Cost benefit analysis of ozone depleting and synthetic
greenhouse gas reduction policies
Department of the Environment
Final
12 August 2015
PRN 1415-0343
Cost benefit anal ysis of oz one depl eti ng and s ynthetic greenhous e g as r educti on policies
Department of the Envir onment
Cost benefit analysis of ozone depleting and synthetic
greenhouse gas reduction policies
Cost benefit analysis of SGG reduction policies
Project no:
RO009700
Document title:
Cost benefit analysis of ozone depleting and synthetic greenhouse gas reduction policies
Document No.:
Final
Revision:
7
Date:
12 August 2015
Client name:
Department of the Environment
Client no:
PRN 1415-0343
Project manager:
Liisa Parisot
Author:
Liisa Parisot and Sophie Rolls
File name:
C:\Users\lparisot\Documents\Liisa\Jobs\DoE ozone\Procurement - PRN 1415-0343
Jacobs final report -12082015_incorporatingRecentTrackChanges.docx
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Document history and status
Revision
Date
Description
By
Review
Approved
Working draft
assumptions
12/2/2015
Working draft to help clarify scenarios and data
requirements from Department of the Environment
Liisa Parisot
Walter Gerardi
Walter
Gerardi
Second
working draft
assumptions
21/2/2015
Second working draft to help clarify scenarios and
data requirements from Department of the
Environment
Liisa Parisot
Walter Gerardi
Walter
Gerardi
Draft report
11/3/2015
Draft report
Liisa Parisot
Walter Gerardi and
Ray Gluckman
Walter
Gerardi
Final draft
report
19/3/2015
Final draft report
Liisa Parisot
Walter Gerardi
Walter
Gerardi
Final report
30/4/2015
Final report
Liisa Parisot
Walter Gerardi
Walter
Gerardi
Final report,
revised
13/6/2015
Final report, revised
Liisa Parisot
Walter Gerardi
Walter
Gerardi
Final report,
revised
29/6/2015
Final report, revised
Liisa Parisot
N/A
N/A
Final report,
revised
6/8/2015
Final report, revised
Liisa Parisot
Walter Gerardi
Walter
Gerardi
2
Cost benefit analysis of ozone depleting and synthetic
greenhouse gas reduction policies
Revision
Date
Description
By
Review
Approved
Final report,
revised
12/8/2015
Final report, minor changes
Liisa Parisot
N/A
Walter
Gerardi
3
Cost benefit analysis of ozone depleting and synthetic
greenhouse gas reduction policies
Contents
List of tables ........................................................................................................................................................... 7
Executive Summary............................................................................................................................................... 9
1.
Introduction ................................................................................................................................................ 2
2.
Approach .................................................................................................................................................... 3
2.1
General framework ...................................................................................................................................... 3
2.2
Existing databases ...................................................................................................................................... 4
2.3
Availability of scenario specific data ............................................................................................................ 5
3.
Scenarios ................................................................................................................................................... 7
3.1
Reference scenario ..................................................................................................................................... 7
3.1.1
Reference scenario RAC equipment stocks................................................................................................ 8
3.1.2
Reference scenario gas consumption, imports and leakage ...................................................................... 9
3.1.3
ODS and SGG emissions ............................................................................................................................ 9
3.1.4
Gas prices ................................................................................................................................................... 9
3.1.5
Mobile air conditioning and refrigerant costs ............................................................................................. 10
3.1.6
Maintenance and leak testing activity........................................................................................................ 11
3.1.6.1 Refrigeration and air conditioning .............................................................................................................. 11
3.1.6.2 Fire protection ............................................................................................................................................ 11
3.2
HFC phase down ....................................................................................................................................... 12
3.3
Import bans ................................................................................................................................................ 14
3.4
End use licensing ...................................................................................................................................... 14
3.5
Equipment controls .................................................................................................................................... 17
4.
Assumptions and methodology ............................................................................................................. 18
4.1
Costs and benefits data ............................................................................................................................. 18
4.2
Greenhouse gas emissions ....................................................................................................................... 19
4.2.1
Direct emissions ........................................................................................................................................ 19
4.2.2
Indirect emissions ...................................................................................................................................... 19
4.2.3
Carbon costs ............................................................................................................................................. 20
4.3
Capital costs .............................................................................................................................................. 21
4.4
Maintenance costs ..................................................................................................................................... 22
4.5
Energy costs .............................................................................................................................................. 22
4.5.1
Electricity cost savings .............................................................................................................................. 23
4.6
Health, safety and property ....................................................................................................................... 24
4.7
Avoided training costs ............................................................................................................................... 25
4.8
Gas costs ................................................................................................................................................... 25
4.9
Administration costs .................................................................................................................................. 26
4.10
Transition costs ......................................................................................................................................... 28
4.10.1 State and territory governments ................................................................................................................ 32
4.11
Licence fees .............................................................................................................................................. 32
5.
Results ...................................................................................................................................................... 34
5.1
HFC phase down ....................................................................................................................................... 34
5.1.1
Models ....................................................................................................................................................... 34
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Cost benefit analysis of ozone depleting and synthetic
greenhouse gas reduction policies
5.1.2
Scenarios ................................................................................................................................................... 34
5.2
Ban on equipment using high GWP gases................................................................................................ 39
5.3
Leak detection ........................................................................................................................................... 40
5.4
Maintenance .............................................................................................................................................. 43
5.5
End use licensing schemes – removal ...................................................................................................... 45
5.6
Source: Jacobs’ analysisEnd use licensing schemes - transfer to States and Territories ........................ 48
6.
Sensitivity analysis ................................................................................................................................. 51
6.1
Discount rate ............................................................................................................................................. 51
6.2
Carbon price .............................................................................................................................................. 52
6.3
Maintenance costs ..................................................................................................................................... 53
6.4
Capital costs .............................................................................................................................................. 53
6.5
Gas costs ................................................................................................................................................... 53
6.6
Maintenance frequency under the maintenance and leak detection scenarios ........................................ 54
7.
Conclusions ............................................................................................................................................. 55
7.1
Uncertainties and limitations ..................................................................................................................... 55
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Cost benefit analysis of ozone depleting and synthetic
greenhouse gas reduction policies
Table of Figures
Figure 1 : Comparison of benefit to cost ratios for each scenario ........................................................................ 10
Figure 2: Projected imports of bulk gases, excluding HCFCs, kg ...........................................................................8
Figure 3: Projected emissions, excluding HCFCs, Mt CO 2-e ..................................................................................8
Figure 4: Growth in appliance stocks ......................................................................................................................9
Figure 5: Greenhouse gas reduction pathways under HFC phase down scenario .............................................. 12
Figure 6: Electricity price projections, $2015 ........................................................................................................ 24
Figure 7: North American proposed import quota* ............................................................................................... 34
Figure 8: Refrigerant reclaim activity by gas type ................................................................................................ 35
Figure 9: Imports pathway under North American amendment phase down scenario, Mt CO 2-e ....................... 37
Figure 10: Imports pathway under Accelerated alternative phase down scenario, Mt CO 2-e .............................. 37
Figure 11: Increased share of low GWP gases used in sales of new equipment (North American Amendment
proposal) ............................................................................................................................................................... 38
Figure 12: Increased share of low GWP gases used in sales of new equipment (Accelerated Alternative
proposal) ............................................................................................................................................................... 38
Source: Jacobs’ analysisFigure 13: Direct emissions by scenario, Mt CO 2-e ...................................................... 47
Figure 14: Benefit cost ratio under a selection of discount rates ......................................................................... 51
Figure 15: Benefit cost ratio under a selection of carbon prices .......................................................................... 52
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Cost benefit analysis of ozone depleting and synthetic
greenhouse gas reduction policies
List of tables
Table 2.1: Applications included in the source database ........................................................................................5
Table 2.2: Refrigerant/fire protection gases, associated global warming potentials and ozone depleting
potentials .................................................................................................................................................................5
Table 3.1: Refrigerant gas price assumptions ...................................................................................................... 10
Table 3.2: Licence application fees, refrigeration and air conditioning ................................................................ 11
Table 3.3: Licence application fees, fire protection .............................................................................................. 11
Table 3.4: HFC phase down scenarios ................................................................................................................ 13
Table 3.5: Import bans .......................................................................................................................................... 14
Table 3.6: End use controls .................................................................................................................................. 15
Table 3.7: Equipment controls .............................................................................................................................. 17
Table 4.1: Leak reduction scenarios ..................................................................................................................... 20
Table 4.2: Energy efficiency improvements for selected low GWP alternatives and applications relative to
energy use under standard refrigerant ................................................................................................................. 20
Table 4.3: Sample of capital cost data for RAC equipment.................................................................................. 22
Table 4.4: Sample of capital, energy and maintenance cost data for RAC equipment ........................................ 22
Table 4.5: Sample of capital, energy and maintenance cost data for RAC equipment ........................................ 23
Table 4.6: Increased administrative burden to bulk importers, HFC phase down................................................ 26
Table 4.7: Administration cost assumptions by scenario, $2015 ......................................................................... 27
Table 4.8: Transitional costs ................................................................................................................................. 28
Table 4.9: Australian Government transition cost assumptions by scenario, $2015............................................ 29
Table 4.10: State and territory government costs (total for all state and territory governments) ......................... 32
Table 4.11: RAC industry licence costs ................................................................................................................ 33
Table 4.12: Fire protection industry licence costs ................................................................................................ 33
Table 5.1: Reclaim and re-use activity levels, 2016-2030 .................................................................................... 36
Table 5.2: Cost-benefit analysis of HFC phase down scenario, $000s ................................................................ 39
Table 5.3: Cost-benefit analysis for equipment bans ........................................................................................... 40
Table 5.4: Leak detection requirement by equipment type .................................................................................. 40
Table 5.5: Indicative assessment of potential manual leak testing costs ............................................................. 42
Table 5.6: Cost –benefit analysis for leak detection scenario .............................................................................. 42
Table 5.7: Proposed maintenance requirement by equipment type ..................................................................... 43
Table 5.8: Assessment of additional maintenance required ................................................................................. 44
Table 5.9: Cost –benefit analysis for maintenance scenario ................................................................................ 45
Table 5.10: Emissions increase estimates under ‘Remove end use licensing’ scenario, Mt CO2-e ................... 47
Table 5.11: Increase in SGG leakage under the ‘Remove End-use licensing’ scenario (kg) .............................. 48
Table 5.12: Cost benefit analysis of ‘Remove end use licensing’ scenario, combined schemes ........................ 49
Table 5.13: Cost benefit analysis of ‘Remove end use licensing’ scenario, Fire Protection ................................ 49
Table 5.14: Cost benefit analysis of ‘remove end use licensing’, RAC ................................................................ 49
Table 5.15: Australian Government transition and administration costs, $M ....................................................... 50
Table 5.16: State and Territory government transition and administration costs, $M .......................................... 50
Table 5.17: Costs and benefits of transferring end use licensing from federal to state and territory governments
.............................................................................................................................................................................. 50
Table 6.1: NPV under a selection of discount rates, $M ...................................................................................... 51
Table 6.2: Net present value under a selection of carbon prices, $M .................................................................. 52
Table 6.3: Net present value under a selection of maintenance cost assumptions, $M ...................................... 53
Table 6.4: Net present value under a selection of capital cost assumptions ....................................................... 53
Table 6.5: Net present value under a selection of gas cost assumptions, $M ..................................................... 54
Table 6.6: Effect of varying maintenance assumptions ........................................................................................ 54
Table 6.7: Effect of varying leak detection assumptions ...................................................................................... 54
Table 7.1: Summary of CBAs by scenario, NPV 2015-2030, $’000s ................................................................... 57
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Cost benefit analysis of ozone depleting and synthetic
greenhouse gas reduction policies
Abbreviations
Item
Definition
AR4
Assessment Report 4 of Intergovernmental Panel on
Climate Change (IPCC)
ARC
Australian Refrigeration Council
CBA
Cost benefit analysis
CO2-e
Carbon dioxide equivalent
DoE
Department of the Environment
EAHL
Extinguishing Agent Handling Licence (EAHL)
EU
European Union
FP
Fire protection
FPAA
Fire Protection Association Australia
GWP
Global warming potential
HFC
Hydrofluorocarbon
HFO
Hydrofluoroolefin, a refrigerant gas class with lower
global warming potential (sometimes referred to as
unsaturated HFCs)
IPCC
Intergovernmental Panel on Climate Change
MAC
Mobile air conditioning
OBPR
Office of Best Practice Regulation
ODS
Ozone depleting substances
RAC
Refrigeration and air conditioning
RCFC
Refrigerated cold food chain
RHL
Refrigerant handling licence, provided for technicians
who work on equipment containing fluorocarbon
refrigerants
RTA
Refrigerant trading authorisation
SGG
Synthetic greenhouse gases
UK
United Kingdom
WPI
Wage Price Index
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Cost benefit analysis of ozone depleting and synthetic
greenhouse gas reduction policies
Executive Summary
Synthetic greenhouse gases (SGGs) and ozone depleting substances (ODS) are a range of manufactured
gases which generally have high global warming potential (GWP). This group includes hydrofluorocarbons
(HFCs), which are used in a wide range of refrigeration and air conditioning equipment (RAC) as well as fire
protection (FP) systems. Ozone depleting substances (ODS) are manufactured gases that deplete the ozone
layer and often have high GWP. They include hydrochlorofluorocarbons (HCFCs) and chlorofluorocarbons
(CFCs).
The Department of the Environment (the DoE) is currently reviewing the Ozone Protection and Synthetic
Greenhouse Gas Management Act 1989, and related legislation. As part of this review, a number of options to
change the legislation are being considered to further reduce ODS and SGG emissions or to reduce compliance
costs. Jacobs was engaged by the DoE to estimate the costs and benefits associated with each of these
options.
The options considered to further reduce synthetic greenhouse gas emissions are:


Phase down of HFC bulk imports
-
North American amendment proposal, starting in 2017
-
Alternative accelerated proposal, starting in 2017
Bans on new equipment using particular gases
-
From 2017, small mobile air conditioning (MAC) systems containing a refrigerant with a GWP >150
-
From 2020, supermarket refrigeration systems containing gas with a GWP >2500.

Mandatory leak testing of certain Refrigeration and Air Conditioning (RAC) equipment from 2017

Mandatory maintenance of certain RAC equipment from 2017.
The options being considered to reduce compliance costs are:

Removal of mandatory end use licensing for technicians handling SGGs and ODS

Transfer of responsibility for end use licensing of technicians to state and territory governments
The costs and benefits of each of the options, relative to the current situation (the reference scenario) were
assessed over the period from 2015 to 2030. To estimate costs and benefits, Jacobs utilised previous work for
the DoE conducted by the Expert Group, which provided estimates of equipment types, amounts of gas leakage
from equipment, and emissions. This was supplemented with surveys of RAC technicians and gas suppliers,
workshops with members of the Ozone Act Review’s Technical Working Group, and published evidence.
In many cases, the available data from which to estimate costs and benefits was scarce and assumptions had
to be made. As a result, there is a high level of uncertainty around the estimates presented, and further
research is recommended to verify these results.
Summary of results
Both HFC phase down options have estimated benefits greater than the cost. The benefits are primarily driven
by the reduction in carbon emissions, as well as savings in energy costs. The highest costs are incurred by
equipment owners who may experience higher maintenance, capital or refrigerant gas costs when end of life
equipment is replaced with alternatives using lower GWP gases.
The costs and benefits of an equipment ban are highly dependent on the type of equipment and gas being
targeted. Banning supermarket equipment using HFC404A has a net benefit. The increase in maintenance,
transition and administration costs is outweighed by the value of the emissions reduction, in conjunction with the
energy cost saving as a result of switching to more energy efficient gases. On the other hand, banning MACs
which use refrigerants with a GWP above 150 has a net cost. This is because customers who switch to MACs
with lower GWP may face greater refrigerant costs, capital and maintenance costs. Both costs and benefits of
9
Cost benefit analysis of ozone depleting and synthetic
greenhouse gas reduction policies
the ban are expected to reduce over time as the international automotive industry moves to increase the use of
low GWP gases, such as HFO1234yf, as the global platform.
The maintenance option has benefits exceeding costs, while the leak reduction option has costs exceeding
benefits. In both cases results are quite sensitive to assumptions around business as usual level of effort in
undertaking maintenance and leak testing.
For the removal of end use licensing, costs exceed benefits in both the RAC and FP sectors. For RAC, the
potential increase in carbon emissions and energy costs outweigh the potential benefits in terms of savings to
technicians through reductions in administrative cost and licence fees, and reductions in scheme costs to the
Australian Government.
The final option examined the potential transfer of end use licensing schemes to State and Territory
governments. This was not expected to change the quantity of carbon emissions. The administrative burden to
technicians was assumed not to change, although it is possible that the administrative burden increases for
technicians working across multiple jurisdictions. The transfer of schemes to States would result in a large
increase in cost for these governments, relative to a minor reduction in Australian Government costs. As such,
the cost of proceeding with this option far outweighs any benefit.
In summary, the analysis suggests that the options worthy of further consideration are a HFC phase down, ban
on supermarket equipment using HFC404A, and maintenance. It is recommended that further work is
undertaken to improve source data and consider possible interactions between these options, as the results of
the cost benefit analysis could differ if more than one option is implemented.
The benefit to cost ratios of each option is shown in Figure 1. A benefit to cost ratio greater than one implies a
net economic benefit.
Sensitivity analyses were also undertaken for discount rate (testing 3% and 10% compared to the used value of
7%), carbon cost (testing carbon costs of $9.50/t CO2-e and $30/t CO2-e against the used value of $13.95/t
CO2-e), maintenance costs, capital costs and certain refrigerant gas prices. The results of the sensitivity
analyses indicated that the conclusions reached by the primary analysis would not materially change.
Figure 1 : Comparison of benefit to cost ratios for each scenario
Source: Jacobs’ analysis; Results for Option 6 are small (<0.05) and may not be visible on this chart.
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Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Disclaimer
The sole purpose of this report and the associated services performed by Jacobs is to identify the net benefit of
a selection of synthetic greenhouse gas policy interventions in accordance with the scope of services set out in
the contract between Jacobs and the Department of the Environment. That scope of services, as described in
this report, was developed with the Department of the Environment.
In preparing this report, Jacobs has relied upon, and presumed accurate, any information (or confirmation of the
absence thereof) provided by the Client and/or from other sources. Except as otherwise stated in the report,
Jacobs has not attempted to verify the accuracy or completeness of any such information. If the information is
subsequently determined to be false, inaccurate or incomplete then it is possible that our observations and
conclusions as expressed in this report may change.
Jacobs derived the data in this report from information sourced from the Client, from surveys and consultation
with industry participants, and/or from information available in the public domain between January and June
2015. The passage of time, manifestation of latent conditions or impacts of future events may require further
examination of the project and subsequent data analysis, and re-evaluation of the data, findings, observations
and conclusions expressed in this report. Jacobs has prepared this report in accordance with the usual care and
thoroughness of the consulting profession, for the sole purpose described above and by reference to applicable
standards, guidelines, procedures and practices at the date of issue of this report. For the reasons outlined
above, however, no other warranty or guarantee, whether expressed or implied, is made as to the data,
observations and findings expressed in this report, to the extent permitted by law.
This report should be read in full and no excerpts are to be taken as representative of the findings. No
responsibility is accepted by Jacobs for use of any part of this report in any other context.
This report has been prepared on behalf of, and for the exclusive use of, Jacobs’s Client, and is subject to, and
issued in accordance with, the provisions of the contract between Jacobs and the Client. Jacobs accepts no
liability or responsibility whatsoever for, or in respect of, any use of, or reliance upon, this report by any third
party.
Final
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Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
1. Introduction
The Department of the Environment (DoE) is currently reviewing options to reform the Ozone Protection and
Synthetic Greenhouse Gas Management Act 1989 and related legislation (the Ozone Acts). The objective of
the review is to identify options to reduce emissions and to reduce compliance costs.
To support the review, Jacobs was commissioned to undertake cost benefit analyses on a selection of policy
scenarios related to the use of ozone depleting substances (ODS) and synthetic greenhouse gases (SGGs).
The policy scenarios examined the affect on two sectors in particular – Refrigeration and Air Conditioning
(RAC), and Fire Protection (FP). Refrigeration and air conditioning systems use SGGs and ODSs to facilitate
heat exchange. The gas held in these systems can vary from less than 100 grams up to around 1 tonne in
large chillers. These are closed systems. However, slow leakage of SGGs and ODSs to atmosphere occurs if
the system is not correctly maintained, if the system fails during normal operation, or if incorrect gas handling
practices are followed during installation, maintenance or disposal at end of life.
FP systems use SGGs and ODSs to protect assets which cannot be protected by other extinguishing agents
such as water. These include computer server rooms, medical facilities, libraries and art galleries, as well as in
aviation, defence and marine applications where alternative extinguishing agents are unsuitable. FP systems
are designed to have minimal leakage, and a high standard of construction, installation and maintenance is
necessary to ensure that sufficient gas will be in the system to extinguish a fire when required. From FP
systems, emissions of SGGs and ODSs to the atmosphere may occur in response to a fire, as a result of
technician error or from accidental discharge. If this occurs, hundreds of kilograms of gas can be released in a
very short period of time.
The report structure is as follows:

Section 2 describes the approach taken in this study. This section also includes a high level discussion of
assumptions and methodology.

