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IB97003: Stratospheric Ozone Depletion:
Implementation Issues

Larry Parker

Resources, Science, and Industry Division

July 12, 2000

CONTENTS

SUMMARY

For two decades, scientists have been warning that chlorofluorocarbons (CFCs) and halons (bromine-containing fluorocarbons) may deplete the stratospheric ozone shield that screens out some of the Sun's harmful ultraviolet rays and thus regulates the amounts which reach the Earth's surface. CFCs have been used as refrigerants, solvents, foam blowing agents, and outside the United States, as aerosol propellants; Halons are used primarily as firefighting agents. Increased radiation could result in an increase in skin cancers, suppression of the human immune system, and decreased productivity of terrestrial and aquatic organisms, including some commercially important crops.

In September 1987, 47 countries (including the United States) agreed to the Montreal Protocol on Substances that Deplete the Ozone Layer, which first required controls on the world's consumption of ozone depleting substances. Over 160 countries have signed on to the Protocol, whose phasedown schedule for developed countries was accelerated twice and completely phased out Halon production at the end of 1994 and CFC production at the end of 1995. The Protocol's coverage has also been extended to include hydrochlorofluorocarbons and other chlorine- and bromine-containing substances such as some solvents and methyl bromide, a widely used soil fumigant.

At their meeting in Vienna (December 1995), the Parties agreed to phase down the use of HCFCs in developing countries and to phase out production of methyl bromide in

developed countries by 2010, to cap its production in developing countries in 2002. In 1997, the methyl bromide deadline for developed countries was advanced to 2005, and a developing country deadline was set at 2015. The 105th Congress enacted an amendment in October 1998 to adjust phaseout of methyl bromide to 2005.

About one-third of the demand for the primary ozone-depleting substances has been eliminated through conservation. Another third has been replaced by changes to ozone layer-friendly technologies. The remaining third, largely in air conditioning, refrigeration, and rigid foam blowing, is turning to substitute substances such as HCFCs (which have 1 to 10% of the ozone-depleting potential of CFCs and are thus also on a schedule to be phased out by 2030), HFCs (some of which have significant global warming potentials), and light hydrocarbons (which are flammable and tend to be less energy-efficient).

Meeting demand continues to be the primary domestic implementation issues, particularly demand for CFC-12 (used in automobile air conditioners). Higher prices for CFC-12 have made alternatives more attractive and may encourage further development. However, currently, there are no "drop in" substitutes for CFC-12.

This situation has encouraged smuggling of CFC-12 into the United States and calls for more aggressive enforcement. In August 1999, the U.N. Environment Program announced an international agreement requiring countries to establish licensing systems for trading ozone-depleting chemicals that entered into force November 10th.

MOST RECENT DEVELOPMENTS

In April 2000, a European Commission-sponsored study indicated that global warming may be offsetting the benefits of phasing out ozone-depleting chemicals. The premise is that warm air is being trapped at lower levels in the atmosphere by greenhouse gases, and therefore, the upper levels of the atmosphere are much colder, promoting the chemical reactions that destroy ozone. The U.S. National Aeronautics and Space Administration (NASA) participated in this study.

In December 1999, the 11th Conference of Parties was held in Beijing. The parties agreed to increase the Montreal Protocol Fund by $440 million to assist developing countries meet their 2010 deadline for phasing out CFC production. The parties also agreed to a phase-out schedule for HCFCs, with developed countries phasing out production by 2020 and developing countries by 2040.

BACKGROUND AND ANALYSIS

Overview

Ozone is an uncommon molecular form of oxygen. In the stratosphere (6 to 20 miles up), it is formed by the action of sunlight on oxygen. Scientists believe that over the history of Earth, the ozone concentration in the stratosphere, although small, has been relatively constant but is now under siege. ("Stratospheric ozone depletion" is a different issue from ozone as an air pollutant. Polluting ozone involves urban "smog" and results from too much ozone in the atmosphere at the Earth's surface. (See CRS Issue Brief IB10004, Clean Air Act Issues in the 106th Congress). Stratospheric ozone depletion is also a different issue from the "greenhouse effect," or global warming. However, chlorofluorocarbons (CFCs), in addition to their putative role in stratospheric ozone depletion, may also be greenhouse gases. (See CRS Issue Brief IB89005, Global Climate Change).

Ozone in the stratosphere is important to life processes on Earth. Absorbing some of the ultraviolet (UV) light reaching the Earth from the Sun, it acts as a regulator of the amount of UV light reaching the Earth's surface. This is important because UV causes sunburn and sometimes skin cancer (among other effects); the greater a person's exposure to UV, the greater the effect. UV also affects both terrestrial and aquatic plant photosynthesis.

Concern that man's activities could in some fashion change the stratosphere first emerged as a public issue during the Supersonic Transport (SST) debate in 1969. That concern led to a sharp increase into stratospheric chemistry and physics research. In 1974, Drs. Molina and Rowland presented a theory that chlorofluorocarbons would, in the stratosphere, break down to release chlorine in an active form that would destroy the ozone. This generated sufficient public concern that research funding was increased and, in 1978, the U.S. Government banned CFCs in domestic aerosol products and then began to press in international negotiations for other countries to do likewise. Most did not.

