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Technical Analysis Report

Review of the Ozone Protection and Synthetic Greenhouse Gas Management Programme

(covering the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989, associated Acts, Regulations and administrative policy)

Purpose 1

The purpose of this document is to provide in depth analysis of the Ozone Protection and Synthetic Greenhouse Gas Management (OPSGGM) Programme.

This Report includes additional analysis to measures outlined in the Options Paper to the OPSGGM Programme Review, as appropriate.

CONTENTSPurpose.............................................................................................................................................2

2

ABBREVIATIONS AND ACRONYMS.....................................................................................................6

1. Background...............................................................................................................................9

1. 1 The Ozone Act...........................................................................................................................9

1. 2 The future of ODS and SGG use in Australia............................................................................15

1. 3 Industry...................................................................................................................................16

2. Operation of the LEGISLATIVE OBJECTIVES...............................................................................20

2.1 Mechanisms to achieve the legislative objectives....................................................................20

2.2 Gases covered...........................................................................................................................21

2.3 Import, manufacture and export controls................................................................................21

2.4 End-use controls.......................................................................................................................26

2.5 Product stewardship and destruction facilities approvals........................................................31

2.6 Halon.........................................................................................................................................32

2.7 Methyl bromide........................................................................................................................34

2.8 Compliance and enforcement...................................................................................................35

2.9 Cost recovery arrangements.....................................................................................................36

3. Scope.......................................................................................................................................37

4. Emission Reduction Opportunities...........................................................................................38

4.1 Emission reduction measures...................................................................................................38

4.2 Maintain current end-use licensing and product stewardship and improve their effectiveness and efficiency..................................................................................................................................40

4.3 Selective high-GWP equipment import bans............................................................................41

4.4 Reducing indirect and direct emissions—RAC maintenance.....................................................43

4.5 Reducing indirect and direct emissions—leak reduction..........................................................44

4.6 Emission reduction of other SGGs—SF6 and PFC......................................................................46

5. Efficiency and Effectiveness Measures......................................................................................48

5.1 Meeting international obligations – regulation of new gases...................................................48

International developments...........................................................................................................48

Montreal Protocol..................................................................................................................48

UNFCCC and the Kyoto Protocol.............................................................................................48

5.2 Phase-out of HCFCs...................................................................................................................50

5.3 Import, Manufacture and Export Controls................................................................................52

5.3.1 Mechanical Changes......................................................................................................52

5.4 Destruction and approval of destruction facilities....................................................................71

5.5 End-use licensing schemes........................................................................................................72

5.5.1 Analyses of WHS issues facing the RAC industry............................................................72

5.5.2 Options for addressing industry concerns.....................................................................77

5.6 Compliance and Enforcement...................................................................................................92

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5.7 Cost recovery............................................................................................................................98

Appendix 1: Fire protection and refrigeration and air-conditioning permits...................................103

Licence 4.......................................................................................................................................103

Appendix 2: Greenhouse and Energy Minimum Standards Act 2012 (GEMS)..................................105

Appendix 3: List of Global Warming Potential for SGGs in Regulations...........................................107

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FIGURESFigure 1 What is ozone and why it is important..................................................................................8Figure 2 Decline of ODS imports into Australia between 1995 and 2012 under the Montreal Protocol

9Figure 3 Predicted refrigerant bank transition from 2013 to 2030 by gas species in Mt CO2-e..........14Figure 4 Bank of refrigerants by major segment, 2012 (total of 43 500 tonnes)................................17Figure 5 ODS and SGGs used in fire protection industry (2013).........................................................18Figure 6 Licences under the Ozone Act.............................................................................................19Figure 7 Mt CO2-e over the modelling period 2003–2030.................................................................27Figure 8 Key facts for methyl bromide use and the Montreal Protocol.............................................33Figure 9 Responsive Regulation—compliance pyramid.....................................................................62

TABLESTable 1 Summary of import, manufacture and export obligations under the Ozone Act...................23Table 2 End-use controls under the Ozone Act and regulations........................................................25Table 3 Number of RAC and fire protection permits held by industry members, as of January 2015. 26Table 4 Estimated consumption in the fire protection industry by gas type in 2013 and ODS/GWP properties........................................................................................................................................27Table 5 Estimated future civilian essential use halon requirements..................................................32Table 6 North American Amendment Proposal and Australian Accelerated phase-down schedule, 2015Error! Bookmark not defined.Table 7 Emission reduction potential from continuing and new policy interventions, cost–benefit and regulatory burden measurement.....................................................................................................36Table 8 Summary of the estimated and projected direct and indirect emissions, 2003 to 2030 (in Mt)

39Table 9 Abatement from leak reduction to 2030 for ODS and SGGs..................................................43Table 10 Abatement from maintenance to 2030 for ODS and SGGs by major commercial equipment classes.............................................................................................................................................41Table 11 Summary of areas of the Ozone Act for improvement...............Error! Bookmark not defined.Table 12 Total gas imports by Equipment Licence holders, years 2012 and 2013..............................58Table 13 Proposed import, export and manufacture licensing structure...........................................62