Section 3 describes scenarios under evaluation, including details of the reference scenario which is
compared to each policy scenario.

Section 4 provides a detailed discussion of assumptions and methodology.

Section 5 presents the results and findings of the analysis.

Section 6 provides sensitivity analysis.

Section 7 provides conclusions and discussion of key results, including uncertainties and gaps in evidence.
Final
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Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
2. Approach
This section sets out the broad assumptions and methodology used in this analysis.
2.1
General framework
The timeframe of the analysis is from 2015 to 2030. This timeframe was selected to align with the emissions
estimates that have already been modelled by the Expert Group for the DoE. Because many of the costs may
be incurred up-front and benefits such as avoided greenhouse gas emissions and energy savings would be
realised after this evaluation period, it is likely that the cost benefit analysis will understate benefits.
The discount rate used is 7%. The cost benefit analysis (CBA) is conducted in line with the recent guidelines
published by the Office of Best Practice Regulation (OBPR) 1 and consistent with the Regulatory Burden
Measure to estimate compliance costs. Unless specified otherwise, all modelling is undertaken in real terms, in
2015 dollars. Data has been obtained from a range of sources, including the work of the Expert Group
(described further below), workshops with Technical Working Group members advising the Department on the
Ozone Act Review, surveys of industry participants conducted by Jacobs, and published literature from
overseas. Data was also reviewed internally by international team members with specialist knowledge in this
market.
A range of policy scenarios are evaluated. The scenarios were based on industry consultation (via submissions
received for the Ozone Act Review), international policy responses to reducing HFC emissions (e.g. the EU’s Fgas regulations), and Australian experience. Scenarios were also informed by the Government’s deregulation
agenda. Where equipment scenarios were specified, these were informed through specialist advice on the
types of equipment that may provide large gains in avoided emissions at low cost.
Each cost-benefit analysis involves a comparison of costs and benefits against a reference scenario which
represents a business as usual outcome. This reference scenario is described in section 3.1. The policy
scenarios evaluated are described in section 3. Scenarios include those that increase regulatory requirements
on government, businesses and individuals (licensees and equipment owners), and those that reduce
regulatory requirements on government, businesses and licensees. Analysis considers the following:

Additional or avoided carbon costs

Additional or avoided energy costs

Additional or avoided capital costs

Additional or avoided maintenance costs

Additional or avoided gas costs

Additional or avoided licence fees

Additional or avoided transaction costs

Additional or avoided administration costs

Additional or avoided transitional costs
1
http://www.cuttingredtape.gov.au/handbook/australian-government-guide-regulation
Final
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Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
2.2
Existing databases
Two databases are available as starting points for the analysis; one database is maintained by the DoE for the
purpose of projecting Kyoto obligations to the UNFCCC, while the other is maintained by the Expert Group 2.
The database maintained by the Expert Group is useful for this analysis because it accounts for the potential
future transition to lower GWP gases such as HFOs, HFO blends, lower Global Warming Potential (GWP) HFCs
and natural refrigerants, such as carbon dioxide, ammonia and hydrocarbons. The global context dictates that
there will be significant shifts to the use of lower GWP gases in new equipment.
Jacobs did not rebuild its own stock model for equipment and SGGs, because (i) a detailed stock model already
exists in the Expert Group database and (ii) replication could lead to CBA results inconsistent with previous
work.
Reliance is therefore placed on the database developed and maintained by the Expert Group. This database
will be referred to as the source database in this report. Jacobs was granted access to some of the outputs of
the database in order to complete this project. For a description of this database, please see Expert Group
(2013), Cold Hard Facts 2, report to the Department of Sustainability, Environment, Water, Population and
Communities, July 2013.
The source database defines the reference scenario used within this report. Data extracted from the source
database include:
1. Equipment numbers by year for nine RAC applications
2. Import quantities of refrigerant gases by year and gas species
3. Estimated direct emissions levels by year and application
4. Estimated electricity savings by year for selected applications
5. Estimated refrigerant gas share by year for each application and gas, for new equipment sales and across
all equipment classes
The analysis models SGG and ODS usage in each of the applications shown in Table 2.1. Aerosols and
solvents are also SGG applications, but these are not modelled as they produce a very minor proportion of SGG
emissions.
Whilst the source database incorporates direct emissions from FP systems, no information is available on the
number or size of FP systems in existing buildings. The FP systems of interest to this study are those
protecting equipment or assets where alternative extinguishing agents such as water cannot be used. The use
of halon is permitted in these cases in aviation, maritime and defence applications where alternatives are not
available. In buildings, FP systems are used to protect computer servers, electronic equipment, and art and
book collections. These tend to use FM-200 gas (HFC227ea), with Novec™ 1230 able to be used in some
cases as a low-GWP alternative.
Gases considered in the study include those shown in Table 2.2. The GWP shown are indicative of the
greenhouse impact of each gas, relative to emission of carbon dioxide. So, one kilogram of HFC404A has
nearly four thousand times as much GWP than one kilogram of carbon dioxide. These values are based on the
fourth assessment report (AR4) provided by the Intergovernmental Panel on Climate Change (IPCC). Australia
uses AR4 values in its national accounts.
2
Expert Group developed a model of the refrigeration and air conditioning equipment bank in Australia for the DoE. The Expert Group has authored
various publications describing the data underlying this database. These include:
“HFC Consumption in Australia in 2013 and an assessment of the capacity of industry to transition to nil and lower GWP alternatives”, April 2014
“Assessment of environmental impacts from the ozone protection and synthetic greenhouse gas management act 1989”, February 2015
Final
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Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Halon was not included in the source database. Separate calculations were completed to allow estimation of the
change in halon emissions under the end use licensing scenarios. These calculations are discussed in Section
5.5.
Table 2.1: Applications included in the source database
Application
Domestic refrigeration; this category includes refrigerators and freezers
Small refrigerated cold food chain (RCFC) (self-contained); this category includes standalone refrigeration equipment where the refrigerating machinery sits inside the cabinet
structure, such as food retail and supermarket cabinets and other small charge refrigeration
equipment <1.5kg.
Medium RCFC: Remote condensing units; refrigeration unit is typically located outdoors or
remote from the trading floor or refrigerated space. Jacobs assumes that this category also
sub-category
Refrigeration
Class
RAC
Refrigeration
RAC
includes industrial refrigeration applications.
Refrigeration
RAC
category also includes large industrial refrigeration applications.
Refrigeration
RAC
Air conditioning
Air conditioning
RAC
RAC
Air conditioning
Mobile air
conditioning
RAC
Large RCFC: Supermarkets; Supermarket refrigeration systems. Jacobs assumes this
Small stationary air conditioning (AC): Self-contained; Packaged AC units that are typically
inserted through a hole in a wall or through a window aperture.
Medium stationary AC; Non ducted split systems and ducted systems
Large stationary AC; Space chillers employed in large commercial buildings, mining and
industry
Small mobile AC; Air conditioners in passenger and light commercial vehicles, mini buses
and trucks
Large mobile AC; Air conditioners in public transport such as trains and buses in excess of 7
metres in length, also air conditioners in larger articulated vehicles such as B Doubles and road
trains, heavy equipment and off road vehicles
Foams; Used to insulate domestic refrigerators and sometimes used in building insulation
applications.
Fire protection; fire extinguishers and other specialised equipment including fire protection
systems in buildings
Other; miscellaneous applications, assumed to include aerosols
MAC
Mobile air
conditioning
MAC
Foams
Other
Fire protection
Other
FP
Other
Source: Expert group source database
Table 2.2: Refrigerant/fire protection gases, associated global warming potentials and ozone depleting potentials
Gas species
HCFC22
HCFC123
HFC134a
HFC404A
HFC410A
HFC407C
HFC32
HFC Mix*
GWP <2150*
GWP <1000*
HFO1234yf
HC
CO2
Ammonia
Halon
HFC227ea (FM-200)
Novec 1230
GWP
1,810
77
1,430
3,922
2,088
1,774
675
3,220
1,500
500
4
5
1
0
1,890-7140
3,220
1
ODP
0.055
0.02
0
0
0
0
0
0
0
0
0
0
0
0
3-10
0
0
Source: Expert group source database, based on fourth IPCC assessment report (AR4); US EPA(2014)
* This item is not a specific greenhouse gas in use, but represents a range of blends of HFC or other gases for modelling purposes. For example, Jacobs has
interpreted the grouping ‘GWP<1000’ to correspond with B300 and B700 blends. It is not clear what blends are represented by the other categories. The HFC
Mix category includes the HFCs used in the fire protection industry, such as FM-200. .
2.3
Availability of scenario specific data
The CBA is reliant on estimates of stocks, emissions reductions, energy savings and equipment gas shares
provided by the source database.
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5
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
For some scenarios this information was used directly. These scenarios included the reference scenario,
maintenance and leakage scenarios, and end use licensing scenarios. Other scenarios required development of
a modified reference scenario stock model enabling the sales mix of gas species used by each type of
equipment to be varied, and enabling an estimate of reclaimable gas which may offset import requirements. The
methods used to convert the data from the source database to scenario specific information are discussed
within the results section covering each scenario.
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6
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
3.
Scenarios
Nine policy scenarios were evaluated and compared to a reference scenario. The scenarios considered were
provided by the DoE following consultation with stakeholders, and reflect different options to achieve the
objectives of the Ozone Act Review. The Ozone Act Review had two objectives – to identify further
opportunities for emissions reduction, and to reduce compliance costs. The HFC phase down, import and
manufacture bans, and requirements for equipment maintenance and leak testing relate to the first objective,
and the end use licensing scenarios relate to the second objective.
The scenarios are:
1. Two types of HFC phase down, whereby the import and manufacture of bulk HFCs in Australia is controlled
through a quota system facilitated by the existing import licence scheme
2. Bans of import and manufacture of selected new RAC equipment containing HFCs, under three variations:
a. ban on supermarket equipment using HFCs with GWP>2500
b. ban on small Mobile Air Conditioning (MAC) with GWP>150
c.
both bans applied concurrently
3. Requirements for owners of limited classes of RAC equipment, including:
a. Maintenance
b. Leak testing
4. Varying end-use licensing arrangements for RAC and FP technicians, including:
a. Removal of end-use licensing schemes
b. Transfer of Australian Government governance arrangements to States and Territories
These scenarios are explored in detail below. They are compared against the reference scenario, which is
based on business as usual expectations of activity in the RAC, MAC and FP industries and the existing
regulatory environment remaining in place.
3.1
Reference scenario
A reference scenario was developed for comparison with each of the proposed policy scenarios. The underlying
equipment stock and gas bank projections in the reference scenario were obtained from the source database
developed by Expert Group. The source database models significant technological change over the time period
of analysis.
Figure 2 and Figure 3 display reference scenario bulk gas imports and direct emissions, respectively.
Features of the source database projections include:

A steady decline in HCFC imports consistent with the phase out of these substances under the Montreal
Protocol and the accelerated phase out in Australia

Continued growth of high GWP SGG imports to 2019 as the stock of equipment expands, especially from
small and medium AC charged with HFC410A

Growth of new and low GWP import substances (carbon dioxide, HFO and HFO blends, hydrocarbons) in
equipment post 2018, reducing the global warming potential of the bank

