a significant contribution to an "ad-hoc" Solvents Committee, composed of industry, military agencies and governments to revise U.S. military CFC specifications; our co-founding of the Industry Cooperative for Ozone Layer Protection (ICOLP) which now has 17 multinational corporations as members. They are all major CFC solvent users who have pledged to an early phase-out and to share their knowledge with industry, government and other stakeholders worldwide. The EPA, the U.S. Air Force, and other governments and institutions from the Soviet Union, Japan, Sweden, Mexico and the United States are affiliate members of this important new model for technology transfer; the creation for ICOLP of a database called OZONET to carry alternatives to ozone depleting solvents electronically to the world user community. It can be accessed by over 90 percent of the world's business telephones; most often by a local telephone call; and finally, our taking the lead role on a first-of-its-kind project to transfer new technology to Mexico's solvent using industry. Under the terms of the Montreal Protocol, a multilateral funding mechanism has been established to assist developing countries with programs to retrofit industry with alternatives to ozone depleting substances. Northern Telecom, in partnership with the EPA and with the Department of Urban & Ecological Development (SEDÛE) of Mexico announced on May 6, 1991 in Washington that the first project under the funding mechanism would proceed as quickly as possible so that Mexico could meet its commitment to complying with the same deadlines that developed countries are obliged to meet under the Protocol. Northern Telecom held the first planning seminar on June 7 for the Tijuana and Mexicali Maquiladoras and the first multiple day workshop is planned for September. This hands-on training session will be undertaken by experts from Northern Telecom and other companies that are members of ICOLP. Workshops will be followed by visits of Mexican industry representatives to plants of Northern Telecom and ICOLP companies. Subsequently, new needed technologies and equipment will be identified and any necessary funding will be applied for under the Montreal Protocol. A Phase 2 is to include the actual purchase and retrofit of equipment and technologies. The project for Tijuana and Mexicali is the first of several planned for other Maquiladoras such as Juarez, Mogales, Monterey and Matamoros. We are committed to making this a successful project because we believe that a shared stakeholder partnership is the best way to affect technology transfer, and thus, in this case, as rapidly as possible protect the stratospheric ozone layer. We believe this will prove to be a model for further projects in other countries. I have attached to my statement a "Background Information" paper which further details Northern Telecom's internal and external CFC elimination efforts. Also, I would be happy to provide you, Mr. Chairman, and members of the subcommittee with copies of the NT/EPA manual I referred to which is a guide for eliminating CFC-113 use in the electronics industry. On behalf of Northern Telecom, thank you very much for the opportunity to appear before your subcommittee to describe one of our important environmental programs and our contribution to environmental projects external to the company. PREPARED STATEMENT OF KEVIN FAY Good Morning. My name is Kevin Fay, and I am Executive Director of the Alliance for Responsible CFC Policy. The Alliance is a coalition of producers and users of CFCs and their substitutes in the United States. The Alliance has been a strong supporter of the international framework for protecting the ozone layer. (See Exhibit I). We have participated in all of the negotiating sessions leading to the Montreal Protocol and its most recent revisions, and in the development of Title VI of the Clean Air Act Amendments of 1990. We appreciate this opportunity to appear before the subcommittee to discuss the status of the Montreal Protocol, efforts to implement Title VI of the Clean Air Act Amendments, and related issues of ozone depletion mitigation research funding. In response to recent events, the Alliance believes that the current global and domestic policy process is working effectively and successfully. We should not discard the current process; rather we should rely on it. Industry supports the following: ● continued emphasis on the participation and enforcement of the Montreal Protocol's global regulatory framework; rapid approval and commercialization of alternative compounds and processes, including HCFCs and HFCs; aggressive recovery, recycling, and reclaiming of used CFCs and HCFCs and recognition of the challenges posed by the installed equipment base; efforts to accomplish technology transfer to developing countries to encourage the acceleration of the phaseout among these nations; and significant new research efforts concerning the effects and potential remediation of ozone depletion. EXISTING REGULATORY FRAMEWORK The announcement earlier this year from EPA of new NASA data indicating accelerated depletion of the ozone layer over North America is a cause for increased concern among citizens, industry, and policy officials worldwide. More recently, some scientists have stated that the eruption of Mount Pinatubo could temporarily further enhance ozone depletion. Despite the new data and natural events beyond our control, the global and domestic policy process is working. The phaseout of CFCs, and the reduction in buildup of atmospheric chlorine concentrations is moving forward. It is chlorine concentration that has served as the surrogate for measuring our response to the ozone depletion concern. With this as our guide, it appears that we have reduced the potential peak chlorine concentration by more than 50 percent. The Montreal Protocol on Substances that Deplete the Ozone