In 1985, the revelation of rapid ozone decrease in the Antarctic (the "Ozone Hole") by the British Antarctic Survey caught the scientific community by surprise and without explanation. Within months, three groups of theories were being proposed to explain the springtime phenomenon. The first group, dynamics theories, suggested winds were carrying ozone away from the pole, causing the hole. The second group, solar theories, suggested a buildup of naturally caused nitrogen compounds ("odd nitrogen") destructive to ozone was causing the hole. The third group, chemical theories (like the Molina/Rowland hypothesis), suggested that man-made chlorine and bromine compounds were causing the hole.

Ongoing research in atmospheric science continues to generate evidence in support of the chemical theories--that chlorine-containing chemical species generated by decomposition of CFCs and adsorbed on ice crystals in polar stratospheric clouds deplete the ozone layer over Antarctica. Satellite, balloon-borne, and ground-based monitoring instruments record increasing size and depth to the Antarctic ozone holes since the mid-1980s. The international scientific community, as represented in the executive summary of the Scientific Assessment of the Ozone Layer -- 1998 (conducted under aegis of the WMO and UNEP) state that the appearance of ozone hole during the austral springs has continued unabated, with ozone column losses of 40-55% during the months of September and October.

Ozone losses have also been detected in the Arctic winter stratosphere. In early 1995, the WMO reported that, according to data from dozens of northern hemisphere monitoring stations, ozone levels were 10% to 15% below long-term averages, with a 35% depletion over Siberia. Below average ozone levels were reported as far south as Spain. WMO reported in early 1996 that ozone levels were depleted over a zone stretching from Greenland to Siberia. Depletion over Siberia reached 45% on several days, the deepest recorded to date. The depletion did not reach as far south as it did in 1995, however. With respect to this, the Scientific Assessment of the Ozone Layer -- 1998 states that in the Arctic regions, ozone has declined during some months by 20% to 45% below the 1960s average in six of the last nine boreal winter-spring seasons.

The international scientific community, as represented by the Scientific Assessment of Stratospheric Ozone: 1994, believed that current scientific findings further strengthened the conclusion that "anthropogenic chlorine and bromine compounds, coupled with surface chemistry on natural polar stratospheric particles, are the cause of polar ozone depletion." In its 1998 Assessment, the international community strengthens this statement: "The link between the long-term build-up of chlorine and the decline of ozone in the upper stratosphere has been firmly established." The Assessment also observes: "The total combined abundance of ozone-depleting compounds in the lower atmosphere peaked in about 1994 and is now slowly declining. Total chlorine is declining, but total bromine is still increasing." This result is attributed to the effectiveness of the Montreal Protocol. However, the Assessment also notes that "Based on past emissions of ozone-depleting substances and a projection of maximum allowances under the Montreal Protocol into the future, the maximum ozone depletion is estimated to lie within the current decade or the next two decades, but its identification and the evidence for the recovery of the ozone layer lie still further ahead." (For a further chronology of events, see CRS Report 96-702, Stratospheric Ozone Depletion: A Chronology of Assessment and Decision.)

Nevertheless, there remain some who question whether CFCs are a central cause of ozone depletion. One alternative hypothesis holds that the chlorine causing the ozone hole is mostly from natural sources (not from CFCs) but the ice crystals in the clouds are enhanced in number and duration as a result of increases in the amount of water vapor in the air from increased releases of methane from human activity, coupled with decreasing stratospheric temperatures caused by increased carbon dioxide concentrations in the atmosphere, also from human activity. (See testimony by S. Fred Singer to the Oversight and Investigations Subcommittee, House Committee on Commerce, August 1, 1995.) A large majority of scientists active in ozone depletion science dispute this hypothesis, which has not yet been published in the scientific literature. They claim that evidence shows that more than 80% of the chlorine in the polar stratosphere is not from natural sources but from CFCs and other human-related hydrocarbon emissions and that radiative effects from the very large changes in ozone levels in the polar vortex, and not increases in methane and carbon dioxide concentrations, explain most of the temperature decrease.

Research also continues into the effects of ozone depletion on ultraviolet-B (UV-B) radiation and resulting effects on the ecosystem. Significant increases in UV-B radiation at ground level in Antarctica have been observed and quantified. A review of 14 years of data from the satellite-borne Total Ozone Mapping Spectrometer (TOMS) confirms that, over wide areas, UV-B levels at the surface increase when ozone levels in the stratosphere decline. The increase is greater toward the poles (there is no detectable increase near the Equator), and over time. These results differ from some ground-based measurements, where local effects such as cloud cover reduce the amount of UV-B reaching the ground. (Geophysical Research Letters, August 1, 1996). As stated in the 1998 Assessment: "the inverse correlation between ozone column amounts and UV-B irradiance has been reconfirmed and firmly established by numerous ground-based measurement."Anomalous UV-trend estimates from the Robertson-Berger meter network have been explained in terms of poor calibration stability.

Studies of phytoplankton in the ocean waters off Antarctica have shown decreases in photosynthesis, a first experimental corroboration of the expectation that increased UV-B penetration would affect photosynthesis. However, the effect appears to be rather small; one paper ("Ultraviolet Radiation in Antarctica: Inhibition of Primary Production," Photochemistry and Photobiology, Vol. 58, No. 4, 1993: 567-570) finds a daily decrease of up to 4% and, because of the short duration of the ozone hole, an annual decrease of 0.2% or less.

