[Federal Register Volume 89, Number 123 (Wednesday, June 26, 2024)]
[Proposed Rules]
[Pages 53373-53380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-13900]


-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 84

[EPA-HQ-OAR-2021-0643; FRL-11739-01-OAR]


Phasedown of Hydrofluorocarbons: Restrictions on the Use of HFCs 
Under the AIM Act in Variable Refrigerant Flow Air Conditioning 
Subsector

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The U.S. Environmental Protection Agency is proposing to amend 
a provision of the Technology Transitions regulations promulgated under 
the American Innovation and Manufacturing Act. This action allows one 
additional year, until January 1, 2027, solely for the installation of 
new residential and light commercial air conditioning and heat pump 
variable refrigerant flow systems that are 65,000 British thermal units 
per hour or greater using components manufactured in the U.S. or 
imported prior to January 1, 2026. The existing January 1, 2026, 
compliance date for the installation of certain variable refrigerant 
flow systems may result in significant stranded inventory that was 
intended for new construction. EPA is promulgating this action to 
mitigate the potential for significant stranded inventory in this 
subsector.

DATES: Comments must be received on or before July 26, 2024.

ADDRESSES: You may send comments, identified by Docket ID No. EPA-HQ-
OAR-2021-0643, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov 
(our preferred method). Follow the online instructions for submitting 
comments.
     Email: [email protected]. Include Docket ID No. EPA-
HQ-OAR-2021-0643 in the subject line of the message.
     Mail: U.S. Environmental Protection Agency, EPA Docket 
Center, Air and Radiation Docket, Mail Code 28221T, 1200 Pennsylvania 
Avenue NW, Washington, DC 20460.
     Hand Delivery or Courier: EPA Docket Center, WJC West 
Building, Room 3334, 1301 Constitution Avenue NW, Washington, DC 20004. 
The Docket Center's hours of operations are 8:30 a.m.-4:30 p.m., 
Monday-Friday (except Federal Holidays).
    Instructions: All submissions received must include the Docket ID 
number for this rulemaking. Comments received may be posted without 
change to https://www.regulations.gov, including any personal 
information provided.
    Do not submit any information you consider to be Confidential 
Business Information (CBI) through https://www.regulations.gov. For 
submission of confidential comments, please work with the person listed 
in the FOR FURTHER INFORMATION CONTACT section. For additional 
submission methods, the full EPA public comment policy, information 
about CBI or multimedia submissions, and general guidance on making 
effective comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: Joshua Silver, Stratospheric 
Protection Division, Office of Atmospheric Protection (Mail Code 
6205A), Environmental Protection Agency, 1200 Pennsylvania Ave. NW, 
Washington, DC 20460; telephone number: (202) 564-2473; email address: 
[email protected]. You may also visit EPA's website at https://www.epa.gov/climate-hfcs-reduction for further information.

SUPPLEMENTARY INFORMATION: 
    Throughout this document, whenever ``we,'' ``us,'' ``the Agency,'' 
or ``our'' is used, we mean EPA. Acronyms that are used in this 
rulemaking that may be helpful include:

AC--Air Conditioning
AHRI--Air-Conditioning, Heating, and Refrigeration Institute
AIM Act--American Innovation and Manufacturing Act of 2020
The Alliance--Alliance for Responsible Atmospheric Policy
APA--Administrative Procedure Act
BTU/h--British thermal units per hour
CAA--Clean Air Act
EPA--U.S. Environmental Protection Agency
FR--Federal Register
GWP--Global Warming Potential
HARDI--Heating, Air-conditioning & Refrigeration Distributors 
International
HFC--Hydrofluorocarbon
OEM--Original Equipment Manufacturer
RACHP--Refrigeration, Air Conditioning, and Heat Pumps
SNAP--Significant New Alternatives Policy
VRF--Variable Refrigerant Flow
VRV--Variable Refrigerant Volume

I. General Information

A. Does this action apply to me?

    You may be potentially affected by this proposed rule if you 
manufacture, import, export, sell or otherwise distribute, or install 
residential and light commercial air conditioning and heat pump 
equipment. Potentially affected categories, by North American Industry 
Classification System code, include:
     Plumbing, Heating, and Air Conditioning Contractors 
(238220).
     Air Conditioning and Warm Air Heating Equipment and 
Commercial and Industrial Refrigeration Equipment Manufacturing 
(333415).
     Plumbing and Heating Equipment and Supplies (Hydronics) 
Merchant Wholesalers (423720).
     Warm Air Heating and Air Conditioning Equipment and 
Supplies Merchant Wholesalers (423730).
    This list is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities that EPA expects could potentially 
be affected by this action. Other types of entities not listed could 
also be affected. To determine whether your entity may be affected by 
this action, you should carefully examine the regulatory text at the 
end of this document. If you have questions regarding the applicability 
of this action to a particular entity, consult

[[Page 53374]]

the person listed in the FOR FURTHER INFORMATION CONTACT section.

B. What action is the Agency taking?

    This proposed rule would provide one additional year, until January 
1, 2027, for the installation of new residential and light commercial 
air conditioning and heat pump systems using variable refrigerant 
volume (VRV) or variable refrigerant flow (VRF) technology that are 
65,000 British thermal units per hour (BTU/h) or larger when using 
components that were manufactured in the U.S. or imported into the U.S. 
before January 1, 2026. Specifically, this proposed rule would allow 
for pre-2026 condensing units, evaporators, and air handlers using R-
410A, a blend of two regulated hydrofluorocarbons (HFCs) listed in the 
American Innovation and Manufacturing Act of 2020 (AIM Act), or other 
regulated substances and blends of regulated substances not meeting the 
2023 Technology Transitions Rule's restrictions, to be assembled into 
new systems (i.e., installed), so long as those systems are assembled 
prior to January 1, 2027.