Layer, originally signed in September 1987, remains an unprecedented agreement for addressing this critical global environmental issue. It is a solid regulatory achievement built on a foundation of global cooperation and goodwill among governments, industry and environmental organizations. It addresses a complex scientific objective while balancing the social and economic concerns of the developed and less developed nations. The approximately 70 signatories to the Protocol represent more than 90 percent of the worldwide CFC production and usage. The treaty is a dynamic agreement based on scientific understanding, technological feasibility, and economics. The Amendments adopted to the Protocol in London last year showed that the process can and will work. At the recent meeting of the Protocol parties in Nairobi, the diplomats undertook significant discussions concerning the recently released scientific information, and the need to take this information into account as part of the Protocol's built-in assessment process. The purpose of the assessment process is to ensure that the Protocol remains environmentally effective, as well as technologically and economically sensible. It remains apparent that our only hope of ultimately reducing global atmospheric chlorine concentrations is to use this international process to ensure that we achieve a 100 percent participation rate and full compliance by all parties. Anything less than 100 percent participation and compliance will lead to a higher peak chlorine level and elevated chlorine concentrations (in excess of 2 parts per billion (ppb)) well beyond the year 2100. (See Exhibit II). The 1990 amendments to the Protocol were guided by rigorous scientific and technical analysis. They included a phaseout of CFC production by the year 2000, the addition of other ozone depleting compounds (carbon tetrachloride, methyl chloroform, and several small volume CFCs), and a resolution concerning the phaseout of compounds with low ozone depletion potentials (known as HCFCs). There was also a keen awareness among the policymakers that a balance must be struck between the rapid phaseout of CFCs, the availability of safe alternatives, the needs of existing installed equipment, and the need to encourage participation among all nations, developed and developing. It was understood that this balance must be struck if we are to have an effective global mechanism that encourages the 100 percent participation rate necessary to reduce atmospheric chlorine. The current assessment process is scheduled to be completed by the end of this year, and will be the basis for further amendments to the Protocol to be adopted in September 1992. The assessment may indicate some ability to accelerate the phaseout of fully halogenated CFCs. We also expect that the assessment will emphasize once again the need for the HFC and HCFC compounds in order to accomplish the phaseout. It is expected that this assessment will and should be instrumental in the EPA's own consideration of accelerating the phaseouts under Section 606 of the Clean Air Act. However, we do not believe that the policy development process should_get ahead of the scientific and technical assessment framework provided for in the Protocol. The new scientific information creates a greater sense of urgency concerning the effects of ozone depletion, and highlights the need for additional effects research and identification of steps for potential effects remediation. It also emphasizes the continued need for a balanced and effective global process that maximizes global participation. TECHNOLOGY TRANSFER Significantly, at the Nairobi meeting, the parties spent considerable time discussing issues pertaining to the technology transfer fund. It is important that this fund become an effective program that provides developing nations with confidence that they can participate in the ozone protection effort and share in the rewards of new technological development. These discussions also highlighted the concerns of many developing country representatives that acceleration of control schedules would be very difficult for their countries absent an aggressive technology transfer effort. The Alliance has cautioned for some time now that the decision making regarding phaseout schedules of CFCs and HCFCs must weigh the impact that such schedules will have on developing country participation. It is encouraging to note that China announced that it was acceding to the Protocol as amended in 1990. It also appears that substantial progress is being made in having Korea participate. It should be noted, however, that even with this progress, we estimate that developing country chlorine contributions could exceed the developed nations' contributions beginning in approximately 1995. (See Exhibit III particularly if HCFC uses are prematurely restricted.) TRANSITION AWAY FROM CFCS Our scientific understanding several years ago was sufficient to lead U.S. industry to be the first to announce its support for a global phaseout of CFCs. U.S. industry has worked since 1986 with the government, the international community, and our colleagues worldwide to assure that an effective global mechanism is implemented. The industry has made significant technological progress in reducing CFC usage and emissions, in recovering and recycling used CFCs, in identifying potential alternative compounds to assist in the elimination of the fully halogenated compounds, and in shaving years off the normal commercialization process for these new compounds and technologies. Chemicals, manufactured products, and manufacturing processes, are being introduced today which offer the hope that we can eliminate CFC compounds from new products and processes in relatively short order. Market forces have already led some industries, such as food packaging, to eliminate CFC usage entirely. Other industries, such as electronics