Ongoing studies of how the ecosystem would react to higher levels of UV-B radiation are beginning to reveal new complexities. A study in British Columbia, published in Science (vol. 265, July 1, 1994, p. 97) found that, over several weeks, algal growth that had been suppressed early in the experiment rebounded to levels higher than the control. The reason: UV-B over time apparently killed insect larvae, which feed on algae. The conclusion: predicting the response of complex, interactive ecosystems from data gained on single life-form systems will probably lead to incorrect or incomplete conclusions.

Finally, research has raised questions about the relationship between ozone depletion and global warming. Until recently, it was thought that, as greenhouse gases, CFCs would contribute to global warming. However, observation indicates that CFC-induced ozone depletion causes cooling in the lower stratosphere, and recent calculations suggest that this cooling either compensates for, or perhaps more than compensates for, the radiative forcing of the CFC content of the atmosphere. That this relationship may be integrated and quite complex is illustrated by a European Community-sponsored study released in April 2000. Entitled the Third European Stratospheric Experiment on Ozone, this European Commission- sponsored study indicates that global warming may be offsetting the benefits of phasing out ozone-depleting chemicals by trapping warm air at lower levels in the atmosphere by greenhouse gases, promoting the chemical reactions that destroy ozone in the now colder upper levels of the atmosphere. The U.S. National Aeronautics and Space Administration (NASA) participated in this study. If these calculations are supported by additional study, then theories about the relationship between ozone depletion and climate change may have to be revised and enlarged. On this subject, the 1998 Assessment states: "The issues of ozone depletion and climate change are interconnected, hence, so are the Montreal and Kyoto Protocols."

CFC Production and Use

The ozone-depleting substances currently receiving policy attention are generically labeled halogenated alkanes, the most common of which are chlorofluorocarbons, or CFCs. CFCs are widely used by industry and consumers. They are nontoxic, nonflammable, chemically inert, and score highly on thermal energy absorption. CFCs were first developed in 1931 as a result of an intensive effort to produce an efficient, safe refrigerant for home use.

Since then, CFCs have been manufactured for a wide variety of uses as a blowing agent in both flexible urethane foams (in carpeting, furniture, and auto seats), and in rigid polyurethane foams (as insulation for buildings and mobile refrigeration units). Others are used as blowing agents in non-urethane foams as well (polystyrene sheet products, foam trays, fast-food wrappers, and the like). Because of their exceptional thermodynamic qualities, CFCs are used as refrigerants in automobile air conditioners, industrial and commercial air conditioners, and home refrigerators and freezers. They have been an important solvent: the electronics and aerospace industries used CFCs as a precision cleaning agent for printed circuit boards and scientific instruments.

Table 1. Relative Ozone Depletion Potential (RODP), Global Warming Potential (GWP), and Atmospheric Lifetimes

Compound RODP* GWP** Lifetime (years)
CFC - 11 *** 1.0 50 50
CFC - 12 *** 1.0 102 108
CFC - 113 *** 0.8 85 88
CFC - 114 1.0 300 180
CFC - 115 0.6 1700 385
HCFC - 22 0.055 1600 13
HCFC - 123 0.016 90 1.4
HFC - 134a 0 1300 18

* From the Montreal Protocol.

** From Intergovernmental Panel On Climate change (IPCC).

***Historically, these accounted for over 90% of U.S. CFC production.

Annual world CFC production peaked in 1974 at about 2 billion pounds. The worldwide interest in ozone depletion which arose about that time and the associated U.S. ban on aerosol uses caused production to fall about 10% and then hold steady for about 6 years. In the 1980s production rose, but has begun to decline as international agreements to reduce production have come into force. Because of the wide variety of uses, the feasibility of substitution varies with the product. Current estimates are that about 40% of historic usage will be replaced by substitute chemicals --hydrofluorocarbons (HFCs) and hyrdrochlorofluorocarbons (HCFCs) -- conservation will reduce usage by about 30%, and "not-in-kind" technology changes will replace the last 30%.

Other ozone-depleting chemicals exist. Halogenated hydrocarbons, halons, are bromine-containing chemicals widely used as flame suppressants in firefighting. Also implicated are a number of chlorine-containing solvents, including carbon tetrachloride and methylene chloride, and the agricultural chemical methyl bromide, used as a soil fumigant and to protect stored agricultural products from insect pests.

International Regulatory Activities

The United Nations Environment Program (UNEP) through its Coordinating Committee on the Ozone Layer has been coordinating, reporting, and assessing the results of research by countries and international organizations since 1977. In 1985, 20 nations plus the European Economic Community agreed on a Convention for the Protection of the Ozone Layer. The Convention creates a framework for international cooperation on research, monitoring, and exchange of information, and provides procedures for developing control measures as needed. The U.S. Senate ratified this Convention July 24, 1986.

International controls on the production of ozone-depleting chemicals were first negotiated with the Montreal Protocol in 1987. It was amended in 1990 (London) and 1992 (Copenhagen) to accelerate the phaseout required by the original protocol. Currently, the Copenhagen Amendments to the Montreal Protocol are the controlling regulatory regime with respect to ozone-depleting chemicals. Additional adjustments to the protocol were made at Vienna in 1995, Montreal in 1997, and Beijing in 1999, but they have not been ratified by the U.S. Senate (see methyl bromide, below, however; for a further chronology of international activities, see CRS Report 96-702 ENR). In September 1997, the Clinton Administration submitted the 1997 Amendments to the Senate for ratification (Treaty Doc. 106-10); however, no action was taken during the remainder of the first session of the 106th Congress.