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ABBREVIATIONS AND ACRONYMS

ABS Australian Bureau of Statistics

ACCC Australian Competition and Consumer Commission

AAT Administrative Appeals Tribunal

AHMS Australian Halon Management Strategy

AIRAH Australian Institute of Refrigeration, Airconditioning and Heating

APVMA Australian Pesticides and Veterinary Medicines Authority

ARA Australian Refrigeration Association

ARC Australian Refrigeration Council

C02-e Carbon dioxide equivalent

CFC Chlorofluorocarbon

COAG Council of Australian Governments

CUE Critical use exemption

CUN Critical use nomination

ERF Emissions Reduction Fund

EQPL Equipment licence

FPAA Fire Protection Association Australia

GEMS Greenhouse and Energy Minimum Standards

GDP Gross domestic product

GWh Gigawatt-hours

GWP Global warming potential

HCFC Hydrochlorofluorocarbon

HFC Hydrofluorocarbon

HFE Hydrofluoroethers

HFO Hydrofluoroolefin

HTOC Halon Technical Options Committee

HVAC&R Heating, ventilation, air conditioning and refrigeration

ICAO International Civil Aviation Organization

LCC Life cycle cost

LCCP Life cycle climate performance

LVIL Low volume import licence

MAC Mobile air conditioning

MBTOC Methyl Bromide Technical Options Committee

MEPS Mandatory Energy Performance Standards

MT Megatonnes

NAA North American Amendment

NABERS The National Australian Built Environment Rating System

NGERS National Greenhouse Energy Reporting System

ODP Ozone depleting potential

ODPT Ozone depleting potential tonnage

ODS Ozone depleting substances

PFC Perfluorocarbon

PFPE Perfluoropolyethers

QAP Quarantine Approved Premises

QPS Quarantine and Pre-shipment

RAC Refrigeration and air conditioning

RCFC Refrigerated cold food chain

RHL Refrigerant handling licence

RRA Refrigerant Reclaim Australia

RTA Refrigerant Trading Authorisation

RTO Registered training organisation

S40 Section 40 of the Ozone Act

SF6 Sulfur hexafluoride

SGG Synthetic greenhouse gas

TEWI Total equivalent warming impact

UNEP United Nations Environment Programme

UNFCCC United Nations Framework Convention on Climate Change

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UV Ultraviolet

WHS Work health and safety

8

Figure 1 What is ozone and why it is important

1. BACKGROUND

1. 1 The Ozone Act

Scope

Ozone depleting substances (ODS) and synthetic greenhouse gases (SGGs) are used in a range of applications including refrigeration and air conditioning (RAC), fire protection, aerosols, electricity distribution, foams, medical and veterinary, smelting, solvents, niche processing (such as plasma etching and semiconductor manufacture), and for laboratory and analytical purposes. Parties to the Montreal Protocol and Kyoto Protocol have responsibilities for these gases because of their chemical potential to cause damage to the ozone layer and the climate system.

Australia’s use of gases has transitioned from halons and chlorofluorocarbons (CFCs) to hydrochlorofluorocarbons (HCFCs), and then to hydrofluorocarbons (HFCs) and low or no-Global Warming Potential (GWP) alternative gases in response to significant technology change. Globally this trend has been driven first by the Montreal Protocol which mandates the phase out of ODS, and now by international policy shifts to reduce the use of high-GWP gases, such as the F-gas rules in the European Union (EU) and action on HFCs in the United States (US) and Japan and energy efficiency improvements. At the same time, equipment design and manufacture has improved to reduce leakages and to increase energy efficiency.

Australia, as primarily a technology taker, has adopted many new technologies and will do so in the future as the global market evolves. In Australia, the challenge is for training, standards and regulatory focus for all technicians to keep pace with the rate of change and the different risks of new technology.

The Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 (Ozone Act) regulates the manufacture, import, export, use and disposal of ODS and SGGs and equipment containing these gases through import, export and domestic use licensing systems. There are around 1200 import licences issued and around 80 000 businesses and technicians licensed to trade in and handle ODS and SGGs in the RAC and fire protection industries.

Objectives

The objectives of the Ozone Act are to give effect to Australia’s international obligations to phase out the production and consumption of ODS under the Vienna Convention for the Protection of the Ozone Layer (Vienna Convention) and the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol). The Ozone Act gives effect to Australia’s international obligations under the United Nations Framework Convention on Climate Change (UNFCCC) and its Kyoto Protocol with respect to reducing emissions of SGGs and reporting on Australia’s emissions of these gases.

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The legislation states in Part 1, section 3, that:

‘the objectives of the Ozone Act are:

(a) to institute, for the purpose of giving effect to Australia’s obligations under the Vienna Convention and the Montreal Protocol, a system of controls on the manufacture, import and export of substances that deplete ozone in the atmosphere; and

(b) to institute, and to provide for the institution of, specific controls on the manufacture, import, export, distribution and use of products that contain such substances or use such substances in their operation; and

(c) to use the best endeavours to encourage Australian industry to:

(i) replace ozone depleting substances; and

(ii) achieve a faster and greater reduction in the levels of production and use of ozone depleting substances than are provided for in the Vienna Convention and the Montreal Protocol; to the extent that such replacements and achievements are reasonably possible within the limits imposed by the availability of suitable alternate substances, and appropriate technology and devices; and

(d) to provide controls on the manufacture, import, export and use of SGGs, for the purposes of giving effect to Australia’s obligations under the framework convention on Climate Change and the Kyoto Protocol; and

(e) to promote the responsible management of scheduled substances so as to minimise their impact on the atmosphere.’

The Montreal Protocol on Substances that Deplete the Ozone Layer

The Montreal Protocol sets binding progressive phase-out obligations for developed and developing countries for all major ODS, including CFCs (chlorofluorocarbons), halons, methyl bromide and less damaging transitional chemicals such as HCFCs (hydrochlorofluorocarbons). Emissions are stopped over time by prohibiting the new production of these chemicals. The Montreal Protocol provides long-term certainty for business through a mandatory timetable for the phase-out of ODS. All 197 United Nations member states have committed to phase-out obligations under the Montreal Protocol.

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Figure 2 Decline of ODS imports into Australia between 1995 and 2012 under the Montreal Protocol

The Montreal Protocol targets 96 chemicals in thousands of applications across more than 240 industrial sectors. The Montreal Protocol has been further strengthened through five amendments—London 1990, Copenhagen 1992, Vienna 1995, Montreal 1997 and Beijing 1999, and one adjustment, Montreal 2007—which have brought forward phase-out schedules and added additional ODS to the list of controlled substances.

Australia was one of the early countries to ratify the Montreal Protocol. Australia has met or exceeded all of its phase-out obligations under the Montreal Protocol. This has been achieved through a cooperative partnership between industry, community and all levels of government.

The graph in Figure 1 shows that Australia has progressively reduced levels of ODS imports in advance of Montreal Protocol requirements. For example, Australia will largely phase out consumption of HCFCs by 2016, four years ahead of the schedule required under the Montreal Protocol. In doing so, Australia will consume 61 per cent less HCFCs in the period to 2020 than permitted under the Montreal Protocol—even after the Parties to the Montreal Protocol agreed in 2007 to accelerate HCFC phase-out globally.

Ozone scientists predict that as the result of action taken under the Montreal Protocol, the ozone layer will be repaired by the middle of this century.

Mr Achim Steiner, the Executive Director of the United Nations Environmental Programme, stated in a speech at the Joint 10th Meeting of the Conference of the Parties to the Vienna Convention and the 26th Meeting of the Parties to the Montreal Protocol, on 17 November 2014, that:

The importance of this achievement is underlined when it is remembered that ozone is the atmospheric chemical that blocks ultraviolet (UV) radiation, protecting us from skin cancer and

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‘Without the Protocol, we would probably have seen large ozone layer depletions around the globe and the Antarctic ozone hole would be larger and deeper today.

And with it, we are starting now to see encouraging signs that the ozone layer is on track to recovery by the middle of this century.’

