Decision 74/50

After hearing the report of the contact group, the Executive Committee decided, in determining criteria for funding HCFC phase-out in the consumption sector for stage II of the HCFC phase-out management plans (HPMPs) in Article 5 countries:

Cut-off date

1. Not to consider any projects to convert HCFC-based manufacturing capacity installed after 21 September 2007;

Second-stage conversion

2. To apply the following principles in respect of second-stage conversion projects:
   1. Full funding of eligible incremental costs of second-stage conversion projects would be considered in those cases where an Article 5 Party clearly demonstrated in its HPMP that such projects:
      1. Were necessary to comply with the Montreal Protocol HCFC targets up to and including the 35 per cent reduction step by 1 January 2020; and/or
      2. Were the most cost-effective projects measured in ODP tonnes that the Party concerned could undertake in the manufacturing sector in order to comply with those targets; and/or
      3. Would make the transition to low global-warming potential (GWP) alternatives;
   2. Funding for all other second-stage conversion projects not covered under sub-paragraph (b)(i) above would be limited to funding for installation, trials, and training associated with those projects;

Eligible incremental costs of HCFC phase-out projects

3. To apply the following principles in respect of eligible incremental costs of HCFC phase-out projects for stage II of HPMPs, subject to a review in 2020:
   1. The current cost-effectiveness threshold values used for CFC phase-out projects in paragraph 32 of the final report of the 16^th meeting of the Executive Committee (document UNEP/OzL.Pro/ExCom/16/20), to be measured in metric kilograms, and a cost-effectiveness threshold of US $7.83/metric kilogram for rigid insulation refrigeration foam, should be used as guidelines during the development and implementation of the second and subsequent stages of HPMPs;
   2. Article 5 countries would have the flexibility to allocate the approved funding from incremental operating costs to incremental capital costs and to allocate up to 20 per cent of the approved funding for incremental capital costs to incremental operating costs, as long as the use of the flexibility did not change the intent of the project. Any reallocation should be reported to the Executive Committee;
   3. Funding of up to a maximum of 25 per cent above the cost-effectiveness threshold would be provided for projects when needed for the introduction of low-GWP alternatives; however, for small and medium-sized enterprises (SMEs) in the foam sector with consumption of less than 20 metric tonnes, the maximum would be up to 40 per cent above the cost-effectiveness threshold;

HCFC phase-out in the foam sector

4. Incremental operating costs for projects in the polyurethane foam sector would be considered at US $1.60/metric kilogram for HCFC-141b; however, for projects that make the transition to low-GWP alternatives, incremental operating costs would be considered at up to US $5.00/metric kilogram;
5. Incremental operating costs for projects in the extruded polystyrene foam sector would be considered at US $1.40/metric kilogram for HCFC-142b, HCFC-142b/HCFC-22, or HCFC-22 consumption to be phased out at the manufacturing enterprise;
6. For group projects linked to systems houses, incremental operating costs would be calculated on the basis of the total HCFC consumption to be phased out for all downstream foam enterprises;
7. When it was clearly demonstrated that low-GWP alternatives with incremental operating costs as indicated in sub-paragraph (c)(iv) above were not feasible, the Executive Committee would fund higher levels of incremental operating costs when needed for the introduction of low-GWP alternatives by SMEs;

HCFC phase-out in the refrigeration and air-conditioning manufacturing sector

8. Incremental operating costs for projects in the air conditioning sub-sector would be considered at US $6.30/metric kilogram of HCFC consumption to be phased out at the manufacturing enterprise;
9. Incremental operating costs for projects in the commercial refrigeration subsector would be considered at US $3.80/metric kilogram of HCFC consumption to be phased out at the manufacturing enterprise;
10. Consistent with decision 31/45 of the Executive Committee, incremental operating costs would not be considered for enterprises in the refrigeration equipment assembly, installation and charging subsector category;

HCFC phase-out in the refrigeration servicing sector, including servicing for all the relevant refrigeration and air-conditioning subsectors

11. Article 5 countries with total HCFC consumption of up to 360 metric tonnes, and former low-volume-consuming (LVC) Article 5 countries with HCFC consumption in the refrigeration servicing sector only above 360 metric tonnes, must include in their HPMPs, as a minimum:
    1. A commitment to meeting, without further requests for funding at least the 35 per cent reduction step in 2020, and, if the country so decided, the 67.5 per cent reduction step in 2025 or the complete phase-out of HCFCs in line or ahead of the Montreal Protocol schedule. This should include a commitment by the country to restrict imports of HCFC-based equipment if necessary to achieve compliance with the reduction steps and to support relevant phase-out activities;
    2. Mandatory reporting, by the time funding tranches for the HPMP were requested, on the implementation of activities undertaken in the refrigeration servicing sector and in the manufacturing sector when applicable, in the previous year, as well as a thorough and comprehensive annual work plan for the implementation of the activities associated with the next tranche;
    3. A description of the roles and responsibilities of major stakeholders, as well as the lead implementing agency and the cooperating agencies, where applicable;
12. Article 5 countries with total HCFC consumption of up to 360 metric tonnes would be provided with funding consistent with the level of consumption in the refrigeration servicing sector, as shown in the table below, on the understanding that project proposals would still need to demonstrate that the funding level was necessary to achieve the 2020 and 2025 phase-out targets, or if the country so decided, later reduction targets:

13. Article 5 countries with HCFC consumption in the refrigeration servicing sector only above 360 metric tonnes would be provided with funding for phase-out activities at US $4.80/metric kilogram;
14. Article 5 countries with total HCFC consumption in the servicing sector only of up to 360 metric tonnes would have flexibility in utilizing the resources available to address specific needs that might arise during project implementation to facilitate the smoothest possible phase-out of HCFCs, consistent with Executive Committee decisions;
15. Article 5 countries with total HCFC consumption of up to 360 metric tonnes, used in both the manufacturing and refrigeration servicing sectors, could submit HCFC phase-out investment projects in accordance with the policies and decisions of the Executive Committee, in addition to funding for addressing HCFC consumption in the servicing sector;
16. Article 5 countries with total HCFC consumption above 360 metric tonnes used in both the manufacturing and refrigeration servicing sectors should prioritize consumption in the manufacturing sector to meet the reduction steps in 2020, where possible. Activities in the refrigeration servicing sector for such countries would be calculated at US $4.8/metric kilogram, to be deducted from their starting point for aggregate reductions in HCFC consumption;

HCFC phase-out in the aerosol, fire extinguisher and solvent sectors

17. The eligibility of incremental capital and operating costs for HCFC phase-out projects in the aerosol, fire extinguisher, and solvent sectors would be considered on a case-by-case basis; and
18. The Executive Committee would be open to considering projects to promote transition to not-in-kind technologies in relevant sectors.