C. What is the Agency's authority for taking this action?

    On December 27, 2020, the AIM Act was enacted as section 103 in 
Division S, Innovation for the Environment, of the Consolidated 
Appropriations Act, 2021 (codified at 42 U.S.C. 7675). Subsection 
(k)(1)(A) of the AIM Act provides EPA with the authority to promulgate 
necessary regulations to carry out EPA's functions under the Act, 
including its obligations to ensure that the Act's requirements are 
satisfied. Subsection (k)(1)(C) of the AIM Act also provides that CAA 
sections 113, 114, 304, and 307 apply to the AIM Act and any 
regulations EPA promulgates under the AIM Act as though the AIM Act 
were part of title VI of the CAA.
    The AIM Act authorizes EPA to address HFCs by providing new 
authorities in three main areas: phasing down the production and 
consumption of listed HFCs; managing these HFCs and their substitutes; 
and facilitating the transition to next-generation technologies by 
restricting use of these HFCs in the sector or subsectors in which they 
are used. This rulemaking focuses on the third area: the transition to 
next-generation technologies by restricting use of these HFCs in the 
sector or subsectors in which they are used. Subsection (i) of the AIM 
Act, ``Technology Transitions,'' provides that ``the Administrator may 
by rule restrict, fully, partially, or on a graduated schedule, the use 
of a regulated substance in the sector or subsector in which the 
regulated substance is used.'' 42 U.S.C. 7675(i)(1). The AIM Act lists 
18 HFCs, and by reference any of their isomers not so listed, that are 
covered by the statute's provisions, referred to as ``regulated 
substances'' under the Act.\1\ (42 U.S.C. 7675(c)(1)). EPA is proposing 
to amend restrictions on the use of certain HFCs in the residential and 
light commercial air conditioning and heat pump subsector for large 
equipment that use VRV or VRF technology.
---------------------------------------------------------------------------

    \1\ ``Regulated substance'' and ``HFC'' are used interchangeably 
in this document.
---------------------------------------------------------------------------

D. What are the incremental costs and benefits of this action?

    This proposed rule would reduce regulatory burden associated with 
the Technology Transitions program while having a negligible 
environmental impact. Original equipment manufacturers (OEMs) have 
indicated that large quantities of manufactured inventory of VRF 
equipment could go unsold without an extension of the installation 
date. Stranding equipment that does not meet the new restrictions is 
counter to the overall approach EPA has taken in the 2023 Technology 
Transitions Rule. Extending the installation date for these systems 
will not have an impact on the benefits modeled in the 2023 Technology 
Transitions Rule because EPA is limiting the extension to equipment 
manufactured in the U.S. or imported into the U.S. before the existing 
compliance date of January 1, 2026 (88 FR 73098). Furthermore, EPA did 
not analyze this subsector separately from the broader residential and 
light commercial air conditioning and heat pump sector for which EPA 
has already provided similar regulatory relief.

II. Background

A. Previous Technology Transitions Rules

    On October 24, 2023, EPA's final rule establishing the Technology 
Transitions program was published in the Federal Register (88 FR 73098, 
hereafter ``2023 Technology Transitions Rule''). That rule restricted 
the use of certain HFCs in over 40 subsectors in which they are used by 
establishing limits for those subsectors based on global warming 
potential (GWP). It also prohibited, among other things, the 
manufacture and import of factory-completed products and the 
installation of certain refrigeration, air conditioning, and heat pump 
systems that use HFCs above specified GWP limits. The compliance dates 
for these restrictions vary by subsector and range from January 1, 
2025, to January 1, 2028. The rule also prohibited the sale, 
distribution, and export of factory-completed products that do not 
comply with the relevant restrictions three years after the prohibition 
on manufacture and import.
    After issuance of the 2023 Technology Transitions Rule, 
manufacturers, importers, and distributors of residential and light 
commercial air conditioning and heat pump equipment requested 
clarification of the provisions of the rule regarding two categories of 
equipment: residential and light commercial air conditioning and heat 
pump systems and variable refrigerant flow (VRF) systems. The November 
13, 2023, letter to EPA from the Air-Conditioning, Heating, and 
Refrigeration Institute (AHRI), the Alliance for Responsible 
Atmospheric Policy (the Alliance), and Heating, Air-conditioning & 
Refrigeration Distributors International (HARDI) states that these 
organizations understand that components for systems in these two 
categories manufactured in the U.S. or imported into the U.S. before 
January 1, 2025, and January 1, 2026, respectively, using a regulated 
substance with a GWP of 700 or more, cannot be installed as new systems 
after each such compliance date.\2\ The letter states that this would 
be ``particularly problematic for residential new construction, 
including both single-family and multi-family dwellings, where builders 
order heating and cooling equipment well in advance of knowing the 
exact date of install. Such equipment is not installed until 
construction is nearly complete, but at time of order builders do not 
know when this date will be.'' The letter further articulates that 
allowing the use of components manufactured in the U.S. or imported 
into the U.S. prior to the compliance date to be installed as part of 
new systems for one year after the compliance date would provide some 
relief to the economic and practical burdens.
---------------------------------------------------------------------------

    \2\ This letter can be found in the docket at EPA Docket ID No. 
EPA-HQ-OAR-2021-0643.
---------------------------------------------------------------------------

    On December 26, 2023, EPA issued an interim final rule (88 FR 
88825) that reevaluated the specific circumstances for residential and 
light commercial air conditioning and heat pumps and extended the 
installation compliance date for that subsector from January 1, 2025, 
to January 1, 2026, when using components that were manufactured in the 
U.S. or imported into the U.S. prior to January 1, 2025. EPA separately 
considered comments on that rule. The Agency is proposing a similar 
adjustment to the restrictions on the installation of VRF systems.