Cape Grim facility

damage to our eyes and immune system while also protecting terrestrial and aquatic plants from damage. Without the action taken under the Montreal Protocol, health problems resulting from extreme UV exposure would have accelerated demand on health systems and further impaired population health and workforce productivity, both in Australia and internationally.

Extreme UV exposure impacts on agricultural productivity impairing developmental processes including reduced leaf area in crops such as rice (The United Nations Environment Programme (UNEP) Stratospheric Ozone and Human Health Project) and degrades materials such as plastics in the built environment. Mr Steiner also stated in his speech on 17 November 2014 that:

The Secretary-General of the United Nations in a media release of 11 September 2014 stated that:

The action taken under the Montreal Protocol has had and will continue to have a major impact on the economic wellbeing, health profiles and national productivity of 1Australia. The Cancer Council of Western Australia’s Report Occupational exposure to ultraviolet radiation advises that Australians experience higher levels of UV exposure because of its clear atmosphere, high sun elevation and outdoor lifestyle. Increasing extreme UV intensity imposes economic and health costs on Australia not born by other countries to the same extent, which in turn reduce Australia’s national productivity and international competitiveness. The report notes that the melanoma rate in Australia is estimated to be two to five times higher than those found in Canada, the US and the United Kingdom.

The Australian scientific community including the CSIRO, the Australian Antarctic Division and the Bureau of Meteorology contribute to Australia’s understanding of the impact of ODS and SGGs on the atmosphere.

The Cape Grim Baseline Air Pollution Station facility is located in remote north-western Tasmania and was the first facility to provide continuous measurement of ODS in the Southern Hemisphere. Cape Grim detects atmospheric changes as part of a scientific research programme established by the Bureau of Meteorology and the CSIRO.

The CSIROcommenced atmospheric measurement in 1976 in a caravan donated by NASA and began the Cape Grim air archive in 1978. Measurements of ODS and SGGs are taken twelve times a day, 365 days a year. The facility now holds extensive longitudinal data of worldwide value on the composition of our atmosphere.

The data recorded and work undertaken at the Cape Grim facility demonstrates the significance of the Montreal Protocol 1 WMO (World Meteorological Organization), Assessment for Decision-Makers: Scientific Assessment of Ozone Depletion: 2014, 88 pp., Global Ozone Research and Monitoring Project—Report No. 56, Geneva, Switzerland, 2014, available at: www.esrl.noaa.gov/csd/assessments/ozone/2014/assessment_for_decision-makers.pdf.

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‘By 2030 the Montreal Protocol may be preventing 2 million cases of skin cancer each year. It will have prevented significant loss of food crops which in turn would

have compounded future food security challenges.’

‘Without the Montreal Protocol and associated agreements, atmospheric levels of ozone depleting substances could have increased 10 fold by 2050.’

http://www.esrl.noaa.gov/csd/assessments/ozone/2014/assessment_for_decision-makers.pdf

Australian Academy of Science’s Shine Dome

in reducing Australia’s greenhouse gas emissions and confirms that ozone recovery has commenced above the Antarctic and at mid-latitudes. Further information on the work, data and findings of the Cape Grim facility is available on the CSIRO’s website.

The Australian Academy of Science’s Shine Dome in Canberra was the setting for the 25th-anniversary commemoration of the Montreal Protocol on 13 September 2012. Australia’s scientific community has made a substantial contribution to the implementation of the Montreal Protocol and the Kyoto Protocol and to global understanding of how these gases work and their effects combatted.

Many of the gases phased out under the Montreal Protocol are also potent SGGs. The Assessment for decision-makers—scientific assessment of ozone depleting: 2014 undertaken by the Montreal Protocol’s Scientific Assessment Panel notes that the Montreal Protocol has provided substantial climate co-benefits as well as significantly repairing the ozone layer. Their report notes a significant global achievement as a result of the efforts under the Montreal Protocol:

Health costs

The World Health Organization states in the paper Health Effects of UV Radiation that:

‘prolonged human exposure to solar UV radiation may result in acute and chronic side effects on the skin, eye and immune system. Over the long term, UV radiation induces degenerative changes in cells of the skin, fibrous tissue and blood vessels leading to premature skin ageing, photodermatoses and actinic keratoses.’

Australians are vulnerable to overexposure to UV and the associated health risks due to Australia’s outdoor working and recreational lifestyle.

The Cancer Council of Western Australia in its 2011 Report Occupational exposure to ultraviolet radiation advised that:

Australia has some of the highest skin cancer rates in the world, and it affects at least two in three Australians before the age of 70

As many as 34 per cent of Australian workers are exposed to direct sunlight during working hours

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‘In 2010, the decrease of annual ODS emissions under the Montreal Protocol is estimated to be about 10 gigatonnes of avoided CO2 equivalent emissions per year, which is about five time larger than the annual emissions reduction target for the

first commitment period (2008–2012) of the Kyoto Protocol.’

http://www.who.int/uv/publications/UVEHeffects.pdf

Around 200 melanomas and 34 000 non-melanoma skin cancers per year can be attributed to occupational exposures to UV radiation

Each year around 440 000 people in Australia are treated for skin cancer and over 1850 people lose their lives to the disease

Skin cancer incurs greater costs than any other cancer in Australia costing the health system more than $300 million per year

A total of 360 workers compensation claims has been made in Australia for sun-related injury between the years of 2000 and 2009.

Increasing extreme UV in Australia would require a significant and additional health prevention and treatment response. The cost of funding new health resources or of diverting existing health resources to new tasks would be high and growing in a higher or more extreme UV scenario. Elements of an elevated response to extreme UV would need to include more population health screening programmes, more extensive community education programmes, and enhanced occupational, health and safety training for those industries with a workforce regularly exposed.

Without the ameliorating trends and impacts of the Montreal Protocol, extreme exposure to high UV conditions would become the norm rather than the summer exception.

The result of a longer and more constant extreme risk UV under a non-Montreal Protocol environment would lead to higher costs for businesses, the health sector and the Australian economy overall. Australia has been a strong supporter of the Montreal Protocol. By doing so, it is avoiding substantially escalated economic and health costs.

UNFCCC, the Kyoto Protocol and SGGs

Australia is a party to both the UNFCCC and its Kyoto Protocol. The Kyoto Protocol gives effect to the UNFCCC’s key principle of assigning legally binding greenhouse gas emissions targets to developed countries. Australia ratified the Kyoto Protocol in 2007 and has inscribed amendments in the Kyoto Protocol for the second commitment period.

While the Australian Government has not yet ratified the Doha Amendment to the Kyoto Protocol which establishes the second commitment period, it will consider ratification at an appropriate time.

