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Appendix K
Cost-Effectiveness of Chlorofluorocarbon Phaseout—United States and Worldwide

Tables K.1 and K.2 detail the cost estimates associated with a CFC phaseout in the United States and worldwide, respectively. The analysis considers only the cost of a CFC phaseout and does not include costs associated with the anticipated phaseout of halons. Costs associated with capital obsolescence or taxes are not considered in this analysis. Fluorocarbon substitute costs are assumed to be 2 times and 3 times the present cost of CFCs ($2250/t)1 for hydrochlorofluorocarbons (HCFCs) and hydrofluorocarbons (HFCs), respectively.

Abatement costs for CO2 equivalents to CFCs are based on net reductions; that is, the CO2 equivalents of fluorocarbon substitutes (where applicable) are subtracted from the CO2 equivalents for the reductions before the cost is calculated. The calculation is based on an estimate of both the present mix of CFCs and an assumed mix of fluorocarbon substitutes.

The CFC reduction (emission) estimates for 1989 were obtained from the Du Pont Company and are based on its market forecasts in 1988.

Details of the assumptions made on each policy option are shown below.

The total cost for a CFC phaseout is approximately $2.0 billion per year in the United States and $6.3 billion per year worldwide (constant 1990 dollars, 6 percent capital recovery rate).

U.S. CFC Policy Options

1. Cleaning and Blowing Agents, Aerosols, Refrigerants, Not-in-Kind Substitutes: Added equipment costs for these applications are assumed to be $2000/t or $172 million per life. Cost of these substitutes is assumed to be $200/t less than CFCs for an annual operating cost savings of $17 million.

2. Conservation and Recycling: A 50-50 split is assumed between conservation



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Page 792 Appendix K Cost-Effectiveness of Chlorofluorocarbon Phaseout—United States and Worldwide Tables K.1 and K.2 detail the cost estimates associated with a CFC phaseout in the United States and worldwide, respectively. The analysis considers only the cost of a CFC phaseout and does not include costs associated with the anticipated phaseout of halons. Costs associated with capital obsolescence or taxes are not considered in this analysis. Fluorocarbon substitute costs are assumed to be 2 times and 3 times the present cost of CFCs ($2250/t)1 for hydrochlorofluorocarbons (HCFCs) and hydrofluorocarbons (HFCs), respectively. Abatement costs for CO2 equivalents to CFCs are based on net reductions; that is, the CO2 equivalents of fluorocarbon substitutes (where applicable) are subtracted from the CO2 equivalents for the reductions before the cost is calculated. The calculation is based on an estimate of both the present mix of CFCs and an assumed mix of fluorocarbon substitutes. The CFC reduction (emission) estimates for 1989 were obtained from the Du Pont Company and are based on its market forecasts in 1988. Details of the assumptions made on each policy option are shown below. The total cost for a CFC phaseout is approximately $2.0 billion per year in the United States and $6.3 billion per year worldwide (constant 1990 dollars, 6 percent capital recovery rate). U.S. CFC Policy Options 1. Cleaning and Blowing Agents, Aerosols, Refrigerants, Not-in-Kind Substitutes: Added equipment costs for these applications are assumed to be $2000/t or $172 million per life. Cost of these substitutes is assumed to be $200/t less than CFCs for an annual operating cost savings of $17 million. 2. Conservation and Recycling: A 50-50 split is assumed between conservation