A high degree of diversification in the use of refrigerant gases, especially in the supermarket industry, with
projected sales mixes including a range of hydrocarbons, carbon dioxide, HFCs, HFOs and blends
The international situation for HFCs is likely to change. The USA, Canada and Mexico have together put
forward a proposed amendment to the Montreal Protocol which, if adopted, would introduce a global HFC phase
down. The amendment proposal is supported by recent agreements between USA and China, and between the
Final
7
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
G-20 group of countries. In addition the EU has introduced a HFC phase-down from 2015. Potential future
changes such as these introduce a high degree of uncertainty around the estimates of reference scenario
emissions and gas sales mix.
Given the range of options being examined, the reference scenario needed to provide annual estimates of
various items from the source database. In addition, projections were required for refrigerant gas prices,
maintenance and leak testing activity, and end use licences issued for RAC and FP equipment. Each of these
variables is projected between 2015 and 2030, based on available evidence and reasonable assumptions,
described in the following subsections.
Figure 2: Projected imports of bulk gases, excluding HCFCs, kg
Source: Expert Group source database
Figure 3: Projected emissions, excluding HCFCs, Mt CO2-e
Source: Expert Group source database
3.1.1
Reference scenario RAC equipment stocks
Reference scenario equipment stocks were extracted from the source database. These stocks are consistent
across all scenarios.
The growth in appliances is generally higher than population growth (between 1 and 2% per annum), reflecting
changing lifestyle and wealth distribution patterns. In particular, there is initial strong growth of medium sized air
conditioners and mobile air conditioning as these markets transition away from smaller air conditioning units and
vehicles without air conditioning are no longer considered standard. As each of these markets reach saturation,
Final
8
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
growth declines and reverts to a level consistent with population growth. Refrigeration in the business sector is
seen to grow stably at 2% per annum (see Figure 4).
Growth of large AC (chillers) and small AC is not shown in Figure 4. These applications are projected to have
declining use, with small AC declining at 3 to 4% per annum and large AC declining at 1% per annum.
Figure 4: Growth in appliance stocks
Source: Jacobs’ analysis of the source database
3.1.2
Reference scenario gas consumption, imports and leakage
Reference scenario gas consumption, imports and leakage were extracted from the source database. The
following logic is applied:
 Bulk gas imports are estimated using domestic SGG consumption estimates from the source database (this
assumes no gas stockpiling occurs)
 The size of the gas bank by SGG type and application is estimated using the equipment stock model
 Leakage rates (derived from the source database) were applied to the gas bank to determine leakage across
the cohort of appliances
 Service requirements and requirements for new stock determined from leakage and mix of new appliances
 Gas consumption data estimated from servicing and new equipment requirements.
3.1.3
ODS and SGG emissions
Synthetic greenhouse gas emissions were extracted from the source database. This is equivalent to applying
GWP values to estimates of gas leakage.
3.1.4
Gas prices
Refrigerant/fire extinguishing agent price assumptions underlying the reference scenario are described in Table
3.1. These were derived from surveying five Australian wholesale and retail distributors of refrigerant gases, two
buyers, and using advice from the Fire Protection Association Australia (FPAA). New substances are initially
highly priced while production/import levels are low, but are expected to reduce over time as the market
establishes. Wholesale prices were used where possible because of greater consistency; it is assumed that
distribution costs which are added to the wholesale costs to create retail costs are consistent across the
different gases.
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9
Cost benefit analysis of ozone depleting and
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Table 3.1: Refrigerant gas price assumptions
Gas species
Price in 2016 (2015
$/kg)
Price in 2020 (2015
$/kg)
Price in 2030 (2015
$/kg)
Data source/assumptions
HCFC22
HCFC123
HFC134a
HFC404A
HFC410A
HFC407C
HFC32
HFC Mix
HFO1234yf
HFO New Blends
Hydrocarbons
Ammonia
CO2
FM-200
98.8
98.8
26.4
27.5
23.95
29.75
42
26.9
150
50
8
4
4
50
98.8
98.8
26.4
27.5
23.95
29.75
42
26.9
120
30
8
4
4
50
98.8
98.8
26.4
27.5
23.95
29.75
42
26.9
26.9
30
8
4
4
50
Novec-1230
62.5
62.5
62.5
Jacobs’ survey
Assumption
Jacobs’ survey
Jacobs’ survey
Jacobs’ survey
Jacobs’ survey
Jacobs’ survey
Assume average of HFC prices
Assumption
Assumption
Assumption
Assumption
Assumption
Fire Protection Association
Australia
Fire Protection Association
Australia (price for Novec™
1230 25% higher than FM200)
Source: Jacobs’ analysis
Future gas prices are uncertain, particularly for recently developed gases such as HFOs which are not yet
widely available in bulk in Australia, and also for some of the high GWP gases such as HFC404A which are
experiencing declining demand on the world market.
3.1.5
Mobile air conditioning and refrigerant costs
Refrigerant costs associated with replacement of gases upon equipment leakage have been calculated using
the refrigerant gas price assumptions shown in Table 3.1. In the specific case of mobile air conditioning, the
dominant market refrigerant is HFC134a, with the least cost low GWP replacement being HFO1234yf. While
hydrocarbons are also available, manufacturers do not support use of hydrocarbons in new vehicles, even
though these are significantly cheaper 3.
The Expert Group report found that HC600a (hydrocarbon) is used in around 6% of vehicle air conditioning in
Australia as a result of its use in the service market for second hand vehicles 4. In their reference scenario, the
Expert Group has assumed that hydrocarbons will continue to be used in the servicing of older vehicles, and
that this practice may expand if more expensive refrigerants such as HFO1234yf begin to replace HFC134a.
Based on the indicative price list in Table 3 the cost of replacing a full refrigerant charge of HFC1234yf would be
around $60 compared to around $11 for HFC134a or $3 for hydrocarbon (assuming a 400 gram charge). The
importation of vehicles with pre-installed air conditioning may increase the share of mobile air conditioners with
HFC1234yf in any case.
Jacobs has assumed that refrigerant replacement costs for mobile air conditioning will not change from the
reference scenario, based on the uncertainty around servicing choices for mobile air-conditioners which have
leaked5. The Expert Group reference scenario supports significant levels of HFO1234yf in the projection period,
as HFO1234yf increases its sales share from 10% in 2015 to around 75% in 2025.
“Availability of low GWP alternatives to HFCs: feasibility of an early phase out of HFCs by 2020”, Michael Kauffeld, Environmental Investigation
Agency (EIA), May 2012
4 “HFC Consumption in Australia in 2013 and an Assessment of the Capacity of Industry to Transition to Nil and Lower GWP alternatives”, Expert
Group, April 2014, p91
5
The price of gas is a material assumption for scenarios involving equipment changes for mobile air conditioning. The wide variation of gas prices
shown can potentially cause large up or down swings in the result of the cost benefit analysis. To address this issue, Jacobs’ has included
sensitivity analysis on this issue in section 6.
3
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Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
3.1.6
Maintenance and leak testing activity
Typical levels of maintenance and leak testing activity were ascertained from a small industry survey of RAC
companies. Five companies responded to the survey, however not all questions were answered by all
respondents. There was also a wide variation in responses, which could significantly impact on the accuracy of
the results of the maintenance and leak testing scenarios. As a result, the limited nature of the survey required
some consideration around how well the survey could be considered to reflect the entire RAC market, and a
more conservative assumption was made that existing levels of maintenance for the entire market were around
50% of proposed EU requirements. Due to the timeframe, a more comprehensive survey of industry practice
was not possible, however this is recommended.Licence fees
3.1.6.1
Refrigeration and air conditioning
Historical licence numbers and trading authorisation numbers were provided by the DoE and projected forward
assuming growth consistent with projected growth in the total number of appliances (between 1.6 and 2.2% per
year). Data on licence numbers has been collected since 2005, however annual growth to 2013/14 has ranged
from -13% to 46%, as the system became established. Jacobs has used equipment growth rates from the
source database to provide a more stable estimate, and these have been verified with the Technical Working
Group. This assumes that the number of licensed technicians required per unit of equipment is constant. These
rates start at 2.6% in 2015, declining to 1.6% by 2030.
Licence application fees were also provided by the DoE for 2013, 2014 and 2015, as shown in Table 3.2. This is
a simplified presentation of licence types and fees, as numerous different subcategories exist. A more detailed
analysis incorporating all the different licence types would be unlikely to significantly change the results of the
analysis, as the majority of licences fall within the two general categories shown below.
Table 3.2: Licence application fees, refrigeration and air conditioning
RAC Industry Permit
Licence Period
(years)
2013 Fees ($)
2014 Fees ($)
2015 Fees ($)
Refrigerant Handling Licence –
Qualified Persons
2
130
134
137
Refrigerant Trading
Authorisation
2
420
431
442
Source: DoE
3.1.6.2
Fire protection
Historical licence numbers and trading authorisation numbers were provided by the DoE and projected forward
in line with the growth in total equipment stocks projected by the source database (annual growth ranging
between 1.6 and 2.6%). Although the source database does not include FP systems, it was thought that the
rate of growth in handling licences was likely to be similar. However for trading authorisations, advice from
FPAA was that the number of businesses holding trading authorisations was likely to remain more or less
constant at 145 authorisations in 2015, as the industry was reasonably mature and new entries unlikely.
Licence fees were also provided by the DoE for 2013, 2014 and 2015, as shown in Table 3.3. This is a
simplified presentation of licence types and fees, as numerous subcategories exist. A more detailed analysis
incorporating all the different licence types would be unlikely to significantly change the results of the analysis,
as the majority of licences fall within the two general categories shown below.
Table 3.3: Licence application fees, fire protection
Fire Protection Industry
Extinguishing Agent Handling
Licence – Qualified Persons
Final
Licence Period
(years)
2013 Fees ($)
2
2014 Fees ($)
250
2015 Fees ($)
257
263
11
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Extinguishing Agent Trading
Authorisation
2
420
431
442
Source: Department of the Environment
3.2
HFC phase down
The Department of the Environment supplied two phase-down schedules to be modelled. Under a HFC phase
down, the import and manufacture of bulk HFCs in Australia operates through a quota system facilitated by the
existing import licence scheme. The phase down is specified in terms of tonnes of carbon dioxide equivalence.
The greenhouse gas reduction pathways under each HFC phase down scenario are defined according to
different baseline definitions. Under the North American Amendment proposal, the baseline is 9.05 Mt CO2-e,
based on 100% HFC consumption and 75% of HCFC consumption between 2011 and 2013. Under the
Accelerated Alternative, the baseline is lower at 7.82 Mt CO2-e, based on the average consumption of HFCs
between 2011 and 2013.
The quotas, expressed in percentage of baseline, are also different between scenarios. Under the North
American Amendment proposal, the initial quota is at 90% in 2019, 65% in 2024 and 30% by 2030. Under the
accelerated proposal, imports are frozen at 100% in 2017, reducing to 90% in 2018, 86% in 2020, 78% in 2022,
68% in 2024, 58% in 2026, 49% in 2028 and 35% in 2030. However, as the baselines are different, it is not
meaningful to compare these numbers. Figure 5 describes each HFC phase down in terms of imports,
expressed in millions of tonnes of carbon dioxide equivalent gases.
Figure 5: Greenhouse gas reduction pathways under HFC phase down scenario
Source: Department of the Environment
Final
12
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Table 3.4: HFC phase down scenarios
Name of option
HFC phase down – accelerated alternative and North American Amendment scenarios
Description of option
Phase down the import and manufacture of bulk HFCs in Australia through a quota system facilitated by the
existing import licence scheme. There is no domestic manufacture of HFCs. The quota system would only
apply to bulk HFCs (not gas contained in equipment). Two variations of the phase down are examined – the
North American Amendment proposal to the Montreal Protocol and an Australian accelerated alternative.
For purposes of this model, the quota is allocated through a hybrid grandfathered/non-grandfathered
allocation system (split 80/20%).
The 2014 baseline (adapted by the Department of the Environment from the North American Amendment
HFC phase down proposal) is 9.05 Mt CO2-e, based on 100% consumption of HFCs and 75% consumption of
HCFCs between 2011 and 2013. Under the accelerated alternative proposal, the baseline is only based on
the average consumption of HFCs between 2011 and 2013, and is much smaller at 7.82 Mt CO 2-e.
Grandfathering would be based on historical imports, similar to the current approach to allocating HCFC
quota. There are currently 28 bulk importers who would be eligible for grandfathered quota.
The non-grandfathered quota would be available for new entrants only. An application and assessment
process would need to be established in the Ozone Act. For the purposes of modelling, it is estimated that 5
new entities would lodge an application for non-grandfathered quota for each quota period.
Quota would be allocated every two years.
Status quo
Import quotas for HFCs are not in place
Regulatory changes
A HFC phase down schedule and quota allocation system would be included in the Ozone Act. All licensing
requirements would remain unchanged. Quota will be allocated through normal licensing processes for
existing importers. Jacobs’ assumes that similar controls as applied to the HCFC quota would also apply
under an HFC phase down.
The Commonwealth needs to design and implement a phase down process including baseline, schedule and
quotas acceptable to industry. As has been the case with the HCFC phase down, there would be no changes
to monitoring, compliance and enforcement.
Market response
Industry will need to adapt their business model to a quota or rationing system where none exists now.
Market would have to adapt to lower supply of existing gases and explore alternative options. This includes
importing equipment that uses lower GWP gases so that equipment could be serviced into the future. It is
anticipated that at end of life, existing systems would be replaced with equipment that uses lower GWP gases.
Equipment owners may feel the need to pay the cost of updating to a new system to avoid longer term HFC
availability issues, although as the phase down is gradual it is unlikely to force early equipment retirement.
Owners of equipment charged with HFCs may experience higher costs to replace gas lost due to leakage.
This may occur if demand for HFCs exceeds available supply, pushing prices up.
Implementation
2017
Changes over time
Staged implementation as described in the text preceding this table. It is assumed that phase down will be
based on least cost low GWP gas alternative being adopted. Safety and ease of handling are also important
considerations in selecting gas alternatives. However these decision criteria cannot be easily modelled.
Gases targeted
All HFCs listed in the Kyoto Protocol
Anticipated benefits
May encourage practices that reduce leakage of existing gases
May encourage retrofit of HFC404A systems with lower GWP alternatives. Good potential for this in
supermarket sector
May encourage replacement of equipment with low GWP alternatives, particularly after 2020.
Improved energy efficiency as a direct consequence of the use of a alternative gas in new equipment and/or
as a direct consequence of reducing leakage.
Reduced greenhouse gas emissions.
Anticipated costs
Final
Commonwealth need to design and implement a phase down process including baseline, schedule and
13
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Name of option
HFC phase down – accelerated alternative and North American Amendment scenarios
quotas acceptable to industry.
Industry will need to adapt their business model to a quota or rationing system where none exists now –
although as noted in the HFC consumption study6, this is unlikely to be a cost until at least 2020 based on
current import/consumption projections.
Equipment owners may feel the need to pay the cost of updating to a new system to avoid longer term HFC
availability issues although as the phase down is gradual; it is unlikely to force early equipment retirement.
Increased transaction costs for equipment owners who may have to undertake research to determine the most
appropriate low GWP technology to replace existing equipment, incremental capital (including associated
infrastructure) and/or maintenance cost associated with changing to equipment using low GWP gases. Higher
maintenance costs can sometimes occur7 where replacement gases have higher flammability, toxicity or
require higher operating pressure.
3.3
Import bans
Two import bans are under consideration: bans on imports of supermarket equipment containing gas with
GWP>2500, and ban on imports of mobile air conditioning equipment containing gas with GWP >150. These
are described in greater detail in Table 3.5.
Table 3.5: Import bans
Name of option
Pre-charged equipment
Description of option

Ban import and manufacture of mobile air conditioning equipment (passenger and light commercial
vehicles) containing gas with GWP >150 and with a date of manufacture from 2017. There are presently
265 importers of MAC equipment.

Ban import and manufacture of supermarket equipment containing gas with a GWP >2500 in 2020.
There are presently 215 importers of equipment containing HFC404A which has a GWP>2500.
Status quo
Bans are not in place for SGGs or for SGG containing equipment; only ozone depleting substances and
equipment containing ozone depleting substances
Regulatory changes
Bans will require changes to legislation
Market response
There is expected to be a more rapid transition towards equipment containingalternative gases than under
the status quo.
Implementation
2017 (MACs), 2020 (supermarket RAC equipment)
Changes over time
No change
Anticipated benefits
Improved energy efficiency and reduced greenhouse gas emissions from displacement of high GWP gases
and possibly improved leak reduction regimes – transitioning the market to newer, more energy efficient
technology.
Anticipated costs
Change in compliance costs, including transition costs to government, cost of education, importers and
equipment owners, administration and transaction costs (including education costs), possible incremental
capital and/or maintenance cost associated with changing to equipment that is low GWP, cost to purchase
alternative gases may also change and could be lower if CO2, ammonia or hydrocarbon options are chosen.
3.4
End use licensing
End use licensing controls the use, acquisition, storage, handling, and discharge of scheduled substances. The
end use licensing schemes cover the RAC and FP industries, and encompass all SGGs listed in the Ozone Act
6Expert
Group (2015), Assessment of Environmental Impacts from the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989,
draft report to the Department of the Environment, February 2015.
7 Expert views around change in maintenance costs under use of different refrigerants are varied. To maintain consistency in the use of data around
change in capital, maintenance, and energy costs, we have opted to take data from a single source that (generally) describes increased
maintenance costs. There may be some instances however where maintenance costs do not change or may even reduce because the equipment
design has incorporated improved engineering and safety measures to counter any increased hazard.
Final
14
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
1989. The Australian Refrigeration Council (ARC) and the Fire Protection Association Australia (FPAA) currently
administer the RAC and FP licensing schemes on behalf of the Commonwealth, and their roles include:

Administer the collection of fees and issuing of permits once applicants are considered to be able to meet
the requirements of the Regulations and minimise the risk of emitting ODS/SGGs to the atmosphere;

To educate those using ODS/SGGs in how to minimise emissions to atmosphere and how to ensure they
are compliant with the Regulations; and

To assess whether or not permit holders are complying with the Regulations.
These organisations do not hold designated enforcement powers. Enforcement powers under the ozone
legislation are held by appointed DoE officers, Customs officers and AFP officers. Officers of the
Commonwealth, and State and Territory agencies are responsible for occupational health and safety, consumer
protection and fair trading requirements for both the RAC and Fire Protection industries, but to varying degrees.
End use licensing arrangements for RAC include granting of refrigerant handling licences (RHLs) provided for
technicians who work on equipment containing ODS and SGG refrigerants, and refrigerant trading
authorisations (RTAs) for businesses that acquire, store, sell or dispose of ODS and SGG refrigerants. There
are three types of RTAs, for buying, selling and storing refrigerants, for using refrigerants in the manufacture of
RAC equipment and for refrigerant recovery. RTA holders are subject to keeping records of purchases, sales
and use of refrigerants and ensuring that gas is only handled by licensed technicians. Licensed technicians are
subject to handling refrigerants in a manner consistent with their conditions of licence. Similar requirements
exist for fire protection under the administration of the FPAA.
The two variations on this scenario are:

Removal of end use controls (voluntary compliance with the appropriate Australian Standards)

Transfer end use controls from Australian Government to State and Territory governments by 2017
Table 3.6: End use controls
Name of option
Removal of end use controls
Transfer end use controls to state and territory
governments
Description of
option
Removal from the regulations of end use licensing
Transfer end use controls to state and territory
requirements (handling licences and trading
authorisations) for SGGs in RAC and FP
industries.
governments. This option requires acceptance by each
state/territory government in order for the transfer to occur.
The current profile of end use licensing and
authorisations is set out below:

The Australian Refrigeration Council (ARC)
administers the RAC licensing scheme. As at
29 January 2015, the ARC licences:



Final
58 873 individuals (Refrigerant Handling
Licences)
17 241 businesses (Refrigerant Trading
Authorisations)
The Fire Protection Association, Australia
(FPAA) administers the licensing scheme. As
at 27 January 2015, the FPAA licences:

1 359 (Extinguishing Agent Handling
Licences)

145 businesses (Extinguishing Agent
Trading Authorisations)
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Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Name of option
Removal of end use controls

Status quo
Transfer end use controls to state and territory
governments
40 businesses (Halon Special Permits)
End use licensing controls for RAC and FP are in place. This includes legislation, monitoring, control and
penalties for non-compliance. Also minimum training requirements, the provision of information and guidance to
licence holders, and targeted scanning for emerging issues.
Regulatory
changes



Market response
Removal of legislation, monitoring and control
of SGGs and ODS.
Licence holders and businesses would no
longer be required to hold a permit at the
Commonwealth level from 2017.

Coordination with industry and jurisdictions as well as
changed processes for industry bodies to implement
their new channels of communication.

Contract arrangements with ARC and FPAA
would no longer be required. Administration
cost of the schemes is currently recovered
through licence fees.
It is assumed that where existing trade licensing
schemes exist, end use licensing requirements will be
added on to these schemes.
Limited evidence of similar policy claw back in
It is assumed that the same environmental benefit will be
another region or similar policy to determine
whether industry self- regulation will still occur.
Worst case scenario is that behaviours revert to
pre-licensing scheme behaviours. Evidence from
the voluntary licensing scheme established prior to
the introduction of mandatory licensing suggests
that voluntary take-up of environmental practices
may be low, and recovery of gas is less likely to
occur.
achieved via state/territory administration. There may be
an ancillary benefit due to improved flexibility in the
schemes to respond to changes in the gas mix and safety
issues; however this is not analysed in this report.
Behaviours may or may not continue to be
regulated via the current state/territory regulations
that have some coverage of RAC and FP work,
either for the purposes of environmental protection
or as an ancillary benefit of some of the same
actions being regulated for different reasons.
Implementation
year
2017, assuming some lead time may be required to set up administrative requirements, education and training on
new requirements
Change over time
No change over time.
Equipment
RAC, FP
Specific gases
HFCs, CFCs, HCFCs and Halon
Anticipated
benefits
Reduced compliance costs
Reduced administrative costs (for Department of
the Environment)
Possible reduced compliance costs for business if
licensing requirements are amalgamated within existing
occupational licensing schemes at state level (only applies
to some states)
Anticipated costs

Increased SGGs/greenhouse gas use /
emissions


The process of change would require
substantial legal and administrative work and
consultation with each jurisdiction.

Loss of legitimacy of the national licence for
equipment handlers may negatively impact the
RAC and FP industry. However it is not
possible to cost this element.

Final
Cost of education
Increased transition costs to DoE and state
governments. Transitional work with industry and the
states and territories will be required to ensure there is
clarity about regulatory coverage and requirements.
The process of change would require substantial legal
and administrative work and consultation with each
jurisdiction.

Increased administrative costs resulting from loss of
economy of scale achievable in federally operated
regulations
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Cost benefit analysis of ozone depleting and
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Name of option
3.5
Removal of end use controls
Transfer end use controls to state and territory
governments


Increased compliance costs for businesses operating
in multiple jurisdictions

Cost of education for businesses to understand new
(and possibly different) state-based regulations
Reduced awareness by consumers around the
environmental cost of refrigerant gases could
lead to reduced operational efficiency leading
to higher emissions. However it is not possible
to cost this element.
Equipment controls
Tighter equipment controls could reduce emissions, both directly (through avoided leakage of SGGs) and
indirectly via reductions in electricity use. Two alternative forms of equipment control are proposed, each with
varying levels of stringency with respect to management of leaks: (i) simple leak testing (including repair) and (ii)
maintenance (which includes leak testing as well as a range of preventative measures to prevent leaks from
occurring and enhance system performance). These scenarios are described in greater detail in Table 3.7.
Table 3.7: Equipment controls
Name of option
Leak testing
Maintenance
Description of
option
Regular leak testing on all large equipment (remote
Regular maintenance on all large equipment (remote and
and supermarket RCFCs, medium to large ACs and
large MACs). The schedule of leak testing required
follows Regulation (EU) No. 517/2014, and varies
depending on the size of the gas charge in the
equipment.
supermarket RCFCs, medium to large ACs and large MACs),
in accordance with ISO 5149-4. Maintenance would be
required to be completed as per the schedule for leak testing
and would cover aspects beyond refrigerants such as fans and
filters. Larger emission savings are derived from tuning
equipment performance. The flow-on effect is reduced energy
consumption as the equipment is running for a longer period
with an optimal refrigerant charge.
Status quo
End use licensing controls for technicians in place, but no equipment maintenance requirements for equipment owners
in place. Some leak testing and regular maintenance already takes place without regulatory requirement, particularly in
larger businesses. Existing levels of leak testing and maintenance have been described in Section 3.
Regulatory
changes
Leak testing and maintenance will require equipment owners to keep records demonstrating that maintenance has
been undertaken, monitoring and control
Market response
-Increased training/certification of licensees around leak testing and maintenance standards
-Education around compliance requirements for equipment owners
-Transaction costs to equipment owners
Implementation
2017
Change over time
No change
Equipment
RAC and FP
Anticipated
benefits
Reduced greenhouse gas emissions
- Reduced energy consumption and therefore energy costs for equipment owner
- Reduce risk of catastrophic equipment failure and as such loss of refrigerated good/air conditioning capacity (e.g. in
the refrigerated cold food chain a catastrophic loss may mean loss of stock).
- Equipment life is extended, delaying capital expenditure for new equipment
- Reduced cost for equipment owners for bulk SGG as a result of lower leak rates
- Increased business for refrigerant/air conditioning technicians – increased economic activity in this sector of the
industry.
Anticipated costs
Final
Increased compliance costs, including increased administration costs, cost of education, increased transaction and
maintenance costs for equipment owners
17
Cost benefit analysis of ozone depleting and
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4. Assumptions and methodology
This section describes the assumptions and methodology underlying calculation of the cost and benefit in each
scenario. In all cases costs and benefits are compared to the reference scenario to deduce net benefit of each
scenario.
4.1
Costs and benefits data
Costs and benefits were classified in the following categories:

Carbon costs. These are likely to reduce under most scenarios which either reduce the amount of leakage
of SGGs or reduce the GWP of SGGs. Carbon costs are likely to increase if regulation is removed
altogether.

