definition of “consumption” is appropriately read to be limited to import of bulk substances. 32 The effect of this decision is that consumption allowances are required for the import of bulk HFCs and not for the import of products containing HFCs. As explained here and in section VI.A, the definition of “consumption” in the AIM Act is ambiguous and does not speak directly to whether imported products containing HFCs be included in the consumption baseline or subject to the allowance obligation. EPA further concludes that the AIM Act's definition of “consumption” is reasonably interpreted not to encompass imports of products containing HFCs, because doing so: (1) Is consistent with EPA's longstanding practice under the closely related provisions of title VI of the CAA; and (2) would create severe implementation difficulties, requiring EPA to obtain decades-old baseline data that almost certainly no longer exist, vastly expanding the number of regulated entities, and sweeping in a range of businesses (such as retailers) that likely did not anticipate being subject to these regulations. 32 As discussed earlier in this definitions section, EPA is defining a bulk substance as “a regulated substance of any amount that is in a container for the transportation or storage of that substance such as cylinders, drums, ISO tanks, and small cans. A regulated substance that must first be transferred from a container to another container, vessel, or piece of equipment in order to realize its intended use is a bulk substance. A regulated substance contained in a manufactured product such as an appliance, an aerosol can, or a foam is not a bulk substance.” EPA's resolution of this interpretive issue begins with the text of the statute. The AIM Act does not directly address whether products containing HFCs that are imported to the country should be included in the Agency's consideration of “consumption.” In subsection (b)(3), Congress defined “consumption” to include “the quantity of regulated substance imported into the United States,” but did not direct EPA as to how to determine such “quantity.” Congress particularly did not direct EPA as to whether this includes the import of products that contain regulated substances versus the import of regulated substances themselves. Because the statute does not address this, the Agency is left to interpret the statute in a reasonable manner. Because this instance “involves an administrative agency's construction of a statute that it administers, [the] analysis is governed by Chevron.” Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132 (2000). Under the Chevron framework, the initial inquiry is “whether Congress has directly spoken to the precise question at issue.” Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842 (1984). “In determining whether Congress has specifically addressed the question at issue, [the analysis] should not [be confined] to examining a particular statutory provision in isolation. The meaning—or ambiguity—of certain words or phrases may only become evident when placed in context.” FDA, 529 U.S. at 133. Here, there is no statutory text in the AIM Act—and the commenter was not able to provide any citation to such text—that unambiguously requires EPA to consider imports of products containing regulated substances in the calculation of “consumption,” in addition to considering the imports of bulk regulated substances. While EPA understands that the phrase “quantity of the regulated substances into the United States” could be read to include regulated substances contained in products imported into the United States, that is not the only permissible reading. Rather, this language can also reasonably be read to include only imported bulk substances. To inform the Agency's analysis of whether Congress has directly spoken to the precise question at issue, the Agency has looked to the definition of “consumption” under title VI of the CAA. The title VI statutory definition of “consumption” is analogous to the parallel definition in the AIM Act, and thus EPA looked to the title VI definition on the question of whether the AIM Act statutory language is unambiguous. The AIM Act language is substantially similar to the definition of “consumption” provided by Congress for the phaseout of ODS in section 601(1) of the CAA, which defines the term “consumption” to include “the amount” of ODS “imported,” but additionally states that “[s]uch term shall be construed in a manner consistent with the Montreal Protocol.” This demonstrates that Congress understood, in the context of the CAA, that the term “consumption,” including the embedded phrase “the amount imported,” could reasonably be read in different ways. Under the Montreal Protocol, calculation of a country's consumption is limited to bulk substances and does not include imports of products containing ODS. Consistent with that practice, EPA has applied the ODS production and consumption controls under title VI of the CAA to bulk ODS, but not to products containing ODS. The term “the amount” in the CAA is substantially similar to “the quantity” in the parallel definition of the AIM Act, which demonstrates that the AIM Act provision can be interpreted in multiple