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Page 793 and recycling. Equipment costs for recycling are $1500/t ($750/t for the total category) or $74 million per lifetime. The CFC cost savings of $2250/t will be equaled by the additional costs associated with increased minor annual equipment upgrades and increased manpower efforts for maintenance and recycling. 3. Cleaning and Blowing Agents, Aerosols, Fluorocarbon Substitutes: Added equipment costs are assumed to be negligible. The cost of substitutes is assumed to be 2 times the cost of CFCs for an annual increase of $167 million in operating costs. 4. Refrigerants, Fluorocarbon Substitutes—Chillers: Each of the present 100,000 chillers now being used is assumed to cost $25,000 additional for retrofit or replacement for a total cost of $2.50 billion per life. Fluorocarbon alternatives are assumed to cost an average of 2.5 times the present cost of CFCs. 5. Refrigerants, Fluorocarbon Substitutes—Mobile Air Conditioning: 100 million automobile air conditioners are assumed to be used at present. Each is expected to cost $50 additional when replaced for a total cost of $5.0 billion per life. Fluorocarbon alternatives are assumed to cost 3 times the cost of CFCs. 6. Refrigerants, Fluorocarbon Substitutes—Other: Other refrigerant applications (supermarkets, transport, etc.) are estimated to represent $15 billion worth of equipment. Replacement is expected to add 10 percent to this equipment cost. Fluorocarbon alternatives are expected to cost 3 times as much as the current price of CFCs. 7. Refrigerants, Fluorocarbon Substitutes, Appliance Insulation, Fluorocarbon Substitutes: Domestic refrigerators are expected to cost $60 additional on replacement for a total cost of $4.8 billion per life for the present 80 million refrigerators. The equipment cost has been allocated to the two uses based on total CFC use. The cost of fluorocarbon substitutes is 3 times and 2 times that of CFCs for refrigerant and insulation, respectively. The high cost of these reductions is due to the small amount of CFCs (approximately 1.0 kg) used in each refrigerator. Worldwide CFC Policy Options 1. Aerosols, Not-in-Kind Substitutes: Equipment costs will increase by $100,000 for each aerosol manufacturing line in order to handle flammable CFC replacements. For 250 lines worldwide, the cost will total $25 million. At a present cost of $2.25/kg, CFCs are replaced with hydrocarbons at $0.65/kg. Savings are reduced 10 percent due to lack of availability of suitable hydrocarbons for some aerosol needs. For those applications, substitute costs are assumed equal to CFCs. Savings are also reduced by $100/t for increased costs of handling flammable substitutes.

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Page 794 TABLE K.1 Cost Impact of CFC Phaseout—United States image NOTE: Mt = megaton = 1 million tons. Tons are metric.

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Page 795 (Table K.1 on page 794) 2. Conservation and Recycling: A 50-50 split is assumed between conservation and recycling. Equipment costs for recycling are $1500/t ($750/t for the total category) or $202.5 million per lifetime. The CFC cost savings of $2250/t will be equaled by the additional costs associated with minor annual equipment upgrades and increased manpower efforts for maintenance and recycling. 3. Cleaning and Blowing Agents, Refrigerants, Not-in-Kind Substitutes: Added equipment cost for these applications is assumed to be $2000/t or $400 million per life. Cost of these substitutes is assumed to be $200/t less than CFCs for an annual operating cost savings of $40 million. 4. Cleaning and Blowing Agents, Aerosols, Fluorocarbon Substitutes: Added equipment costs are assumed to be negligible. The cost of substitutes is assumed to be 2 times the cost of CFCs for an annual increase of $472.5 million in operating costs. 5. Refrigerants, Fluorocarbon Substitutes—Chillers: Each of the present 150,000 chillers now being used is assumed to cost $25,000 additional for retrofit or replacement for a total cost of $3.75 billion per life. Fluorocarbon alternatives are assumed to have an average of 2.5 times the present cost of CFCs. 6. Refrigerants, Fluorocarbon Substitutes—Mobile Air Conditioning: About 200 million automobile air conditioners are assumed to be used at the present time. Each is expected to cost $50 extra when replaced for a total cost of $10 billion per life. Fluorocarbon alternatives are assumed to have 3 times the cost of CFCs. 7. Refrigerants, Fluorocarbon Substitutes—Other: Other refrigerant applications (supermarket, transport, etc.) are estimated to represent $35 billion worth of equipment. Replacement is expected to add 10 percent to this equipment cost. Fluorocarbon alternatives are expected to have 3 times the present cost of CFCs. 8. Refrigerants, Fluorocarbon Substitutes, Appliance Insulation, Fluorocarbon Substitutes: Domestic refrigerators are expected to cost $60 additional on replacement for a total cost of $30 billion per life for the present

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Page 796 TABLE K.2 Cost Impact of CFC Phaseout—Worldwide image NOTE: Mt = megaton = 1 million tons. Tons are metric.

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Page 797 (Table K.2 on page 796) 500 million refrigerators. Equipment cost has been allocated to the two uses based on total CFC use. The cost of fluorocarbon substitutes is 3 times and 2 times that of CFCs for refrigerant and insulation, respectively. The high cost of these reductions is due to the small amount of CFCs (approximately 1.0 kg) used in each refrigerator. Note 1. Throughout this report, tons (t) are metric; 1 Mt = 1 megaton = 1 million tons.