Copenhagen Amendments

By November 1992, several major parties had decided unilaterally to accelerate phaseout of ozone depleting substances beyond that stipulated in the London amendments to the Montreal Protocol. Germany and Switzerland banned CFCs and other ozone depleting substances by the beginning of 1995. President Bush ordered a U.S. phaseout by the end of 1995. Following these initiatives, and based on available scientific, environmental, technical, and economic information, the Conference of Parties at Copenhagen accelerated the phaseout schedules for CFCs, methyl chloroform, and carbon tetrachloride to January 1, 1996. The phaseout schedule for halons was accelerated to January 1, 1995. Hydrobromofluorocarbons (HBFCs) were added to the controlled substances list and production and consumption was banned commencing January 1, 1996. Also, the agreement added methyl bromide to the list of controlled substances, requiring a freeze on consumption and production beginning in 1995 based on 1991 levels.

The accelerated phaseout schedules for CFCs and halons, and the freeze in methyl bromide consumption, agreed to at Copenhagen do not extend to developing countries, whose phaseout deadline remains at 2010.

The Copenhagen amendments also reflected agreement on phaseout schedules for HCFCs -- "transitional substances" that deplete the ozone layer at considerably lower rates than CFCs. Beginning January 1, 1996, consumption of HCFCs was frozen at a level that is the sum of a country's actual 1989 consumption of HCFCs plus an additional amount based on the product of the country's CFC consumption times 3.1%. Beginning January 1, 2004, parties are obligated to reduce consumption of HCFCs on a schedule that leads to a 99.5% reduction by 2020, and to a total ban on consumption on January 1, 2030.

The United States Senate ratified the Copenhagen Amendments on November 20, 1993 (vote by division).

The Vienna Accord

The Conference of Parties (COP) held its seventh meeting since the Montreal Protocol of 1987 in Vienna in December 1995. With the phaseout by industrial countries of halons completed January 1, 1995, and of chlorofluorocarbons (CFCs), methyl chloroform, carbon tetrachloride, and hydrobromofluorocarbons (HBFCs) scheduled to be completed by January 1, 1996, the Vienna meeting focused on methyl bromide, HCFCs, and the situation with respect to developing countries.

New scientific and technological assessments indicated that methyl bromide should be viewed as a significant ozone-depleting compound. The COP decided to require a 25% reduction in consumption by 2001, 50% reduction by 2005, and complete phaseout by 2010. The parties also agreed to ban the export of methyl bromide to non-parties of the 1992 Copenhagen Amendments, and to revisit in 1997 the issue of exemptions from the phaseout for critical agricultural uses.

For HCFCs, the COP effectively did not change the schedule from that contained in the 1992 Copenhagen Amendments, but it did reduce the baseline for industrialized countries from the sum of a country's actual 1989 HCFC consumption plus 3.1% of its CFC consumption to actual 1989 HCFC consumption plus 2.8% of its CFC consumption.

The above reduction and phaseout schedules do not apply to developing countries. For methyl bromide, developing countries are required to freeze their future 2002 consumption against a baseline calculated from their average annual consumption from 1995-1998. For HCFCs, developing countries are required to freeze consumption commencing January 1, 2016, based on consumption during 2015 with a phaseout by 2040. However, the phaseout deadline of 2040 is to be revisited in the year 2000.

The Vienna Adjustments have not yet been considered by the U.S. Senate.

The Montreal Adjustments

The Conference of Parties held its ninth meeting since the Montreal Protocol of 1987 in Montreal in September 1997. The Montreal meeting focused on a number of issues, but came to substantial decisions on only two: methyl bromide phaseout and CFC export licensing.

Following up on its decision at Vienna to review methyl bromide phaseout in 1997, the parties agreed to advance their phaseout deadline for developed countries from 2010 to 2005. This schedule included interim reductions of 25% by 1999, 50% by 2001, and 70% by 2003. Developing countries received a ten-year grace period with a phaseout deadline of 2015 and an interim reduction of 20% by 2005 (using an average consumption during 1995-1998 as the base year).

Parties also agree to a system for licensing the import and export of new, used, recycled, and reclaimed CFCs, Halons, HCFCs and methyl bromide. The system requires parties to assist in preventing illegal traffic in these substances and to allow cross-checking of information between trading countries. The system is to begin in 2000

Several other issues were discussed, but no consensus reached. These include efforts to accelerate the phaseout schedule for HCFC for developed countries and carbon tetrachloride for developing countries, treatment of process agents, and the transition to non-CFC-based inhalers.

The Montreal Adjustments were submitted for ratification in September, 1999, but have not been considered by the U.S. Senate. However, the 105th Congress did enacted an amendment to adjust U.S. phaseout of methyl bromide to 2005.

The Beijing Adjustments

The Conference of Parties held its eleventh meeting since the Montreal Protocol of 1987 in Beijing in November 1999. The Beijing meeting focused on a number of issues resulting in agreement in two major areas: funding for the Multilateral Fund and HCFC phase-out.

