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Cost benefit analysis of ozone depleting and syntheticgreenhouse gas reduction policies

Department of the Environment

Final

12 August 2015

PRN 1415-0343

Cost benefit analysis of ozone depleting and synthetic greenhouse gas reduction policies

Department of the Environment


Cost benefit analysis of SGG reduction policies

Project no: RO009700Document title: Cost benefit analysis of ozone depleting and synthetic greenhouse gas reduction policiesDocument No.: FinalRevision: 7Date: 12 August 2015Client name: Department of the EnvironmentClient no: PRN 1415-0343Project manager: Liisa ParisotAuthor: Liisa Parisot and Sophie RollsFile name: /tt/file_convert/5f977257453f9671ac7127ac/document.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


29/6/2015 Final report, revised Liisa Parisot N/A N/A


6/8/2015 Final report, revised Liisa Parisot Walter Gerardi Walter Gerardi

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Revision Date Description By Review Approved


12/8/2015 Final report, minor changes Liisa Parisot N/A Walter Gerardi

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ContentsList of tables......................................................................................................................................................... 7Executive Summary............................................................................................................................................. 91. Introduction.............................................................................................................................................. 22. Approach.................................................................................................................................................. 32.1 General framework.................................................................................................................................... 3

2.2 Existing databases..................................................................................................................................... 4

2.3 Availability of scenario specific data...........................................................................................................5

3. Scenarios.................................................................................................................................................. 73.1 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...........................................................................................................184.1 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.................................................................................................................................................... 345.1 HFC phase down..................................................................................................................................... 34

5.1.1 Models..................................................................................................................................................... 34

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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................................................................................................................................ 516.1 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........................................................................................................................................... 557.1 Uncertainties and limitations.................................................................................................................... 55

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Table of FiguresFigure 1 : Comparison of benefit to cost ratios for each scenario........................................................................10Figure 2: Projected imports of bulk gases, excluding HCFCs, kg..........................................................................8Figure 3: Projected emissions, excluding HCFCs, Mt CO2-e.................................................................................8Figure 4: Growth in appliance stocks..................................................................................................................... 9Figure 5: Greenhouse gas reduction pathways under HFC phase down scenario..............................................12Figure 6: Electricity price projections, $2015.......................................................................................................24Figure 7: North American proposed import quota*..............................................................................................34Figure 8: Refrigerant reclaim activity by gas type................................................................................................35Figure 9: Imports pathway under North American amendment phase down scenario, Mt CO2-e........................37Figure 10: Imports pathway under Accelerated alternative phase down scenario, Mt CO2-e..............................37Figure 11: Increased share of low GWP gases used in sales of new equipment (North American Amendment proposal).............................................................................................................................................................. 38Figure 12: Increased share of low GWP gases used in sales of new equipment (Accelerated Alternative proposal).............................................................................................................................................................. 38Source: Jacobs’ analysisFigure 13: Direct emissions by scenario, Mt CO2-e......................................................47Figure 14: Benefit cost ratio under a selection of discount rates.........................................................................51Figure 15: Benefit cost ratio under a selection of carbon prices..........................................................................52