The Australian Government is committed to achieving a five per cent reduction on 2000 emissions levels by 2020 and the target under the second commitment period of the Kyoto Protocol to reduce emissions to 99.5 per cent of 1990 levels from 2013–2020. The first target is equivalent to a reduction of 13 per cent below 2005 emissions levels and a 19 per cent reduction from projected business as usual emissions. Australia’s target poses a challenge because emissions are projected to increase without further action. On current trends, Australia faces a cumulative emissions reduction task of around 236 MtCO2-e from 2013 to 2020, or 126 MtCO2-e in 2020.2

Action to reduce the emission of SGGs covered by the Ozone Act contributes to Australia’s efforts to meet its existing targets and build towards a post-2020 target as well.

2 Department of the Environment, Emissions Reduction Fund green paper, Australian Government, December 2013, available at: www.environment.gov.au/climate-change/emissions-reduction-fund/green-paper.

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SGG emissions accounted for around 1.9 per cent of Australia’s annual net CO2-e emissions (excluding emissions from land use, land use change and forestry) in 2013. By gas types, HFC emissions account for 1.8 per cent, PFCs for 0.04 per cent and SF6

for 0.02 per cent of Australia’s total annual emissions in 2013.

http://www.environment.gov.au/climate-change/emissions-reduction-fund/green-paper

The Emission Reduction section considers several options to reduce both direct SGG emissions and indirect greenhouse gas emissions, through avoided electricity use in RAC equipment, including through amending the Ozone Act. The ultimate policy objective is to support a shift towards a low-GWP, energy efficient future for industries that use ODS and SGGs.

1. 2 The future of ODS and SGG use in Australia

The use of ODS and SGGs in Australia is changing. Generally, SGG use is increasing as domestic air conditioning becomes more prevalent, while total emissions of these gases, in CO2-e terms, are expected to fall over time. This is due in large part to improved containment, a more skilled workforce and changing technology, with a predicted transition from high-GWP SGGs to lower or no-GWP SGG alternatives. Figure 2 shows the potential refrigerant bank transition by gas species in Mt CO2-e.

While equipment entering the market is progressively more likely to have a lower or no-GWP working gas, new equipment containing high-GWP gases will continue to enter the market and there is a large installed bank of equipment containing ODS and SGGs that requires management to reduce the emissions during life and at the end of life. The largest sector of the bank is stationary air conditioning while the largest annual service demand is in the mobile air conditioning sector. Using end-use controls as an effective and appropriate way of delivering emission reduction into the future will be discussed in later sections.

20032005

20072009

20112013

20152017

20192021

20232025

20272029

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

GWP <10GWP <1000GWP <2150HFC-MixHFC-32HFC-407CHFC-410AHFC-404AHFC-134aHCFC-MixHCFC-22

Refr

iger

ant b

ank

Figure 3 Predicted refrigerant bank transition from 2013 to 2030 by gas species in Mt CO2-e

Source: The data used to produce this graph was sourced by the Expert Group from departmental imports data and industry data.

Advances in gas and equipment technology will impact on the role of industry, consumer demand and the need for environmental regulation. The increasing availability of lower or zero GWP refrigerant gas options will have implications on the need for environmental regulation or how environmental regulation is applied. As the GWP of ODS and SGGs is reduced and the bank of higher GWP gases decreases, two trends emerge:

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the environmental benefits from reducing emission of ODS and SGGs through end-use licensing decrease over a long period

technicians increasingly face challenges associated with low-GWP alternatives such as increased flammability and toxicity.

In transitioning to low-GWP technology, the effectiveness of regulating the use of ODS and SGGs in the RAC and fire protection industries through end-use licensing under the Ozone Act will diminish, albeit many years in the future. However, there may be benefits from regulating these activities into the future as a means of providing optimal energy efficiency benefits, consumer protection, work health and safety (WHS) and/or public safety.3

These trends suggest that the role of the Australian Government in regulating industry to reduce emissions of ODS and SGGs will progressively reduce over a long period. While this stage is still some time away, the Ozone Act Review offers the opportunity to consider how a reduction in regulatory requirements, and the timeframe in which they are likely to occur, can best be managed by government and industry. It also provides the opportunity to identify the challenges arising from replacements to ODS and high-GWP SGGs, and regulatory and non-regulatory options to manage these risks including using the systems developed under the Ozone Act.

Managing the end-use licensing schemes into the future is considered further in the End-Use sections. Managing issues associated with workplace health and safety and/or public safety is also considered further in the End-Use sections.

1. 3 Industry

The RAC sector is the predominant user of ODS and SGGs in Australia, using over 80 per cent of the gas imported.

The RAC industry has provided strong support for the Montreal Protocol and has played an important role in helping Australia to achieve and exceed its Montreal Protocol obligations. Australian industry has been responsive to reducing the emissions of SGGs. It has addressed environmental impacts ahead of action elsewhere in the world and government intervention.

Cold hard facts 2: A study of the refrigeration and air conditioning industry in Australia 4 provides a detailed examination of the RAC industry in Australia. It provides information on the role of the RAC industry and related industries and how they provide essential services within the Australian economy. The report5 notes that:

3 Council of Australian Governments (COAG), National licensing system for specified occupations – decision regulation impact statement, April 2009, p. 7.4 Department of the Environment, Cold hard facts 2: A study of the refrigeration and air conditioning industry in Australia, Australian Government, July 2013, available at: www.environment.gov.au/protection/ozone/publications/cold-hard-facts-2 . 5 ibid., p. 12.

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“The refrigeration and air conditioning industry is an essential part of the Australian economy. Without its services our major cities and much of our agriculture,

telecommunications sector and health sector would not be able to function as they presently do.”

http://www.environment.gov.au/protection/ozone/publications/cold-hard-facts-2

Refrigerated trucks are an essential element of perishable food distribution across Australia

The statistical snapshot in Cold hard facts 2 reports the following:

The refrigerated cold food chain transports nearly $30 billion worth of perishable food annually.

There are more than 140 million square metres of air conditioned, commercial and other non-residential buildings in Australia.

Air conditioning is estimated to be installed in the majority of Australia’s 8 million homes.

Air conditioning is installed in the majority of the 16 million registered road vehicles.

Around 173 000 people are employed in more than 20 000 businesses operating in the RAC industry

These employees are earning approximately $13.3 billion in wages and salaries per annum.

Nearly $5.9 billion was spent purchasing and installing new equipment in 2012 with a further $533 million spent on refrigerant gas.

An overall expenditure figure of some $26.2 billion was spent on RAC equipment and services in 2012.

