89021: Stratospheric Ozone Depletion:
Regulatory Issues

David E. Gushee

Consultant

Larry Parker

Environment and Natural Resources Policy Division

Updated November 4, 1996

CONTENTS

SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS

Stratospheric Ozone Depletion

Latest Data

CFC Production and Use

International Regulatory Activities

The Montreal Protocol

The London Accord

The Copenhagen Accord

The Vienna Accord

Possible Future Actions

Domestic Regulatory Activities and a CFC Tax

CFC Tax

Economic Impacts of a CFC Production Limit

Methyl Bromide

LEGISLATION
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
CHRONOLOGY
FOR ADDITIONAL READING

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.

Recent evidence has strengthened the scientific case against CFCs and Halons and has revealed that ozone concentrations have begun to decline throughout the stratosphere, even in the Temperate Zones. Although much remains to be learned about the behavior of trace gases in the atmosphere, most scientists active in atmospheric research believe they have identified the key chemical species, their sources, and their modes of action. Some scientists remain unconvinced, but do not discount the possibility that the threat may be real.

Scientists have also maintained that CFCs are also "greenhouse gases" and thus contributory to the possibility of global climate change. However, some very recent findings have cast doubt on this.

In September 1987, 47 countries agreed to the Montreal Protocol on Substances that Deplete the Ozone Layer, which first froze world consumption of specified CFCs and Halons and by 2000 would reduce CFC consumption 50%. Currently, over 120 countries have signed on to the Protocol, whose phasedown schedule was accelerated twice and included a complete phaseout of Halons at the end of 1994 and of CFCs by the end of 1995. The Protocol's coverage has also been extended to include hydrochlorofluorocarbons (HCFCs) and other chlorine-and bromine-containing substances such as some solvents and methyl bromide, a widely used soil fumigant.

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).

At their latest meeting (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, and to revisit the role of methyl bromide in developing countries in 1997. Current remaining issues are basically associated with compliance by member countries, including a rising amount of smuggling of CFCs.

MOST RECENT DEVELOPMENTS

A new review of satellite data on levels of UV-B radiation (the type of radiation which negatively affects photosynthesis, human skin, and eyes) at the Earth's surface has found that, averaged over wide areas, they are increasing in proportion to the decline of ozone concentrations in the stratosphere, as predicted by theory. Measurements of UV-B at the surface, affected as they are by clouds and other local effects, do not always show such increases.

BACKGROUND AND ANALYSIS

Ozone is a special 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 nonattainment. The latter is an atmospheric issue at the Earth's surface; the problem there is too much ozone. Stratospheric ozone depletion is also a different issue from the "greenhouse effect," or global warming. However, CFCs, in addition to their role in stratospheric ozone depletion, are also greenhouse gases (see CRS Issue Brief 89005, Global Climate Change).

Ozone in the stratosphere is important to life processes on Earth. It absorbs some of the ultraviolet (UV) light reaching the Earth from the Sun. It thus 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; there is some evidence that increased UV is negatively affecting marine plant life in Antarctica.

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 in research in stratospheric chemistry and physics. One of the results of that heightened attention was evolution of a theory that chlorofluorocarbons would, in the stratosphere, break down to release active chlorine fragments which would destroy the ozone.

When that theory became public in 1974, public reaction caused another public debate as in the SST case. In this instance, however, in addition to funding more research, 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.

Latest Data

A "hole" in the ozone layer was first recognized by scientists in 1985. In reviewing earlier data, they found that the "hole" first appeared in the late 1970s, according to satellite data.

What happened in Antarctica during the winter/spring season of August to October 1987 was the object of an intense multi-agency scientific expedition. The data showed that the ozone hole was the largest ever to that date and that ozone concentrations at the top of the Antarctic stratosphere were reduced by more than 95% from base levels. Samples were taken from the affected stratospheric areas that seemed to show that the ozone-depleting reactions were caused by chlorine from CFC decomposition adsorbing on ice crystals in the winter stratospheric cloud layer and that the ice crystal surfaces catalyzed the reaction of chlorine with ozone to destroy the latter.