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List of tablesTable 2.1: Applications included in the source database.......................................................................................5Table 2.2: Refrigerant/fire protection gases, associated global warming potentials and ozone depleting potentials............................................................................................................................................................... 5Table 3.1: Refrigerant gas price assumptions.....................................................................................................10Table 3.2: Licence application fees, refrigeration and air conditioning................................................................11Table 3.3: Licence application fees, fire protection..............................................................................................11Table 3.4: HFC phase down scenarios................................................................................................................13Table 3.5: Import bans......................................................................................................................................... 14Table 3.6: End use controls................................................................................................................................. 15Table 3.7: Equipment controls............................................................................................................................. 17Table 4.1: Leak reduction scenarios....................................................................................................................20Table 4.2: Energy efficiency improvements for selected low GWP alternatives and applications relative to energy use under standard refrigerant................................................................................................................. 20Table 4.3: Sample of capital cost data for RAC equipment.................................................................................22Table 4.4: Sample of capital, energy and maintenance cost data for RAC equipment........................................22Table 4.5: Sample of capital, energy and maintenance cost data for RAC equipment........................................23Table 4.6: Increased administrative burden to bulk importers, HFC phase down................................................26Table 4.7: Administration cost assumptions by scenario, $2015.........................................................................27Table 4.8: Transitional costs................................................................................................................................ 28Table 4.9: Australian Government transition cost assumptions by scenario, $2015............................................29Table 4.10: State and territory government costs (total for all state and territory governments)..........................32Table 4.11: RAC industry licence costs...............................................................................................................33Table 4.12: Fire protection industry licence costs................................................................................................33Table 5.1: Reclaim and re-use activity levels, 2016-2030....................................................................................36Table 5.2: Cost-benefit analysis of HFC phase down scenario, $000s................................................................39Table 5.3: Cost-benefit analysis for equipment bans...........................................................................................40Table 5.4: Leak detection requirement by equipment type..................................................................................40Table 5.5: Indicative assessment of potential manual leak testing costs.............................................................42Table 5.6: Cost –benefit analysis for leak detection scenario..............................................................................42Table 5.7: Proposed maintenance requirement by equipment type.....................................................................43Table 5.8: Assessment of additional maintenance required................................................................................44Table 5.9: Cost –benefit analysis for maintenance scenario................................................................................45Table 5.10: Emissions increase estimates under ‘Remove end use licensing’ scenario, Mt CO2-e....................47Table 5.11: Increase in SGG leakage under the ‘Remove End-use licensing’ scenario (kg)...............................48Table 5.12: Cost benefit analysis of ‘Remove end use licensing’ scenario, combined schemes.........................49Table 5.13: Cost benefit analysis of ‘Remove end use licensing’ scenario, Fire Protection.................................49Table 5.14: Cost benefit analysis of ‘remove end use licensing’, RAC................................................................49Table 5.15: Australian Government transition and administration costs, $M.......................................................50Table 5.16: State and Territory government transition and administration costs, $M..........................................50Table 5.17: Costs and benefits of transferring end use licensing from federal to state and territory governments............................................................................................................................................................................ 50Table 6.1: NPV under a selection of discount rates, $M......................................................................................51Table 6.2: Net present value under a selection of carbon prices, $M..................................................................52Table 6.3: Net present value under a selection of maintenance cost assumptions, $M......................................53Table 6.4: Net present value under a selection of capital cost assumptions........................................................53Table 6.5: Net present value under a selection of gas cost assumptions, $M.....................................................54Table 6.6: Effect of varying maintenance assumptions........................................................................................54Table 6.7: Effect of varying leak detection assumptions......................................................................................54Table 7.1: Summary of CBAs by scenario, NPV 2015-2030, $’000s...................................................................57

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AbbreviationsItem 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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Executive SummarySynthetic 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

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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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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.

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1. IntroductionThe 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.

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2. ApproachThis 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 F-gas 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-regulationFinal 3

http://www.cuttingredtape.gov.au/handbook/australian-government-guide-regulation


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 Group2.

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

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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

Applicationsub-category Class

Domestic refrigeration; this category includes refrigerators and freezers Refrigeration RACSmall refrigerated cold food chain (RCFC) (self-contained); this category includes stand-alone 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. Refrigeration RACMedium 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 includes industrial refrigeration applications. Refrigeration RACLarge RCFC: Supermarkets; Supermarket refrigeration systems. Jacobs assumes this category also includes large industrial refrigeration applications. Refrigeration RACSmall stationary air conditioning (AC): Self-contained; Packaged AC units that are typically inserted through a hole in a wall or through a window aperture.

Air conditioning RAC

Medium stationary AC; Non ducted split systems and ducted systemsAir conditioning RAC

Large stationary AC; Space chillers employed in large commercial buildings, mining and industry

Air conditioning RAC

Small mobile AC; Air conditioners in passenger and light commercial vehicles, mini buses and trucks

Mobile air conditioning MAC

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

Mobile air conditioning MAC

Foams; Used to insulate domestic refrigerators and sometimes used in building insulation applications. Foams OtherFire protection; fire extinguishers and other specialised equipment including fire protection systems in buildings

Fire protection FP

Other; miscellaneous applications, assumed to include aerosols Other OtherSource: Expert group source database

Table 2.2: Refrigerant/fire protection gases, associated global warming potentials and ozone depleting potentialsGas species GWP ODPHCFC22 1,810 0.055HCFC123 77 0.02HFC134a 1,430 0HFC404A 3,922 0HFC410A 2,088 0HFC407C 1,774 0HFC32 675 0HFC Mix* 3,220 0GWP <2150* 1,500 0GWP <1000* 500 0HFO1234yf 4 0HC 5 0CO2 1 0Ammonia 0 0Halon 1,890-7140 3-10HFC227ea (FM-200) 3,220 0Novec 1230 1 0

Source: Expert group source database, based on fourth IPCC assessment report (AR4); US EPA(2014) http://www.epa.gov/Ozone/snap/subsgwps.html

* 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. Final 5


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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3. ScenariosNine 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

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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


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,

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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 3.3. 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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Table 3.3: Refrigerant gas price assumptionsGas species Price in 2016 (2015

$/kg)Price in 2020 (2015

$/kg)Price in 2030 (2015 $/kg)