Energy costs. These are likely to reduce for most scenarios. Energy reduction occurs when SGG leakage
is reduced (i.e. improving the efficiency of the equipment) and can also occur when standard gas options
are replaced with certain alternatives in new equipment. Energy costs are likely to increase if regulation is
removed. These costs will be incurred by equipment owners.

Capital costs. In the case of scenarios in which equipment is replaced at the end of life with low GWP
alternatives, these could increase if equipment is more expensive when designed for certain types of low
GWP gases. For example, equipment that uses carbon dioxide is typically more expensive because the
properties of the gas create additional pressurisation requirements. These costs will be incurred by the
RAC and/or FP industries, and be passed on to equipment owners. Capital costs may also include
automatic leak detection equipment in the leak detection and maintenance scenarios.

Maintenance costs. In the case of scenarios in which equipment is replaced at the end of life with low GWP
alternatives, maintenance costs could increase as a result of changes to flammability and thermodynamic
properties. In the case of scenarios which increase leak detection and maintenance from business as
usual, these costs will include additional time costs of equipment handlers. Maintenance costs will be
incurred by the RAC and/or FP industries and will be passed on to equipment owners.

Gas costs. These costs may increase or decrease depending on the scenario under consideration.
Scenarios which alter the composition of gases in the bank may see increases or decreases depending on
the mix. Scenarios which reduce leakage will reduce gas costs. These costs will be incurred by the RAC
and/or FP industries, and will be passed on to equipment owners. If leakage increases under reduced
regulation, these costs could also rise.

Licence fees. Licence fees will be incurred by the RAC and FP industries, so ultimately these costs will be
passed on to equipment owners as these industries seek to recover costs. Licence fees could reduce
under a scenario which reduces regulation.

Administration costs. For the purpose of this analysis, these costs describe regular ongoing costs which
underpin management, monitoring, reporting, and control under each scenario. Administration costs are
presently incurred by Australian Government and RAC/FP industry licensees. Depending on the scenario
under consideration, the distribution of administration costs could change between the Australian
Government, the State and Territory governments, and RAC/FP licensees.

Transitional costs. Transitional costs are incurred prior to, or in the first few years of any scenario, and
cover the cost of stakeholder adjustment to each scenario’s conditions relative to current conditions.
Transitional costs could be incurred by the Australian Government, State and Territory Governments, and
the RAC/FP industries.
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Cost benefit analysis of ozone depleting and
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4.2
Greenhouse gas emissions
4.2.1
Direct emissions
Direct emissions include emissions from leakage of gases through the lifetime of each piece of equipment.
Direct emissions are materially impacted by the GWP of each gas in use. Replacement of equipment with lower
GWP alternatives, or strategies that reduce leaks, will provide a means of reducing direct emissions. GWP
values are based on AR4 values.
The source database includes estimates of leakage and direct emissions, but does not include emissions during
disposal of equipment. Only two of the scenarios may have any impact on disposal emissions: the HFC phase
down scenarios may make reclaimed refrigerant more valuable so that participants may recover more of it at
end of life (and hence reduce disposal emissions). It is not possible at this time to model this behaviour, so the
benefits may be understated for these scenarios. In all other scenarios, there is no expectation of an increase or
decrease in disposal emissions, so it is not required to calculate disposal emissions for the purposes of the
cost-benefit analysis.
Direct emissions are calculated using the following formulation:
Direct emissions (kg CO2-e) = Leakage (kg) x GWP (kg CO2-e/kg)
For the maintenance and leak testing scenarios, direct emissions estimates were taken directly from the source
database. For the end use licensing scenarios, the source database estimates had to be modified. This is
discussed in section 5.5.
4.2.2
Indirect emissions
Indirect emissions arise from use of electricity or liquid fuels to run equipment. These are specific to RAC
equipment as FP equipment does not generally require electricity to operate. As with direct emissions, these
contribute to climate change. More efficient practices of maintaining RAC equipment can reduce indirect
emissions by reducing electricity use. Equipment which leaks refrigerant needs more electricity to achieve the
same cooling temperature. Also, replacing equipment at the end of life with equipment running on certain types
of lower GWP gases can save electricity, and in some cases (such as use of CO2 in place of HFC404A in very
hot weather), can increase electricity use.
The source database includes energy reduction estimates for regularly leak testing equipment, and repairing as
necessary, maintaining RAC equipment, or alternative licensing arrangements leading to more efficient
practices in these areas. These energy reduction estimates apply to remote condensing units in the refrigerated
cold food chain, supermarkets in the refrigerated cold food chain, medium and large stationary air conditioning
applications, and large MAC applications. The reference scenario estimates are shown inTable 4.1.
As the licensing scenario used in this analysis differs from that in the source database, to estimate indirect
emissions for the two end use licensing options we used the ratio of direct to indirect emissions (1:0.15), derived
from the Expert Group’s estimates of direct and indirect emissions for their No Measures scenario between
2003 and 2030 (reported in the Assessment of Environmental Impacts of the OPSGGM Act).
The source database also excludes remote stock from ‘RCFC – remote’ leakage estimates. This approach is
conservative and could underestimate emissions benefits as remote stock could receive electricity supply from
diesel fired generators. The source database also considers only independent supermarkets in the ‘RCFC –
supermarkets’ category.
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19
Cost benefit analysis of ozone depleting and
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Table 4.1: Leak reduction scenarios
Application
Further leak reductions above the reference scenario
Leak reduction scenario
Maintenance scenario
1%
1%
1%
1%
10%
10%
7.5%
7.5%
RCFC – remote
RCFC – supermarkets
Medium AC
Large AC
Source: Expert Group source database
Energy use reductions for RAC equipment can be achieved when switching from one refrigerant gas to an
alternative that improves the effectiveness and hence the efficiency of equipment, independent of other
improvements in energy efficiency8. Refrigerant gas alternatives that improve energy efficiency include
hydrocarbons, carbon dioxide, some HFCs, and HFO1234yf and certain HFO blends, as shown in Table 4.2.
Assumptions for CO2 were not modified for Australian conditions even though energy efficiency is dependent on
ambient temperature. The modifications were not made because temperatures usually need to exceed 40
degrees9 centigrade which occur infrequently in most Australian cities.
Table 4.2: Energy efficiency improvements for selected low GWP alternatives and applications relative to energy use under
standard refrigerant
Application
Domestic
refrigeration
RCFC: selfcontained
RCFC: remote
RCFC:
supermarket
Standard
refrigerant
HFO blends
(HFO407A or
HFO407F),
GWP <2150
HFO blends,
GWP <1000
HFC134a
HFC134a
HFC404A
HFC404A
HC
EU CO2
assumption
-3.5%
0.0%
-8.0%
-8.0%
-7.5%
-8.0%
0.0%
EU
HFO1234
assumption
0.0%
-2.5%
0.0%
-2.5%
-8.0%
-2.5%
0.0%
Source: “Phase down of HFC Consumption in the EU – Assessment of Implications for the RAC Sector”, September 2012, SKM Enviros (now trading as
Jacobs). Note: Negative values imply energy use savings.
A number of publications10 indicate that energy savings for natural refrigerants are much higher than the values
quoted here. However, a cost benefit analysis requires identification of the impact of the refrigerant alone,
independent of changes to operation or system design that may also improve energy efficiency. This
requirement is there because additional changes to operation or system design may also incur additional costs
(or benefits) which are not considered in this study. It is also of value to retain assumptions which were
consistently derived, even if these are conservative. The assumptions used in this study could therefore be
considered conservative with regard to the benefits attributable to the use of natural refrigerants, and it may be
beneficial to undertake further research to develop a set of plausible alternative assumptions.
4.2.3
Carbon costs
Emissions, relative to the reference scenario, are expected to reduce in most scenarios under evaluation. The
economic value of this reduction is determined by applying carbon cost estimates to estimates of indirect and
direct emissions reductions. Carbon costs in this case are a proxy for the environmental benefit, and may
understate the value of reducing carbon (because people may value goods or services more highly than they
actually have to pay for them).
SKM Enviros (2012), Phase Down of HFC Consumption in the EU – Assessment of Implications for the RAC sector, SKM Enviros, UK. Note: It is
likely that equipment energy efficiency standards will have improved when equipment is replaced. This analysis ignores these types of energy
savings. It is important that these savings are not included because costs of achieving energy efficiency improvements are not counted in the
various CBAs.
9
“Availability of low GWP alternatives to HFCs: Feasibility of an early phase-out of HFCs by 2020”, M Kaufman, May 2012, Environmental
Investigation Agency
10 “Cool technologies: working without HFCs”, Greenpeace, 2012 edition
8
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Cost benefit analysis of ozone depleting and
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Development of carbon cost estimates can be highly uncertain. Treasury estimated in 2013 that the price of an
Australian Carbon Unit (ACU) in 2015 would be $5 per tCO2-e, rising to $54 per tCO2-e in 203011. The first
auction of ACUs for the Emissions Reduction Fund was conducted in April 2015, with the average price being
$13.95 per tCO2-e. Energy efficiency projects funded through legislated energy efficiency schemes are being
achieved at certificate prices of around $17/t CO2-e in Victoria (under the Victorian Energy Efficiency scheme;
contracts achieved have ranged between $11 and $22/t CO2-e through 2014), and $18/t CO2-e in NSW (under
the Energy Savings Scheme contracts have ranged from $10/t CO 2-e to around $33/t CO2-e). This implies that
the credible range of carbon cost is relatively wide.Jacobs has used the central estimates of $13.95/t CO2-e, as
this is a known central price currently being paid to achieve emissions reductions. A real price increase of 3%
per year has been included to reflect the increasing cost of achieving emissions reductions over time. Given the
range of potential carbon costs, sensitivity analysis is conducted on upper and lower bound estimates. See
section 6.2.
4.3
Capital costs
The HFC phase down scenario and the two ban scenarios will not mandate early replacement of equipment.
Instead it is assumed that equipment will be replaced at end of life with alternatives that use low GWP gases.
Jacobs has used the data contained in their report “Phase Down of HFC Consumption in the EU – Assessment
of Implications for the RAC Sector”, September 2012, SKM Enviros. This report provides a credible source of
expected cost differentials between high and low GWP alternative technologies, where no equivalent source
exists within Australia. The majority of SGG equipment is manufactured overseas, effectively making Australia a
price taker with respect to capital costs. SGG handling practices are also more likely to follow experience in
overseas countries, which may be ahead in the use of low GWP gases (for example, in the EU which more
aggressively pursues emissions reductions policy in this area). Jacobs has also included sensitivity analysis on
capital costs in section 6.4. Capital cost increases decline over a period of ten years between 2010 and 2020,
after which no capital cost change is assumed.
The suggested alternative gas species are consistent with technology change exhibited in Australian work (i.e.
Expert Group’s study of HFC phase down).
For FP systems, FPAA suggests that the capital cost to install a new system using FM-200 can vary between
$20,000 and $300,000. An alternative system using Novec™ 1230 as a low-GWP alternative would be
expected to cost between 20% and 30% more. This assumes that using Novec™ 1230 as an alternative is
feasible – in some situations this will not be the case, for instance where site characteristics limit the space
available for gas storage.
FP systems are commonly built to last for the life of the building, with 15 years being a minimum system
lifespan. Replacement of FP systems is likely to occur very gradually due to this. Unfortunately no data is
available on the number of FP systems currently installed, and it is not possible to estimate this using gas
consumption data as gas consumption data is likely to be heavily influenced by gas discharges from FP
systems (both accidental through technician error, or as a response to a fire).
11
Climate Change Authority (2014), Reducing Australia’s Greenhouse Gas Emissions – Targets and Progress Review, final report, February 2014.
Final
21
Cost benefit analysis of ozone depleting and
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Table 4.3: Sample of capital cost data for RAC equipment
Equipment
type
Years
of
useful
life
Gas
charge
(grams)
Domestic
refrigeration
RCFC: selfcontained
RCFC: remote
15
RCFC:
supermarket
Small AC
Medium AC
Large AC
Small MAC
Large MAC
Reference gas species
Gas
Least capital cost low GWP alternative
gas species
Gas
First year
Change to capital
available
cost, %
50
Initial capital
cost ($ per
annum, 2015)
1,000
HFC134a
HFO1234yf
2015
0.0%
15
240
3,000
HFC404A
GWP<1000
Pre-2015
0.0%
15
3150
20,000
HFC404A
Pre-2015
0.0%
15
150000
488,000
HFC404A
Pre-2015
0.0%
12
12
15
9
15
1026
2250
21730
600
14000
1,000
3,000
52,000
1,000
7,000
HFC410A
HFC410A
HFC410A
HFC134a
HFC134a
HFC
407A/407F
HFC
407A/407F
GWP<1000
GWP<1000
GWP<1000
HFO1234yf
HFO1234yf
Pre-2015
Pre-2015
Pre-2015
2015
2015
0.0%
0.0%
0.0%
5.0%
10.0%
Source: “Phase down of HFC Consumption in the EU – Assessment of Implications for the RAC Sector”, September 2012, SKM Enviros (now
trading as Jacobs).
4.4
Maintenance costs
While there is no reason for there to be regional differences in capital cost data, the same might not be true for
maintenance costs, which may be impacted by climate and differing equipment management practices. This is
likely to be the case for gases which have only recently become available in Australia, as training and familiarity
with these gases is likely to be more prevalent in larger cities. It was not possible to assess this difference in
costs. Table 4.4 provides an overview of likely changes in maintenance costs for RAC equipment.
Table 4.4: Sample of capital, energy and maintenance cost data for RAC equipment
Equipment
type
Years of
useful
life
Gas
charge
(grams)
Reference gas species
Domestic
refrigeration
RCFC: selfcontained
RCFC: remote
15
50
HFC134a
Initial
maintenance
cost ($ per
year, 2015)
10
15
240
HFC404A
50
15
3150
HFC404A
600
RCFC:
supermarket
Small AC
15
150000
HFC404A
14,640
12
1026
HFC410A
40
Medium AC
12
2250
HFC410A
80
Large AC
15
21730
HFC410A
9,740
Small MAC
Large MAC
9
15
600
14000
HFC134a
HFC134a
30
200
Gas
Least capital cost low GWP alternative
gas species
Gas
First year
Change to
available
maintenance
cost, %
HFO1234yf
2015
0.0%
HFO New
Blends
HFC
407A/407F
HFC
407A/407F
HFO New
Blends
HFO New
Blends
HFO New
Blends
HFO1234yf
HFO1234yf
2015
0.0%
Pre-2015
0.0%
Pre-2015
0.0%
2015
0.0%
2015
0.0%
2015
0.0%
Pre-2015
Pre-2015
9.0%
14.0%
Source: “Phase down of HFC Consumption in the EU – Assessment of Implications for the RAC Sector”, September 2012, SKM Enviros
(now trading as Jacobs).
4.5
Energy costs
Energy costs may also differ in other regions because of differing energy market cost structures. However, it is
likely that percentage reductions in energy use may still hold some validity in the Australian market. See Table
4.5.
Final
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Cost benefit analysis of ozone depleting and
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Table 4.5: Sample of capital, energy and maintenance cost data for RAC equipment
Equipment
type
Years of
useful
life
Gas
charge
(grams)
Reference gas
Gas
Domestic
refrigeration
RCFC: selfcontained
RCFC: remote
15
50
HFC134a
Initial energy
cost ($ per yr,
2015)
100
15
240
HFC404A
800
15
3150
HFC404A
3,000
RCFC:
supermarket
Small AC
15
150000
HFC404A
65,550
12
1026
HFC410A
500
Medium AC
12
2250
HFC410A
900
Large AC
15
21730
HFC410A
5,650
Small MAC
Large MAC
9
15
600
14000
HFC134a
HFC134a
200
4,250
Least capital cost low GWP alternative
Gas species
Gas
First year
Change to
available
energy cost
HFO1234yf
2015
0.0%
HFO New
Blend
HFC
407A/407F
HFC
407A/407F
HFO New
Blend
HFO New
Blend
HFO New
Blend
HFO1234yf
HFO1234yf
2015
0.0%
Pre-2015
-5.8%
Pre-2015
-5.8%
2015
0.0%
2015
0.0%
2015
0.0%
2015
2015
0.0%
0.0%
Source: “Phase down of HFC Consumption in the EU – Assessment of Implications for the RAC Sector”, September 2012, SKM Enviros (now trading as
Jacobs).
4.5.1
Electricity cost savings
Indirect emissions are available in the source database and have been used to estimate electricity cost savings
using the same emissions factors (tCO2-e per MWh) as used by the Expert Group. These estimates are
applicable to the leak reduction scenarios and maintenance provided by Expert Group to the DoE.
To estimate electricity savings for scenarios involving changes to equipment, Jacobs has sourced % savings
reduction data, which was combined with knowledge of electricity use and electricity prices to determine
possible electricity savings resulting from switching gases.
Retail electricity prices were sourced internally from Jacobs’. Jacobs’ market models create predictions of
wholesale electricity price and generation driven by the supply and demand balance, with long-term prices
capped near the cost of the cheapest new market entrant (based on the premise that prices above this level
provide economic signals for new generation to enter the market). Price drivers include carbon prices, fuel
costs, unit efficiencies and capital costs of new plant. These models have been developed over more than 20
years, and include an energy market database that is regularly populated with as much publicly available
information as possible and a suite of market modelling tools covering the electricity and gas industries as well
as renewable and emissions abatement markets.
Retail price projections for Australia as a whole are calculated as a load weighted average of state based retail
price projections, where state projections are based on estimates of aggregated price components including
wholesale, network, market and green charges. These estimates are provided in Figure 6.
Final
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Cost benefit analysis of ozone depleting and
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Figure 6: Electricity price projections, $2015
Source: Jacobs’ analysis
4.6
Health, safety and property
Using lower GWP gases as substitutes for high GWP gases brings with it some additional risk. Carbon dioxide
poisoning can be fatal in high concentrations. Ammonia is highly toxic and mildly flammable. Both HFO1234yf
and HFO1234ze are mildly flammable, and hydrocarbons such as propane and isobutane are highly flammable.
Reported incidents to date involving these substitute gases have been rare, and there is a long history of safe
use across Australia when gases are used in equipment specifically designed for their use. A recent review of
Workplace Health and Safety (WHS) legislation noted that:
‘…industry stakeholders need to recognise that each of the WHS regulators operates under a WHS or
occupational health and safety Act that stipulates the duties of care for the employers or persons in control
of the business or undertaking and the employees or workers’ (David Caple and Associates Pty Ltd 2012)12
The same review however recommended that the Commonwealth, state and territory governments assist
operators by providing information on strategies to reduce the risk associated with substitute gases, and
supporting the development of training programs.
The business as usual scenario developed by the Expert Group suggests that the use of low GWP substitutes
(GWP<10) is likely to rise significantly, and these changes are driven by events that will occur regardless of
regulatory change, such as response to increasing energy costs, product offerings being developed in
international markets and so forth. As such, it is assumed that state and territory government 13 and industry
collaboration would need to occur to educate technicians and reduce risk, and that this education would have
spillover benefits into the options analysed, in particular those which alter the mix of gases used (HFC phase
down, high GWP gas ban and high GWP gas equipment ban). There may be a small residual increase in safety
risk; however it is very difficult to quantify this with any degree of certainty.
12
13
This report is being reviewed as part of the current Ozone Act review.
State and territory governments presently have responsibility for work place health and safety issues.
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Cost benefit analysis of ozone depleting and
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4.7
Avoided training costs
RAC Industry
Under the current national Refrigerant Handling Licence (RHL) scheme, to obtain a licence an individual must
complete one of various qualifications through an apprenticeship and/or provide paperwork documentation
depending on the type of RHL they want to qualify for. These include:




An apprenticeship as a Refrigeration Mechanic
Trade certificate in refrigeration and/or air conditioning (or related qualification); or
Proof of enrolment in a refrigeration and/or air conditioning course (trainee RHLs); or
Letter from employer and/or competency assessment (restricted RHLs).
The following ARC (ARCtick) link provides more detail regarding the specific qualifications and training needed
to obtain a RHL licence (https://www.arctick.org/pdf/RHL%20Information%20Brochure.pdf). Regardless of
whether an individual possesses an RHL or not, the training and qualifications listed in this document would be
desirable to perform any operation within the RAC industry safely. This training is also important for the
technician to meet state/territory work, health and safety and consumer protection requirements.
Without the ARCtick scheme, the majority of technicians would still likely complete some formal training, either
through an apprenticeship or trade training. Larger refrigeration and air conditioning firms with a known brand
are expected to continue to support formal training, however smaller firms or sole operators who work with
refrigerants as a side line may choose not to pursue training. We have assumed that all technicians will
continue to undertake some form of training, noting that this may understate the benefit of avoided training
costs.
Required training and qualifications are therefore not expected to differ between the reference scenario and the
proposed scenarios where the licences are completely removed or substituted with state licences.
FP Industry
Under the current Extinguishing Agent Handling Licence (EAHL) scheme, a technician must complete the units
of competency listed in Table 322 of the Ozone Protection and Synthetic Greenhouse Gas Management
Regulations 1995. These competencies specifically address gas handling, equipment servicing and disposal of
SGGs, and are directly relevant to reducing emissions. The cost for this training is approximately $2,750 per
person.
State-based regulation as it currently exists is targeted towards fire safety, and with the exception of
Queensland there is no requirement for FP technicians to have an appropriate qualification. The FPAA
estimates that around 300 of the current 1,412 handling licensees are in Queensland (21% of total). It is
assumed therefore that without the Commonwealth regulatory requirement, there would be limited demand for
formal training such as that required under the OPSGGM Act. The FPAA has advised that larger FP companies
(employing approximately 30% of the total number of licensees) are likely to continue with an equivalent level of
formal training for new technicians. The remaining 70% of new technicians working for smaller businesses or
involved in FP as a side line are likely to complete on-the-job training only, at approximately 50% of the cost of
formal training.
4.8
Gas costs
The price of refrigerant/FP gases is relevant to the following scenario: HFC phase down – the reduced quota of
HFCs will require alternative gases to be used, with differences in cost
Prices are based on Australian data where possible, or converted from UK pounds to Australian dollars where
Australian data could not be sourced. We have assumed that HFOs and new blends will be readily available in
Australia.
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Cost benefit analysis of ozone depleting and
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The analysis assumes that gas prices will not change, because the nature of the phase down is such that it
allows the market to choose where the phase down can most efficiently be undertaken. This approach was
undertaken because it simplifies the modelling and makes results more transparent and explainable. However,
any significant potential shortfall in supply for any gas under any scenario could result in an increase in prices.
As the phase down is based on CO2-equivalence, and consequently weighted by GWPs, it is feasible that
importers will choose to reduce the quantity imported of high GWP gases first, and may charge a premium to
import such gases, at least while significant demand exists (e.g. in a transition period).
To some extent, gas in existing systems can be reused to fill any shortfall in gas supply. This may incur an
additional cost if the gas must be cleaned or reclaimed to remove impuritiesFor RAC and FP equipment, the
gas must be brought back to the manufacturer’s specification before it can be used again. Advice from the
FPAA is that gas treatment to meet manufacturer’s specifications is an expensive process, and reclamation
rates are low as a result.
4.9
Administration costs
Bulk importers
The costs to be experienced by bulk importers vary by scenario and industry participant. Estimates were
determined through consultation with the Technical Working Group.
For the HFC phase down, administrative costs have been estimated at 8 hours per importer per year. This
includes costs associated with keeping up to date on changes in phase down levels, determining how to divide
their allocated quota between different GWP gas imports, and negotiating with regular customers (HFC traders)
on purchase amounts.
Table 4.6: Increased administrative burden to bulk importers, HFC phase down
Bulk importers
Unit
Ongoing administrative cost
8
Hours/ supplier/ year
Number
33
Number of importers
Total hours, ongoing
624
hours/ year
Source: Jacobs’ assumptions; Number of importers provided by the Department of the Environment, based on 28 current importers and 5 new entrants.
We assume that the value of a bulk importer’s time is $50 per hour. This is based on Australian average weekly
earnings of $36.91 per hour in 201414, increased to 2015 values by the 10 year average wage price index of
3.5%, plus 20% for salary on-costs (superannuation, payroll taxes etc.), plus a small additional allowance
recognising that the individuals responsible for quota administration are likely to be business managers and
therefore command a higher than average wage.
Equipment owners
For the maintenance and leak testing scenarios, it is expected that there would be an additional administrative
burden to equipment owners. Equipment owners would need to schedule technician visits, as well as maintain
records of any maintenance and leak testing carried out. It is assumed that this would require 0.5 hours per
piece of equipment for the maintenance scenario, and 0.25 hours per piece of equipment for the leakage
scenario. We assume that the value of an equipment owner’s time is $50 per hour. As for bulk importers, this is
based on Australian average weekly earnings of $36.91 per hour in 201415 , increased to 2015 values by the 10
year average wage price index of 3.5%, plus 20% for salary on-costs (superannuation, payroll taxes etc.), plus a
small additional allowance recognising that equipment owners are likely to be store/facilities managers and
therefore command a higher than average wage.
14
Australian Bureau of Statistics (2014), Key Economic Indicators, 2014, catalogue number 1345.0, available:
http://www.abs.gov.au/ausstats/abs@.nsf/mf/1345.0#Incomes
15
Australian Bureau of Statistics (2014), Key Economic Indicators, 2014, catalogue number 1345.0, available:
http://www.abs.gov.au/ausstats/abs@.nsf/mf/1345.0#Incomes
Final
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Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Technicians
With respect to the licensing scenarios, businesses must spend time completing licence applications.The TWG
considered that a Refrigerant Trading Authorisation (RTA) would take 4.5 hours to complete for the first
application, as the application requires specific details on leak detection systems, vacuum pumps, gas recovery
units and risk management planning. For RTA renewals, this time is expected to be reduced to 30 minutes per
application. Refrigerant Handling Licences (RHLs) require less detail, so a time of 1 hour to complete was
recommended by the TWG in the first instance, and 5 minutes for every licence renewal thereafter. There is an
opportunity cost to this time, as it could be spent on income generating activities. We have assumed that the
income lost as a result of completing the licence application is $150 per hour, approximately equivalent to a
client charge-out rate in the RAC industry. These costs are incurred once every two years when the licence
requires renewal.
For the FP industry, the FPAA has recommended a time of two hours to complete an Extinguishing Agent
Trading Authorisation (EATA), and 30 minutes for a renewal. Extinguishing Agent Handling Licence (EAHL)
applications require less detail, and we therefore assume it would take 30 minutes to complete in the first
instance, and 5 minutes for every licence renewal thereafter. There is an opportunity cost to this time, as it could
be spent on income generating activities. We have assumed that the income lost as a result of completing the
licence application is $70 per hour, approximately equivalent to a client charge-out rate in the FP industry.
These costs are incurred once every two years when the licence requires renewal.
Australian Government
The nature of administration costs to government varies by scenario. Additional administration costs were
estimated by the DoE and a summary is provided in Table 4.7.
Table 4.7: Administration cost assumptions by scenario, $2015
Scenario
Administration costs included
Summary of costs
Option 1:
HFC phase
down
Import operations staff
$254K every second
year from 2019
Option 2:
Equipment
bans
Import operations staff
Compliance and enforcement staff (includes Customs)
$333K per annum
($165K each for MAC
and supermarket
equipment)
Option 3:
Maintenance
Communications work (transition team)
$586K in 2019 and
Increase in compliance and enforcement (audit of maintenance activity, audit of technician
training)
$576K per annum
thereafter
Option 4:
Leakage
Communications work (transition team)
$586K in 2019 and
Increase in compliance and enforcement (audit of maintenance activity, audit of technician
training)
$576K per annum
thereafter
Option 5:
Continuation of RAC Industry Board for 2 years (2018 and 2019) to provide some ongoing
support and a co-ordination point for industry to raise emerging issues.
Benefit of $95K per
End use
transfer
Compliance and enforcement staff (includes Customs)
Continuation of FP Industry Board for 2 years (2018 and 2019) to provide some ongoing
support and a co-ordination point for industry to raise emerging issues.
Compliance and enforcement saving
annum from 2020 –
this includes the lost
income from licence
fees
Ongoing engagement with industry to remain aware and influential on matters relevant to the
Ozone Act / international obligations (includes participation in standards committees, training
orgs, key industry groups etc.)
Final
27
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Scenario
Administration costs included
Summary of costs
Option 6:
Continuation of RAC Industry Board for 2 years (2018 and 2019) to provide some ongoing
support and a co-ordination point for industry to raise emerging issues.
Benefit of $95K per
End use
removal
Continuation of FP Industry Board for 2 years (2018 and 2019) to provide some ongoing
support and a co-ordination point for industry to raise emerging issues.
annum – this includes
the lost income from
licence fees
Compliance and enforcement saving
Ongoing engagement with industry to remain aware and influential on matters relevant to the
Ozone Act / international obligations (includes participation in standards committees, training
orgs, key industry groups etc.)
Source: Department of the Environment
State and Territory governments
The only option which is expected to directly affect state and territory government administration costs is the
transfer of end use licensing to state and territory governments. The DoE estimates that each state and territory
government would require 22 FTE per year to manage the RAC scheme, and 7 to manage the FP scheme.
Additionally, compliance and enforcement effort is estimated at 4 FTE for RAC and 2 FTE for FP, per year. In
total, administrative cost per state is estimated at $3.5 million annually (assuming a labour cost of $100,000 per
year per FTE, including wages, superannuation, and other variable costs). Total administrative cost for all
states and territories is estimated at $28 million annually.
4.10
Transition costs
Bulk importers and traders
With respect to the HFC phase down scenario and scenarios which ban equipment, transition costs have been
estimated and verified with the Technical Working Group. These are presented in Table 4.8. We have assumed
that bulk importers would require an additional 8 hours each to understand the change in regulations, plan for
which gases to import and in which quantities to meet their quota (given that the phase down is GWPweighted), and liaise with key customers about future changes in gas availability. Refrigerant traders were
assumed to require an additional 4 hours each to understand the phase down and begin identifying alternative
gases to promote to customers.
Table 4.8: Transitional costs
Option 1: HFC
phase down
Once off cost for adapting to policy
Number
Total hours, once off
Bulk
importers
Refrigerant
traders
8
4
33 (28
existing
importers
plus 5 new
entrants)
17,241
624
68,964
Total
Unit
Hours/ supplier/ year
Number
69,588
hours/ year
Source: Jacobs’ assumptions
Equipment owners
Transition costs of 0.5 hours per piece of equipment have been assumed for the maintenance and leak
detection scenarios.
Australian Government
The nature of transition costs to government varies by scenario. Transition costs were estimated by the
Department of the Environment and a summary is provided in Table 4.9.
Final
28
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Table 4.9: Australian Government transition cost assumptions by scenario, $2015
Scenario
Transition costs included
Summary of
costs
Option 1:
HFC phase
down
2015 - Transition team to:
2015: $506K

2016: $769K

Prepare communications strategy and materials
mend compliance and enforcement plans and strategies

Consult with industry

Develop and publish guidelines for quota allocation

A mend Standard Operating Procedures

Develop IT systems changes

Prepare and deliver training to Customs brokers

Two national “road shows” to communicate and engage with broader cohort of stakeholders

Slight increase in Import Operations team to manage applications/quota
2017: $635K
2016 and 2017 - Transition team:

Prepare and deliver training to Customs brokers

One national “road show” to communicate and engage with broader cohort of stakeholders

Prepare communications strategy and materials
Option 2:
Transition team to:
2024: $430K
Equipment
bans

Prepare communications strategy and materials
2025: $922K

Amend compliance and enforcement plans and strategies

Amend Standard Operating Procedures to account for change

Develop IT systems changes

Prepare and deliver training to Customs brokers

One national “road show” to communicate and engage with broader cohort of stakeholders
Slight increase in Import Operations team to manage red lines/stakeholder questions
Transition team:

Prepare and deliver training to Customs brokers

One national “road show” to communicate and engage with broader cohort of stakeholders

Prepare communications strategy and materials
Compliance and enforcement team – increase in audits/review of documentation. This includes
some staffing costs for Customs
Final
29
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Scenario
Transition costs included
Summary of
costs
Option 3:
Maintenance
Transition team to:
2016: $960K

Prepare communications strategy and materials – joint effort between Department of Industry
and Environment
2017: $1,203K

Amend compliance and enforcement plans and strategies (support equipment owner
compliance and technician compliance with maintenance standards)

Undertake seven national “road shows” to communicate and engage with broader cohort of
stakeholders

Amend regulations to require training for technicians to support good maintenance practices
– regulation amendment and consultation process. This could also include work to redraft
Codes of Practice.

Engagement with training organisations to establish appropriate training is available to
technicians

Undertake technical study to establish specific benefits for equipment classes

Increase in compliance and enforcement (audit of maintenance activity, audit of technician
training)
2018: $1,081K
Transition team:
Final

Participation at industry events to promote the regulations through the building services
sector

Regular representation at building services conferences/forums to inform equipment owners
of regulation

Regulation amendments and on-going consultation with training organisations to develop
training/codes of practice.

Undertake further technical studies to establish specific benefits for equipment classes

Develop further communication materials

Monitor the programme
30
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Scenario
Transition costs included
Summary of
costs
Option 4:
Leakage
Transition team to:
2016: $960K

Prepare communications strategy and materials – joint effort between Department of Industry
and Environment
2017: $1,203K

Amend compliance and enforcement plans and strategies (support equipment owner
compliance and technician compliance with maintenance standards)

Undertake seven national “road shows” to communicate and engage with broader cohort of
stakeholders

Amend regulations to require training for technicians to support good maintenance practices
– regulation amendment and consultation process. This could also include work to redraft
Codes of Practice.

Engagement with training organisations to establish appropriate training is available to
technicians

Undertake technical study to establish specific benefits for equipment classes

Increase in compliance and enforcement (audit of maintenance activity, audit of technician
training)
2018: $1,081K
Transition team:

Participation at industry events to promote the regulations through the building services
sector

Regular representation at building services conferences/forums to inform equipment owners
of regulation

Regulation amendments and on-going consultation with training organisations to develop
training/codes of practice.

Undertake further technical studies to establish specific benefits for equipment classes

Develop further communication materials

Monitor the programme
Option 5:
Transition team to:
2015: $593K
End use
transfer

Prepare communications strategy;
2016: $1,456K

Prepare for liaison with industry
2017: $1,363K

Prepare strategy for liaison with Commonwealth agencies
2018: $1,101K

Prepare strategy for liaison with jurisdictions
2019: $798K

Plan two national road shows to communicate and engage with broader stakeholder group.
Policy review and development - amendments to Ozone regulations (including legal advice,
OBPR processes)
Transition team to:

Implement communications strategy

Liaison with industry (via industry boards)

Liaison with relevant Commonwealth agencies

Liaison with jurisdictions

Carry out two national “road shows” to consult and communicate with broader stakeholder
group
Compliance and Enforcement Additional resources to assist with set up for jurisdictions
Commonwealth: one-off IT costs – consultancy to consolidate data / scheme information from
RAC and FP Boards into a useable data source and record for the Department.
Transition support continues until 30 June 2018.
Final
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Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Scenario
Transition costs included
Summary of
costs
Option 6:
Transition team to:
2015: $422K
End use
removal

Prepare communications strategy;
2016: $1,315K

Prepare for liaison with industry
2017: $1,214K

Prepare strategy for liaison with Commonwealth agencies
2018: $892K

Prepare strategy for liaison with jurisdictions
2019: $848K

Plan two national “road shows” to communicate and engage with broader cohort of
stakeholders
Policy review and development - amendments to Ozone regulations (including legal advice,
OBPR processes)
Transition team to:

Implement communications strategy

Liaison with industry (via industry boards)

Liaison with relevant Commonwealth agencies

Liaison with jurisdictions

Two national “road shows”: consultation and communications for broader stakeholder group.
Compliance and Enforcement Additional resources to ensure compliance until end of scheme
One-off IT costs – consultancy to consolidate data / scheme information from RAC and FP
Boards into a useable data source and record for the Department.
Transition support continues until 30 June 2018.
Source: Department of the Environment estimates
4.10.1
State and territory governments
State and territory governments are expected to incur additional transition costs for the scenario where end use
licensing is transferred to state and territory responsibility. These additional costs are shown below, per
state/territory government.
Table 4.10: State and territory government costs (total for all state and territory governments)
Scenario
Transition costs included
Summary of costs
Option 7:
Policy review and development – amendments to state/territory legislation to incorporate licensing
provisions for RAC and FP (including legal advice, drafting/parliamentary processes)
2015: $0K
Transitional arrangements – prepare and implement communications strategy, liaison with
Commonwealth, liaison with industry
2017: $13,000K
End use
transfer
2016: $16,800K
IT establishment costs to administer licensing
Source: Department of the Environment estimates
4.11
Licence fees
RAC Industry
Table 4.11 lists the 2015 purchase costs for each licence that can be obtained by individuals or businesses.
These fees, which are currently incurred under the national licensing scheme, will be removed under the
‘Remove end-use licensing’ scenario. There may be some cost savings where state governments have an
existing occupational licence and can combine that with the end use licence, however it is not possible to
assess the extent of this saving.
Final
32
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Table 4.11: RAC industry licence costs
RAC Industry Permit
Licence Period (years)
2015 Fees ($)
Refrigerant Handling Licence
2
137
Restricted Refrigerant Handling Licence
1
69
Trainee Refrigerant Handling Licence
1
28
Refrigerant Trading Authorisation
2
442
Refrigerant Trading Authorisation
1
221
Restricted Refrigerant Trading Authorisation
2
137
Source: Department of the Environment
FP Industry
Table 4.12 lists the 2015 purchase costs for each licence that can be obtained by individuals or businesses. For
the purposes of this analysis, it was assumed that all licensed handlers are qualified persons.
Table 4.12: Fire protection industry licence costs
FP Industry Permit
Licence Period (years)
2015 Fees ($)
Extinguishing Agent Handling Licence (Qualified Person)
2
263
Extinguishing Agent Handling Licence (Experienced Person)*
1
131
Extinguishing Agent Handling Licence (Trainee)
1
131
Extinguishing Agent Trading Authorisation
2
442
Halon Special Permit
1
263
*Note: This licence type will no longer be available after 2015
These fees currently incurred under the national licensing scheme will be removed under the proposed end-use
licence scheme. However, similar costs will be incurred under the state-based licensing scheme.
Additional Information
To calculate the total licensing fees on a yearly basis for the cost projection to year 2030, the yearly licence fee
cost has been multiplied by the quantity of technicians for each year. The total quantity of licences issued is
estimated in accordance with the rate of increase in the total quantity of equipment estimated by the stock
model. This assumes that the number of licensed technicians required per unit of equipment is constant.
Final
33
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
5. Results
5.1
HFC phase down
5.1.1
Models
Jacobs developed policy scenario models to represent each phase down scenario. Each policy scenario model
is based on the reference case stock model in the source database, with adjustment of the following:
a. Gas shares among new equipment types change to include a greater share of lower GWP alternative
gases in future years, adjusting the levels of required imports and emissions produced by imported
gases in the entire market16.
b. Import levels in the policy scenario are reduced by increased reclaim and re-use of existing gases, if
any is needed to reduce imports.
5.1.2
Scenarios
The HFC phase down is to be applied gradually, starting in 2017. The phase down will be applied to imports of
bulk HFC gases, and will be measured in terms of carbon dioxide equivalents.
Two variations were requested by the DoE: a phase down based on the North American proposal to amend the
Montreal Protocol and an accelerated phase down. Imports of bulk gases are primarily emitted through
commissioning, use and decommissioning of equipment that use these gases. Imports are comprised of gas
imported to refill equipment that has leaked gas, and gas imported to charge new equipment. Figure 7
compares each phase down quota.
Figure 7: North American proposed import quota*
*HCFCs excluded
Source: Jacobs’ analysis of source database
Each phase down scenario is broadly reflective of international market shifts because of technology and policy
developments such as the EU requirements for all new vehicle air conditioning to use a refrigerant gas with a
GWP<150 by 2017, and assumptions around the increasing availability of lower GWP alternatives at declining
cost and would ensure industry did transition to low or no-GWP alternatives.
Projections show that through the majority of the evaluation period the refrigerant industry will be able to meet
the North American and accelerated phase down schedule without any additional action, assuming that the
industry does transition to low or no-GWP alternatives. However, by 2030, some addtional reduction activity will
be required for both pathways.
16
Jacobs was provided with outputs from Expert Group work, not the Expert Group models. Jacobs’ approach is not able to replicate the same time
lag functions as the Expert Group work so Jacobs’ modelling may not achieve the same results as would be achieved using Expert Group models.
Final
34
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Where it is needed, reduction activity will occur either through increasing reclaimed gas activity, leak reduction
or by replacing equipment at end of life with alternative technologies using gases with lower global warming
potential than standard gases such as HFC134a (GWP of 1430), HFC404A (GWP of 3922) or HFC410A (GWP
of 2088). Reduction activity could also occur through early retirement or retrofitting; however these were not
considered in the analysis.Market activities to reduce imports are only needed in 2030, but the market may
choose to reduce imports earlier if it is economic to do so. The modelling found some early effort to replace
equipment at end of life is required before 2030 in the absence of increased maintenance or leak detection
activity.
The HFC phase down scenario is not matched in the source database. Jacobs developed an alternate version
of the reference scenario by adapting the stock model in the reference scenario to consider:

Changing mix of gas species for new equipment. The model enables the user to adjust the mix of gases in
new equipment to derive emissions, energy use and cost estimates that are directly comparable to the
reference scenario.