In March 1988, an international group of more than 100 scientists reported the results of an intensive review and re-analysis of data gathered over the past 20 years. This review showed that ozone concentrations, adjusted for cyclic variations, had decreased up to 5%, depending on latitude, over both northern and southern temperate zones, in addition to the Antarctic effects. The magnitude of the decrease was a surprise to the scientists: "Things are worse than we thought," Robert Watson, then of NASA and currently with the Office of Science and Technology Policy, told the Washington Post March 16, 1988: A1).

In September and October 1988, scientists observed that the Antarctic ozone hole was neither as large nor as deep as it was in 1987 or in 1985. It was instead similar to the situation in 1984 or 1986, when the hole was smaller than in 1987 or 1985, but larger than in 1979 to 1983. The ridge of high ozone content surrounding the hole in 1988 was almost back to pre-hole levels, and the atmosphere was unusually dynamic, thus weakening the polar vortex within which the hole exists. These results, according to NASA scientists, were consistent with then-current scientific understanding of the mechanism of ozone depletion and fell within the range of normal variability in atmospheric phenomena.

Scientists expected that the hole would again enlarge in 1989. Measurements supported this expectation; the hole was about the same size as in 1987. It was also the same size in 1990, contrary to previous experiences that the hole alternated year to year between larger and smaller. In 1991, 1992, 1993 (the deepest depletion yet), and 1994, the hole was again larger, making 6 years in a row that major depletion has occurred. Early reports on the 1995 hole showed it to be larger earlier than in previous years. However, by the end of the polar spring, it ended up comparable in size to the 1994 hole.

Ongoing scientific studies continue to generate evidence in support of the hypothesized mechanisms through which the CFCs deplete the ozone layer over Antarctica (chlorine-containing chemical species generated by decomposition of CFCs and adsorbed on ice crystals in polar stratospheric clouds are the culprit). On the other hand, at least one alternative hypothesis to explain how the hole occurs has been put forth. Under this hypothesis, the chlorine 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 theory, 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.

Significant increases in ultraviolet (UV) radiation at ground level in Antarctica have been observed and quantified. These are the first experimental corroboration of the expectation that stratospheric ozone depletion would lead to increased UV levels on the Earth's surface. Studies of phytoplankton in the ocean waters off Antarctica have shown decreases in photosynthesis, again 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. In 1993, Canadian scientists measured a significant increase in the amount of UV-B radiation reaching the ground in the Toronto area and inferred from a concurrent downward trend in total ozone over Toronto that the reduction in ozone caused the increase in UV-B. Some scientists have questioned the interpretation of the Toronto data. They are concerned that a weather disturbance rather than ozone depletion caused the reduction in UV-B levels. (See "(N)O3 Problem" by S. Fred Singer, The National Interest, Summer 1994).

However, a review of 14 years of data from the satellite-borne Total Ozone Mapping Spectrometer (TOMS) confirms that levels of UV-B radiation at the Earth's surface over wide areas where such local effects as clouds, aerosols, and tropospheric ozone buildups do not correlate with stratospheric ozone levels -- that is, when ozone levels in the stratosphere decline, UV-B levels at the surface increase. The increases increase with increasing latitude (there is no detectable increase near the Equator) and are increasing over time as stratospheric ozone levels are decreasing 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).

Studies of the Arctic stratosphere began in earnest in January 1989 to determine whether the ozone-depleting mechanisms, including the polar stratospheric clouds involved in the Antarctic ozone holes, operate in the North as well. Winter data since 1989 show that the chemical composition of the stratosphere in the North has changed in ways that are analogous in many instances to changes in the Antarctic. Ozone appears to be only slightly depleted, perhaps because of the lack of the ongoing presence of stratospheric clouds and the wind vortex, both of which are present in Antarctica. Although these findings are inconclusive, the scientists view them as consistent with the hypothesis that the potential for ozone depletion in the Arctic is real. On the other hand, it is possible that sulfates in the atmosphere from volcanic activity, such as the recent eruption of Mount Pinatubo in the Philippines, are exacerbating the chlorine concentration increases already present from the CFCs, although the 1994-95 data, which show a continued depletion, tend to weaken that hypothesis.