Data source/assumptions

HCFC22 98.8 98.8 98.8 Jacobs’ surveyHCFC123 98.8 98.8 98.8 AssumptionHFC134a 26.4 26.4 26.4 Jacobs’ surveyHFC404A 27.5 27.5 27.5 Jacobs’ surveyHFC410A 23.95 23.95 23.95 Jacobs’ surveyHFC407C 29.75 29.75 29.75 Jacobs’ surveyHFC32 42 42 42 Jacobs’ surveyHFC Mix 26.9 26.9 26.9 Assume average of HFC

pricesHFO1234yf 150 120 26.9 Assumption HFO New Blends 50 30 30 AssumptionHydrocarbons 8 8 8 AssumptionAmmonia 4 4 4 AssumptionCO2 4 4 4 AssumptionFM-200 50 50 50 Fire Protection Association

AustraliaNovec-1230 62.5 62.5 62.5 Fire Protection Association

Australia (price for Novec™ 1230 25% higher than FM-200)

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 3.3. 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 cheaper3.

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 vehicles4. 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.

3 “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.

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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 3.4. 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 3.4: 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 3.5. 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 3.5: Licence application fees, fire protectionFire Protection Industry Licence Period

(years)2013 Fees ($) 2014 Fees ($) 2015 Fees ($)

Extinguishing Agent Handling Licence – Qualified Persons 2 250 257 263

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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


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Table 3.6: 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 CO2-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 Commonwealth need to design and implement a phase down process including baseline, schedule and 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

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Name of option HFC phase down – accelerated alternative and North American Amendment scenarios

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 3.7.

Table 3.7: 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 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:

6 Expert 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.

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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 3.8: 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 requirements (handling licences and trading authorisations) for SGGs in RAC and FP industries.

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:

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)

40 businesses (Halon Special Permits)

Transfer end use controls to state and territory governments. This option requires acceptance by each state/territory government in order for the transfer to occur.

Status quo 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

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licence holders, and targeted scanning for emerging issues.

Regulatory changes

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.

Contract arrangements with ARC and FPAA would no longer be required. Administration cost of the schemes is currently recovered through licence fees.

Coordination with industry and jurisdictions as well as changed processes for industry bodies to implement their new channels of communication.

It is assumed that where existing trade licensing schemes exist, end use licensing requirements will be added on to these schemes.

Market response Limited evidence of similar policy claw back in 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.

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.

It is assumed that the same environmental benefit will be 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.

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.

Cost of education

Reduced awareness by consumers around the environmental cost of refrigerant gases could lead to reduced operational efficiency leading

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

Increased compliance costs for businesses operating in multiple jurisdictions

Cost of education for businesses to understand new

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to higher emissions. However it is not possible to cost this element.

(and possibly different) state-based regulations

3.5 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 3.9.

Table 3.9: Equipment controls

Name of option Leak testing Maintenance

Description of option

Regular leak testing on all large equipment (remote 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.

Regular maintenance on all large equipment (remote and 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 Increased compliance costs, including increased administration costs, cost of education, increased transaction and maintenance costs for equipment owners

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4. Assumptions and methodologyThis 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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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 4.10.

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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Table 4.10: Leak reduction scenarios

Application Further leak reductions above the reference scenario

Leak reduction scenario Maintenance scenarioRCFC – remote 1% 10%RCFC – supermarkets 1% 10%Medium AC 1% 7.5%Large AC 1% 7.5%


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 4.11. 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 4.11: Energy efficiency improvements for selected low GWP alternatives and applications relative to energy use under standard refrigerant

ApplicationStandard

refrigerantHFO blends

(HFO407A or HFO407F), GWP <2150

HFO blends, GWP <1000 HC EU CO2

assumption

EU HFO1234 assumptio

n

Domestic refrigeration

HFC134a -3.5% 0.0%RCFC: self-contained

HFC134a 0.0% -7.5% -2.5% 0.0%RCFC: remote HFC404A -8.0% -8.0% -2.5% -8.0%RCFC: supermarket

HFC404A -8.0% 0.0% -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).

8 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 editionFinal 20


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 CO2-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


Table 4.12: Sample of capital cost data for RAC equipmentEquipment type

Years of

useful life

Gas charge (grams)

Reference gas species Least capital cost low GWP alternativegas species

Initial capital cost ($ per

annum, 2015)

Gas Gas First year available

Change to capital cost, %


15 50 1,000 HFC134a HFO1234yf 2015 0.0%

RCFC: self-contained

15 240 3,000 HFC404A GWP<1000 Pre-2015 0.0%

RCFC: remote 15 3150 20,000 HFC404A HFC 407A/407F

Pre-2015 0.0%

RCFC: supermarket

15 150000 488,000 HFC404A HFC 407A/407F

Pre-2015 0.0%

Small AC 12 1026 1,000 HFC410A GWP<1000 Pre-2015 0.0%Medium AC 12 2250 3,000 HFC410A GWP<1000 Pre-2015 0.0%Large AC 15 21730 52,000 HFC410A GWP<1000 Pre-2015 0.0%Small MAC 9 600 1,000 HFC134a HFO1234yf 2015 5.0%Large MAC 15 14000 7,000 HFC134a HFO1234yf 2015 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 4.13 provides an overview of likely changes in maintenance costs for RAC equipment.