With the developing countries facing a 50% phase-out of CFCs by 2005 and complete phase-out by 2010, funding of the Multilateral Fund was a major focus during the meeting. After considerable debate, the parties agreed to replenish the Fund with $440 million in new contributions.

With respect to HCFCs, the parties agreed to phase-out schedules for both developed and developing countries. A production freeze for developed countries will begin in 2004 at 1989 levels, and for developing countries in 2016 at 2015 levels. Complete phase-out of production is targeted at 2020 for developed countries and 2040 for developing countries. In addition, trade in HCFCs will be banned with countries that have not ratified the 1992 Copenhagen Amendments that introduced the HCFC phase-out.

Current International Activities

Multilateral Fund. The 1990 London Amendments set up a multilateral assistance fund to provide developing countries with financial and technical assistance in meeting their extended 2010 deadlines. Financed by over 30 industrialized countries, initial funding was set at $160-$240 million over three years with the United States responsible for 25% of the budget. In Beijing, the parties agreed to replenish the multilateral fund for the fourth time with $440 million in new contributions. The United States is responsible for 25% of the budget. For the year 2000, the Congress appropriated $39 million for the Multilateral Fund.

HFCs and PFCs. The Kyoto agreement on global climate change includes HFCs and PFCs as two of the six chemicals to be reduced by the treaty's participants. These substances are increasingly being used as substitutes for ozone-depleting CFCs. However, they also have high global warming potentials -- hence, their addition to the Kyoto agreement. Over U.S. objections, the 10th Conference of Parties held in Cairo in November 1998, asked its technical committees to look into available ways of limiting use of HFCs and PFCs as replacements for CFCs. (For further information on HFCs, PFCs and global warming, see CRS Report 98-235 ENR, Global Climate Change: Reducing Greenhouse Gases -- How Much from What Baseline?)

Metered Dose Inhalers (MDIs). There are about 100 million patients worldwide with asthma or chronic obstructive pulmonary disease. Their metered dose inhalers (MDIs) require about 10,000 tons of CFCs annually under the Protocol's essential use exemption provision. Of this, about 4,000 tons are released through inhaler use in the U.S. Inhaler use is increasing at a significant rate worldwide as a result of improving diagnosis and ability to pay.

At the Protocol's Working Group level, discussions are underway on how to phase-out CFC usage in MDIs. Dry powder inhalers are an alternative for many patients, according to the Technical Options Committee, and their use is increasing (but not at a rate sufficient to reduce CFC use). The subgroup reviewing this issue believes more progress is possible, but expresses caution: "It should be feasible eventually to commercialize alternatives to most of the commonly-used MDIs; significant reductions could be achieved by 2000, with a virtual phaseout of CFCs for MDIs by 2005 in developed countries; it is too early to draft a global framework for phase-out; national transition strategies are necessary to facilitate a major reduction in CFC use in MDIs by the end of 2000." Such a transition will be a complex process. At the Cairo meeting in November 1998, the Conference of Parties decided to preserve the current essential-use exemption for CFCs as propellants in MDIs.

HCFCs. As noted above, the 1999 Beijing Adjustments accelerated the phase-out schedule for HCFCs with developed countries to eliminate production by 2020 and developing countries by 2040.

Domestic Regulatory Activities and a CFC Tax

1990 Clean Air Act Amendments

Title VI of the 1990 Clean Air Act Amendments represents the United States's primary response on the domestic front to the ozone depletion issue. It also implements the United States international responsibilities under the Montreal Protocol (and its amendments). Indeed, Section 606(a)(3) provides that the Environmental Protection Agency (EPA) shall adjust phaseout schedules for ozone depleting substances in accordance with any future changes in Montreal Protocol schedules. The phaseout schedules contained in Title VI for various ozone depleting compounds have now been superseded by the Copenhagen amendments to the Montreal Protocol, or subsequent legislation in the case of methyl bromide.

The EPA is required to add any substance that meets a statutory trigger (an ozone depletion potential (ODP) of 0.2 or greater) to a list of designated Class 1 substances and set a phaseout schedule of no more than seven years. For example, methyl bromide (ODP estimated by EPA at 0.7) was added to the list in December 1993, requiring its phaseout by January 1, 2001. Also, EPA is required to add any substance that is known or may be reasonably anticipated to harm the stratosphere to a list of less depleting Class 2 substances and set a phaseout schedule of no more than 10 years.

With respect to methyl bromide, this provision of the CAA was modified by the Congress in October, 1998, with the enactment of the Omnibus Appropriations Act. The amendment essentially harmonized the U.S. phaseout of methyl bromide with that contained in the Montreal Protocol as amended in 1997. Effectively, the phaseout of methyl bromide is delayed from the year 2001, as required under the Clean Air Act, to the year 2005, as agreed to by the parties to the Montreal Protocol in 1997. The amendment also permits production, importation, and consumption of methyl bromide for critical agricultural and other uses and to ensure compliance with appropriate food safety standards.