[[Page 53375]]

Specifically, EPA is proposing to extend the installation compliance 
date for the VRF subsector from January 1, 2026, to January 1, 2027, 
when using components that were manufactured in the U.S. or imported 
into the U.S. prior to January 1, 2026.

B. Variable Refrigerant Flow Subsector

    Variable refrigerant flow (VRF) and variable refrigerant volume 
(VRV) systems are direct expansion multi-split systems that incorporate 
the following: a split system air conditioner or heat pump 
incorporating a single refrigerant circuit that is a common piping 
network to two or more indoor evaporators, each capable of independent 
control, or compressor units. VRF split systems contain a single module 
outdoor unit or combined module outdoor units with at least one 
variable capacity compressor that has three or more steps of capacity, 
with air or water as the heat source. This design is generally more 
energy efficient than unitary split systems without VRF. In this rule, 
EPA is considering only those VRF systems that are larger than 65,000 
BTU/h and are used for air conditioning.
    While this technology is used in air conditioning and heat pump 
equipment of any size, the 2023 Technology Transitions Rule limited its 
restrictions for this subsector to air-source VRF systems with 
capacities of 65,000 BTU/h (19 kW) or more and water-source VRF systems 
of any capacity. EPA proposed, and finalized, a compliance date that 
provided one additional year compared to the rest of the residential 
and light commercial air conditioning and heat pump subsector due to 
the complexity of the design and installation for large VRF systems. 
Data released annually by AHRI show that equipment with capacities of 
65,000 BTU/h or more constitute roughly three percent of all 
residential and light commercial equipment sold. VRF equipment of that 
size are a subset of that three percent. EPA has summarized this 
publicly available data and included it in the docket for this proposed 
rule.

C. Avoiding Stranded Inventory

    An important consideration in the 2023 Technology Transitions Rule 
was to avoid stranding inventory of existing equipment. This includes 
systems that are already installed and operating as well as unsold 
equipment in the manufacturing and distribution chain. EPA stated that 
``[w]e recognize that the production and purchase of products or 
components that are unable to be sold to consumers is an economic and 
environmental outcome no parties desire, and the proposed rule's 
forward-looking compliance dates were intended to allow all parties in 
the market supply chain sufficient time to avoid that outcome'' (88 FR 
73123). EPA's goal of avoiding the stranding of inventory is consistent 
with the requirement in subsection (i)(6) that Technology Transition 
restrictions may not take effect sooner than one year from the date of 
promulgation; this provision also serves to ensure that regulated 
parties have sufficient time to prepare for and comply with 
restrictions under this provision. In response to concerns about 
stranded inventory raised during the public comment period on the 
proposed rule, EPA made two significant adjustments in the final 2023 
Technology Transitions Rule.
    First, EPA removed the applicability of the rule's use restrictions 
to components. EPA explained that components are pieces of equipment 
that do not function independently and must be assembled together in 
the field in order to function for its intended purpose. Components are 
replaceable and a faulty component can be swapped out to avoid 
replacing an entire system. Recognizing the ongoing need for servicing 
and updating previously installed systems, EPA allowed for the 
continued manufacture, import, sale, distribution, offer for sale and 
distribution, and export of components that rely on regulated 
substances that would not meet the new restrictions. Aside from 
reporting requirements, components are therefore not subject to the 
restrictions in the 2023 Technology Transitions Rule, except insofar as 
those components may not be installed in new systems on or after the 
installation compliance dates.
    Second, the proposed rule set a compliance date, one year after the 
manufacture and import compliance date, by which factory-completed 
products could no longer be distributed, sold, and offered for sale or 
distribution (i.e., the ``sell-through'' date). For the purposes of the 
refrigeration, air conditioning, and heat pump (RACHP) sector, factory-
completed products are equipment which are charged at the factory with 
the full and proper amount of refrigerant needed to function. Since the 
Agency received many comments on this topic, including from those 
commenters that considered one year to be insufficient especially for 
certain seasonal products, EPA extended the sell-through period for 
factory-completed products in the 2023 Technology Transitions Rule to 
be three years after the manufacture and import compliance date.
    Through these two modifications in the 2023 Technology Transitions 
Rule, EPA determined it had minimized the potential for stranded 
inventory. Specifically with respect to components, the Agency's view 
was that there would continue to be a market for components not meeting 
the GWP limit thresholds for new systems, because those components 
could continue to enter the market to service existing systems.
    Additionally, in the 2023 Technology Transitions Rule, EPA extended 
the compliance dates, or raised the GWP limit, for the installation of 
most field-assembled refrigeration systems (as compared to its proposed 
compliance dates), recognizing, in part, that refrigeration systems 
would require manufacturers and importers to make component equipment 
available and that such systems can be specifically designed for an 
individual facility and would need more time to transition.\3\ EPA did 
not finalize later compliance dates for the installation of systems in 
the residential and light commercial air conditioning and heat pump, 
and VRF, subsectors in that rule.\4\ Subsequent to promulgating the 
2023 Technology Transitions Rule, EPA learned that additional time, 
which had already been extended to nearly all of the subsectors 
covering field-assembled refrigeration systems, was needed for those 
air conditioning subsectors. EPA responded by issuing an interim final 
rule reevaluating the specific circumstances for residential and light 
commercial air conditioning and heat pumps and extending the 
installation compliance date for that subsector by one year (88 FR 
88825) and by undertaking this proposed rulemaking.
---------------------------------------------------------------------------