Table 4.13: Sample of capital, energy and maintenance cost data for RAC equipmentEquipment type

Years of

useful life

Gas charge (grams)

Reference gas species Least capital cost low GWP alternativegas species

Gas Initial maintenance cost ($ per year, 2015)

Gas First year available

Change to maintenance

cost, %


15 50 HFC134a 10 HFO1234yf 2015 0.0%


15 240 HFC404A 50 HFO New Blends

2015 0.0%

RCFC: remote

15 3150 HFC404A 600 HFC 407A/407F

Pre-2015 0.0%

RCFC: supermarket

15 150000 HFC404A 14,640 HFC 407A/407F

Pre-2015 0.0%

Small AC 12 1026 HFC410A 40 HFO New Blends

2015 0.0%

Medium AC 12 2250 HFC410A 80 HFO New Blends

2015 0.0%

Large AC 15 21730 HFC410A 9,740 HFO New Blends

2015 0.0%

Small MAC 9 600 HFC134a 30 HFO1234yf Pre-2015 9.0%Large MAC 15 14000 HFC134a 200 HFO1234yf Pre-2015 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 4.14.

Final 22


Table 4.14: Sample of capital, energy and maintenance cost data for RAC equipmentEquipment type

Years of useful

life

Gas charge (grams)

Reference gas Least capital cost low GWP alternativeGas species

Gas Initial energy cost ($ per yr,

2015)

Gas First year available

Change to energy cost


15 50 HFC134a 100 HFO1234yf 2015 0.0%


15 240 HFC404A 800 HFO New Blend

2015 0.0%

RCFC: remote

15 3150 HFC404A 3,000 HFC 407A/407F

Pre-2015 -5.8%

RCFC: supermarket

15 150000 HFC404A 65,550 HFC 407A/407F

Pre-2015 -5.8%

Small AC 12 1026 HFC410A 500 HFO New Blend

2015 0.0%

Medium AC 12 2250 HFC410A 900 HFO New Blend

2015 0.0%

Large AC 15 21730 HFC410A 5,650 HFO New Blend

2015 0.0%

Small MAC 9 600 HFC134a 200 HFO1234yf 2015 0.0%Large MAC 15 14000 HFC134a 4,250 HFO1234yf 2015 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 23


Figure 6: Electricity price projections, $2015


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 government13 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 This report is being reviewed as part of the current Ozone Act review.13 State and territory governments presently have responsibility for work place health and safety issues.Final 24


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.

Final 25

https://www.arctick.org/pdf/RHL%20Information%20Brochure.pdf


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 4.15: Increased administrative burden to bulk importers, HFC phase down Bulk importers UnitOngoing 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.

Technicians14 Australian Bureau of Statistics (2014), Key Economic Indicators, 2014, catalogue number 1345.0, available:

http://www.abs.gov.au/ausstats/[email protected]/mf/1345.0#Incomes15 Australian Bureau of Statistics (2014), Key Economic Indicators, 2014, catalogue number 1345.0, available:

http://www.abs.gov.au/ausstats/[email protected]/mf/1345.0#IncomesFinal 26


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 4.16.

Table 4.16: Administration cost assumptions by scenario, $2015

Scenario Administration costs included Summary of costs

Option 1: HFC phase down

Import operations staff

Compliance and enforcement staff (includes Customs)

$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)

Increase in compliance and enforcement (audit of maintenance activity, audit of technician training)

$586K in 2019 and $576K per annum thereafter

Option 4: Leakage

Communications work (transition team)


$586K in 2019 and $576K per annum thereafter

Option 5: End use transfer

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.

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

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.)

Benefit of $95K per annum from 2020 – this includes the lost income from licence fees

Final 27


Scenario Administration costs included Summary of costs

Option 6: End use removal

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.

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

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.)

Benefit of $95K per annum – this includes the lost income from licence fees


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 4.17. 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 GWP-weighted), 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 4.17: Transitional costs Bulk

importers

Refrigerant traders

Total Unit


Once off cost for adapting to policy 8 4 Hours/ supplier/ year

Number 33 (28 existing importers plus 5

new entrants)

17,241 Number

Total hours, once off 624 68,964 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

Final 28


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 4.18.