There are more than 45 million individual pieces of RAC equipment operating in Australia consuming more than an estimated 59 000 gigawatt-hours (GWh) of electricity in 2012, equivalent to more than 22 per cent of all electricity used in Australia that year. (Figure 7 extracted from the Cold Hard Facts 2 report indicates where RAC sector electricity is consumed.)

RAC owners spent an estimated $14 billion to pay for that electricity.

RAC technology in all its forms is the single largest electricity consuming class of technology in Australia.

More than 4800 tonnes of low-GWP refrigerants was in RAC equipment.

As a result of the huge quantity of electricity used and the significant bank of high-GWP refrigerant gases used RAC equipment is one of the largest single sources of greenhouse emissions in Australia.

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Bayswater Power Station Muswellbrook Total indirect greenhouse gas emissions resulting from the energy required to power RAC systems is equivalent to more than 10 per cent of Australian greenhouse emissions.

Total economic spending in the sector is equivalent to 1.7 per cent of Australia’s gross domestic product (GDP).

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Stationary ACMobile ACDomestic refrigerationRefrigerated cold food chain

Figure 4 Bank of refrigerants by major segment, 2012 (total of 43 500 tonnes)

Source: Cold hard facts 2 stock model.

Fire protection

The fire protection industry represents a smaller component of Australia’s total consumption of ODS and SGGs. Based on bulk import data collected by the Department and consultation with industry representatives, it is estimated that fire protection applications in 2013 represented approximately 54 tonnes6 or 1.3 per cent of Australia’s annual consumption (excluding halon sourced from the National Halon Bank).

ODS and SGG use in the fire protection industry is generally for special hazard systems (systems that cannot use more traditional extinguishing agents such as water, carbon dioxide or dry powder). These systems are predominantly used for telecommunications and data centres; transport infrastructures such as aircraft, marine vessels and trains; and the niche application of protecting fragile cultural assets housed in galleries and museums. The most common extinguishing agent is FM-200, a HFC. Figure 7 below illustrates the relative proportions of ODS and SGGs used in the fire protection industry based on estimated consumption of bulk gas in 2013.

6 This total does not include halon for fire protection which is sourced from halon already recovered from the existing stocks within Australia.

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63% 27,404t

21% 9135t

5% 2175t

11% 4785t

Halon-1211 (2%)Halon-1301 (4%)NAF-S-III (0.2%)NAF-P-III (0.2%)FM-200® / FE-227TM (92%)Other HFCs (<1%)

Figure 5 ODS and SGGs used in fire protection industry (2013)

Source: The data used to produce this graph was sourced by the Expert Group from departmental imports data and industry data, and verified through consultation with fire protection industry representatives.

2. OPERATION OF THE LEGISLATIVE OBJECTIVES

2.1 Mechanisms to achieve the legislative objectives

The Ozone Act seeks to reduce the emission of ODS and SGGs to the atmosphere. While emissions reduction for both ODS and SGGs is a unifying objective, the internationally prescribed mechanisms are different. As a result, the Ozone Act balances both sets of international requirements through its provisions.

The Ozone Act achieves its objectives by regulating the manufacture, import, export, use and disposal of ODS and SGGs through import, export and domestic use licensing systems through several pieces of legislation. The legislation also includes provision for levies on the import and manufacture of ODS and SGGs to fund the programme. The full suite of Commonwealth ODS and SGG legislation is:

Ozone Protection and Synthetic Greenhouse Gas Management Act 1989

Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Act 1995 and Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Act 1995

Ozone Protection and Synthetic Greenhouse Gas Management Regulations 1995

Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Regulations 2004 and Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Regulations 2004.

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92%

4%

2.2 Gases covered

The Ozone Act covers the scheduled substances listed under the Montreal Protocol and synthetic greenhouse gases listed under the UNFCCC and its Kyoto Protocol. The scheduled substances are listed in Schedule 1 (scheduled substances) of the Ozone Act.

Parties to the Montreal Protocol may consider controls on additional ODS in the future if they are likely to have a material impact on the recovery of the ozone layer. Australia’s obligations under the Kyoto Protocol’s second commitment period will expand to include three high-GWP gases not currently covered by the Ozone Act: HFC-41-10mee, PFC C10F18 and nitrogen trifluoride.

2.3 Import, manufacture and export controls

Australia is required to have an import and export licence scheme (licence scheme) under Article 4B of the Montreal Protocol. The licence scheme, which also covers manufacturing, has enabled Australia to meet its ODS phase-out obligations and facilitates the collection of data reporting under the Montreal Protocol. The licence scheme also satisfies Australia’s reporting obligations for SGGs under the UNFCCC7.

The Ozone Act bans the import, export and manufacture of regulated bulk ODS or SGGs and import of regulated ODS/SGG equipment unless an appropriate licence is held (Section 13). There are four types of licences under the Ozone Act (section 13A, Figure 2). Some bulk gas and equipment is exempted from the operation of the Ozone Act.

Figure 6 Licences under the Ozone Act

Importing bulk ODS and SGGs

Bulk ODS can be imported under a controlled substances licence, used substances licence or essential uses licence. Bulk SGG (there is no distinction between new or used) can only be imported under a controlled substance licence. While the term bulk is not defined in the Ozone Act, it is widely understood to mean gas that is not contained in equipment, for example, it is in a storage container.

Additional conditions are placed on controlled substances licences for bulk ODS licences under section 18 of the Ozone Act to meet Montreal Protocol obligations including that trade is not conducted with

7 Explanatory Memorandum, Ozone Protection and Synthetic Greenhouse Gas Legislation Amendment Bill 2003 available at: www.comlaw.gov.au/Details/C2004A01211 .

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Import, manufacture and export licences under the Ozone Act

Bulk ODS and SGGs

Controlled substances licence

Essential uses licence

Used substances licence

Equipment or products containing

ODS or SGGs

ODS/SGG equipment licence

Exempted or unregulated bulk

ODS/SGG and ODS/SGG

equipment import, manufacture and

export

http://www.comlaw.gov.au/Details/C2004A01211

non-parties to the Montreal Protocol 8 and the requirement to hold a HCFC quota. The trade restrictions are consistent with Australia’s obligations under the Montreal Protocol.

HCFC phase-out quota:

The phase-out of HCFCs is managed through the quota system set out in Part IV of the Ozone Act, attached to controlled substance licence conditions (section 18(1) and sections 23-35).

Quota is granted on a grandfathered system based on the ODP (ozone depleting potential) tonnes of the HCFCs imported. The ODP of a chemical compound is the relative amount of degradation to the Ozone layer it can cause.

Quota is allocated every two years and is calculated based on ODP tonnes, rather than metric tonnes. This approach has allowed the industry to progressively transition to alternatives.