Over the past several years, scientists have made calculations which show that the cooling observed in the lower stratosphere caused by ozone depletion there from CFC- derived chlorine either compensates for, or perhaps more than compensates for, the radiative forcing of the CFC content of the atmosphere. If these calculations are supported by additional study, then the previously held view that reducing CFC emissions would reduce the threat of global warming would have to be revised.

Satellite data from 1980-1992 show a decline rate in ozone levels of 2.5+/- 1.4% per decade, with the 1992 results significantly lower than the trend line would predict. In 1993, scientists observed that ozone levels over both northern and southern hemispheres were lower by 2% to 3% than in any of the previous 13 years of satellite data. They speculated that the decrease was "related to the continuing presence of aerosol from the Mount Pinatubo eruption." In early 1995, the World Meteorological Organization 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.

Ongoing studies of how the ecosystem would react to higher levels of UV-B radiation are beginning to reveal new complexities. A recent 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 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 conclusions.

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 (as 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.

The CFC family has many members, each somewhat different chemically and physically from its relatives. The most widely used CFCs with the highest ozone depletion potential have been CFC-11 and -12 (mainly used as refrigerants). However, most have some ozone depletion potential.

Annual world CFC production peaked in 1974 at about 2 billion pounds (see Figure 1). 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 the Protocol has 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 (HFCs and HCFCs), conservation will reduce usage by about 30%, and "not-in-kind" technology changes will replace the last 30%.

Another set of halogenated hydrocarbons, the halons, are also implicated. These bromine-containing chemicals are 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 pest-related deterioration.

International Regulatory Activities

There has been considerable international involvement in the ozone depletion problem. 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 supported this Convention in August 1986.

The Montreal Protocol

In December 1986, the Convention began to deliberate on some possible CFC control measures. Meetings were held in December 1986, and February, April, and September 1987. At Montreal in September 1987, 47 countries reached agreement, which 24 immediately signed. Called the Montreal Protocol on Substances that Deplete the Ozone Layer, it called for a freeze on consumption of specified CFCs at 1986 levels within a year after it comes into effect. Thereafter, consumption would be cut by 20% over 3 years and by an additional 30% by 1999. Parties could intervene to delay or otherwise modify the provision which would reduce the last 30% by 1999.

The agreement to cap and then reduce consumption covered CFCs 11, 12, 113, 114, and 115. The agreement also capped consumption of Halons 1211, 1301, and 2402, but did not specify subsequent reductions for these latter three chemicals.

Special provisions were included for developing countries, permitting them to increase CFC usage for 10 years but limiting their total consumption to 0.3 kilograms per capita per year (their current level is about 0.2 kg per capita per year). And the Soviet Union was granted a special provision allowing its base level to be increased about 25% from 1986 levels to take into account production from plants then under construction.

The agreement took effect on January 1, 1989. The Protocol provided that at least 11 nations representing at least two-thirds of the world's consumption had to deposit their instruments of ratification for the January 1989 date to be used. This requirement was fulfilled on December 16, 1988. More than 120 countries are now signatories.

The London Accord

In Helsinki, Finland, in early May 1989, delegates to the first official meeting of parties to the Montreal Protocol initiated work toward an agreement to ban production of listed CFCs by 2000, to expand the list to include carbon tetrachloride and perhaps methyl chloroform, and to begin to phase out Halons.

In London on June 29, 1990, the Parties concluded the negotiations begun in Finland by agreeing to accelerate the phaseout of ozone-depleting chemicals. The agreement marked substantive changes and additions to the 1987 Protocol goals. Under it, reductions (from 1986 levels) would be made as follows:

CFCs 20% by 1993 50% by 1995 85% by 1997 100% by 2000

Halons 50% by 1995 100% by 2000 (with some exemptions)

Carbon Tetrachloride 85% by 1995 100% by 2000

Methyl Chloroform 30% by 1995 70% by 2000 100% by 2005

Less developed nations would again be given a grace period of 10 years to complete the phaseout. Also, HCFCs would be eliminated no later than 2040, and earlier than 2020 if possible.

Major stumbling blocks to the agreement involved whether developed countries should provide technology and funds to less developed nations. China and India, in particular, which did not sign the 1987 Protocol, maintained that they and other nations without the new technologies should be given access to them and financial assistance. The London agreement provided for creation of an international fund, administered by a 14- nation board, funded at $160 million over the period 1991-1993. The United States has a permanent seat on the board and contributes 25% of the fund. Some thirty other nations also contribute.