Table 4.18: Australian Government transition cost assumptions by scenario, $2015

Scenario Transition costs included Summary of costs


2015 - Transition team to:

Prepare communications strategy and materials

mend compliance and enforcement plans and strategies

Consult with industry

Develop and publish guidelines for quota allocation

Amend 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

2016 and 2017 - Transition team:


One national “road show” to communicate and engage with broader cohort of stakeholders


2015: $506K2016: $769K2017: $635K

Option 2: Equipment bans

Transition team to:


Amend compliance and enforcement plans and strategies

Amend Standard Operating Procedures to account for change

Develop IT systems changes



Slight increase in Import Operations team to manage red lines/stakeholder questions

Transition team:




Compliance and enforcement team – increase in audits/review of documentation. This includes some staffing costs for Customs

2024: $430K

2025: $922K

Final 29




Transition team to:

Prepare communications strategy and materials – joint effort between Department of Industry and Environment

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


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

2016: $960K

2017: $1,203K

2018: $1,081K

Final 30



Option 4: Leakage

Transition team to:

Prepare communications strategy and materials – joint effort between Department of Industry and Environment

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


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

2016: $960K

2017: $1,203K

2018: $1,081K


Transition team to:

Prepare communications strategy;

Prepare for liaison with industry

Prepare strategy for liaison with Commonwealth agencies

Prepare strategy for liaison with jurisdictions

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.

2015: $593K

2016: $1,456K

2017: $1,363K

2018: $1,101K

2019: $798K

Final 31



Option 6: End use removal

Transition team to:

Prepare communications strategy;

Prepare for liaison with industry

Prepare strategy for liaison with Commonwealth agencies

Prepare strategy for liaison with jurisdictions

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.

2015: $422K

2016: $1,315K

2017: $1,214K

2018: $892K

2019: $848K

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 4.19: State and territory government costs (total for all state and territory governments)



Policy review and development – amendments to state/territory legislation to incorporate licensing provisions for RAC and FP (including legal advice, drafting/parliamentary processes)

Transitional arrangements – prepare and implement communications strategy, liaison with Commonwealth, liaison with industry

IT establishment costs to administer licensing

2015: $0K

2016: $16,800K

2017: $13,000K

Source: Department of the Environment estimates

4.11 Licence fees

RAC Industry

Table 4.20 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


Table 4.20: 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


FP Industry

Table 4.21 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 4.21: 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


5. Results5.1 HFC phase down

5.1.1 ModelsJacobs 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

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


industry does transition to low or no-GWP alternatives. However, by 2030, some addtional reduction activity will be required for both pathways.

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 re-used. 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 5.22. Low levels of increase in activity are assumed under the HFC phase down, except in the MAC industry, where the introduction of HFO-1234yf may prompt increased reclaim and re-use of HFC134a in response to high prices. Jacobs has also

17 https://refrigerantreclaim.com.au/program-performance/potential-recovery/ Final 35

https://refrigerantreclaim.com.au/program-performance/potential-recovery/


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.

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 5.22: Reclaim and re-use activity levels, 2016-2030

Reference scenario HFC phase down

HFC134a HFC404A HFC410A HFC134a HFC404A HFC410A

Domestic refrigeration18 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%

Source: Jacobs’ assumptions

2) 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

3) 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.

18 “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-equipment-australia.pdf



Final 36

http://www.environment.gov.au/system/files/resources/73c361c3-4a03-4b11-8dcb-a0b515ec5a2c/files/end-life-domestic-rac-equipment-australia.pdf







Figure 9: Imports pathway under North American amendment phase down scenario, Mt CO2-e


Figure 10: Imports pathway under Accelerated alternative phase down scenario, Mt CO2-e


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


Figure 11: Increased share of low GWP gases used in sales of new equipment (North American Amendment proposal)


Figure 12: Increased share of low GWP gases used in sales of new equipment (Accelerated Alternative proposal)


The cost benefit analysis is provided in Table 5.23. 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 5.23, 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


Table 5.23: Cost-benefit analysis of HFC phase down scenario, $000sUnit Accelerated alternative

phase downNorth American

amendment phase down

NPV, 2016-2020

NPV, 2016-2030

NPV, 2016-2020

NPV, 2016-2030

Net Benefits $000s -3,652 10,491 5,712 39,667BenefitsCarbon saving Direct (leakage) $000s 6,528 44,155 3,671 17,711

Direct (reclaim and re-use) $000s 8,351 19,358 8,455 20,044Indirect $000s 725 2,930 725 2,930

Energy saving Residential $000s 5,974 19,243 5,974 19,243Business $000s 2,855 12,541 2,855 12,541

Total Benefits $000s 24,473 98,228 21,680 72,470

CostsRefrigerant gas costs

RAC industry – leakage replacement

$000s 7,682 27,940 1,284 3,780

Incremental capital cost

Residential households $000s 7,291 7,291 4,745 4,745Business $000s 2,889 2,889 2,889 2,889