It is illegal to import bulk HCFCs without adequate quota.

The quota system has demonstrated to be an efficient and effective intervention to progressively phase out the import of ODS.

A quota system is required by all parties to the Montreal Protocol. Australia’s quota approach is similar to most developed countries to meet their Montreal Protocol obligations.

There are several exemptions to the requirement to hold a licence to import, manufacture or export bulk SGGs and ODS including:

the manufacture of SGGs during aluminium production (regulation 3)

Aluminium production is the largest source of perfluorocarbons (PFC) emissions in Australia. PFCs are released during aluminium production if the alumina ore content of the electrolytic bath used in manufacture falls below levels required for electrolysis resulting in anode effects. The manufacture of PFCs as a by-product of the manufacture of aluminium is automatically exempted from the licensing scheme (section 13 and regulation 3(1) (b)). Emissions of PFC from aluminium manufacture are captured under the National Greenhouse and Energy Reporting Act 2007 (NGER Act). This satisfies the reporting requirements under the UNFCCC. The aluminium industry has worked to reduce emissions from production.

the manufacture or import of SGGs for use in magnesium smelting and casting (regulation 3A)

Sulfur hexafluoride (SF6) is used in magnesium smelting and casting. This is an emissive use of SF6. Imports of SF6 are exempted from the licensing scheme if a permit is granted by the Minister. There are currently no permits granted under this provision. Based on Australia’s National Greenhouse Accounts’ National Inventory Report 2013, there is no magnesium smelting in Australia.

Scheduled substances used to manufacture other chemicals and feedstocks (section 12A and regulation 3AA)

8 This requirement only applies if the ODS is halon, CFC, carbon tetrachloride, methyl chloroform and bromochloromethane. It does not apply to the import or export of HCFCs.

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Section 12A of the Ozone Act provides that scheduled substances imported or manufactured exclusively for use as an intermediate substance to manufacture other chemicals are not subject to all the controls in the Ozone Act. These substances are called feedstocks, and licensing and levy requirements do not apply. This is because the substances are transformed in manufacture and are not expected to be emitted to the atmosphere. There is a requirement for manufacturers or importers of feedstocks to report on imports to the Department to enable Australia to comply with international reporting obligations. Similarly, SGGs destroyed in a manufacturing process are exempted from the requirement to hold a licence if Ministerial approval is given (regulation 3AA).

scheduled substances imported or exported on board ships or aircraft and used exclusively to service the air conditioning or refrigeration equipment aboard the aircraft or ship (section 12B,) where the ship or aircraft is transiting between Australia and a place outside Australia or transiting between two places outside Australia.

Importing equipment containing ODS and SGGs

The Ozone Act bans the import, export and manufacture of equipment containing a SGG and refrigeration and air condition equipment containing a HCFC unless an ODS/SGG equipment licence (section 13A (5)) is held. This enables the collection of data for international reporting and to support efforts in emissions reductions.

There are a series of exemptions to the requirement to hold an appropriate licence and includes:

low volume equipment imports (currently imports of up to five pieces of equipment in a single consignment containing up to 10 kilograms of gas in a two-year period)

equipment that is kept for household or domestic use (section 13(6A) and regulation 3)

medical and veterinary equipment that contains a SGG (section 8D and regulation 2A)

imported foam products containing SGGs (section 8D and regulation 2A).

To support the phase-out of bulk ODS, a licence will not be granted for products or equipment listed in Schedule 4 of the Ozone Act unless an exemption applies. The import of the following equipment is banned under Schedule 4:

specified equipment containing CFCs, halon, carbon tetrachloride, methyl chloroform and bromochloromethane—this includes dry cleaning machinery, automotive air conditioning maintenance kits, extruded polystyrene packaging and insulation, aerosol products, rigid polyurethane foam products, moulded flexible polyurethane foams, disposable containers of CFC refrigerants

equipment containing halon (not limited to equipment types in the above list)

RAC equipment containing CFC or HCFC, unless an exemption to this ban applies.

An exemption to this ban may be granted if the product is essential for medical, veterinary, defence, industrial safety or public safety purposes and no practical alternative exists (section 40).

Regulations 70 to 73 provide limited exemptions for the Schedule 4 ban on the import of RAC equipment charged with or containing HCFCs. These exemptions progressively sunset up to

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31 December 2019 when import of all HCFC RAC equipment will be banned under Schedule 4 of the Ozone Act.

Operation of import, manufacture and export licences

The licences, notices or permits issued under the Act contain additional obligations including quarterly reporting obligations, requirement to participate in a product stewardship scheme, requirement to pay an import levy and requirement to pay a licence application fee.

Manufacturers, importers and exporters of ODS and SGGs are required to provide a quarterly report on the quantity and species of scheduled substance manufactured, imported or exported. This reporting directly supports Australia’s international obligations under the Montreal Protocol and UNFCCC9.

Controlled substances and ODS/SGG equipment import licence holders are required to participate in an approved product stewardship scheme (if one exists) as a condition of their licence. There is only one product stewardship scheme for some ODS and SGGs in Australia, namely Refrigerant Reclaim Australia (RRA) which provides product stewardship for ODS and SGGs used as refrigerants. There are approximately 1200 licence holders most of whom are required to be members of RRA.

Controlled substances and ODS/SGG equipment licence holders are required to pay levy (section 69 and the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Act 1995 and the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Act 1995). Levies will be considered in more detail within the context of the Ozone Protection and SGG Special Account (Cost Recvoery Section).

Table 4 summarises obligations against the different licence types and exemptions from the Ozone Act.

9 Article 7 of the Montreal Protocol requires Parties to report data on ODS produced and consumed on an annual basis to the Ozone Secretariat. This obligation includes amounts of ODS imported or manufactured for feedstock purposes. Article 12 of the UNFCCC requires Parties to provide a national inventory of anthropogenic emissions. SGG import, export and manufacture data is used to generate or verify Australia’s emissions inventory for emissions in this sector.