The President submitted the Protocol amendments to Congress for ratification (Treaty Doc. 102-4). The Senate agreed to ratification in the last days of its 1991 session.

The Copenhagen Accord

A new review of scientific findings by Protocol parties was carried out in 1991 and 1992. In anticipation of the results of that review, and possibly in an attempt to influence the outcome, Germany and Switzerland banned CFCs and other Class I regulated substances by the beginning of 1995. Without waiting for action by the Protocol process, President Bush ordered a U.S. phaseout by the end of 1995.

As a result of the scientific review, the Montreal Protocol parties, meeting in Copenhagen, Denmark, in November 1992, agreed to an additional acceleration of the phaseout of CFCs, methyl chloroform, and carbon tetrachloride to the end of 1995, with an interim goal of a 75% reduction by 1994. Halons were phased out completely at the end of 1994.

Further, the parties reached agreement on the phaseout schedule for HCFCs -- cap in 1996 at a total ozone depletion potential (ODP) of 3.1% of the total ODP of CFCs plus the total for HCFCs consumed in 1989, reduced to 65% of the 3.1% in 2004, 35% in 2010, 10% in 2015, 0.5% in 2020, and 0 in 2030. This schedule is designed to provide an adequate life cycle for the HCFCs, while third generation substitutes are developed, while at the same time minimizing total impact on stratospheric ozone levels of the products produced.

A process for review of the need for essential use exemptions has been established. Under it, a panel has reviewed the Halon situation and has recommended that there be no exemptions granted, on the basis that sufficient stocks exist to handle essential needs and that to approve any exemptions would reduce the incentive to find alternatives. The recommendation went first to the "Open-Ended Working Group of the Parties to the Montreal Protocol," which met in Geneva early in September and went next to the formal conference of the Parties in Bangkok, Thailand, in November 1993, where it was approved.

The Senate agreed to ratification (Treaty Doc. 103-9) on November 20, 1993.

The Vienna Accord

Parties to the Protocol, starting at their first meeting after the Copenhagen Accord was reached, began to debate additional regulatory actions. Several countries, led by Germany and Sweden, urged that the HCFC phasedown schedule be accelerated by at least 10 years and that methyl bromide be brought under a phaseout schedule as well.

The Parties met again in Vienna, Austria, in December 1995, after completing new scientific and technological assessments. Despite the proposal by the European Union that, for developing countries, the HCFC cap be reduced from 3.1% of the 1989 consumption of CFCs plus HCFCs to 2.0% and an acceleration of the phaseout from 2030 to 2015, the Parties agreed that the phaseout schedule (see page 8 for details) should not be accelerated but agreed further that the cap would be reduced to 2.8% of the 1989 consumption of CFCs plus HCFCs and that the allowed production be used exclusively to service existing air conditioning and refrigeration equipment. For developing countries production would be capped in 2016 at 2015 levels and brought down to zero by 2040.

Although the U.S. delegation ultimately signed on to the HCFC cap reduction, it expressed strong resistance to any further attempts at future meetings of the Parties to reduce the cap further or to change the phaseout schedule for HCFCs. The change agreed to at Vienna will have only a tiny impact on overall stratospheric chlorine loadings, while any further changes would have even less impact.

Methyl bromide, already capped in developed countries at the 1991 production level, was brought under a phasedown schedule under which, for developed countries, production would cease in 2010 while, for developing countries, production would be capped in 2002 at a baseline, which is an average of the years 1995-1998.

Possible Future Actions

The Parties agreed to review the methyl bromide phaseout schedules in 1997. The Parties will also consider requests for special exemptions for agricultural uses for which no adequate substitutes have been developed.

Discussions carried out within the International Negotiating Committee of the Global Climate Change Treaty are including the pros and cons of controlling the amount of HFCs permitted, in light of their potential to contribute to global warming. Since the industries involved have not yet developed alternatives to the HFCs and had not expected that HFCs would be so regulated, the possibility that they might be has opened a new round of development efforts and political maneuvering. This issue generated recommendations for regulation at the first meeting of the Convention on Climate Change in Berlin in April 1995. Negotiators did not agree to any acceleration in phasedown schedule, but did agree to develop such a schedule by the time the parties meet again in 1997. Whether this agreement will be formally accepted by the U.S. is now an issue, since American industry feels that such an agreement will adversely affect its competitiveness.