Maintenance cost

Equipment owners $000s 7,458 46,188 4,244 17,958

Transitional cost Industry $000s 831 831 831 831Australian Government $000s 1,662 1,662 1,662 1,662

Administrative cost

Industry $000s 31 40 31 40Australian Government $000s 282 897 282 897

Total costs $000s 28,125 87,738 15,968 32,802Benefit to cost ratio Ratio 0.9 1.1 1.4 2.2

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 5.24, 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


Table 5.24: Cost-benefit analysis for equipment bansUnit Supermarket

equipment from 2020MAC equipment

from 2017Both categories

NPV, 2016-2020

NPV, 2016-2030

NPV, 2016-2020

NPV, 2016-2030

NPV, 2016-2020

NPV, 2016-2030

Net Benefits – Equipment bans

$000s -296 3,834 -103,353

-181,704

-103,649 -177,870

BenefitsCarbon Costs Direct -

leakage$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

Total Benefits $000s 692 6,051 8,745 40,866 9,437 46,937Costs

Incremental capital cost

Equipment owners

$000s 0 0 39,089 39,089 39,089 39,089

Refrigerant gas cost

Equipment owners

$000s 39,951 98,316 39,951 98,316

Maintenance cost

RAC industry

$000s 10 412 31,472 82,774 31,482 83,186

Transitional cost

Australian Governme

nt

$000s 978 978 1,207 1,207 2,185 2,185

Administrative cost

Australian Governme

nt

$000s 0 826 378 1,204 378 2,031

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 0.2Source: Jacobs’ analysis

5.3 Leak detectionThe 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 5.25: Leak detection requirement by equipment type

Equipment type21 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

Medium AC 3 0 Every 6 months Yes

21 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


Equipment type No. units of equipment (2017) Proposed manual leak test frequency

Automatic leak testing system required to be installed

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 201423 , 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/[email protected]/mf/1345.0#Incomes

Final 41


Table 5.26: Indicative assessment of potential manual leak testing costs

Equipment type24

No. units of equipment

(2017)

Hours to complete a

single leak test

Reference scenario Proposed option

Tests per year

Total hours of manual leak

testing per year for one piece of

equipment

Tests per year Total hours of manual leak testing

per year for one piece of equpment

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


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 5.27 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 5.27: Cost –benefit analysis for leak detection scenario

Unit NPV, 2016-2020

NPV, 2016-2030

Net Benefits – Leak testing $000s -188,183 -341,937

Benefits Carbon Costs Direct $000

s14,928 82,414

Indirect $000s

16,306 47,804

24 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


Unit NPV, 2016-2020

NPV, 2016-2030

Energy Costs All end users $000s

139,987 384,712

Refrigerant Costs All end users $000s

13,536 80,202

Total Benefits $000s

184,756 595,132

Costs Leak testing cost Equipment owners $000

s251,978 679,727

Transitional cost

Equipment owners $000s

41,039 41,039

Australian Government $000s

2,830 2,830

Administrative cost


76,234 209,731


858 3,742

Total costs $000s

372,939 937,070

Benefit to cost ratio ratio 0.50.6


5.4 MaintenanceThe 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 5.28.

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.

Final 43


Table 5.28: Proposed maintenance requirement by equipment type

Equipment type25 No. units of equipment (2017)

Proposed maintenance frequency

Remote 1 238,122 Every 12 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

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 5.29: Assessment of additional maintenance required

Equipment type26

No. units of

equipment (2017)

Automated leak test

Hours to complete a

single manual leak

test27

Hours to 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.

25 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.26 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.27 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


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. 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 5.30presents 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 5.30: Cost –benefit analysis for maintenance scenario

Unit NPV, 2016-2020

NPV, 2016-2030

Net Benefits – Maintenance $000s

-36,528 105,506

Benefits Carbon Costs Direct $000

s14,977 82,505

Indirect 132,237 388,737Energy Costs All end users $000

s1,135,262 3,128,005

Refrigerant Costs All end users $000s

13,577 80,291

Total Benefits $000s

1,296,053 3,679,537

Maintenance cost Equipment owners $000s

959,642 2,636,961

Leak detection cost Equipment owners $000s

251,978 679,727

Transitional cost


41,039 41,039


2,830 2,830

Administrative cost


76,234 209,731


858 3,742

Total costs

$000s

1,332,582 3,574,031

Benefit to cost ratio ratio 0.97 1.03Source: Jacobs’ analysis

28 Australian Bureau of Statistics (2014), Key Economic Indicators, 2014, catalogue number 1345.0, available: http://www.abs.gov.au/ausstats/[email protected]/mf/1345.0#Incomes

Final 45


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 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 pre-existing 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.