    \3\ See 88 FR 73143 (industrial process refrigeration systems--
proposed January 1, 2025, compliance date, finalized January 1, 2026 
compliance date (January 1, 2028, for some subsectors); 88 FR 73149 
(data centers, ITEF, computer room cooling equipment--proposed 
January 1, 2025, compliance date, finalized January 1, 2027 
compliance date); 88 FR 73150 (systems in retail food refrigeration 
subsector--proposed January 1, 2025, compliance date, finalized a 
range of compliance dates from January 1, 2026 to January 1, 2028); 
88 FR 73162 (cold storage warehouses--proposed January 1, 2025, 
compliance date, finalized January 1, 2026, compliance date); 88 FR 
73163 (ice rinks--retained proposed January 1, 2025, compliance date 
in final rule but increased GWP limit from 150 to 700); 88 FR 73175 
(chillers-industrial process refrigeration--proposed January 1, 2025 
compliance date, finalized compliance dates of January 1, 2026, and 
January 1, 2028 depending on the system).
    \4\ See 88 FR 73178 (residential and light commercial air 
conditioning and heat pumps--proposed January 1, 2025, compliance 
date, finalized January 1, 2025, compliance date); id. (VRF 
systems--proposed January 1, 2026, compliance date, finalized 
January 1, 2026, compliance date).

---------------------------------------------------------------------------

[[Page 53376]]

    EPA is reevaluating the planning, purchasing, and installation 
timeframes for new construction using VRF equipment as referenced in 
the November 13, 2023, letter from industry stakeholders and is 
proposing an extension of one additional year, which would align with 
the additional time already provided for many refrigeration subsectors 
in the 2023 Technology Transitions Rule and in the interim final rule 
for installation of certain residential and light commercial air 
conditioning and heat pumps.
    Multi-unit residential and commercial new construction buildings 
must be planned well in advance, including plans for the heating and 
cooling systems intended to be installed in that new construction. 
Builders may order those planned heating and cooling systems in concert 
with the planning process without knowing when those systems will be 
installed. As noted by stakeholders, installation of these systems is 
often one of the final steps in construction. EPA acknowledges that it 
may therefore be the case that for new construction planned to occur in 
2026, builders may have already designed and received a permit ahead of 
the issuance of the 2023 Technology Transitions Rule, for a building 
that contains a heating and cooling system that is planned to be 
installed in that new construction. Specifically, EPA recognizes that 
for construction planned to occur in 2026, components of residential 
and light commercial air conditioning and heat pump systems using VRF 
with regulated substances may have already been incorporated into the 
design of the building, received a permit from the appropriate 
authority having jurisdiction, and ordered by builders, such that the 
VRF system equipment associated with these projects are at risk of 
being stranded. EPA also recognizes that as one of the first subsectors 
facing a system installation compliance date under the new Technology 
Transitions program, the ability of the VRF subsector to comply with 
this deadline relies on manufacturers, importers, and distributors to 
quickly make commercially available component parts that comply with 
the GWP thresholds. For this reason, as well, EPA has determined it is 
appropriate to propose this limited extension for compliance.
    As discussed in the 2023 Technology Transitions Rule, EPA 
established the compliance date of January 1, 2026, based on 
consideration of the AIM Act's subsection (i)(4) factors, and in 
particular, the assessment that the VRF subsector will be able to meet 
the 2023 Technology Transitions Rule's GWP limit of 700, and transition 
from the current use of HFCs in the subsector. EPA's consideration of 
the statutory factors continues to support a speedy transition for this 
subsector. However, as discussed above, the Agency recognizes that the 
January 1, 2026, installation compliance date could result in builders 
of new construction being left with stranded inventory that could not 
be used. Stranding inventory is an economically and environmentally 
undesirable outcome, and the issue addressed in this proposed rule was 
not brought to the Agency's attention until after the 2023 Technology 
Transitions Rule was finalized. This action therefore proposes to 
extend the January 1, 2026, new installation compliance date to January 
1, 2027, provided the new installation uses components that were 
manufactured in the U.S. or imported into the U.S. prior to January 1, 
2026.
    Stakeholders, including the authors of the November 13, 2023, 
letter, have indicated that extending the installation compliance date 
by one year would alleviate their concerns about stranded inventory.\5\ 
EPA also heard from one stakeholder that its concerns would be 
alleviated by exempting the installation of VRF systems in buildings 
from the restrictions of the 2023 Technology Transitions Rule if those 
buildings received a permit prior to finalization of the 2023 
Technology Transitions Rule (i.e., October 24, 2023).\6\
---------------------------------------------------------------------------

    \5\ The letter dated November 13, 2023, can be found in the 
docket at EPA Docket ID No. EPA-HQ-OAR-2021-0643. Another letter 
from a stakeholder, dated October 17, 2023, can be found in the 
docket for this proposed rule.
    \6\ The letter from this stakeholder, dated March 5, 2024, and 
supporting documentation that accompanied that letter, are included 
in the docket for this proposed rule.
---------------------------------------------------------------------------