ways, so Congress did not speak directly to the question of whether “consumption” under the AIM Act should include imports of products containing regulated substances. As further explained elsewhere in this preamble, EPA is reasonably interpreting the AIM Act to have a similar scope and meaning as title VI. Lawson v. FMR LLC, 571 U.S. 429, 459 (2014) (“[P]arallel text and purposes counsel in favor of interpreting . . . two provisions consistently.”). In addition, looking to the larger statutory context, in defining “consumption” in subsection (a)(3) of the AIM Act, Congress used the phrase “the quantity of” the regulated substance not only to refer to the quantity of the regulated substance imported into the United States, but also to refer to the quantity of the regulated substance produced in the United States, as well as the quantity exported from the United States. The “quantity of” the regulated substance produced in the United States is readily understood to include bulk substances, particularly in light of the statutory definition of “produce,” but it would be difficult to interpret this phrase to extend to products containing HFCs. Such products could include either domestic or imported HFCs. Interpreting the phrase “the quantity of” a regulated substance to include only bulk substances reasonably applies the same understanding of this term across all the instances where it is used in the definition of consumption. These points further support EPA's views that “the quantity” as used in the AIM Act is open to more than one possible construction and that it can reasonably be read to be limited to bulk substances. Since the definition of “consumption” in the AIM Act can be read in different ways, this issue is not decided under the first step of the Chevron analysis. Since the AIM Act does not provide unambiguous direction as to whether imported products containing HFCs should be considered part of “consumption,” EPA is given discretion to interpret the statute, as long as such construction is reasonable, under the second step of the Chevron analysis. Where Congress has not directly spoken to an issue or has left ambiguity in the statute, that silence or ambiguity creates an assumption that “Congress implicitly delegated to the agency the power to make policy choices that represent a reasonable accommodation of conflicting policies that are committed to the agency's care by the statute.” National Ass'n of Mfrs. v. United States DOI, 134 F.3d 1095, 1106 (D.C. Cir. 1998). The “power of an administrative agency to administer a congressionally created . . . program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress.” Chevron, 467 U.S. at 843-44. The Supreme Court has explained “[w]e accord deference to agencies under Chevron . . . because of a presumption that Congress, when it left ambiguity in a statute meant for implementation by an agency, understood that the ambiguity would be resolved, first and foremost, by the agency, and desired the agency (rather than the courts) to possess whatever degree of discretion the ambiguity allows.” Smiley v. Citibank (S.D.), N.A., 517 U.S. 735, 740-41 (1996). Accordingly, Congress's silence with regard to whether imports of products containing HFCs should be considered in the determination of “consumption” leaves a gap for the Agency to fill, which EPA is doing in this rulemaking. Excluding imports of products containing HFCs from the definition of “consumption” is consistent with EPA's longstanding practice in implementing nearly identical statutory language governing a nearly identical industry under title VI of the CAA. As further explained in Section II.B, there are significant similarities in the text, structure, function, and purpose of the provisions for production and consumption in the AIM Act and those in title VI of the CAA. Accordingly, EPA is utilizing its experience interpreting similar statutory terms under the CAA to phase out ODS when developing the AIM Act's HFC allowance allocation and trading program. 33 Moreover, the close similarities in text, structure, function, and purpose between title VI and the AIM Act make it reasonable to infer that Congress was aware of EPA's approach of applying the ODS production and consumption controls under title VI to bulk substances but not products, including imported products, and did not intend to require EPA to depart from that approach under the AIM Act. See FPC v. Sierra Pacific Power, 350 U.S. 348 (1956) (determining that an interpretation of the Natural Gas Act was “equally applicable” to the Federal Power Act given that “the provisions of the Federal Power Act relevant to [the] question are in all material respects substantially identical to the equivalent provisions in the Natural Gas Act.”). See also Arkansas Louisiana Gas Co. v. Hall, 435 U.S. 571 (1981) (citing to FPC v. Sierra Pacific Power for a similar premise); NTEU v. Chertoff, 452 F.3d 839, 857 (D.C. Cir. 2006) (“There is a presumption that Congress uses the same term consistently in different statutes.”); Smith v. City of Jackson, Miss., 544 U.S. 228, 233 (2005) (emphasizing the “premise that when Congress uses the same language in two statutes having similar purposes, . . . it is appropriate to presume that Congress intended that text to have the same meaning in both statutes”). 