Final 46


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 5.31.

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 5.32.

Table 5.31: 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

29 A scenario modelled by Expert Group in which end use licensing was removed in 200330 A scenario in the Expert Group modelling in which end use licensing was removed in 200331 Source database32 Jacobs’ estimateFinal 47


Source: Jacobs’ analysisFigure 13: Direct emissions by scenario, Mt CO2-e

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030 0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

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% 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 5.32: 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 32

HFC Mix

GWP <2150

GWP <1000

GWP <10

Total

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

33 Expert Group (2015), Assessment of Environmental Impacts of the OPSGGM Act, report to the Department of the Environment, March 2015.Final 48


HCFC 22

HCFC 123

HCF 134a

HCF 404A

HFC 410A

HFC 407C

HFC 32

HFC Mix

GWP <2150

GWP <1000

GWP <10

Total

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.

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 5.33: Cost benefit analysis of ‘Remove end use licensing’ scenario, combined schemes

Unit NPV, 2016-2020

NPV, 2016-2030

Net Benefits $000s 19,864 -134,238

Benefits Licence Costs Technicians/business owners $000

s 28,158 77,982

Opportunity cost of time Technicians/business owners $000s

8,465 23,062

Training cost saving Technicians/business owners $000s

176 434

Administrative cost saving


67 541

Costs Carbon costs (direct) Environment $000

s6,718 105,340

Carbon costs (indirect) Environment $000 603 13,992 Final 49


Unit NPV, 2016-2020

NPV, 2016-2030

sGas costs Equipment owners $000

s 5,394 111,877

Electricity costs Equipment owners $000s

41 802

Transition costs Australian Government $000s

4,246 4,246



Table 5.34: Cost benefit analysis of ‘Remove end use licensing’ scenario, Fire Protection

Unit NPV, 2016-2020

NPV, 2016-2030

Net Benefits $000s -3,500 -14,207


s 785 2,150


108 291

Training cost saving Technicians/business owners $000s

176 434

Administrative cost saving


913 7,329

Costs Carbon costs Environment $000

s 2,778 12,406

Halon emission costs Environment $000s

2,582 9,338

Gas costs Equipment owners $000s

73 2,618


50 50



Table 5.35: Cost benefit analysis of ‘remove end use licensing’, RAC

Unit NPV, 2016-2020

NPV, 2016-2030

Net Benefits $000s 16,584 -140,956


s 27,373 75,832


8,356 22,771

Costs Administrative cost no longer offset by fees


936 7,511

Carbon costs (direct) Environment $000s

6,522 102,272

Carbon costs (indirect) Environment $000s

603 13,992

Gas costs Equipment owners $000s

5,320 109,259

Electricity costs Equipment owners $000s

41 802


5,723 5,723

Benefit to cost ratio ratio 2.0

Final 50


Unit NPV, 2016-2020

NPV, 2016-2030

0.4Source: Jacobs’ analysis

The change in Australian Government transition and administration costs was provided by the DoE, and is shown in Table 5.36.

Table 5.36: Australian Government transition and administration costs, $M

$ millions 2015 2016 2017 2018 2019 2020 to 2030

Transition costs 0.4 1.6 1.2 1.9 1.5

Administration costs - 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 5.37.

Table 5.37: State and Territory government transition and administration costs, $M

$ millions 2015 2016 2017 2018 2019 2018 to 2030

Transition costs - 16.8 13 1.9 1.5

Administration costs - - - $33 per year


Table 5.38 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 5.38: Costs and benefits of transferring end use licensing from federal to state and territory governments

Unit NPV, 2016-2020

NPV, 2016-2030

Net Benefits $000s -137,457 -301,237

Benefits Administrative cost saving


67 541

Costs Administration costs State and territory

governments$000s 75,183 239,437

Transition costs State and territory governments

$000s 56,763 56,763

Australian Government $000s 5,578 5,578

Benefit to cost ratio ratio <0.05<0.05


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.

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6. Sensitivity analysisA 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 6.39 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 6.39: NPV under a selection of discount rates, $M

Discount rate 3% 7% 10%

Scenario

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


Figure 14: Benefit cost ratio under a selection of discount rates


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6.2 Carbon price

Table 6.40 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 6.40: Net present value under a selection of carbon prices, $M

Carbon price $9.50 $13.95 $30

Scenario

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-combined -192 -178 -129

Maintenance -45 106 648

Leakage -383 -342 -192

Removal of End Use Licensing Scheme (RAC) -104 -141 -275

Removal of End Use Licensing Scheme (FP) -7 -14 -39

End Use Licensing Scheme Transfer to states -301 -301 -301


Figure 15: Benefit cost ratio under a selection of carbon prices


Final 53


6.3 Maintenance costs

Table 6.41 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 6.41: 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 assumptionsScenario