    EPA recognized in the 2023 Technology Transitions Rule that some 
buildings had already been permitted prior to finalization of that 
rule. While permits may not always specify the refrigerant to be used 
in a refrigeration or air conditioning technology in a building, some 
permits may require a particular regulated substance or blend of 
regulated substances. Recognizing that where earlier issued permits 
required a particular regulated substance or blend, and where such 
permitted systems were likely to be highly complex and costly to 
redesign, the 2023 Technology Transitions Rule provided one additional 
year beyond the final rule compliance dates for the installation of 
certain field-assembled systems. Specifically, for the installation of 
refrigeration systems in four subsectors (certain industrial process 
refrigeration systems; retail food refrigeration--supermarkets; cold 
storage warehouses; and ice rinks) if an approved building permit was 
issued before the signature date of the 2023 Technology Transitions 
Rule (i.e., October 5, 2023), and the permit specified the use of a 
system containing a particular regulated substance or blend of 
regulated substances with a GWP above the relevant GWP threshold for 
that subsector (88 FR 73120; 40 CFR 84.54(d)).
    EPA intended this limited flexibility in the 2023 Technology 
Transitions Rule to prevent the need to redesign these systems and, in 
some cases, the facility that houses these systems. EPA granted this 
permit-based extension selectively, as most systems are not typically 
designed specifically for an individual facility and/or most systems 
have a later compliance date and thus can make any necessary changes 
with the GWP restrictions in mind.
    The stakeholder that requested an exemption of VRF systems from the 
restrictions of the 2023 Technology Transitions Rule where such systems 
were covered by a building permit issued prior to finalization of the 
2023 Technology Transitions Rule, is a developer of buildings which are 
hundreds of thousands of square feet. The stakeholder described, in 
information it provided to EPA, how the time from initial permitting to 
final construction can take several years.\7\ One of its buildings 
received an approved permit in June of 2023, and the developer expects 
the building to be completed in 2028. This stakeholder would like the 
VRF system in this building to be exempted from the restrictions of the 
2023 Technology Transitions Rule, which would otherwise have required 
installation of GWP-compliant VRF systems starting on January 1, 2026.
---------------------------------------------------------------------------

    \7\ See letter from stakeholder, dated March 5, 2024, included 
in the docket for this proposed rule.
---------------------------------------------------------------------------

    Included in the information this stakeholder provided to EPA was an 
attachment from the manufacturer of VRF equipment that the developer 
intends to install in its building. In this attachment, dated March 4, 
2024, the manufacturer states that while it ``has not made available 
selection software or complete engineering data for the upcoming R-32 
product to satisfy the project'' indicated by the developer, the 
manufacturer ``can confirm that on or before the date of the mandated 
transition to A2L refrigerants, equipment will be available for design,

[[Page 53377]]

manufacture, and sale in North America.'' \8\
---------------------------------------------------------------------------

    \8\ See Attachment A, after the letter from stakeholder, dated 
March 5, 2024, (page 10), included in the docket for this proposed 
rule.
---------------------------------------------------------------------------

    EPA does not agree that it would be appropriate and consistent with 
subsection (i)(4) to provide a broad, unlimited exemption from the 2023 
Technology Transitions Rule to any project where the system had 
received a building permit prior to finalization of the rule. EPA is 
cognizant in establishing these restrictions, and in considering 
requested flexibilities from stakeholders, that in some instances, the 
individual costs to some regulated entities to accommodate updated 
regulations in their planning must be balanced with the national 
priorities established in the AIM Act of phasing down HFCs on a set 
schedule and transitioning away from the use of HFCs where practicable. 
In this case, EPA's analysis under the 2023 Technology Transitions Rule 
was that lower-GWP substitutes for HFCs will be available for the 
component equipment needed for these VRF installations in time for the 
January 1, 2026, compliance date. One of the primary manufacturers of 
this equipment has confirmed EPA's assessment about availability in the 
materials provided to the Agency. The fact that such equipment may not 
be available for purchase in early 2024 does not mean that projects 
planned for 2028 should not be expected to comply with restrictions 
promulgated in 2023.
    However, EPA recognizes that a permit-based flexibility is an 
alternative way to accommodate potential concerns about compliance. We 
are therefore proposing in the alternative a similar one-year extension 
that was provided to certain field-assembled systems with building 
permits that specified use of a particular HFC or blend under the 2023 
Technology Transitions Rule. Specifically, this proposal in the 
alternative would extend the compliance date for installation of new 
VRF systems from January 1, 2026, to January 1, 2027, where the 
building permit both specified the HFC or HFC blend to be used and was 
issued prior to the signature date of the 2023 Technology Transitions 
Rule (October 5, 2023). This alternative proposal is consistent with 
the permit-based flexibility provided to the four previously mentioned 
refrigeration subsectors (88 FR 73120; 40 CFR 84.54(d)). However, it is 
likely that fewer projects would meet the criteria for this permit-
based extension compared to the number of projects potentially impacted 
by EPA's primary proposal of extending the compliance date to January 
1, 2027, for installation of all VRF systems using components 
manufactured in the U.S. or imported into the U.S. by January 1, 2026.