Title VI contains several implementing strategies to avoid releases of ozone depleting chemicals to the atmosphere, including: (1) for class 1 substances used as refrigerant -- lowest achievable level of use and emissions, maximum recycling, and safe disposal required by July 1, 1992; (2) for servicing or disposing refrigeration equipment containing class 1 and 2 substances -- venting banned as of July 1, 1992; (3) for motor vehicle air conditioners containing class 1 or 2 substances -- recycling required by January 1, 1992 (smaller shops by January 1, 1993); (4) sale of small containers of class 1 and 2 substances -- banned within 2 years of enactment; (5) nonessential products -- banned within 2 years of enactment.

CFC Excise Tax

As part of the Omnibus Budget Reconciliation Act of 1989 (P.L. 101-239), Congress enacted an excise tax on five chlorofluorocarbons (CFC-11, 12, 113, 114, 115) and three halons (Halon 1211, 1301, 2402). The tax, scheduled to increase every year, is calculated as the product of a base tax per pound times a compound's ozone depletion potential (ODP) times the amount of the chemical produced or imported. The ODPs were set at those specified in the Montreal Protocol. The incidence of the tax falls upon three categories of events: (1) sale or use of the compounds by manufacturer, producer, or importer; (2) sale or use by an importer of imported products when a taxed compound is used in the manufacture or production process; and, (3) stocks of taxed compounds owned by any person (other than the manufacturer, producer, or importer) on January 1, 1990, if said stocks are held for sale or for use in further manufacture. Exemptions are made for recycled chemicals, exports, chemicals used as feedstocks or in manufacturing rigid form insulation. Halons receive special treatment for an initial period, until 1994.

As part of the Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508), Congress expanded the range of ozone-depleting compounds included under the tax. Compounds added included carbon tetrachloride, methyl chloroform, and 10 additional CFCs (CFC-13, 111, 112, 211, 212, 213, 214, 215, 216, 217). Tax rates for these newly listed chemicals are calculated on the same basis as the previous compounds with an adjusted phase in period.

The Energy Policy Act of 1992 (P.L. 102-486) established the current rate of taxation for CFCs. Rates for 1993-1995 were increased substantially from previous levels. From a base rate of $5.35 in 1995, the base rate increases by 45 cents/lb. annually--to $5.80 in 1996, $6.25 in 1997, and so on. In addition, the law extends the tax on stocks beyond 1994 and provides for a reduced tax rate of $1.67/lb. for chemicals used as medical sterilants or propellants for metered dose inhalers.

Current Issues

Markets and Prices

When the Montreal Protocol was created and the phasedown of production of ozone-depleting substances (ODSs) was initiated, policymakers recognized that prices would rise as production declined. This was viewed not merely as beneficial but in fact as essential for the market penetration of substitutes to occur through market pull. In the United States, and in a small number of other countries, a tax was imposed on the ODSs to accelerate the price increases and thereby accelerate the development and marketing of substitutes.

CFC-12 has felt the effects of the production phaseout the most. The largest buyer on the open market currently is the auto air conditioning repair sector. Other users tend to be larger entities with several, if not many CFC-12-using units, entities which have instituted refrigerant management plans and a schedule of replacement or retrofit of existing CFC-12-using units. In the auto air conditioner aftermarket, the entities tend to be individual garages or local or regional chains. These entities have not had the opportunity, nor have they had the financial resources, to gather CFC-12 stocks in advance. Thus, they buy the CFC-12 stocks they needed as demand dictates, with their needs peaking, naturally, during the summer. The price for CFC-12 (the historic refrigerant for auto air conditioners), which was about 60 cents per pound from the producer before the production phasedown began, has risen substantially as the Protocol led to reductions in production. Immediately after production stopped, the price began to rise rapidly. By the end of the summer of 1996, the price peaked at over $25 per pound (wholesale, including tax), with some reports of transactions at over $30 per pound.

The outlook for 1999 and beyond is for continued price increases, particularly during the summers when the frequency of auto air conditioner repairs peaks. How much CFC-12 is in inventory is unclear, as most of those who hold stocks are not revealing how big their stocks are. The most recent survey of stocks was taken by ICF Incorporated for the EPA in 1998. Table 2 provides the midpoint estimates of that report. More pessimistic estimates of available inventories had the country's stocks being depleted at the end of 1998. More optimistic estimates of available inventories have the country's stocks lasting until 2002.

EPA and the auto air conditioning service industry are struggling to work with individual technicians and shops to help them recognize cost-effective opportunities for retrofit of CFC-12 systems to substitutes and learn how best to persuade car owners to retrofit when it would be cost effective for them to do so. This is a slow process because the sector is made up of a large number of small enterprises and is thus hard to reach in any comprehensive way, and car owners are not generally interested in a life cycle cost analysis but instead tend to minimize current maintenance costs. On the other hand, this task of persuading car owners to retrofit may soon be easier; there is an increasing number of reports from technicians that

Table 2. CFC-12 Supply/Demand Balance
(millions of pounds)

  1998 1999 2000 2001 2002
Beginning
Inventory
58 35 15 0 0
Reclaim &
Recycle
5 5 5 5 5
Demand/ Use 27 26 21 17 13
Ending
Inventory
35 15 -1 -12 -8

Source: "Report on the Supply and Demand of CFC-12 in the United States: 1998." ICF Incorporated, prepared for U.S. Environmental Protection Agency, May 15, 1998.

they can now offer a repair plus retrofit to alternative refrigerants for the same price as a repair and recharge with CFC-12 at its new high price because the alternative refrigerants are selling at less than $10 per pound compared to the $20 or more that CFC-12 is currently being sold for.