Domestic Regulatory Activities and a CFC Tax

The Clean Air Act Amendments of 1977 (P.L. 95-95) included authority for regulation of ozone-depleting substances (Section 157 required that the EPA Administrator promptly propose regulations on any substance or activity which in his judgment may reasonably be anticipated to affect the stratosphere, especially the ozone in the stratosphere, if such effect may reasonably be expected to endanger public health or the environment). P.L. 95-95 set up a research program to include atmospheric effects, control technologies, and economic impacts of regulation; sought to assure interagency coordination; and authorized international negotiations.

Since enactment of the Clean Air Act Amendments of 1990, EPA has developed a comprehensive program to regulate production and use of ozone-depleting substances, including production limits, labeling requirements, recovery and recycle, certification of technicians, and approval processes for safe substitutes. It periodically issues lists of acceptable substitutes.

CFC Tax. As part of the budget reconciliation process for FY1990, the Senate Environment and Public Works Committee proposed application of the fee approach as its way to generate $450 million in savings required in the budget resolution. The Committee marked up a bill that included not only the fee but also a regulatory rubric, plus an emphasis on increased attention to methane. Late in the reconciliation process the regulatory provisions were stripped and the fee became an excise tax. On the House side, the Ways and Means Committee included a CFC tax in its tax package. The tax was included in the final budget reconciliation package, starting in 1990 at $1.37 per pound, rising to $2.65 in 1993 and 1994, and increasing at 45 cents per pound per year thereafter.

In the Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508), carbon tetrachloride, methyl chloroform, and 10 additional CFCs were made subject to the tax. The newly listed chemicals are taxed at $1.37/lb. in 1991-2, $1.67/lb. in 1993, $3.00/lb. in 1994, $3.10/lb. in 1995, and escalating at 45 cents per pound, per year thereafter.

The 102nd Congress increased the existing excise tax on ozone depleting substances in its energy policy bill, P.L. 102-486. It is now $5.35/lb.

Economic Impacts of a CFC Production Limit

As CFC production is capped and then reduced as a result of the Montreal agreement, significant increases in the prices of the capped CFCs were expected and have occurred (see Figure 3). How much more of an increase will occur will be determined by several factors: whether effective drop-in substitutes can come on line, how user industries and consumers react to the changes in price and product performance by retrofitting or replacing CFC-using equipment, and how the private sector generates and manages inventories of captured, recycled, and reclaimed CFCs.

A number of estimates have been made of the cumulative costs of phasing out all ozone- depleting substances. The EPA's most recent estimate for the next decade, carried out as part of the rulemaking accelerating the phaseout from 2000 to 1995, was about $16 billion. However, a more recent study by The Competitive Enterprise Institute (CEI) estimates costs of $44 to $95 billion, half of which are associated with auto air conditioners. EPA's estimate assumes in essence an optimum phaseout path, while CEI's assumes almost a worst case path. EPA also estimated health and environmental benefits as much greater than the costs, while CEI did not estimate benefits.

As CFC regulation has increased, industry has stepped up its efforts to find substitute products, develop recovery and recycle programs, and develop alternative technological approaches toward performing the CFC functions. A key issue is the schedule of HCFC phaseout and use. Many consider HCFCs, particularly HCFC-22 and HCFC-123, the best near-term substitutes for CFCs and see them as vital to an orderly transition away from use of CFCs. HCFCs, however, do contain chlorine, and thus deplete the ozone layer, but at levels one-twentieth to one-fiftieth those of regulated CFCs. At the negotiations in London in June 1990, participants agreed to phase out HCFCs by 2040, but earlier if possible. Environmentalists favor a more accelerated phasedown and succeeded in the second review process under the Protocol in getting the HCFC phaseout schedule advanced to 2030. As indicated earlier, pressure to accelerate the phasedown further is continuing (p. 7). Development work on substitutes is proceeding rapidly, and CFC producers periodically announce new product developments that offer increasing hope that accelerated phasedown of the regulated HCFCs will be possible without traumatic economic adjustment.