D. Limiting the Environmental Impact of This Action

    EPA is narrowly tailoring this proposal to respond to stakeholder 
concerns about stranded inventory in this subsector while maintaining 
the human health and environmental benefits of the 2023 Technology 
Transitions Rule. To do so, EPA is proposing to extend the installation 
compliance date by one year to January 1, 2027, only for new VRF 
systems installed from specified components (e.g., condensing units and 
indoor evaporators) that were manufactured in the U.S. or imported into 
the U.S. prior to January 1, 2026. This restriction means that the 
total number of VRF systems using HFCs or HFC blends with a GWP above 
700 installed in 2025 and 2026 would match what the Agency modeled for 
installation in 2025. The extra year for installation would not 
increase demand for HFCs in this subsector but rather could shift some 
of the demand from 2025 into 2026.
    EPA is proposing to extend the original compliance date for new 
installations in this subsector to January 1, 2027, when using 
components manufactured in the U.S. or imported into the U.S. on or 
after January 1, 2026. These components remain subject to the original 
restrictions of the 2023 Technology Transitions Rule. Specifically, if 
they contain an HFC with a GWP of 700 or greater, their use is limited 
to servicing previously installed systems. As elaborated on more below, 
all the existing labeling, reporting, and recordkeeping requirements 
also continue to apply to components using, or intended to use, any 
regulated substance. Consideration of extending the compliance date for 
all installations in the subsector by one year is not warranted based 
on EPA's prior analysis of the availability of substitutes within this 
subsector, as described in the 2023 Technology Transitions Rule and 
supporting documents in the docket for that rule.\9\
---------------------------------------------------------------------------

    \9\ This refers to EPA Docket ID No. EPA-HQ-OAR-2021-0643.
---------------------------------------------------------------------------

    EPA finds that this proposed approach of providing additional time 
for installation effectively responds to stakeholder concerns about 
stranded inventory while remaining protective of the environment. This 
approach was suggested by industry stakeholders in their letter dated 
November 13, 2023, and it aligns with industry's plans to transition in 
this subsector.
    This proposed rule would provide an additional year for 
installation only if all ``specified components'' of that system are 
manufactured in the U.S. or imported into the U.S. prior to January 1, 
2026. The term ``specified component'' is defined under the 2023 
Technology Transitions Rule as ``condensing units, condensers, 
compressors, evaporator units, and evaporators'' (88 FR 73112). Other 
components of an air conditioning or heat pump system such as valves or 
refrigerant piping are not restricted by the 2023 Technology 
Transitions Rule and can be installed regardless of manufacture or 
import date.

E. How would the labeling, recordkeeping, and reporting provisions 
apply?

    The 2023 Technology Transitions Rule requires labels on products 
and certain components that use HFCs. The labeling requirement takes 
effect for each subsector at the same time as the manufacture and 
import prohibition for products or the installation prohibition for 
systems. This timing reflects the primary purpose of the labels, which 
is for assessing compliance of products and systems in sectors and 
subsectors with active HFC restrictions.
    This action would not require any specific labeling for components 
that are manufactured in the U.S. or imported into the U.S. prior to 
January 1, 2026. Nameplates typically include the date that a component 
is manufactured, which would be sufficient for the purposes of this 
action. Furthermore, it would be impractical to require entities that 
are not OEMs to relabel components that are already within the 
distribution chain.
    This action would not change the existing labeling requirements 
related to components that are effective January 1, 2026. For specified 
components of systems, the 2023 Technology Transitions Rule required 
labels as of the applicable installation compliance date. This means 
that for specified components manufactured in the U.S. or imported into 
the U.S. on or after January 1, 2026, the requirements of the 2023 
Technology Transitions Rule continue to apply. These requirements 
include, among others, that such components must be labeled with the 
statement ``For servicing existing equipment only.'' This labeling is 
particularly important to distinguish components manufactured in the 
U.S. or imported into the U.S. before January 1, 2026, from those that 
are not.

[[Page 53378]]

    The 2023 Technology Transitions Rule established recordkeeping and 
reporting requirements for any entity that manufactures or imports 
products or specified components that use or are intended to use HFCs 
in the sectors and subsectors covered in that rule. The reporting 
period for all sectors and subsectors starts on January 1, 2025, and 
the first reports must be submitted to the Agency by March 31, 2026. 
This action does not add to nor modify the existing reporting and 
recordkeeping requirements for specified components. EPA is not 
proposing to establish new reporting and recordkeeping requirements 
related to the sale or installation of components manufactured in the 
U.S. or imported into the U.S. prior to January 1, 2025. Reporting and 
recordkeeping would still be required for specified VRF components that 
are manufactured in the U.S. or imported into the U.S. on or after 
January 1, 2025.