Smuggling

Given the price history outlined above, the outlook for continued price increases, and the continuation of CFC-12 production in developing countries (allowed under the provisions of the Montreal Protocol until 2010), the lure of illegal trade in CFC-12 is obvious. Smuggling into the United States, where the CFC tax caused CFC prices to be higher than in most other countries which did not impose similar taxes, was already noticeable as early as 1994. In response, in late 1994, several government agencies began an intensified anti-smuggling initiative. Involved are the EPA, the Customs Service, the Internal Revenue Service (IRS), the Commerce Department and the Justice Department. This initiative has been strongly supported by the U.S. Alliance for Responsible Atmospheric Policy, a trade group of producers, distributors, and users of CFCs and their alternatives. The Alliance estimates that between 10,000 and 20,000 tons of CFCs (up to about 6 months supply) illegally entered the United States in each year in 1994 and 1995. By late 1996, Customs had impounded over 1 million pounds of illegal CFC imports, and IRS has assessed nearly $80 million in unpaid taxes. Although most of the early arrests for illegal imports were made in Miami, significant volumes of illegal imports have also been reported from Houston and Baltimore. Significant volumes of illegal imports of CFCs into Western Europe have been reported. Evidence as to the scale of this illegal activity is sparse, but what is known indicates that it is large enough to make CFCs readily available, even though production in Western Europe ceased at the end of 1994, one year earlier than in the United States.

The ninth meeting of the Conference of Parties, held September, 1997 in Montreal, calls for an export ban on ozone-depleting substances when a country does not comply with the production controls of the protocol, and the establishment of a world wide licensing system, effective in the year 2000, to track the import and export of such substances. In August, 1999, the U.N. Environment Program announced that sufficient countries had ratified the agreement for it to enter into force in November. However, the United States has not ratified the agreement to date.

This international action on smuggling was reinforced at the April 1998 environmental ministerial meeting of the G-8 countries. Held at Kent, U.K., the ministers agreed to a plan to reduce smuggling of CFCs, and negotiate stronger anti-smuggling provisions in existing international agreements. Agreement was further strengthened at the G-8 meeting of law enforcement officials held at Rome in July 1999. Specifically, the G-8 countries agreed to share data in an effort to detect and prevent illegal shipments of ozone-depleting chemicals.

A recent report by the London-based Environmental Investigation Agency argues that the illegal trade in CFCs has moved from Russia, where progress in controlling exports has occurred, to China. Successful exports of CFCs from China to the United States and Europe are accomplished through tactics that include false labeling, counterfeit paperwork, and bogus export corporations ("A Crime Against Nature: The Worldwide Illegal Trade in Ozone-Depleting Substances," November 12, 1998).

Metered Dose Inhalers

Besides international discussions of CFC-activated inhalers identified above, there have been considerable domestic discussion as well. In March 1997 the Food and Drug Administration (FDA) issued an advance notice of proposed rule-making for CFC-activated inhalers (62 Federal Register 10242-10247). The FDA's notice required public comment on proposed criteria for evaluating the essential-use status of CFC in metered-dose inhalers (MDI). The criteria proposed was four-fold: (1) at least two alternatives MDI products for the same medical condition with equivalent levels of convenience; (2) adequate supplies and production capacity for the alternatives exist; (3) at least 1 year of actual use data are available for each alternative with persuasive evidence of patient acceptance; (4) all significant patient subpopulations are served by the alternative products. FDA has taken no further regulatory steps beyond the public comment period that ended May 7, 1997.

With more than 20 million Americans potentially affected by this proposed rulemaking, considerable interest has been generated in Congress. In 1998, hearings on the proposed rulemaking have been held in the Senate Labor and Human Resources Committee (April 2) and in the House Commerce subcommittee on Health and the Environment (May 6). At those hearings, the FDA stated that it did not have a deadline for phasing out CFC-based inhalers and that costs would be part of the "adequate patient acceptance" criteria that FDA proposed in its rulemaking. According to FDA testimony, there are currently 17 CFC-based inhalers on the U.S. market, of which 9 have alternatives under development, 2 are no longer marketed, and 2 have alternatives under consideration. This leaves 4 alternatives with no active effort to develop alternatives.

Despite FDA reassurances their primary focus "is, and will remain, the health and safety of patients" who use inhalers, legislation has been introduced with respect to the FDA rulemaking. During the 105th Congress, Senator Hutchinson introduced S. 1299 to constrain FDA from phasing out CFC-based inhalers.

Significant New Alternatives Program (SNAP)

Section 612 of the Clean Air Act requires EPA to set up a program to identify alternatives to ODSs in their various uses and to publish lists of acceptable and unacceptable substitutes. EPA has done this. It evaluates candidate products for ozone depleting potential, global warming potential, toxicity, flammability, and physical and chemical properties. When it determines that a substitute is acceptable for a given use, it is certifying that the substitute is more benign in terms of ozone depletion and global warming potential than the ODS it is a substitute for and is otherwise acceptable from an environmental and health standpoint, subject if necessary to specific conditions on how the substitute is used.