33 For purposes of implementing the ODS phaseout regulations (40 CFR part 82, subpart A), EPA defined a controlled substance, in part, as any listed ODS, whether existing alone or in a mixture, but excluding any such substance or mixture that is in a manufactured product other than a container used for the transportation or storage of the substance or mixture. Any amount of a listed substance that is not part of a use system containing the substance is a controlled substance. If a listed substance or mixture must first be transferred from a bulk container to another container, vessel, or piece of equipment in order to realize its intended use, the listed substance or mixture is a “controlled substance.” In addition to these considerations, including imports of products containing HFCs in the calculation of consumption, and thereby including them in the regulatory allocation and phasedown program, would significantly increase the universe of regulated entities and reporters subject to this program. New categories of affected industries would include large-scale retailers that directly import products such as air conditioning units, refrigerators, fire extinguishers, and consumer aerosol products. These entities have never been subject to allowance obligations under title VI, and EPA finds it reasonable to infer that Congress did not expect or intend to place allowance obligations on this vast array of entities under the closely related provisions of the AIM Act. Courts have previously supported statutory interpretations that enable sensible regulations as opposed to readings that “would radically transform those programs and render them unworkable as written.” Utility Air Regulatory Group v. EPA, 134 S. Ct. 2427, 2442 (2014) (holding that EPA was not compelled to interpret the Clean Air Act's reference to “any air pollutant” as requiring the Agency to consider greenhouse gases in determining whether a source was major for purposes of new source review and CAA Title V permitting). Further, it would be administratively impossible for EPA to gather data necessary to incorporate imports of products containing HFCs into the statutorily defined calculation of the baseline to a degree that matches the surety and caliber of data otherwise included in that calculation. Congress directed EPA to add figures for consumption of HCFCs and CFCs in 1989 in calculating baselines. If EPA were to read such a reference to “consumption” as encompassing imports of products containing chemicals, the Agency would need data on imports of products containing HCFCs and CFCs back in 1989. We are not aware of any source of this information, and it seems impossible that a comprehensive set of businesses would have actual data from that time period that EPA could obtain. One commenter noted that EPA could rely on estimates or modeled data from that time period and provided trade data for certain types of products that were imported in 1989, but such imprecise calculations would not match the certainty of data on which EPA is currently relying to calculate the baseline. In light of these challenges, the ambiguity of the statutory text, and the close similarities in the term “consumption” as used in title VI and the AIM Act, EPA concludes that it is reasonable to interpret the statutory term “consumption,” and the adopted reference of the term “import,” as including only bulk substances. Defense spray. EPA is defining this term as “an aerosol-based spray used for self-defense, including pepper spray and animal sprays, and containing the irritant capsaicin and related capsaicinoids (derived from oleoresin capsicum), an emulsifier, and an aerosol propellant.” Two commenters stated their support of the proposed definition for defense spray. EPA is finalizing the definition as proposed. Etching. EPA proposed to define etching as, “in the context of semiconductor manufacturing, a process type that uses plasma-generated fluorine atoms and other reactive fluorine-containing fragments that chemically react with exposed thin-films ( e.g., dielectric, metals) or substrate ( e.g., silicon) to selectively remove portions of material. This includes production processes using fluorinated GHG reagents to clean wafers.” This definition is closely based on the definition of the electronics manufacturing source category in the GHGRP (40 CFR 98.90(a)(1)) and on the GHGRP definition of “wafer cleaning” (40 CFR 98.98). Some commenters suggested that EPA expand the definition of “etching” to include “wafer cleaning.” EPA agrees that it is appropriate to include “wafer cleaning” in the definition of “etching” and is doing so in the final rule. Wafer cleaning involves using fluorinated GHG reagents to remove residual material from wafers, and other etching processes involve using fluorinated GHG reagents to remove materials from a substrate, which includes wafers. Under the GHGRP, the same emission factors are used for wafer cleaning as for other etching processes. Commenters also recommended that EPA use the GHGR [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2021-21030. Public record. Not legal advice.