F. Evaluation of the Subsection (i)(4) Factors

    Subsection (i)(4) of the AIM Act directs EPA to factor in, to the 
extent practicable and using best available data, various 
considerations when carrying out a rulemaking under subsection (i). As 
discussed in detail in the preamble to the 2023 Technology Transitions 
Rule, EPA views subsection (i)(4)(A) through (D) as providing 
overarching direction for setting restrictions under subsection (i) (88 
FR 73129-73141). In this action, EPA is not reconsidering the 
interpretations provided in the 2023 Technology Transitions Rule 
regarding how it considers the factors laid out in subsection (i)(4). 
Nor is the Agency revisiting its analysis of the (i)(4) factors with 
respect to the residential and light commercial air conditioning and 
heat pump subsector that uses VRF technology as set forth in the 2023 
Technology Transitions Rule preamble (88 FR 73177-73180). However, in 
proposing this narrow adjustment to the January 1, 2026, compliance 
date for the residential and light commercial air conditioning and heat 
pump VRF subsector, we have considered the (i)(4) factors to the extent 
practicable, as applicable to the Agency's adjustment of that 
compliance date.
    The issue being addressed by this proposal was brought to the 
Agency's attention by stakeholders impacted by the 2023 Technology 
Transitions Rule. As noted in EPA's discussion of subsection (i)(4)(A), 
in addition to information generated by other governing bodies and 
agencies, the Agency does also take into account information provided 
by industry, environmental non-governmental organizations, trade 
associations, academia, standard-setting bodies, and more (88 FR 
73129). We acknowledge that in some cases, regulated entities may be 
best situated to identify best available information regarding 
implementation challenges. As part of this proposed rule, EPA is 
providing an opportunity for comment and invites stakeholders who may 
have information relevant to this action to weigh in.
    With respect to the Agency's evaluation of the availability of 
substitutes under subsection (i)(4)(B), EPA previously determined that 
substitutes with a GWP less than 700 are available effective January 1, 
2026, for the residential and light commercial air conditioning and 
heat pump VRF subsector. EPA is not proposing to change that 
determination and continues to find that substitutes with a GWP less 
than 700 will be available January 1, 2026, for this subsector. 
Manufacturers in this subsector are currently making air conditioning 
and heat pump systems and components with lower-GWP refrigerants for 
other markets and are prepared to meet the January 1, 2026, 
installation compliance date for such systems. This action is not 
proposing to reconsider the Agency's prior evaluation of the 
availability of substitutes for meeting the use restrictions issued in 
the 2023 Technology Transitions Rule for this subsector; rather, this 
action is narrowly tailored to address the disposition of components 
manufactured in the U.S. or imported into the U.S. prior to January 1, 
2026.
    This proposal to adjust the installation compliance date for large 
VRF systems is motivated by the policy goal of avoiding stranding 
inventory where possible, while recognizing that the AIM Act directs 
the Agency to establish use restrictions where appropriate for sectors 
and subsectors to move away from the use of high-GWP HFCs. We believe 
these goals to be consistent with the direction in subsection 
(i)(4)(C), which instructs the Agency to factor in, to the extent 
practicable, overall economic costs and environmental impacts, as 
compared to historical trends. As discussed in the 2023 Technology 
Transitions Rule, EPA interprets (i)(4)(C) as purposefully 
accommodating different types and degrees of analysis of economic costs 
and environmental impacts, including costs and impacts that may be 
difficult to quantify (88 FR 73138). The narrow adjustment being 
proposed would reduce the potential to unintentionally strand large VRF 
components, while still achieving a prompt transition for this 
subsector. Specifically, even with the adjustments in this proposed 
rule, manufacturers and importers of components for new VRF systems 
will be required in the very near term (i.e., before January 1, 2026) 
to transition from using R-410A and other higher-GWP regulated 
substances in those components, and developers and builders will not be 
permitted to install new systems that use R-410A or other non-compliant 
HFCs or HFC blends beginning January 1, 2027. This proposed action 
would not affect the overall consumption of HFCs because EPA does not 
anticipate a change in the amount of new VRF equipment that would be 
manufactured in the U.S. or imported into the U.S prior to January 1, 
2026. Further discussion of environmental impacts can be found in 
section III.B.
    EPA requests comment on the incremental costs and benefits 
associated with this action, including avoiding impacts such as 
stranded inventory (e.g., number and type of units affected) and on the 
incremental impacts to regulated entities regarding compliance (e.g., 
avoiding redistribution of equipment, avoiding revisions or new permits 
to replace previously secured building permits).
    Finally, subsection (i)(4)(D) directs the Agency to factor in, to 
the extent practicable, the remaining phasedown period for regulated 
substances under the allowance allocation program. The reduction in the 
supply of HFCs is an important factor supporting compliance dates and 
GWP limits that are as stringent as feasible under the analysis of all 
the (i)(4) factors. EPA finds that this proposed rule would not 
materially affect the demand for HFCs because it limits installations 
to components that were manufactured in the U.S. or imported into the 
U.S. prior to January 1, 2026. The effect of this proposed rule would 
be to extend the installations that EPA modeled to occur in 2025 over 
the two-year period of 2025 and 2026. However, given the small size of 
this subsector, at a subset of roughly three percent of all equipment 
sold in the residential and light commercial subsector, EPA did not 
independently model this subsector in the 2023 Technology Transitions 
Rule's Regulatory Impact Assessment Addendum.

G. Negotiated Rulemaking

    Prior to proposing a rule, subsection (i)(2)(A) of the Act directs 
EPA to consider negotiating with stakeholders in the sector or 
subsector subject to the potential rule in accordance with

[[Page 53379]]

negotiated rulemaking procedures established under subchapter III of 
chapter 5 of title 5, United States Code (commonly known as the 
``Negotiated Rulemaking Act of 1990''). If EPA makes a determination to 
use the negotiated rulemaking procedures, subsection (i)(2)(B) requires 
that EPA, to the extent practicable, give priority to completing that 
rulemaking over completing rulemakings under subsection (i) that are 
not using that procedure. If EPA does not use the negotiated rulemaking 
process, subsection (i)(2)(C) requires the Agency to publish an 
explanation of the decision not to use that procedure before 
commencement of the rulemaking process.
    EPA noted in the 2023 Technology Transitions Rule that, where 
appropriate, EPA will consider recent Agency actions and decisions 
related to restrictions on the use of HFCs in sectors and subsectors 
when considering using negotiated rulemaking procedures. EPA provided 
the example of not issuing a separate notice to consider using 
negotiated rulemaking for four petitions received after a first round 
of petitions had received public notice. EPA's reasoning was that these 
petitions were received well ahead of the final action and the 
requested restrictions are in the same sectors and subsectors contained 
in petitions for which a determination had already been made. EPA 
stated that nothing in those four petitions caused EPA to reconsider 
that decision and that it was unnecessary for the Agency to reconsider 
whether to use negotiated rulemaking procedures.
    Upon considering recent Agency action, specifically the 2023 
Technology Transitions Rule, this proposed rulemaking does not merit a 
reconsideration of the prior determination not to use negotiated 
rulemaking procedures. This proposal is a direct and immediate response 
to a specific concern arising from the recent Agency action to 
establish a compliance date for the installation of certain systems 
within the residential and light commercial air conditioning and heat 
pump VRF subsector. EPA is not proposing to address a new subsector nor 
establish a new restriction. Instead, this proposed rule would provide 
targeted relief to address concerns about stranded inventory in a 
single subsector subject to a recently finalized restriction.
    Furthermore, this action was requested through a November 13, 2023, 
letter signed jointly by AHRI, the Alliance, and HARDI, which together 
represents a majority of the stakeholders in the subsector subject to 
the rule. The groups did not request the use of the negotiated 
rulemaking procedure in their letter, and EPA does not believe that the 
rule would benefit from the negotiated rulemaking procedure especially 
because timeliness is a concern universally shared by stakeholders in 
this subsector.