Listing as an acceptable substitute does not carry with it any evaluation of the material for the particular use for which it is designed. Thus, an acceptable substitute from EPA's significant new alternatives program evaluation may actually not work as well in that use as other substitutes equally acceptable from the EPA point of view. EPA leaves it to the market to determine the ultimate winners and losers.

Lists of acceptable substitutes for the various use categories can be obtained from EPA's hotline (1-800-296-1996), from the Federal Register notices, or from EPA's bulletin board or WorldWide Web site (http://www.epa.gov/ozone/title6/snap/snap.html). The lists are updated quarterly. Most recently, EPA issued a rule April 28 to find chlorobromomethane (CBM) unacceptable as a substitute for halons or other ozone-depleting chemicals banned under the Montreal Protocol. EPA did find HFC-236fa an acceptable substitute for halons (fire suppression), HFC-4310mee for CFC-113 (metal cleaning), and other substitutes. The rule became effective May 28th. (See 64 Federal Register 22982.)

With respect to auto air conditioners designed for CFC-12, where CFC-12 supply shortages and price spikes are now being felt, EPA has listed nine acceptable substitutes. None are "drop-in" substitutes; the CFC-12 must be removed, and the equipment must be modified in some way. The first listed was HFC-134a, now the refrigerant of choice in the air conditioning units of new cars; the fact that there are eight others means that there will inevitably be problems of cross-contamination. This is already occurring, despite the EPA requirement that each alternative have its own set of unique fittings for charge and discharge; cross-contamination means that recycle is not possible and reclaiming is very difficult at best and often not yet economically possible. An issue of increasing significance is how best to make sure that contaminated refrigerants, all of which have some ozone depleting potential, are destroyed and not vented. Another issue is how to identify contaminated refrigerant before it contaminates the recovery equipment and recovered refrigerants on their way to reclaiming. Both of these issues are being addressed by EPA in cooperation with the industry members and associations. So far, the problems remain intractable.

Aside from auto air conditioning, the sector with the greatest difficulty with respect to substitutes is methyl bromide. There, the issue is not retrofit of existing equipment but finding cost effective substitutes for many of the pesticide applications. This issue remains ongoing. (See CRS Report 98-590 STM, Methyl Bromide and Stratospheric Ozone Depletion Policy Issues).

Regulating Substitutes -- HFCs and PFCs

In June 1998, EPA proposed a new recycling rule with respect to substitute refrigerants (63 Federal Register 32043-32099). Consistent with its previous decisions under the SNAP program, EPA has determined that the global warming potential of HFCs and PFCs warrant prohibiting the venting of such substances to the atmosphere under Section 608(c)(2) of the Clean Air Act. Specifically, the proposed rule would extend to HFC and PFC refrigerants the same requirements currently placed on CFCs and HCFC refrigerants, including certification programs for recovery/recycling equipment and technicians, and a prohibition on the sale of such refrigerants to anyone but certified technicians. These requirements would not prohibit the use of HFCs or PFCs, just as the use of CFCs is not prohibited. However, the proposed rule would require service technicians to minimize any venting of these substances to the atmosphere and restrict access to such refrigerants to technicians properly certified to handle them. The public comment period on this proposal ended on August 31, 1998. No further action has occurred.

In a similarly justified action, the EPA issued a final rule March 3, 1999 (made effective April 1) that banned the use of HFC-134a and HFC 152a as refrigerants in self-chilling cans (64 Federal Register 10374-10378). EPA stated that such use of the two CFC replacements would lead to "unacceptably high greenhouse gas emissions."

FOR ADDITIONAL READING

Bothwell, M. L., D. M. J. Sherbot, and C. M. Pollock. "Ecosystem Response to Solar UV-B Radiation: Influence of Trophic-Level Interactions." Science, vol. 265, July 1, 1994: 97-100.

Herman, J.R. et al. "'UV-B increases (1979-1992) from Decreases in Total Ozone."Geophysical Research Letters, vol. 23, No. 16, August 1, 1996: 2117-2120."

Holm-Hansen, Osmund, E. W. Heibling, and Dan Lubin. "Ultraviolet Radiation in Antarctica: Inhibition of Primary Production." Photochemistry and Photobiology, vol. 58, No. 4, 1993: 567-570.

Lieberman, Ben. "The High Cost of Cool: The Economic Impact of the CFC Phaseout in the United States." Competitive Enterprise Institute. June 1994.

Ozone Action. "Deadly Complacency: US CFC Production, the Black Market and Ozone Depletion." September 1995.

Rowland, F. Sherwood and Mario Molina. "Ozone Depletion: 20 Years After the Alarm." Chemical and Engineering News, August 15, 1994: 8-13.

Singer, S. Fred. "(N)O3 Problem". The National Interest, Summer 1994: 73-76.

Taubis, Gary. "The Ozone Backlash." Science, vol. 260, June 11, 1993: 1580-83.

Zurer, Pamela S. "As CFC Ban Quietly Comes into Force, Attention Turns to Other Concerns." Chemical and Engineering News, December 4, 1995: 26-27.

---- "Complexities of Ozone Loss Continue to Challenge Scientists." Chemical and Engineering News, June 12, 1995: 20-23.

CRS Reports

CRS Report 98-590 STM. Methyl Bromide and Stratospheric Ozone Depletion Policy Issues.

CRS Report 96-702 ENR. Stratospheric Ozone Depletion: A Chronology of Assessment and Decision.

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