Now that CFC production for domestic consumption has ended, it appears that the sector likely to have the greatest problem of adjustment is the one servicing existing air conditioners in commercial buildings and in cars, and refrigeration equipment. The economics of auto air conditioner retrofit are becoming clearer as experience grows. The average cost for a retrofit to HFC-134a is now estimated to be $260, not counting the cost of necessary maintenance or repair. The cost could be as low as $77.50 for a front-wheel-drive car or $122.50 for a rear-wheel-drive car. Necessary repairs could add up to $1000 or more, should the compressor, for example, have failed and have to be replaced.

Drop-in substitutes for CFCs and for lubricants have been developed, but their performance has not yet been fully demonstrated. Supplies of recycled CFCs may not be sufficient to service existing units. The air conditioning and refrigeration equipment-supplying and contracting industries have become very concerned over the slow rate of retrofit or accelerated replacement of existing units and are carrying out an aggressive education campaign to try to stimulate a greater response. The rates of both retrofit and replacement are increasing, but the industries remain concerned about the post-'95 years, with tens of thousands of pieces of CFC-using equipment remaining in use.

These industries, commercial building owners, and producers and users of metered-dose inhalers have petitioned EPA to permit CFC production after 1995. EPA decided in September 1993 not to petition the member countries for emergency production allocations for air conditioning and refrigeration (eight other countries did make refrigeration-related requests, which were turned down), although it did proceed with a request for inhalers. EPA concluded not only that the air conditioning and refrigeration petition would not be well received internationally, but also that the sectors have a good chance to "muddle through."

Should drop-in substitutes be developed that perform well in use at costs similar to those being experienced currently, the need for a bank of stored CFCs would be sharply reduced, and the CFC price would fall. On the other hand, if such substitutes do not appear, the CFC price would rise sharply, as Figure 3 shows. The uncertainty about future CFC prices is one reason why companies are not moving unequivocally into the business of acquiring stockpiles of them.

DuPont, holder of about half the available CFC production allowances, expressed in 1993 an interest in phasing out its production by the end of 1994, one year ahead of schedule. In December, 1993, EPA asked DuPont to reconsider, in light of the slow buildup of CFC inventories and the sluggish response of equipment owners to retrofit or replace their equipment. DuPont agreed to produce in 1995 "as demand dictates."

CFC prices, which were about 60 cents per pound before the production phasedown began, rose slowly as the Protocol led to reductions in production to the point where they were about $4 per pound (wholesale, pretax) in mid-1995. As production ended, they rose fairly rapidly to about $9 per pound. By August 1996, as uncommitted stocks (those not owned by the ultimate users) began to be depleted, prices have risen sharply again, to the point where, by mid-summer 1996, prices of $25 and even higher per pound have been reported. Further price increases are expected, because production for the domestic market has ceased but demand continues.

As production volumes of CFCs have declined and as CFC prices have risen, anecdotal reports of black market activity in CFCs have multiplied. The black market supplies have tended to hold the CFC price down and suppress both CFC recovery and CFC equipment retrofit or replacement. To date, 13 arrests for illegal imports of CFCs have been made and five convictions obtained. A recent study by the environmental group Ozone Action concluded that illegal CFC traffic is much larger than would be implied by the arrests to date. Industry and government observers agree that the arrests are only the tip of the iceberg. Although Miami was the port where most of the original arrests were made, entry of smuggled CFS at other ports is now suspected.

In Europe, similar signals of pending troubles have begun to arise. Since the European Union phased out CFC production at the end of 1994, experience there may be a helpful indicator of what will happen here. Reports of illegal imports of CFCs into the European Union countries are frequent, with one estimate that they have been large enough to create a stockpile of a year's worth of consumption. If so, Europe's phaseout of CFC production one year earlier than required by the Montreal Protocol will have had no effect on stratospheric ozone levels.

Methyl Bromide. In the United States, methyl bromide production, capped at 1991 levels starting in 1994, is scheduled for phaseout by 2001. The Vienna agreement of Protocol countries would begin phaseout in developed countries in 2002 with production terminating in 2010. Production could continue, however, in developing countries.