III. Statutory and Executive Order Reviews

    Additional information about these statutes and Executive Orders 
can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 14094: Modernizing Regulatory Review

    This action is not a significant regulatory action as defined in 
Executive Order 12866, as amended by Executive Order 14094, and was 
therefore not subject to a requirement for Executive Order 12866 
review.

B. Paperwork Reduction Act (PRA)

    This action does not impose an information collection burden under 
the PRA because it does not contain any information collection 
activities.

C. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. In 
making this determination, EPA concludes that the impact of concern for 
this proposed rule is any significant adverse economic impact on small 
entities and that the Agency is certifying that this proposed rule 
would not have a significant economic impact on a substantial number of 
small entities because the proposed rule would relieve regulatory 
burden on the small entities subject to the rule. This proposed rule 
would prevent the stranding of components used to install residential 
and light commercial air conditioning and heat pump systems using 
variable refrigerant flow technology. We have therefore concluded that 
this action would relieve regulatory burden for all directly regulated 
small entities.

D. Unfunded Mandates Reform Act (UMRA)

    This action does not contain any unfunded mandate as described in 
UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect 
small governments. The action imposes no enforceable duty on any state, 
local or tribal governments or the private sector.

E. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, or on the distribution of power 
and responsibilities among the various levels of government.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications as specified in 
Executive Order 13175. It will not have substantial direct effects on 
tribal governments, on the relationship between the Federal government 
and Indian tribes, or on the distribution of power and responsibilities 
between the Federal government and Indian tribes, as specified in 
Executive Order 13175. Thus, Executive Order 13175 does not apply to 
this action.

G. Executive Order 13045: Protection of Children From Environmental 
Health and Safety Risks

    EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that concern environmental health or safety risks 
that EPA has reason to believe may disproportionately affect children, 
per the definition of ``covered regulatory action'' in section 2-202 of 
the Executive Order. This action is narrowly tailored to prevent the 
stranding of certain air conditioning and heat pump equipment using 
variable refrigerant flow technology while not affecting the demand for 
HFCs. Therefore, this action is not subject to Executive Order 13045 
because it does not concern an environmental health risk or safety 
risk. Since this action does not concern human health, EPA's Policy on 
Children's Health also does not apply.

H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    This action is not subject to Executive Order 13211, because it is 
not a significant regulatory action under Executive Order 12866.

I. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

[[Page 53380]]

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations and 
Executive Order 14096: Revitalizing Our Nation's Commitment to 
Environmental Justice for All

    EPA believes that this type of action does not concern human health 
or environmental conditions and therefore cannot be evaluated with 
respect to potentially disproportionate and adverse effects on 
communities with environmental justice concerns. This action is 
narrowly tailored to prevent the stranding of inventory of air 
conditioning and heat pump equipment using variable refrigerant flow 
technology while not affecting the demand for HFCs.
    Although this action does not concern human health or environmental 
conditions, EPA identified and addressed environmental justice concerns 
within the 2023 Technology Transitions Rule (88 FR 73098; October 24, 
2023).

List of Subjects in 40 CFR Part 84

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Chemicals, Climate change, Emissions, Imports, 
Reporting and recordkeeping requirements.

Michael S. Regan,
Administrator.

    For the reasons stated in the preamble, EPA proposes to amend 40 
CFR part 84 as follows:

PART 84--PHASEDOWN OF HYDROFLUOROCARBONS

0
1. The authority citation for part 84 continues to read as follows:

    Authority:  Pub. L. 116-260, Division S, Sec. 103.

Subpart B--Restrictions on the Use of Hydrofluorocarbons

0
2. Amend Sec.  84.54 by revising paragraph (c)(2) to read as follows:


Sec.  84.54  Restrictions on the use of hydrofluorocarbons.

* * * * *
    (c) * * *
    (2) Effective January 1, 2026, variable refrigerant flow systems 
for use as residential or light commercial air-conditioning or heat 
pumps, using a regulated substance, or a blend containing a regulated 
substance, with a global warming potential of 700 or greater. New 
variable refrigerant flow systems using a regulated substance, or a 
blend containing a regulated substance, with a global warming potential 
of 700 or greater may be installed prior to January 1, 2027, where all 
specified components of that system are manufactured in the U.S. or 
imported into the U.S. prior to January 1, 2026.
* * * * *
[FR Doc. 2024-13900 Filed 6-25-24; 8:45 am]
BILLING CODE 6560-50-P