Potential reclaim of gas from end of life equipment. The model enables the user to adjust the percentage of
reclaimed gas to determine offsets to bulk gas imports.
Jacobs has adapted the gas species mix and import requirements in the reference scenario to deliver a model
of HFC phase down. This was undertaken by using economic principles to identify options that would be likely
to be adopted at least cost. These options include:
1)
Increasing reclaim activity. Refrigerant Reclaim Australia17 (RRA) recovers a range of CFCs, HCFCs,
HFCs and other refrigerant gases and safely destroys them. As shown in Figure 8, the amount of gas
returned to RRA will vary in response to the supply and demand activity associated with that gas. The
quantity of gas returned to RRA in 2012 and 2013 reduced significantly as a result of more gas being reused. This was driven by growing scarcity of HCFCs as Australia’s phase out reaches its final stages. The
amount of HCFC gas reclaimed dropped from around 270 tonnes in 2011 to 50 tonnes in 2013, implying
that the difference is more likely to have been re-used in the interim. By contrast, the amount of HFC gas
returned for destruction has increased as the share of these gases in the market has increased. A HFC
phase down may also increase the reclaim and re-use of these gases.
Figure 8: Refrigerant reclaim activity by gas type
Source: Refrigerant Reclaim Australia
There is little solid data around reclaim and re-use activity in Australia. Jacobs has assumed that some
level of reclaim is already occurring in Australia, as shown in Table 5.1. Low levels of increase in activity
are assumed under the HFC phase down, except in the MAC industry, where the introduction of HFO1234yf may prompt increased reclaim and re-use of HFC134a in response to high prices. Jacobs has also
assumed that reference scenario reclaimed gas is already allowed for in reference scenario projections of
imports, so that only change to reclaim activity will reduce the phase down target.
17
https://refrigerantreclaim.com.au/program-performance/potential-recovery/
Final
35
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Reclaimed and re-used gases may not avoid Australian emissions, but may avoid carbon emissions
globally, because avoided production will eventually result in avoided emissions.
The increase to reclaimed and re-used gases is assumed to be used within the facility they are derived
from, at a cost that is lower than purchase of new gas, so that the cost of reclaim and re-use is cost neutral.
Table 5.1: Reclaim and re-use activity levels, 2016-2030
Reference scenario
HFC134a
HFC phase down
HFC404A
HFC410A
HFC134a
HFC404A
HFC410A
35%
35%
35%
45%
45%
45%
RCFC: self-contained
80%
80%
80%
90%
90%
90%
RCFC: remote
80%
80%
80%
90%
90%
90%
RCFC: supermarket
80%
80%
80%
90%
90%
90%
Small AC19
80%
80%
80%
90%
90%
90%
Medium AC20
80%
80%
80%
90%
90%
90%
Large AC
80%
80%
80%
90%
90%
90%
Small MAC
10%
10%
10%
50%
50%
50%
Large MAC
80%
80%
80%
90%
90%
90%
Domestic
refrigeration18
Source: Jacobs’ assumptions
2)
3)
Changing over equipment to lower GWP alternatives at end of life. Jacobs reviewed the sales mix of
gas species for each type of equipment, with reference to the cost assumptions described in this report.
The review was undertaken with the aid of an Excel Solver routine which specified the proportion of low
GWP gases for each application group, so that:
a)
Equipment owner costs (capital, maintenance and energy) were minimised
b)
Import levels, less any offset from reclaimed gas, fell below the HFC phase down quota
c)
Shares of total low GWP gases in equipment were above that in the reference scenario and less than
one
d)
Individual gases within each low GWP group were sold in similar proportions to the reference scenario
Leak reduction and maintenance. Leak reduction and maintenance strategies are also a logical
approach to reduce imports for equipment. The maintenance scenario, discussed in section 5.3, avoids
sufficient leakage to meet each target and does this cost effectively.
Because maintenance is an economically beneficial activity for equipment owners (as demonstrated in the
maintenance scenario), it is reasonable to assume that some activity will occur. However, it is also desirable to
consider other means of achieving the HFC phase down because a lower regulatory burden or improved overall
economic cost might be achieved through a combination of approaches.
Jacobs considered whether each target could be reached without maintenance being implemented. The
emissions pathway of each scenario, including equipment replacement and increased re-use and reclaim
activity, is displayed in and in , showing that each target can be reached with these two measures alone.
“End-of-life domestic refrigeration and air conditioning equipment in Australia”, Department of the Environment, 23 July 2014,
http://www.environment.gov.au/system/files/resources/73c361c3-4a03-4b11-8dcb-a0b515ec5a2c/files/end-life-domestic-rac-equipmentaustralia.pdf
19 “End-of-life domestic refrigeration and air conditioning equipment in Australia”, Department of the Environment, 23 July 2014,
http://www.environment.gov.au/system/files/resources/73c361c3-4a03-4b11-8dcb-a0b515ec5a2c/files/end-life-domestic-rac-equipmentaustralia.pdf
20
“End-of-life domestic refrigeration and air conditioning equipment in Australia”, Department of the Environment, 23 July 2014,
http://www.environment.gov.au/system/files/resources/73c361c3-4a03-4b11-8dcb-a0b515ec5a2c/files/end-life-domestic-rac-equipmentaustralia.pdf
18
Final
36
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Figure 9: Imports pathway under North American amendment phase down scenario, Mt CO2-e
Source: Jacobs’ analysis
Figure 10: Imports pathway under Accelerated alternative phase down scenario, Mt CO 2-e
Source: Jacobs’ analysis
Where end of life equipment replacement involves increased use of low GWP gases, the modelling suggested
that the sectors most likely to affected include domestic refrigeration and supermarkets, as well as self
contained equipment in the refrigerated cold food chain, as demonstrated in and Figure 12 which shows the
increase to sales share of low GWP gases in these sectors in 2017 and 2020. Figure 12 indicates that
additional activity will be required in the mobile air conditioning sector under the accelerated alternative.
Final
37
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Figure 11: Increased share of low GWP gases used in sales of new equipment (North American Amendment proposal)
Source: Jacobs’ analysis
Figure 12: Increased share of low GWP gases used in sales of new equipment (Accelerated Alternative proposal)
Source: Jacobs’ analysis
The cost benefit analysis is provided in Table 5.2. The table shows that the HFC phase down would provide a
positive net benefit under each proposal between 2016 and 2030. The differences arise from a greater modelled
level of end of life equipment replacement under the Accelerated Alternative, particularly small mobile air
conditioning requiring higher expenditure on refrigerant gases. However, if other parts of the industry choose to
increase maintenance, the pressure to reduce imports in the MAC industry may reduce, and it could be cost
effective to undertake the Accelerated Alternative in this circumstance.
The regulatory burden of this option, as presented in Table 5.2, is the transitional and administrative cost to bulk
gas importers, which incorporates the cost of educating themselves on the new quota requirements,
determining which gases to import to meet their quota, and liaising with regular customers on gas availability.
The regulatory burden is estimated at $870,000 (NPV) for each phase down scenario.
The results presented here do not include any impacts on the FP industry, due to a lack of data on the number
of systems currently installed or new systems projected to be installed over the analysis period. Any reduction
in availability of FM-200 gas due to the quota may encourage uptake of systems using Novec™ 1230 - the
FPAA advises that this is likely to increase the cost of a system by around 20%, in addition to Novec™ 1230
gas itself costing between 20-30% more than FM-200. It is possible that this additional cost is offset by the
value of the emissions reduction, given that the GWP of FM-200 is 3,220 compared with a GWP of 1 for
Novec™ 1230.
Final
38
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Table 5.2: Cost-benefit analysis of HFC phase down scenario, $000s
Unit
Net Benefits
Benefits
Carbon saving
Accelerated alternative
phase down
NPV, 2016NPV, 20162020
2030
North American
amendment phase down
NPV, 2016- NPV, 20162020
2030
$000s
-3,652
10,491
5,712
39,667
$000s
$000s
$000s
$000s
$000s
6,528
8,351
725
5,974
2,855
44,155
19,358
2,930
19,243
12,541
3,671
8,455
725
5,974
2,855
17,711
20,044
2,930
19,243
12,541
$000s
24,473
98,228
21,680
72,470
$000s
7,682
27,940
1,284
3,780
$000s
$000s
$000s
$000s
$000s
$000s
$000s
7,291
2,889
7,458
831
1,662
31
282
7,291
2,889
46,188
831
1,662
40
897
4,745
2,889
4,244
831
1,662
31
282
4,745
2,889
17,958
831
1,662
40
897
Total costs
$000s
28,125
87,738
15,968
32,802
Benefit to cost ratio
Ratio
0.9
1.1
1.4
2.2
Energy saving
Direct (leakage)
Direct (reclaim and re-use)
Indirect
Residential
Business
Total Benefits
Costs
Refrigerant gas
costs
Incremental
capital cost
Maintenance cost
Transitional cost
Administrative cost
RAC industry – leakage
replacement
Residential households
Business
Equipment owners
Industry
Australian Government
Industry
Australian Government
Source: Jacobs’ analysis. Note that the net benefit may be much higher if the scenario was based on increased maintenance and leak reduction strategies
5.2
Ban on equipment using high GWP gases
The ban on equipment scenario is not matched in the source database. Jacobs has adapted the gas species
mix in the reference scenario to match those in use in the low GWP scenario provided by the Expert Group.
This option imposes a ban on new MACs containing a refrigerant with a GWP>150 from 2017, and new
supermarket equipment containing a refrigerant with a GWP>2500 from 2020. This option does not affect the
FP industry.
The sales mix of new supermarket equipment (RCFC – Supermarket in the Expert Group model) in 2020 is
diverse, with only 10% of all new equipment sold containing HFC404A. By 2024, no new supermarket
equipment is expected to be sold using HFC404A, with a total of 92 pieces of equipment sold between 2020
and 2024 (6% of total sales over the period). This suggests there are a range of cost-effective alternatives on
the market. The SKM-Enviros report indicates that systems based on alternative gases are likely to have similar
capital and maintenance costs, and can reduce energy costs by up to 5.8%, hence a strong incentive for
supermarkets to consider other options may already exist. The cost-benefit analysis is provided in Table 5.3,
and indicates a positive net benefit for the ban on supermarket equipment.
The low GWP scenario in the source database indicates the most appropriate alternative gas for mobile air
conditioning equipment is HFO1234yf as a replacement for HFC134a. Under this assumption, the most
significant costs include capital and maintenance costs, which outweigh benefits in avoided emissions. The
increased capital and maintenance costs occur because MAC systems using HFO1234yf are more expensive to
produce (thus potentially increasing the purchase price of a vehicle) and more expensive to maintain.
There is not expected to be a regulatory burden associated with this scenario, as the bans are imposed at times
when there is expected to be readily available supply of equipment using alternative gases. No additional time
is expected to be required to locate these supplies. The bans are also applied at the point of import, and
therefore do not cause a regulatory burden for end users of the equipment. However, there is expected to be
an additional capital and maintenance cost to equipment purchasers, as a direct result of no longer being able
to purchase equipment containing certain gases.
Final
39
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Table 5.3: Cost-benefit analysis for equipment bans
Unit
Supermarket equipment
from 2020
MAC equipment from
2017
Both categories
NPV,
2016-2020
NPV, 20162030
NPV,
20162020
NPV,
20162030
NPV,
20162020
NPV,
2016-2030
Net Benefits – Equipment
bans
Benefits
Carbon Costs
Direct leakage
$000s
-296
3,834
-103,353
-181,704
-103,649
-177,870
$000s
547
1,645
8,745
40,866
9,292
42,531
Indirect
$000s
10
490
10
490
Energy Costs
All end
users
$000s
84
3,788
84
3,788
Refrigerant gas
cost
RAC
industry
$000s
51
129
51
129
$000s
692
6,051
8,745
40,866
9,437
46,937
$000s
0
0
39,089
39,089
39,089
39,089
39,951
98,316
39,951
98,316
31,482
83,186
2,185
2,185
378
2,031
Total Benefits
Costs
Incremental
capital cost
Refrigerant gas
cost
Maintenance
cost
Transitional cost
Equipment
owners
Equipment
owners
RAC
industry
Australian
Governmen
t
Australian
Governmen
t
$000s
$000s
10
412
31,472
82,774
$000s
978
978
1,207
1,207
$000s
0
826
378
1,204
Total costs
$000s
988
2,217
112,098
222,590
113,086
224,807
Benefit to cost ratio
ratio
0.7
2.7
0.1
0.2
0.1
0.2
Administrative
cost
Source: Jacobs’ analysis
5.3
Leak detection
The leakage detection option puts in place requirements for leak testing for large pieces of equipment,
specifically RCFCs (remote and supermarket), medium and large ACs and large MACs. The specific
requirements vary depending on the size of the equipment charge, and are shown below. The requirements
have been developed based on Jacobs’ interpretation of EU Regulation 517/2014, and do not apply to FP
systems.
Table 5.4: Leak detection requirement by equipment type
Equipment type21
21
No. units of equipment (2017)
Proposed manual leak test
frequency
Automatic leak testing
system required to be
installed
Remote 1
238,122
Every 12 months
No
Remote 2
45,628
Every 6 months
No
Remote 3
1,426
Every 6 months
Yes
Supermarket 2
1,922
Every 6 months
No
Supermarket 3
1,245
Every 6 months
Yes
Medium AC 1
1,481,874
Every 12 months
No
Medium AC 2
13,295
Every 6 months
No
The numbers after the equipment type refer to the charge size: 1 is above 5 t CO2-e; 2 is above 50 t CO2-e; and 3 is above 500 t CO2-e.
Final
40
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Equipment type21
No. units of equipment (2017)
Proposed manual leak test
frequency
Automatic leak testing
system required to be
installed
Medium AC 3
0
Every 6 months
Yes
Large AC 1
685
Every 12 months
No
Large AC 2
23,280
Every 6 months
No
Large AC 3
3,423
Every 6 months
Yes
Large MAC 1
69,786
Every 12 months
No
Large MAC 2
0
Every 6 months
No
The leak testing reference scenario has been developed based on an assumption of 50% of required
maintenance being undertaken in business as usual conditions. Evidence from the EU suggests that most
sectors in 2011 were compliant with the leak testing requirements of the previous F-Gas regulations. However
compliance was less likely for smaller supermarkets and private commercial applications. For smaller
companies leak testing tends to be done in response to identified equipment problems or as specified in the
maintenance contract22. We assume that all equipment types are currently tested manually, not using automatic
systems. The assumptions below exclude the time required to repair equipment and the cost of any new parts
required, as leak repair is assumed but not required under this option.
Jacobs has used the difference between the leakage rates under the Leak Reduction Strategy and reference
scenarios provided by the Expert Group to calculate the estimated saving in gas costs and the value of the
carbon emissions reduction. Gas prices used are the same as under the reference scenario. We assume a cost
of $150 per hour for a contractor to conduct leak testing, payable by the equipment owner for each piece of
equipment.
Some larger pieces of equipment will be required to install an automatic leak detection system, and conduct a
check of the system every 12 months. This requirement applies to Remote 3, Supermarket 2, Medium AC 3
and Large AC 3. For these pieces of equipment, there will be an initial cost associated with their installation, but
in most cases an ongoing saving in manual leak testing costs. We assume a cost of $1,500 per unit to purchase
and install automatic leak detection, and that the yearly system test is included within one of the six monthly
manual leak tests.
This approach may overstate the cost to business if automatic leak testing is already being adopted by
businesses. Similarly, the benefits may be overstated if the source database assumes a lower level of
reference leak testing than that specified in this analysis. Further work to verify leak testing levels and
subsequent emissions impacts is recommended.
Additional to the cost of leak testing, there is a cost to equipment owners/managers in education and
administrative time. We assume that the value of an equipment owner’s time is $50 per hour. This is based on
Australian average weekly earnings of $36.91 per hour in 2014 23 , increased to 2015 values by the 10 year
average wage price index of 3.5%, plus 20% for salary on-costs (superannuation, payroll taxes etc.), plus a
small additional allowance recognising that equipment owners are likely to be store/facilities managers and
therefore command a higher than average wage.
22
Schwarz, W. et al (2011), Preparatory study for a review of Regulation (EC) No. 842/2006 on certain fluorinated greenhouse gases, Final report to
European Commission, September 2011.
23
Australian Bureau of Statistics (2014), Key Economic Indicators, 2014, catalogue number 1345.0, available:
http://www.abs.gov.au/ausstats/abs@.nsf/mf/1345.0#Incomes
Final
41
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Table 5.5: Indicative assessment of potential manual leak testing costs
Equipment
type24
No. units of
equipment
(2017)
Hours to
complete a
single leak test
Reference scenario
Remote 1
238,122
0.5
0.5
0.25
1
0.5
Remote 2
45,628
0.5
1
0.5
2
1
Supermarket 1
1,922
1
0.5
0.5
2
1
Medium AC 1
1,481,874
0.5
0.5
0.25
1
0.5
Medium AC 2
13,295
0.5
1
0.5
2
1
Large AC 1
685
0.5
0.5
0.25
1
0.5
Large AC 2
23,280
0.5
1
0.5
2
1
Large MAC 1
69,786
0.5
0.5
0.25
1
0.5
Tests per
year
Proposed option
Total hours of
Tests per year
manual leak
testing per year
for one piece of
equipment
Total hours of
manual leak testing
per year for one
piece of equpment
Source: Jacobs’ analysis
The transitional cost per piece of equipment is estimated at $25 (0.5 hours of time for the owner to educate
themselves on the new requirements for the piece of equipment, multiplied by the opportunity cost of their time).
The administrative cost annually is estimated at $15 per piece of equipment (0.25 hours to arrange and record
leak testing, multiplied by the opportunity cost of their time). The costs to government of implementing and
administering this measure have been provided by the DoE.
The regulatory burden of this measure (i.e. all costs applicable to equipment owners) includes the cost to
equipment owners of purchasing leak testing services (either manual or automatic), the cost associated with
educating themselves on the new regulations, and the cost of organising leak testing and maintaining
appropriate records. Table 5.6 presents costs and benefits, demonstrating that regulated leak detection is of
positive economic benefit.
If observed against the maintenance scenario, the indirect emissions in the maintenance scenario are around
8.4 times that shown here, while direct emissions are the same. Related to this, energy cost savings are
significantly higher for maintenance than for leak testing. The same direct emissions occur because
maintenance is assumed to save the same level of direct emissions as leak detection. However, higher indirect
emissions savings and higher energy cost savings occur because there is an improvement in operating
efficiency through equipment tuning, cleaning filters, etc.
The regulatory burden of this measure includes the cost to equipment owners in purchasing leak testing
services (either manual or automatic), plus the cost associated with educating themselves on the new
regulations, organising leak testing and maintaining appropriate records. This cost is estimated at