Accelerated phase down 57 10 -36

North American amendment phase down 58 40 22



6.4 Capital costs

Table 6.42 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 6.42: Net present value under a selection of capital cost assumptions

Scenario

No increase to capital costs assumed for Equipment using alternative gases

Current assumption

s

Double the increase to

capital costs assumed for alternative

gases

Accelerated phase down 21 10 0.3




6.5 Gas costs

Table 6.43 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 54


Table 6.43: 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 assumption

s

Current assumption: HFO 1234 remains at

$150/kg to 2020Scenario

Accelerated phase down 25 10 -0.5



Maintenance 104 106 106

Leak detection -343 -342 -341


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 6.44: Effect of varying maintenance assumptionsAssumed percentage of equipment currently maintained in accordance with schedule defined in EU Regulation 517/2014

30% 50% (baseline scenario) 80%Benefits $M 3.7 3.7 3.7Costs $M 4.5 3.6 2.1NPV, 2016-2030 $M -0.8 0.1 1.6Benefit cost ratio 0.8 1.0 1.7

Table 6.45: Effect of varying leak detection assumptionsAssumed percentage of equipment currently leak tested in accordance with schedule defined in EU Regulation 517/2014

30% 50% (baseline scenario) 80%Benefits $M 0.6 0.6 0.6Costs $M 1.2 0.9 0.5NPV, 2016-2030 $M -0.6 -0.3 0.1Benefit cost ratio 0.5 0.6 1.1

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7. ConclusionsA summary of net benefits is provided in Table 7.46.

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 56


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 57


Table 7.46: Summary of CBAs by scenario, NPV 2015-2030, $’000s

Affected stakeholder group

Option 1a: HFC Phase Down Accelerated alternative

Option 1b: HFC Phase Down North American amendment

Option 2a: High GWP Equipment Bans - supermarket equipment

Option 2b: High GWP Equipment Bans-MACs

Option 2c: High GWP Equipment Bans-combined


Option 4: Leak detection

Option 5a: Removal of End Use Licensing Scheme (RAC)

Option 5b: Removal of End Use Licensing Scheme (FP)

Option 6: End Use Licensing Scheme Transfer to states

CostsCapital cost of new equipment Equipment owners 10,180$ 7,634$ -$ 39,089$ 39,089$ Refrigerant costs Equipment owners 27,940$ 3,780$ 98,316$ 98,316$ 109,259$ 2,618$ Equipment maintenance/leak testing Equipment owners 46,188$ 17,958$ 412$ 82,774$ 83,186$ 3,316,688$ 679,727$

Federal government 1,662$ 1,662$ 978$ 1,207$ 2,185$ 2,830$ 2,830$ 5,723$ 50$ 5,578$ Bulk importers 25$ 25$ Equipment owners 806$ 806$ 41,039$ 41,039$ State/territory governments 56,763$ Federal government 897$ 897$ 826$ 1,204$ 2,031$ 3,742$ 3,742$ 7,511$ Bulk importers 40$ 40$ Equipment owners 209,731$ 209,731$ State/territory governments 239,437$

Energy cost Equipment owners 802$ Value of direct carbon emissions All 102,272$ 12,406$ Value of indirect carbon emissions All 13,992$ Value of increased halon emissions All 9,338$ Total cost 87,738$ 32,802$ 2,217$ 222,590$ 224,807$ 3,574,031$ 937,070$ 239,559$ 24,412$ 301,777$

BenefitsRefrigerant cost saving Equipment owners 129$ 80,291$ 80,202$ Value of direct carbon emissions avoided All 63,514$ 37,755$ 1,645$ 40,886$ 42,531$ 82,505$ 82,414$ Value of indirect carbon emissions avoided All 2,930$ 2,930$ 490$ 490$ 388,737$ 47,804$ Value of energy savings Equipment owners 31,784$ 31,784$ 3,788$ -$ 3,788$ 3,128,005$ 384,712$ Licence fee expenditure saving RAC/FP industry 75,832$ 2,150$ Opportunity cost of time saving RAC/FP industry 22,771$ 291$ Training cost saving FP industry 434$ Adminstrative cost saving 7,329$ 541$ Total benefits 98,228$ 72,470$ 6,051$ 40,886$ 46,808$ 3,679,537$ 595,132$ 98,603$ 10,204$ 541$

Net Benefit 10,491$ 39,667$ 3,834$ 181,704-$ 177,999-$ 105,506$ 341,937-$ 140,956-$ 14,207-$ 301,237-$ BCR 1.12 2.21 2.73 0.18 0.21 1.03 0.64 0.41 0.42 0.00

Transition costs

Administration costs

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