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Table 1 Summary of import, manufacture and export obligations under the Ozone Act

Exempt from obligations

Apply for a licence, notice, permit or Ministerial approval

Hold import quota

Import/Export to country on Montreal Protocol register

Pay application fee

Pay levy Quarterly reporting obligations

Product stewardship scheme membership

Bulk HCFCs—controlled Substance licence

Methyl bromide—controlled substance licence

Bulk SGGs—controlled substance licence

Used substances licence Essential use licence Imported or manufactured for use in magnesium production

Feedstock SGG destroyed in a manufacturing process

Manufacture as by-product of aluminium smelting

Bulk gas on ships and aircraft ODS equipment—ODS/SGG equipment licence

(not export)

SGG equipment—ODS/SGG equipment licence

(not export)

Section 40 exemption Regulation 73 exemption Low volume importers and personal imports

Medical and veterinary equipment

Foams containing ODS and SGGs

Aerosols containing ODS

2.4 End-use controls

RAC and fire protection end-use controls complement the import and manufacture controls and are the primary policy intervention to achieve emissions reduction under the Ozone Act once these gases are present in the Australian market. End-use controls are designed to improve industry standards as a way to reduce preventable emissions. The emission reduction potential of the RAC and fire protection end-use licensing schemes is considered further in the Emission Reduction section.

The end-use controls regulate how ODS and SGGs are traded, stored, handled and disposed of in specific Australian industries. The significant majority of ODS and SGGs are used in long-lasting equipment—sometimes over decades. The purpose of the end-use controls is to minimise emission of these gases through the supply chain, during equipment installation and maintenance and when equipment reaches end of life.

The interaction and consistency of the regulation of ODS and SGGs with other Commonwealth, state and territory policies and legislation

At the time of evaluating the Ozone Act ahead of amendments in 2003, states and territories had complementary legislation placing some controls on the use and emission of ODS, some of which included or referred to other provisions for regulating the sale, handling, decanting, storage and transport of gases in a way that minimised emissions to the atmosphere. In some states and territories, these controls incorporated a system of training and licensing through registered training organisations nationally while others required technicians to complete awareness training.

The Regulation Impact Statement prepared in 2003 to articulate this evaluation recognised the complementary nature of the controls in place at the time, but also highlighted the transition at that time from ODS to SGGs as alternatives with a lesser impact on the ozone layer. It was acknowledged that, with the exception of Western Australia, there were no requirements for managing SGGs in the same way. There was a regulatory gap at the state and territory level that was filled by the introduction of end-use controls at the national level in 2004.

In 2003, the Ozone Act was amended to include provisions for Regulations to be made to regulate the sale, purchase, acquisition, storage, use, disposal and labelling of ODS and SGGs. The policy intention was to implement nationally consistent regulation of these gases, replacing individual state and territory environmental regulatory requirements. The aims of introducing end-use licensing controls included delivering environmental gains more efficiently, and realising benefits to industry in terms of increased certainty and consistency. Some state and territory governments continue to administer individual occupational licensing schemes to regulate work health safety and consumer protection matters to differing degrees.

The interaction of other state, territory and Commonwealth policies and legislation is considered further below in regard to the structure of end-use licensing and safety considerations.

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Table 2 End-use controls under the Ozone Act and regulations

*Unregulated end-uses include SF6 use in switchgear, laboratory, analytical and medical uses, and feedstock use. It is an offence to discharge an ODS or SGG unless the discharge is in accordance with the Regulations.

Refrigeration and air conditioning licensing

Under the end-use licensing arrangements, the use of ODS and SGGs in the RAC industry and the use of ODS and SGG extinguishing agents in the fire protection industry are regulated through two separate licensing schemes which reflect the very different scales and nature of gas usage between the two industries.

The RAC licensing scheme is administered by the Australian Refrigeration Council (ARC) on behalf of the Australian Government. The scheme is structured to restrict access to these gases to businesses and individuals that are competent to store and handle them. It is essentially a competency-based permit scheme.

For the purposes of the scheme, a refrigerant is a CFC, HCFC, HFC, PFC and halon that is, or has been, used in RAC equipment and is a listed controlled substance under the Ozone Act. The scheme does not cover compliance with occupational, safety and fair trading requirements as these areas fall within the legislative powers of state and territory governments but it complements and supports high standards and safe work practices, for example, by referencing codes of practice.

The Regulations require technicians who work on equipment containing refrigerants to hold a refrigerant handling licence (RHL) and businesses that store, possess or dispose of ODS and SGG refrigerants to hold a refrigerant trading authorisation (RTA). RHL holders are often affiliated with RTA holders or, as sole traders, may hold both an RTA and RHL.

A RTA is required by any business or individual who acquires, stores, sells or disposes of an agent that is a scheduled substance under the Ozone Act. It is an offence under the regulations to undertake any of these activities without the relevant trading authorisation (regulation 112). RTAs are issued to business owners or managers for a period generally of two years. There are three types of RTAs, depending upon the type of business activity for which they are required:

a RTA that permits the holder to buy, sell and store refrigerant for stationary and automotive RAC work

a RAC equipment manufacturing authorisation that permits the holder to acquire refrigerant for use in the manufacture of RAC equipment

a restricted RTA which permits the business to recover refrigerant.

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Regulated end use for ODS and SGGs

Refrigeration and air

conditioning Fire protection

Methyl bromide record keeping and reporting

ODS/SGG destruction

facility approval

Unregulated handling of ODS and SGGs*

An RTA is subject to conditions which, among other things, prescribe equipment that must be owned to avoid emissions in the handling of gas, require records to be kept of refrigerant bought, recovered, sold or otherwise disposed of, and require that gas is only handled by RHL holders (regulation 141).

RHLs are based on nationally endorsed trade qualifications—overseen by the Industry and Skills Council Advisory Committee—and issued to technicians who handle refrigerant. There are four main and twenty-one restricted RHL types which are specific to the sector or type of work being undertaken and, accordingly, have different evidential requirements to demonstrate competency to do the work specified in the licence. Technicians are required to undertake work consistent with the conditions of their licence (regulation 135). The conditions relate to, among other things, carrying out work in accordance with Australian Standards and Codes of Practice to reduce the emission of gases and return of recovered gas for disposal.

Fire protection licensing scheme

The fire protection industry permit scheme is a separate competency-based scheme administered by the Fire Protection Association Australia (FPAA), on behalf of the Australian Government. Regulation 301 defines an extinguishing agent as scheduled substances, listed under the Ozone Act that can be used to prevent, control or extinguish a fire, or suppress an explosion. Under regulation 303 it is an offence to possess or trade extinguishing agent without holding an extinguishing agent trading authorisation (EATA). Under regulation 302 it is an offence to work with an extinguishing agent without holding an extinguishing agent handling licence (EAHL). Under regulation 304 it is an offence to possess halon without a halon special permit unless the individual is in the process of transferring the halon to the operator of an approved extinguishing agent destruction facility.

Licences are issued to technicians who work on equipment containing controlled fire extinguishing agents; authorisations are issued to businesses that acquire, possess and dispose of controlled fire extinguishing agents; and ‘halon special permits’ are issued for the possession of halon for use in fire protection equipment. There are six types of fire protection licences distinguished by the type of work to be undertaken on specific types of equipment in addition to halon special permits.