$930,498,000 (NPV).
Table 5.6: Cost –benefit analysis for leak detection scenario
Unit
Net Benefits – Leak testing
Benefits
Carbon Costs
Energy Costs
Refrigerant Costs
Total Benefits
24
$000s
Direct
Indirect
All end users
All end users
NPV, 2016-2020
NPV, 2016-2030
-188,183
-341,937
$000s
$000s
$000s
$000s
14,928
16,306
139,987
13,536
82,414
47,804
384,712
80,202
$000s
184,756
595,132
The numbers after the equipment type refer to the charge size: 1 is more than 5 t CO2-e; 2 is more than 50tCO2-e; and 3 is more than 500tCO2-e.
Final
42
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Unit
Costs
Leak testing cost
Transitional cost
Equipment owners
Equipment owners
Australian Government
Equipment owners
Australian Government
Administrative cost
Total costs
Benefit to cost ratio
NPV, 2016-2020
NPV, 2016-2030
$000s
$000s
$000s
$000s
$000s
251,978
41,039
2,830
76,234
858
679,727
41,039
2,830
209,731
3,742
$000s
ratio
372,939
0.5
937,070
0.6
Source: Jacobs’ analysis
5.4
Maintenance
The maintenance option described below is an extension to the leakage reduction option. Maintenance would
be scheduled according to the same timetable as for leak testing, occurring in the same technician call-out to
maximise efficiency. Maintenance however, also includes activities such as regular inspection, cleaning and
possible replacement of air filters, regular inspection and clearing of the surfaces of condensers, evaporators,
fans, blades and fan guards, and improved containment practices on equipment connections, hoses, pipes and
accessories, and such activities will improve energy efficiency and provide energy savings benefits to
participants.
It is assumed that maintenance requirements would be imposed from 2017, and would apply to large pieces of
equipment, specifically RCFCs (remote and supermarket), medium and large ACs and large MACs. The
maintenance requirements would not apply to FP systems. Equipment owners would be required to follow the
international standard ISO 5149-4: 2014 Refrigerating systems and heat pumps - Safety and environmental
requirements - Part 4: Operation, maintenance, repair and recovery.
This standard has not been reviewed as part of this analysis. However as with most ISO standards we
understand that it provides general guidelines rather than being prescriptive about the types and timing of
maintenance activities. The Expert Group for instance notes that the standard requires regular inspections and
repairs, however what constitutes ‘regular’ is not specified. This may make it hard to enforce, and equipment
owners would need greater clarity about what is expected of them. A number of possible maintenance
activities exist. It was not possible to identify which particular maintenance activities would be required and
enforced under this option. However the timing would be specified as for manual leak testing, if leak detection
and maintenance were to occur concurrently. These timings are shown in Table 5.7.
The hours of maintenance required for each equipment type are shown in Section 3.1.6 . For certain types of
equipment, maintenance is dictated by the need to meet food safety standards and to avoid product losses. It is
assumed that where the required level of maintenance is less than is currently being carried out voluntarily, that
there will be no reduction in maintenance task, and that the time spent during each maintenance session is the
same for the reference scenario and this scenario.
Table 5.7: Proposed maintenance requirement by equipment type
Equipment type25
25
No. units of equipment
(2017)
Proposed maintenance frequency
Remote 1
238,122
Every 12 months
Remote 2
45,628
Every 6 months
Remote 3
1,426
Every 6 months
Supermarket 2
1,922
Every 6 months
Medium AC 1
1,481,874
Every 12 months
Medium AC 2
13,295
Every 6 months
The numbers after the equipment type refer to the charge size: 1 is above 5 t CO2-e; 2 is above 50 t CO2-e; and 3 is above 500 t CO2-e.
Final
43
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Equipment type25
No. units of equipment
(2017)
Proposed maintenance frequency
Large AC 1
685
Every 12 months
Large AC 2
23,280
Every 6 months
Large AC 3
3,423
Every 6 months
Large MAC 1
69,786
Every 12 months
Source: no. units of equipment from Expert Group database
Table 5.8: Assessment of additional maintenance required
Equipment
type26
No. units
of
equipment
(2017)
Automated
leak test
Hours to
Hours to
complete a
single
manual leak
test27
complete a
single
maintenance
session
Reference scenario
Proposed option
Tests
per
year
Total hours of
manual leak
testing and
maintenance
per year for
one piece of
equipment
Tests
per year
Total hours of
manual leak
testing and
maintenance
per year for one
piece of
equpment
Remote 1
238,122
No
0.5
2
0.5
1.25
1
2.5
Remote 2
45,628
No
0.5
2
1
2.5
2
5
Remote 3
1,426
Yes
0
2
1
2
2
4
Supermarket 1
1,922
No
1
4
1
5
2
10
Medium AC 1
1,481,874
No
0.5
2
0.5
1.25
1
2.5
Medium AC 2
13,295
No
0.5
2
1
2.5
2
5
Large AC 1
685
No
0.5
2
0.5
1.25
1
2.5
Large AC 2
23,280
No
0.5
2
1
2.5
2
5
Large AC3
3,423
Yes
0
2
1
2
2
4
Large MAC 1
69,786
No
0.5
2
0.5
1.25
1
2.5
Source: Jacobs’ analysis based on survey results
Jacobs has used the difference between the leakage rates under the maintenance and reference scenarios
provided by the Expert Group to calculate the estimated saving in gas costs. As with the cost to undertake
maintenance, gas cost savings and emissions benefits are heavily influenced by the actual additional
maintenance that equipment owners undertake. The analysis is based on an assumption of 50% of required
maintenance activity, which may overstate emissions reductions. If this is indeed the case, there would also be
no reduction in indirect emissions or energy costs. For consistency with previous modelling conducted by the
Expert Group, we have used their estimates of direct and indirect emissions for the maintenance scenario,
however any results should be used with caution and further research should be undertaken.
Under the Expert Group modelling assumptions, around 8.4% of energy is also saved under the maintenance
scenario, compared with around 1% under the leak detection scenario. These estimates underlie the indirect
emissions and energy savings shown in this analysis.
Refrigerant gas prices used are the same as under the reference scenario. Contractor costs to conduct
maintenance have been estimated at $150 per hour. We have assumed that, for each piece of equipment, an
equipment owner would require 30 minutes on average to update themselves with the new maintenance
requirements, and an average of an additional 30 minutes annually to organise and record maintenance. This
takes into account that a number of equipment owners are likely to already be keeping maintenance records.
However, this could be considered low because greater understanding would be needed for larger installations.
26
27
The numbers after the equipment type refer to the charge size: 1 is more than 5 t CO2-e; 2 is more than 50tCO2-e; and 3 is more than 500tCO2-e.
Values lower than one imply less than annual frequency of maintenance. For example, values of 0.5 reflect maintenance every two years, rather
than annually.
Final
44
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
We assume that the value of an equipment owner’s time is $50 per hour. This is based on Australian average
weekly earnings of $36.91 per hour in 201428 , increased to 2015 values by the 10 year average wage price
index of 3.5%, plus 20% for salary on-costs (superannuation, payroll taxes etc.), plus a small additional
allowance recognising that equipment owners are likely to be store/facilities managers and therefore command
a higher than average wage.
Table 5.9presents indicative costs and benefits, remembering the uncertainty surrounding these results. A
targeted education campaign may also achieve a similar benefit.
The regulatory burden of the maintenance option is significant and comprises the bulk of total costs. Equipment
owners would incur additional maintenance costs as a result of the regulatory requirement, as well as additional
costs in organising and recording maintenance. These costs are estimated at $3,567,459,000 (NPV).
However, this cost is estimated to be more than offset by the reduction in energy costs as a result of improved
maintenance.
Table 5.9: Cost –benefit analysis for maintenance scenario
Unit
Net Benefits – Maintenance
Benefits
Carbon Costs
Energy Costs
Refrigerant Costs
Direct
Indirect
All end users
All end users
Total Benefits
Maintenance cost
Leak detection cost
Transitional cost
Administrative cost
NPV, 2016-2030
$000s
-36,528
105,506
$000s
14,977
132,237
1,135,262
13,577
82,505
388,737
3,128,005
80,291
1,296,053
3,679,537
959,642
251,978
41,039
2,830
76,234
858
2,636,961
679,727
41,039
2,830
209,731
3,742
1,332,582
3,574,031
0.97
1.03
$000s
$000s
$000s
Equipment owners
Equipment owners
Equipment owners
Australian Government
Equipment owners
Australian Government
NPV, 2016-2020
$000s
$000s
$000s
$000s
$000s
$000s
Total costs
$000s
Benefit to cost ratio
ratio
Source: Jacobs’ analysis
5.5
End use licensing schemes – removal
The removal of end-use licensing scenario is not matched in any scenarios available in the source database.
However the source database does include a scenario which examines the impact of not having end use
licensing from 2003, rather than the required start year for evaluation, 2017.
The licence conditions can be broadly summarised as follows:
i.
Abide by a number of Australian standards for labelling, transport, maintenance, leak testing of bulk
cylinders and recovery of SGGs and ODSs
ii.
Use refillable containers
iii.
Give any recovered refrigerant to an authorised destruction/reclaim facility
iv.
Keep up-to-date records and check own gas supply for leaks (trading authorisations only)
Of these, the second, third and fourth have been assumed to occur even without the licence conditions. The
import of disposable refrigerant containers was banned in 2000 under the Customs (Prohibited Imports)
regulations. Any change would require a change to the Customs regulations, which is not being considered
28
Australian Bureau of Statistics (2014), Key Economic Indicators, 2014, catalogue number 1345.0, available:
http://www.abs.gov.au/ausstats/abs@.nsf/mf/1345.0#Incomes
Final
45
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
here. Technicians receive a rebate for providing recovered gas to Refrigerant Reclaim Australia, and have a
(currently small) financial incentive to continue to recover gas. We note that this financial incentive existed prior
to the introduction of end use licensing, and the amount of gas received by Refrigerant Reclaim Australia
increased significantly once end use licensing was introduced. This suggests that the removal of end use
licensing may impact on the amount of gas received by Refrigerant Reclaim Australia, however it is not possible
to estimate the extent of this impact. Regarding record-keeping and leak testing for trading authorisations,
refrigerant trading businesses have a financial incentive also to check their gas supply for leaks, as it directly
impacts on their profit, however the extent of the leak and the cost to correct it also factor in to this decision.
Anecdotal evidence from the Australian Refrigeration Council suggests that leak testing was not routine prior to
the introduction of end use licensing, however it is not possible to estimate what the likely change might be as a
result of removing end use licensing.
Of course, good behaviour could continue where it is convenient, for example in states and territories with preexisting regulation prior to the introduction of federal regulation. However such an assumption would assume
that states and territories return pre-existing legislation in response to changes in the federal arena, so is not
considered in the CBA.
A key factor is the extent to which technicians continue to follow the Australian standards to maintain equipment
and minimise leaks with only industry led regulation in place, and the extent to which technicians with less
rigorously obtained skills enter the industry after regulation is removed.
Jacobs’ review of occupational licence deregulation identified a number of recent cases where an occupation
has been deregulated. Most recently in Australia, national travel agent licensing was abolished on the grounds
that consumers had options for protection and redress through Australian consumer law and other avenues
(Western Australian Department of Commerce 2013). The primary objective of most occupational licensing
schemes appears to be consumer protection, making them of low relevance to the schemes administered under
the OPSGGM Act. Even without a licensing scheme, businesses have an incentive to provide a quality service
to their customers or else risk reputational damage and/or litigation. Deregulation of these schemes can be
achieved with relatively low impact. Without an environmental licensing scheme however, it is unclear how
strong the incentive is for businesses to maintain high environmental standards.
We have therefore used a maximum scenario to demonstrate the potential maximum impact of removal of the
ARCTick licensing scheme administered by the Australian Refrigeration Council and the removal of the
extinguishing agent licensing scheme administered by the Fire Protection Association Australia. We have
limited our analysis to the main licence categories of handling licences and trading authorisations only.
This scenario assumes that all businesses will revert to behaviours present prior to the licensing schemes being
implemented. We ignore the possibility that technicians and businesses may continue to practise the
environmental behaviours learnt and enforced through the schemes.
The source database scenario has applied non-linear lag functions to estimate increases in emissions. The
average annual change in emissions from 2003 to 2030 under the ‘No Measures’29 scenario has been applied
from 2017 for the current study to obtain a proxy analysis of emission change. Under the No Measures
scenario, emissions decreased by 2.7% annually on average (compared to reference scenario decrease in
emissions of 6.1% annually); however the No Measures scenario in the source database also includes two
measures which are not part of this analysis, Refrigerant Reclaim Australia’s industry stewardship scheme and
the ban on disposable cylinders. These were excluded as both were expected to continue to some degree in the
absence of end use licensing, and there is insufficient information to estimate the potential costs and benefits of
end use licensing removal specifically in relation to Refrigerant Reclaim Australia.
Between 2014 and 2030 these two measures are expected to contribute to 24% of the difference between BAU
and No Measures scenarios. This impact has been removed from our estimates, implying an average increase
in emissions under the ‘Remove end-use licensing scenario’ of around 2.05% per annum. Because of the
uncertainty surrounding this approach, it may be useful to conduct additional sensitivity analysis. The emissions
estimates used in this analysis are shown in Table 5.10.
29
A scenario modelled by Expert Group in which end use licensing was removed in 2003
Final
46
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Over the analysis period, the total change in direct emissions as a result of the removal of end use licensing is
estimated at 10.6 Mt CO2-e.
Total change in indirect emissions is estimated at 1.5 Mt CO2-e over the analysis period. This was derived
using the estimated change in direct emissions above and the Expert Group’s ratio of direct to indirect emission
reductions between 2003 and 2013 (24.7 Mt CO2-e direct emissions to 3.6 Mt CO2-e indirect emissions, i.e.
1:0.15).
The carbon emissions equivalent difference shown above is used to calculate the carbon value of the increase
in emissions. To calculate the increase in gas costs, we assume that the gas split is the same as for the ‘No
Measures’30 scenario developed by the Expert Group. This gives us the additional leakage shown in Table 5.11.
Table 5.10: Emissions increase estimates under ‘Remove end use licensing’ scenario, Mt CO2-e
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
BAU direct
emissions31
7.9
7.7
7.4
7.1
6.8
6.5
6.1
5.7
5.3
4.8
4.4
4.1
3.8
3.5
3.2
Licence scheme
removal
emissions 32
7.9
7.7
7.4
7.2
7.0
6.9
6.7
6.5
6.3
6.1
6.0
5.8
5.7
5.5
5.4
Difference
0.0
0.0
0.1
0.1
0.2
0.4
0.6
0.8
1.1
1.4
1.5
1.7
1.9
2.0
2.2
Difference less
Refrigerant
Reclaim
Australia/
disposable
cylinders
0.0
0.0
0.1
0.1
0.2
0.3
0.4
0.6
0.8
1.0
1.2
1.3
1.4
1.6
1.7
Source: Jacobs’ analysisFigure 13: Direct emissions by scenario, Mt CO2-e
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Reference case
Removal of licensing
To examine the costs and benefits of removing each scheme individually, we used the emissions split between
RAC and FP under the No Measures scenario, provided in Expert Group (2015) 33. This was 97% RAC and 3%
30
A scenario in the Expert Group modelling in which end use licensing was removed in 2003
Source database
32 Jacobs’ estimate
33 Expert Group (2015), Assessment of Environmental Impacts of the OPSGGM Act, report to the Department of the Environment, March 2015.
31
Final
47
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
FP. Halon emissions were not provided in the source database, therefore emissions were calculated assuming
that the current consumption of Halon-1211 (1 tonne annually) and Halon-1301 (2.25 tonnes annually) was
equal to emissions in that year. It was assumed that this level of consumption was constant over the analysis
period. The increase in consumption due to the removal of end use licensing was estimated using the Expert
Group’s assessment of the change in leakage rates under the No Measures scenario (+0.4% annually), and this
was converted into emissions using the GWP for Halon-1211 of 1,890 and for Halon-1301 of 7,140. The total
increase in halon emissions over the analysis period was therefore estimated at 0.93 MtCO2-e. We have not
included any valuation of ozone depletion in this analysis. However any increase in halon emissions will have a
resulting negative impact on the ozone layer.
Gas costs were calculated using the leakage estimates provided in the source database, modified as for
emissions estimates. No indirect emissions or electricity costs were assumed for FP, as these systems were
assumed to be not connected to electricity. The DoE provided administration and transition costs for both
schemes.
In summary, it is not economically beneficial to remove regulations in either the FP or RAC industries.
Removal of end use licensing is expected to result in no additional regulatory burden.
Table 5.11: Increase in SGG leakage under the ‘Remove End-use licensing’ scenario (kg)
HCFC
22
HCFC
123
HCF
134a
HCF
404A
HFC
410A
HFC
407C
HFC
HFC
Mix
GWP
<2150
GWP
<1000
GWP
<10
Total
32
2019
4,851
6
9,816
3,554
5,297
519
71
723
182
342
2,422
27,783
2020
8,757
12
21,826
7,481
12,568
1,092
201
1,439
541
1,010
6,353
61,279
2021
12,048
20
38,104
12,605
23,210
1,821
552
2,241
1,219
2,258
13,146
107,225
2022
14,725
30
61,219
19,434
39,434
2,732
1,335
3,189
2,608
4,857
25,698
175,262
2023
15,873
42
90,740
27,638
61,653
3,728
2,967
4,105
5,046
9,457
46,602
267,850
2024
15,418
56
127,270
36,929
90,028
4,835
6,668
4,994
9,120
17,191
80,316
392,825
2025
13,679
71
171,701
47,244
126,396
5,661
13,374
5,648
15,784
30,238
134,099
563,895
2026
10,964
87
221,673
57,370
169,600
6,622
24,646
5,730
26,179
50,715
216,295
789,881
2027
7,012
90
248,646
62,372
194,217
5,916
38,280
6,589
35,676
68,507
293,012
960,318
2028
4,023
89
275,420
65,587
216,050
6,121
57,269
7,468
47,635
92,063
389,539
1,161,262
2029
2,057
83
300,011
67,187
234,083
6,269
83,139
8,374
62,634
22,456
510,001
1,396,294
2030
930
72
319,400
66,397
243,308
6,346
117,966
9,242
80,789
60,872
55,629
1,660,951
5.6
Source: Jacobs’ analysisEnd use licensing schemes - transfer to States and
Territories
The transfer of end use licensing scenario does not affect stock levels, sales mix, or leakage rates, and so it is
relevant to use the reference scenario to model this scenario.
This option has two parts:

