DDBA 8522 Week 8 Phasedown Policy Analysis Example

When a Statute Sets the Schedule: A Policy Analysis of the AIM Act's Stepped Phasedown of Hydrofluorocarbon Refrigerants Toward an 85 Percent Cut by 2036, Asking Who Pays and Who Benefits at Each Step

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Walden University

DDBA 8522: Seminar in Sustainability

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Month Day, Year

When a Statute Sets the Schedule: A Policy Analysis of the AIM Act's Stepped Phasedown of Hydrofluorocarbon Refrigerants Toward an 85 Percent Cut by 2036, Asking Who Pays and Who Benefits at Each Step

The Choice the Rule Took Away

Left to themselves, most companies would replace refrigeration and air-conditioning equipment using hydrofluorocarbons, refrigerants with high global warming potential, when the equipment wore out, typically after 15 to 20 years. A grocery chain with 200 stores might replace a few store refrigeration systems a year as they aged, keeping its capital spending even. The AIM Act, passed by Congress in December 2020 and codified at 42 U.S.C. § 7675, took that choice away. It directs the Environmental Protection Agency to phase down the production and import of these refrigerants in steps, reaching an 85 percent reduction from a historic baseline by 2036. This analysis reads the schedule and asks who pays and who benefits at each step.

The Schedule

The statute sets the phasedown in steps: a 10 percent reduction in 2022 and 2023, 40 percent from 2024 through 2028, 70 percent from 2029 through 2033, 80 percent in 2034 and 2035 and 85 percent from 2036 onward. The agency implements the cuts through allowances for production and import. As allowances shrink, supply of these refrigerants falls and their price rises, which gives equipment owners a reason to switch to lower-warming alternatives sooner than equipment age alone would.

Who Pays at Each Step

In the first step, 2022 to 2023, the cost fell mostly on refrigerant producers and importers, who had to manage reduced allowances, and on equipment owners who saw refrigerant prices rise for servicing existing systems.

In the 40 percent step, from 2024, the cost shifted toward equipment owners. Supermarkets, cold-storage warehouses and building owners with large systems faced higher costs to keep old systems charged, and some began replacing systems early. Small businesses, such as independent restaurants and convenience stores, with fewer resources to replace equipment ahead of schedule, are especially exposed.

In the 70 percent and later steps, from 2029, remaining owners of older systems will face scarce and expensive refrigerant, which will push nearly all of them to replace. By then, alternative equipment should be more widely available and cheaper.

Who Benefits, and When

The benefits arrive later and spread widely. Velders et al. (2009) projected that without controls, hydrofluorocarbon emissions could contribute substantially to climate forcing by mid-century, and the phasedown is meant to avoid much of that. The climate benefit accrues to everyone, mostly after 2040. Manufacturers of low-warming refrigerants and new equipment benefit commercially in the middle years, as demand for replacements rises.

The Timing Problem

Slawinski and Bansal (2015) described how organizations face tensions between short-term costs and long-term benefits and often resolve them in favor of the short term. The AIM Act removes that choice by setting the schedule in law. That is its strength from a sustainability perspective: it makes the timing of change independent of each firm's capital budget. But it also means costs arrive on the statute's schedule rather than when each owner can best afford them.

How the Allowance System Works

The agency allocates allowances to produce or import hydrofluorocarbons each year, measured in exchange value equivalents that weight each refrigerant by its global warming potential. Producers and importers must hold enough allowances for what they bring to market, and allowances can be traded. As the total allowed falls at each step, prices for the most heavily weighted refrigerants rise fastest, because they consume the most allowances per pound. That design pushes users first away from the highest-warming refrigerants, which is where the climate benefit per dollar is greatest.

Who Is Exempt or Delayed

The statute and the agency's rules allow certain essential uses to receive allowances longer, including some medical inhalers and certain military applications. Those exceptions shift a slightly larger share of the burden onto other users, since the total cap still falls. They also show that the schedule is not purely technical: it reflects judgments about which uses society is least willing to disrupt.

Implications for a Firm

A grocery chain facing this schedule should plan replacements around the 2029 step rather than around equipment age, replacing its oldest and leakiest systems first, and should price the risk of being caught with many old systems when refrigerant becomes scarce. It should also track the agency's allowance announcements each year, since prices for refrigerant move most sharply in the months after each step takes effect, and should budget leak repairs on older systems now, because every pound that leaks must be replaced at rising prices.

References

American Innovation and Manufacturing Act of 2020, 42 U.S.C. § 7675 (2020).

Slawinski, N., & Bansal, P. (2015). Short on time: Intertemporal tensions in business sustainability. Organization Science, 26(2), 531-549. https://doi.org/10.1287/orsc.2014.0960

Velders, G. J. M., Fahey, D. W., Daniel, J. S., McFarland, M., & Andersen, S. O. (2009). The large contribution of projected HFC emissions to future climate forcing. Proceedings of the National Academy of Sciences, 106(27), 10949-10954. https://doi.org/10.1073/pnas.0902817106