U.S. agricultural interests are concerned about the difference in phaseout schedules, arguing that the availability of methyl bromide to producers and distributors in and from other countries would place domestic activities at a competitive disadvantage, since for some agricultural uses there are as yet no satisfactory replacement substances or technologies. Further, under the Clean Air Act, EPA is not authorized to grant waivers.

In California, where methyl bromide was to be banned at the end of 1996, bills in the state legislature would delay the ban. In Congress, H.R. 2230 would conform U.S. practice with that of the Protocol. There is also interest in providing EPA with authority to grant special use exemptions beyond the ban for those applications which lack viable alternatives. A bill to this effect is expected in the early months of the second session of the 104th Congress.

LEGISLATION

H.R. 475 (DeLay)
Repeals Title VI of the Clean Air Act Amendments of 1990, containing provisions implementing the Montreal Protocol and establishing regulation of ozone-depleting substances. Introduced January 11, 1995; referred to Committee on Commerce.

H.R. 2230 (Miller of Florida)
Limits regulatory authority of EPA over agricultural uses of methyl bromide as a pesticide to those authorities specified in the Montreal Protocol, unless the Secretary of Agriculture has certified by rule that viable cost-effective substitutes or other alternatives exist. Introduced August 4, 1995; referred to Committees on Commerce and Agriculture.

H.R. 2367 (Doolittle)
Returns the United States to a phaseout date of January 1, 2000, and reduces the CFC tax from $5.35/lb to $3.55/lb. Introduced September 20, 1995; referred to Committees on Commerce and Ways and Means.

CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS

U.S. Congress. House. Committee on Commerce. Subcommittee on Oversight and Investigations. Review of Title VI of the Clean Air Act. Hearings, 104th Congress, 1st session. August 1, 1995.

U.S. Congress. House. Committee on Science. Subcommittee on Energy and the Environment. Stratospheric Ozone: Myths and Realities. Hearings, 104th Congress, 1st session. September 20, 1995.

CHRONOLOGY

12/31/95 ---CFC production ban in United States and other developed nations took effect.

12/31/94 ---CFC production ban in Europe took effect.

11/24/92 ---Montreal Protocol parties accelerated CFC phaseout to the end of 1995 and set phaseout schedule for HCFCs.

10/07/92 ---Energy bill containing increases in CFC taxes passed by Congress (P.L. 102-486).

02/11/92 ---President Bush announced that the United States will phase out CFCs and related ozone-depleting compounds by the end of 1995.

11/15/90 ---President Bush signed P.L. 101-549 (Clean Air Act Amendments), which includes an accelerated phaseout of CFCs, in Title VI.

02/17/89 ---Scientists reported Arctic air chemically disturbed but no measurable ozone hole.

01/01/89 ---Montreal Protocol entered into force.

09/14/87 ---Diplomatic conference in Montreal finalized a phasedown agreement. Representatives from 24 nations signed immediately.

08/07/77 ---Clean Air Act Amendments of 1977 (P.L. 95-95) enacted. Section 150-159, Part B, Ozone Protection, included authority for additional R&D and regulation.

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.

"Compliance Guide for HVACR Contractors." Air Conditioning Contractors of America, July 1993.

Hamilton, Martha H. "Rising Illegal Imports of CFCs Slow Effort to Protect Ozone Layer." Washington Post, January 15, 1996. p. D1

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.

U.S. Library of Congress. Congressional Research Service. CFC Phaseout: Future Problem for Air Conditioning Equipment? by David E. Gushee [Washington] April 1, 1993. CRS Report 93-382 S

-----Methyl Bromide and Stratospheric Ozone Depletion: New Directions for Regulation? by Wayne A. Morrissey. [Washington] May 1996. CRS Report 96-474 SPR

-----Montreal Protocol Negotiations: Should the HCFC Phaseout Schedule be Accelerated in 1995? by David E. Gushee. [Washington] October 12, 1994. 18 p. CRS Report 94-788 S

World Meteorological Organization (United Nations). Scientific Assessment of Ozone Depletion: 1994. (Also available from NASA and NOAA.)

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.