The transfer of responsibility for the refrigerant handling licences and trading authorisations from the
Australian Government, through the Australian Refrigeration Council, to state and territory governments

The transfer of responsibility for extinguishing agent handling licences and trading authorisations from the
Australian Government, through the Fire Protection Association Australia, to state and territory
governments
Jacobs assumes that state and territory governments will each provide a scheme with similar environmental
outcome and no difference in SGG emissions relative to the reference scenario.
Final
48
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
There may be a saving to businesses where state and territory governments are able to integrate SGG licensing
with occupational licensing requirements, thus reducing the time required to apply for licences. This will vary by
state and territory, and has not been estimated here due to the high level of uncertainty surrounding the
implementation of this option by states and territories. Conversely there may be additional costs where
businesses and individual operate in more than one jurisdiction. We assume that transaction costs associated
with applying for licences under this option are the same as for the reference scenario.
Table 5.12: Cost benefit analysis of ‘Remove end use licensing’ scenario, combined schemes
Unit
Net Benefits
Benefits
Licence Costs
Opportunity cost of time
Training cost saving
Administrative cost saving
Costs
Carbon costs (direct)
Carbon costs (indirect)
Gas costs
Electricity costs
Transition costs
NPV, 2016-2020
NPV, 2016-2030
$000s
19,864
-134,238
Technicians/business owners
Technicians/business owners
Technicians/business owners
Australian Government
$000s
$000s
$000s
$000s
28,158
8,465
176
67
77,982
23,062
434
541
Environment
Environment
Equipment owners
Equipment owners
Australian Government
$000s
$000s
$000s
$000s
$000s
6,718
603
5,394
41
4,246
105,340
13,992
111,877
802
4,246
ratio
2.2
0.4
Benefit to cost ratio
Source: Jacobs’ analysis
Table 5.13: Cost benefit analysis of ‘Remove end use licensing’ scenario, Fire Protection
Unit
Net Benefits
Benefits
Licence Costs
Opportunity cost of time
Training cost saving
Administrative cost saving
Costs
Carbon costs
Halon emission costs
Gas costs
Transition costs
$000s
NPV, 2016-2020
NPV, 2016-2030
-3,500
-14,207
Technicians/business owners
Technicians/business owners
Technicians/business owners
Australian Government
$000s
$000s
$000s
$000s
785
108
176
913
2,150
291
434
7,329
Environment
Environment
Equipment owners
Australian Government
$000s
$000s
$000s
$000s
2,778
2,582
73
50
12,406
9,338
2,618
50
ratio
0.4
0.4
Unit
NPV, 2016-2020
Benefit to cost ratio
Source: Jacobs’ analysis
Table 5.14: Cost benefit analysis of ‘remove end use licensing’, RAC
Net Benefits
Benefits
Licence Costs
Opportunity cost of time
Costs
Administrative cost no
longer offset by fees
Carbon costs (direct)
Carbon costs (indirect)
Gas costs
Final
NPV, 2016-2030
$000s
16,584
-140,956
Technicians/business owners
Technicians/business owners
$000s
$000s
27,373
8,356
75,832
22,771
Australian Government
$000s
936
7,511
Environment
Environment
Equipment owners
$000s
$000s
$000s
6,522
603
5,320
102,272
13,992
109,259
49
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Unit
Electricity costs
Transition costs
Equipment owners
Australian Government
Benefit to cost ratio
NPV, 2016-2020
NPV, 2016-2030
$000s
$000s
41
5,723
802
5,723
ratio
2.0
0.4
Source: Jacobs’ analysis
The change in Australian Government transition and administration costs was provided by the DoE, and is
shown in Table 5.15.
Table 5.15: Australian Government transition and administration costs, $M
$ millions
Transition costs
2015
2016
2017
2018
2019
0.4
1.6
1.2
1.9
1.5
Administration costs
2020 to 2030
- 0.1 per year
Source: Department of the environment
This cost will be transferred to the states and territories. The DoE has estimated that 29 FTE (22 for RAC and 7
for FP) will be required per state and territory to administer the schemes. We have assumed a staff cost of
$100,000 per full time equivalent (FTE). These costs are shown in Table 5.16.
Table 5.16: State and Territory government transition and administration costs, $M
$ millions
2015
2016
2017
2018
2019
Transition costs
-
16.8
13
1.9
1.5
Administration costs
-
-
-
2018 to 2030
$33 per year
Source: Department of the Environment
Table 5.17 presents costs and benefits of transferring responsibility for licensing to state and territory
governments. Economies of scale seem to make it difficult to justify such a change.
Table 5.17: Costs and benefits of transferring end use licensing from federal to state and territory governments
Unit
Net Benefits
Benefits
Administrative cost saving
Costs
Administration costs
Australian Government
$000s
State and territory governments
$000s
Transition costs
State and territory governments
$000s
Australian Government
$000s
Benefit to cost ratio
$000s
ratio
NPV, 2016-2020
NPV, 2016-2030
-137,457
-301,237
67
541
75,183
239,437
56,763
56,763
5,578
5,578
<0.05
<0.05
Source: Jacobs’ analysis
There is not expected to be a change in regulatory burden under this option, however may occur if end use
licensing can be streamlined within existing state-based occupational licensing.
Final
50
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
6. Sensitivity analysis
A number of parameters were found to be material to the outcome of the various cost benefit analyses. These
include the discount rate, the carbon price, maintenance cost assumptions, capital cost assumptions, and the
cost of gases, particularly the cost of HFO1234. This section describes the change to the CBA outcomes for
each scenario by sensitivity testing each of these parameters. These are presented in the following subsections.
6.1
Discount rate
Table 6.1 and Figure 14 display the net benefit and benefit cost ratios under discount rates of 3%, 7% and 10%
respectively. In all cases the sign of the net benefit is not affected by the discount rate, leaving overall
conclusions around the analysis unaffected.
Table 6.1: NPV under a selection of discount rates, $M
Discount rate
3%
7%
10%
HFC Phase Down Accelerated Alternative
19
10
6
HFC Phase Down North American amendment
57
40
31
High GWP Equipment Bans - supermarket equipment
6
4
3
High GWP Equipment Bans-MACs
-220
-182
-159
High GWP Equipment Bans-combined
-215
-178
-156
Maintenance
186
106
67
Leakage
-433
-342
-292
Removal of End Use Licensing Scheme (RAC)
-231
-141
-98
Removal of End Use Licensing Scheme (FP)
-20
-14
-11
End Use Licensing Scheme Transfer to states
-391
-301
-254
Scenario
Source: Jacobs’ analysis
Figure 14: Benefit cost ratio under a selection of discount rates
Source: Jacobs’ analysis
Final
51
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
6.2
Carbon price
Table 6.2 and Figure 15 display the net benefit and benefit cost ratios under carbon prices of $9.50, $13.95 and
$30 respectively. In most cases the sign of the net benefit is not affected by the discount rate, leaving overall
conclusions around the analysis unaffected, though there is some potential for a negative net benefit with very
low carbon price values under the accelerated alternative HFC phase down and the maintenance option.
Table 6.2: Net present value under a selection of carbon prices, $M
Carbon price
$9.50
$13.95
$30
HFC Phase Down Accelerated Alternative
-11
10
87
HFC Phase Down North American amendment
27
40
86
High GWP Equipment Bans - supermarket equipment
3
4
6
High GWP Equipment Bans-MACs
-195
-182
-135
High GWP Equipment Bans-combined
-192
-178
-129
Maintenance
-45
106
648
Leakage
-383
-342
-192
Removal of End Use Licensing Scheme (RAC)
-104
-141
-275
-7
-14
-39
-301
-301
-301
Scenario
Removal of End Use Licensing Scheme (FP)
End Use Licensing Scheme Transfer to states
Source: Jacobs’ analysis
Figure 15: Benefit cost ratio under a selection of carbon prices
Source: Jacobs’ analysis
Final
52
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
6.3
Maintenance costs
Table 6.3 displays the net benefit and benefit cost ratios with and without adjustments for increased
maintenance cost when end of life equipment is replaced with a low GWP alternative, for those scenarios where
this is relevant. The results show that, while maintenance costs are material to the analysis, their level does not
significantly affect the outcome.
Table 6.3: Net present value under a selection of maintenance cost assumptions, $M
Maintenance assumption
No increase
to equipment
maintenance
cost under
alternative
gas
Current
assumptions
Double
current
maintenance
assumptions
Accelerated phase down
57
10
-36
North American amendment phase down
58
40
22
High GWP Equipment Bans-MACs
-99
-182
-264
Scenario
Source: Jacobs’ analysis
6.4
Capital costs
Table 6.4 displays the net benefit and benefit cost ratios with and without adjustments for increased capital cost
when end of life equipment is replaced with a low GWP alternative, for those scenarios where this is relevant.
The results show that capital costs are material to the analysis, but the outcome is not materially affected.
Table 6.4: Net present value under a selection of capital cost assumptions
No increase to capital costs
assumed for Equipment
using alternative gases
Current
assumptions
Double the
increase to
capital costs
assumed for
alternative
gases
Accelerated phase down
21
10
0.3
North American amendment phase down
47
40
32
-143
-182
-221
Scenario
High GWP Equipment Bans-MACs
Source: Jacobs’ analysis
6.5
Gas costs
Table 6.5 displays the net benefit and benefit cost ratios with different gas cost assumptions for HFO1234yf.
The results show that even though capital costs are material to the analysis the conclusions do not generally
change with different gas prices. Gas prices at the higher end of the range may yield a negative cost benefit
under the accelerated phase down scenario.
Final
53
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Table 6.5: Net present value under a selection of gas cost assumptions, $M
Cost of HFO 1234
Assume HFO
1234 drops to
$80/kg by 2020
Current
assumptions
Current assumption:
HFO 1234 remains at
$150/kg to 2020
Accelerated phase down
25
10
-0.5
North American amendment phase down
41
40
38
High GWP Equipment Bans-MACs
-146
-181
-209
Maintenance
104
106
106
Leak detection
-343
-342
-341
Scenario
Source: Jacobs’ analysis
6.6
Maintenance frequency under the maintenance and leak detection scenarios
Given the uncertainty around the true amount of maintenance currently being conducted on RAC equipment,
sensitivity analysis was conducted on this variable to examine how changes in the amount of maintenance
might impact on the costs and benefits of the maintenance scenario examined.
As the benefits of the maintenance scenario (reduced emissions, electricity and gas costs) were defined by the
outputs of the source model, these do not change in response to a change in maintenance frequency. The
Expert Group do not include a baseline level of maintenance in the source model to determine their estimate of
emissions and electricity reductions; this means that it is not possible to compare costs and benefits on an
equal basis. This is a significant limitation of the analysis.
To assist in decision-making, Jacobs varied the baseline maintenance frequency (percentage of equipment
currently being maintained in accordance with the proposed maintenance schedule, defined by EU Regulation
517/2014). As the table below demonstrates, the higher the percentage of equipment currently being
maintained, the lower the additional cost to implement maintenance requirements. Consequently, the net benefit
is higher under an assumption of high existing levels of maintenance as well. The table also demonstrates that
the results are highly sensitive to this assumption.
Table 6.6: Effect of varying maintenance assumptions
Assumed percentage of equipment currently maintained in accordance with
schedule defined in EU Regulation 517/2014
30%
Benefits
Costs
NPV, 2016-2030
Benefit cost ratio
50% (baseline scenario)
3.7
4.5
-0.8
0.8
$M
$M
$M
80%
3.7
3.6
0.1
1.0
3.7
2.1
1.6
1.7
Table 6.7: Effect of varying leak detection assumptions
Assumed percentage of equipment currently leak tested in accordance with
schedule defined in EU Regulation 517/2014
30%
Benefits
Costs
NPV, 2016-2030
Benefit cost ratio
Final
$M
$M
$M
50% (baseline scenario)
0.6
1.2
-0.6
0.5
80%
0.6
0.9
-0.3
0.6
0.6
0.5
0.1
1.1
54
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
7.
Conclusions
A summary of net benefits is provided in Table 7.1.
The results imply that a HFC phase down could be cost effectively undertaken. Results for equipment bans are
mixed and highly dependent on the market, equipment type and alternative gases available to meet
requirements. A ban on supermarket equipment using gases with a GWP >2500 would have a net benefit,
whereas a ban on gases with GWP>150 in small MAC would not.
The maintenance scenario reveals a positive net benefit, while the leak detection scenario reveals a negative
net benefit. However, the business as usual maintenance assumptions and the electricity savings assumptions
would benefit from further investigation given the larger cost investment associated with these scenarios and
the uncertainty around existing maintenance effort.
With respect to removal of end use licensing for RAC and fire protection, the results suggest it would be
beneficial to maintain the status quo. This would not preclude undertaking efficiency improvements that would
streamline the various forms of regulation imposed on participants. Economies of scale appear to preclude
transfer of end use licensing to the states and territories.
While the results remain largely unchanged with different discount rates and carbon prices, implying a certain
level of robustness, it is recommended that additional data collection, research and/or modelling be undertaken
in the following areas:

Equipment disposal outcomes, including refrigerant reclaim and re-use

Maintenance and leak detection practices in use

Industry practices around gas replacement for vehicles fitted with HFO1234yf air conditioning

Gas prices for emerging gases such as HFO1234yf
7.1
Uncertainties and limitations
There is a level of uncertainty surrounding many of the estimates in this analysis. This uncertainty is driven by a
changing international context, the limited availability of key data, and ambiguity around how business will
respond to the options analysed.
International efforts to reduce SGG emissions are progressing, and it is possible that the reference scenario
used in this report over or under estimates SGG use into the future. This may lead to the benefits of any of the
options analysed here being over or under stated. Similarly, the source of estimates of emissions change
should be reviewed in light of new evidence collected for this report. Under the maintenance and leakage
scenarios the RAC industry survey suggests that a high level of maintenance and leak testing activity is already
taking place. As this is a limited survey, it may be useful to undertake a more comprehensive survey to verify
this data.
One of the most important benefits of a number of options analysed is the carbon equivalent emissions
reduction achieved. There is much uncertainty around the appropriate value for this benefit. The cost to reduce
carbon emissions has been used as a proxy for the benefit, in the absence of a more appropriate estimate of
how highly people value emissions reductions.
Where no Australian data was available, evidence from the UK has been used. This is acceptable for initial
analysis. However given differences between the two countries in terms of market size, climate and SGG
regulations, it is possible that capital, maintenance and energy costs for different pieces of equipment vary
significantly. We recommend that these costs are checked against local information.
This analysis has had to predict how businesses and households are likely to respond over time to the different
options if they are implemented. It has been assumed that users are primarily driven by cost, and will seek out
Final
55
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
the lowest cost alternative. In reality, other factors may play a part in determining their response – these factors
include equipment constraints, local availability and knowledge of alternative technologies, and
toxicity/flammability considerations.
The removal of regulatory requirements for end use licensing may have a lesser or greater effect on SGG
emissions than that estimated in the source database and in this report. Evidence of the likely response by
technicians is not available, and any estimate of the emissions change is therefore subjective. The risk of SGG
emissions increasing by more than estimated in this study should be considered.
A number of the options are likely to interact if implemented concurrently. The HFC phase down, for instance,
may affect the number of technicians working on HFC equipment, and therefore the number of end use licences
issued. The phase down may also encourage equipment owners to undertake more regular leak testing and
maintenance to reduce refrigerant leaks. Mandatory leak testing may encourage equipment owners to
undertake more regular maintenance – if they have to call out a technician anyway, the owner might see the
value in getting some additional maintenance done at the same time. For this analysis, all options have been
considered independently of each other. If a suite of options is taken forward, we recommend that the costs
and benefits of these options be considered collectively.
Given the high level of uncertainty described above, the results of this analysis should be interpreted with
caution. Further investigation is recommended.
Final
56
Cost benefit analysis of ozone depleting and
synthetic greenhouse gas reduction policies
Table 7.1: Summary of CBAs by scenario, NPV 2015-2030, $’000s
Option 1b: HFC
Option 1a: HFC
Phase Down
Affected
Phase Down
North
stakeholder group Accelerated
American
alternative
amendment
Costs
Capital cost of new equipment
Refrigerant costs
Equipment maintenance/leak testing
Transition costs
Administration costs
Energy cost
Value of direct carbon emissions
Value of indirect carbon emissions
Value of increased halon emissions
Equipment owners
Equipment owners
Equipment owners
Federal government
Bulk importers
Equipment owners
State/territory
governments
Federal government
Bulk importers
Equipment owners
State/territory
governments
Equipment owners
All
All
All
Total cost
Benefits
Refrigerant cost saving
Value of direct carbon emissions
avoided
Value of indirect carbon emissions
avoided
Value of energy savings
Licence fee expenditure saving
Opportunity cost of time saving
Training cost saving
Adminstrative cost saving
Option 2a: High
GWP
Equipment
Bans supermarket
equipment
$
$
$
$
$
$
10,180
27,940
46,188
1,662
25
806
$
$
$
$
$
$
7,634
3,780
17,958
1,662
25
806
$
-
$
$
412
978
$
$
897
40
$
$
897
40
$
$
87,738
$
32,802
$
129
All
$
63,514
$
37,755
$
1,645
All
$
2,930
$
2,930
$
490
Equipment owners
RAC/FP industry
RAC/FP industry
FP industry
$
31,784
$
31,784
$
3,788
Equipment owners
$
826
2,217
Option 2c: High
Option 2b: High
GWP
GWP
Option 3:
Equipment
Equipment
Maintenance
BansBans-MACs
combined
$
$
$
$
$
224,807
$
40,886
$
42,531
$
490
$
-
$
3,788
$
72,470
$
6,051
Net Benefit
$
10,491
$
39,667
$
3,834 -$
2.73
2,031
$
98,228
2.21
$
39,089
98,316
83,186
2,185
222,590
$
1.12
1,204
$
$
$
$
$
Total benefits
BCR
39,089
98,316
82,774
1,207
$
40,886
$
$
3,316,688
2,830
$
$
679,727
2,830
$
41,039
$
41,039
$
3,742
$
3,742
$
209,731
$
209,731
$
3,574,031
$
937,070
$
80,291
$
80,202
$
82,505
$
82,414
$
388,737
$
47,804
$
3,128,005
$
384,712
$
46,808
$
181,704 -$
177,999
$
0.18
0.21
Option 4: Leak
detection
3,679,537
$
595,132
Option 5a:
Removal of
End Use
Licensing
Scheme (RAC)
$
109,259
$
2,618
$
5,723
$
50
$
7,511
$
$
$
802
102,272
13,992
$
9,338
$
239,559
$
$
$
75,832
22,771
$
98,603
Option 6: End
Use Licensing
Scheme
Transfer to
states
$
5,578
$
56,763
$
239,437
24,412
$
301,777
$
$
$
$
2,150
291
434
7,329
$
541
$
10,204
$
541
301,237
$
12,406
105,506 -$
341,937 -$
140,956 -$
14,207 -$
1.03
0.64
0.41
0.42
Source: Jacobs’ analysis
Final
Option 5b:
Removal of
End Use
Licensing
Scheme (FP)
57
0.00