manufacturers, have substantially curtailed their usage. Industry has also worked to implement recovery and recycling programs for mobile and stationary air conditioning equipment, beginning with the development of necessary industry standards and the building of new infrastructures in order to reprocess these compounds. In 1989, the Alliance petitioned EPA to establish uniform national recycling standards and requirements. As a result of the work on new compounds, processes, and recovery and recycling, we believe that the market for substitute chemicals will be less than half the size of the CFC markets they replace. In other words, containment, conservation, and replacement with not-in-kind substitutes will eliminate over half of the traditional markets. All of this work was begun several years ago, long before the Clean Air Act Amendments were adopted or even before the revisions to the Montreal Protocol. While the Clean Air Act Amendments provide EPA with all the necessary authority to regulate (or accelerate) the CFC phaseout and the introduction of substitute chemicals, they can do little to affect global atmospheric chlorine concentrations that is not already being done. By our analysis, the Clean Air Act Amendments will have the effect of reducing chlorine over and above that which would be achieved by the Montreal Protocol (assuming full global compliance) by only 0.1 ppb over the next several decades. Atmospheric chlorine concentrations are currently above 3 ppb. If all CFC activity were ceased today, stratospheric chlorine concentrations would still reach approximately 3.5 ppb. We are projecting that the chlorine concentration will peak at approximately 3.9 ppb. In contrast, the original 1987 Montreal Protocol would have resulted in atmospheric chlorine concentrations in excess of 8 ppb. In implementing Title VI of the Clean Air Act Amendments, EPA recognized the desirability and reasonableness of integrating discharge of its domestic responsibilities with the ongoing international effort. As in the Protocol assessment process, the domestic regulatory initiatives to date have included substantial participation by industry, environmental organizations and government representatives. We be lieve that the Agency is working to establish an effective program that continues the working relationship that has been a hallmark of the Protocol process. It is still early in the rulemaking process to comment with great precision on the rules being developed. Based on the industry success to date, however, EPA will be challenged to develop regulations that can keep pace with the technological developments underway. U.S. usage of CFCs has declined substantially ahead of the schedule provided by the Protocol or the Clean Air Act. According to EPA, usage in the first Protocol control year was approximately 23 percent less than that allowed by the Protocol. This reduction is due in large part to the industry actions described earlier. It is currently expected, assuming EPA's rapid approval and acceptance of HFCs and HCFCs, that the transition away from CFCs and technologies could be virtually complete for most new products by 1997. This does not address one issue of major concern to the U.S. economy, the existence of a huge installed base of equipment that relies upon CFCs for operation. The United States has the highest utilization rate for air conditioning and refrigeration equipment in the world. This CFC-reliant equipment has been valued at more than $135 billion. In addition, current HCFC reliant equipment is valued at more than $150 billion. This equipment, which is owned by consumers, small business owners, building owners, and industry, includes: 140million home refrigerators and freezers 45million residential and commercial central air conditioning systems 5-10million commercial refrigeration units None of the identified substitute compounds are "drop-in" substitutes for the CFCs used in this existing equipment. It is estimated that approximately 200 million pounds of CFCs are used annually to service this existing equipment base. Under the current CFC reduction schedules for 1997 (the Protocol and the Clean Air Act Amendments are consistent between 1997-2000), the U.S. is allowed only about 100 million pounds of virgin production, creating a potential shortfall of approximately 100 million pounds of essential refrigerant material. Absent other technological breakthroughs, CFC shortfalls after 1997 will result in the early retirement of this equipment or reduced operating efficiencies. The latter effect could lead to significantly increased energy consumption by this equipment. It is expected that some of the shortfall will be made up as a result of CFC recovery and recycling operations, and that retrofitting of some existing equipment will be possible. No study by government or industry has indicated that this projected shortfall of CFCs can be eliminated through even the most aggressive recycling efforts. Therefore, while it is expected that most manufacturers of new products will have ceased to rely on CFCs, careful policy consideration must be given to the consumers and owners of existing equipment which may remain in service from anywhere from 10 to 40 years. While several European countries have called for accelerated CFC phaseouts, none of these countries relies to the same extent on air conditioning and refrigeration technology as does the United States, nor do they have the climate conditions that would require such reliance. Also, to our knowledge, the policies adopted by many of these countries are silent on the issue of existing equipment and whether CFCs will be allowed to be used for such equipment. The sooner EPA signals the acceptance of the substitute compounds that have been identified, such as HFCs and HCFCs, the sooner manufacturers will be able to broadly commercialize non-CFC reliant equipment. This will alleviate some of the pressures expected in the latter 1990's and in the next decade; and it will alleviate the concern for premature obsolescence of the existing equipment base. According to a study performed for the Department of Energy, a three year delay in making the substitute compounds available nearly doubles the capital obsolescence costs from $13 billion to $22 billion. Substantial retrofit of existing equipment may be possible. However, this too will entail substantial investment. One large corporation has estimated the cost of its program to retrofit its 476 industrial CFC-reliant chillers at $90 million. The cost for accomplishing the same task for the more than 80,000 industrial chillers in the United States would be more than $15 billion. (Even if only one-third of these units were converted the cost would still be in excess if $5 billion.) In any case, the policy requirement is the same-rapid approval of substitute compounds, and identification of the technological needs of the installed equipment base. The sooner the substitute compounds are commercialized, the smaller the need for CFC production and the smaller the base of existing equipment at the end of the CFC phaseout schedule. Concern has been expressed for the use of HCFC compounds as part of the transition out of CFCs, because of their low, but measurable, ozone depletion potential. The industry recognizes this concern. U.S. industry was the first to acknowledge that HCFCs are “bridging" compounds. Their use allows developed and developing countries to phase out of CFCs more rapidly. As a family HCFCs are an 85 percent to 98 percent improvement over CFCs. (See Exhibit IV). The Protocol's technology assessment panel has determined that commercialization of these compounds is essential in order to accomplish the first priority of the Montreal Protocol, i.e., the elimination of CFCs. HCFCs are not perfect, but their energy efficient characteristics and their very low ozone depletion potential elevate their importance as a substitute technology for CFCs. They allow for the continuation of high priority products and services such as refrigeration, air conditioning, and energy efficient insulation materials, while offering similar consumer and workplace protections characteristic of the CFC compounds. It is already clear that the market has identified a preference for the lowest impact or no ozone depletion products. EPA and policymakers at the international level have recognized the essentiality of HCFCs and the need to phase out ultimately their use as well. Industry is continuing to work with EPA and other Protocol parties on the appropriate use of these compounds. It is important that EPA speak clearly now so that final commercialization decisions regarding HCFCs and other alternatives can be made by the chemical manufacturers and the user industries. It is not productive to debate faster phaseout dates for HCFCs beyond those contained in the Clean Air Act when the potential chlorine contribution from developing country CFC usage is substantially greater than the potential chlorine contribution from worldwide HCFC usage. Reasonable HCFC use will not add to the peak atmospheric chlorine levels. If phased out in accordance with the timetables set forth in the Clean Air Act, HCFCs will not delay the return to pre Antarctic ozone hole chlorine levels. The phaseout for HCFCs in the Clean Air Act, and the resolution adopted as part of the 1990 Protocol revisions, are based on sound scientific analysis, as well as the practical consideration that some assurance of a reasonable lifetime for HCFC technologies is necessary in order to persuade the users to shift away from CFC technologies. Furthermore, if HCFCs and HFCs are not rapidly commercialized, we believe that the task of encouraging a more aggressive phaseout policy on the less developed countries and current significant Protocol non-signatories will be made virtually impossible. Continued CFC use by those nations for the timeframe currently allowed by the Protocol will lead to significantly higher atmospheric chlorine concentrations for several additional decades. (See Exhibit V). HCFCs and HFCs have been more thoroughly tested and scrutinized than any chemicals ever proposed for commercialization. The concern for exposures to these compounds has been recognized by the industry and has led to an unprecedented cooperative research effort by the industry and the government on the potential toxicological and environmental effects (including global warming potential) of these compounds. Recently, for example, the industry consortium known as PAFT, notified EPA officials of preliminary toxicology results from one of the more promising alternative compounds, known as HCFC-123. Male rats were found to have developed benign tumors in the pancreas and testes. This information is currently being analyzed and industry and EPA are working together to develop additional exposure information to determine the conditions under which the compound can be acceptably used. Absent additional new findings from the toxicity analysis, the information indicates that HCFC-123 can still be used, but probably not to the extent hoped for prior to the development of this data. The significance of the data on HCFC-123 is that it should remind us of the technological challenge to replace the CFC compounds and the need to strike a balance between the needs to phase out CFCs rapidly and to protect the health of workers and consumers using these technologies. FURTHER RESEARCH You have raised a question concerning the elimination of ozone protection research under EPA's global environment mitigation research program. It is our understanding that the issue involved not whether research was going to be done, but which budget category was going to pay for the work. We have also been informed that the funding issue has been resolved. |