Appendix 1 provides a table of end-use authorisation and licence types and the types of activities allowable under each.

Table 3 Number of RAC and fire protection permits held by industry members, as of January 2015

RAC permit numbers Fire protection permit numbers

Trading authorisations 17 241 145

Handling licences 58 873 1 359

Halon special permits 40

Analysis by the Expert Group in its 2015 report indicates that, excluding halon which is sourced domestically from recovered stock, fire protection in Australia uses less than 1.3 per cent of the bulk gas imported to Australia for all end-use. Industry transition to low-GWP alternatives indicates that over the next five to ten years, halon and, potentially for a shorter period of time, FM-200/FE270 gases will remain the key substances still requiring tight controls and reporting

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around their volume and use in Australia. In the case of halon this is to ensure Australia can continue to meet its Montreal Protocol commitments to restrict halon essential uses. In the case of FM-200/FE270 gases, which constituted approximately 92% of the scheduled extinguishing agent consumed in Australia 2013, the need for controls is based on its high-GWP of 3 220.

Table 4 Estimated consumption in the fire protection industry by gas type in 2013 and ODS/GWP properties

Substance ODP AR4 GWP-1002013 consumption

(tonnes)

Halon-1211 3 1890* ~ 1 tonne or 2%

Halon-1301 10 7140* ~ 2 to 2.5 tonnes or 4%

NAF-S-III ~ 0.036 ~1444* ~ 0.1 tonne or 0.2%

NAF-P-III ~ 0.014 ~340* ~ 0.1 tonne or 0.2%

FM-200®/FE-227TM 0 3220 = 50 tonnes or 92%

Other HFCs 0 - <0.5 tonnes or <1%

Total all ODS and SGGs > 161 000 tonnes

~ 54 tonnes

* These gases are regulated under the Montreal Protocol and are not counted towards Australia’s Kyoto Protocol targets. Nevertheless, these substances do have a significant GWP.

By comparison, the RAC industry is expected to remain the heaviest user of ODS and SGGs over the next two decades. While RAC, too, is undergoing a transition to lower GWP refrigerants there is a need to continue to manage their use in a targeted way.

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

GWP <10GWP <1000GWP <2150HFC-MixHFC-32HFC-407CHFC-410AHCF-404AHCF-134aHCFC-123HCFC-22

Refr

iger

ant b

ank

Figure 7 Mt CO2-e over the modelling period 2003–2030

Environmental benefits of end-use licensing29

Direct emissions reduction of 24.7 Mt CO2e (16.7ODS/8.0SGG) has been achieved as a result of the end-use controls for both fire protection and RAC introduced with the 2003 amendments to the Act (24.37 Mt CO2-e as a result of the RAC licensing scheme and 0.33 Mt CO2-e as a result of the FP licensing scheme10). These controls have been effective in reducing direct and indirect emissions, and it is expected that they would reduce direct emissions by a further 59.3Mt CO2e (18.0ODS/41.3SGG) when modelled out to 2030 (58.02 Mt CO2-e as a result of the RAC licensing scheme and 1.28 Mt CO2-e as are result of the FP licensing scheme).

Ancillary benefits of end-use licensing: Complementary to other legislation

The RAC and fire protection industries are regulated by some states and territories variously through regulations for the built environment and, to some extent, work on motor vehicles. These regulatory platforms cover WHS and consumer protection matters. Similarly, the Commonwealth agencies responsible for regulating the aviation and maritime industries, as well as Defence, have their own regulatory frameworks to cover work standards and safety which interacts with the Ozone Act.

The goal in designing, installing and maintaining RAC and fire protection equipment is to retain the charge of working gases inside the equipment so that it is able to function as intended. Effective and reliable fire protection relies on equipment that maintains its charge of extinguishing agent so that it is ready to use if and when required. Similarly, effective and reliable air conditioning and refrigeration uses a continuous cycle of gas inside a closed system to continue to cool or heat.

For both the RAC and the fire protection industries, the assessment of a technician’s competence to undertake specific tasks allowed under a licence defines eligibility for that licence type. The rationale for this approach is that if a technician is trained to be able to install, maintain and decommission equipment and to handle the gas component according to the standards taught through trades courses then they would be able to undertake their work in a way that minimised emissions to the atmosphere. Further, if the conditions of that licence were based on work being undertaken in accordance with the Australian and New Zealand Standards and codes of practice accepted for RAC and fire protection work, then compliance with those conditions would also mean that gases and the equipment designed to contain and use them would be treated in a way that minimised emissions to the atmosphere.

These implicit assurances of work quality and work safety that are built into the end-use controls under the Ozone legislation are important ancillary benefits of the end-use licensing schemes that have a much narrower primary purpose. There are, however, limitations to the legislative power behind some of these benefits. The schemes were designed, as noted above, to reduce the 10 Expert Group, Assessment of environmental impacts from the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989, April 2015, p. 15.

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The way in which administration of end-use licensing has developed over the decade since its inception has helped to establish a highly skilled workforce that applies

good trade practices and is aware of the occupational health and safety implications of the work that they undertake. By placing an industry-based administrator at the national level for the RAC and fire protection industries respectively, the licensing schemes have established a coordination point for communicating the regulations

with the backing of legislative power in relation to gas emissions.

emission of ODS and SGGs and the legislative basis for end-use controls does not extend to occupational matters such as WHS or consumer protection, or to indirect greenhouse gas emissions from energy consumption.

Due to the way that end-use licensing is structured and administered (since its inception in 2005), there is a perception within some areas of the fire protection and RAC industries and other government agencies that the Ozone end-use licensing schemes regulate work practices in the trades that incorporate fire protection work and RAC work—in essence it has come to be viewed as a national occupational licensing scheme, rather than an environmental scheme limited to direct emissions of ODS and SGGs.

The Ozone Act does not provide the required powers to regulate activities beyond actions to prevent direct emissions. Further analysis is being undertaken to establish the degree to which there are gaps or overlaps in regulation of the RAC and fire protection industries and if significant overlaps are found, will be addressed after the Ozone Act review has been completed.

Safety issues in the RAC industry

All refrigerants have some hazard characteristics, such as toxicity or flammability, under certain conditions and should, therefore, be handled in accordance with state and territory WHS, dangerous goods and other relevant requirements.

A key attribute of many of the high-GWP SGGs is that they are not flammable or are mildly flammable11. Some alternatives with low or no-GWP have hazardous properties different to the commonly used high-GWP SGGs and require suitable controls for their safe use. Some of these properties include flammability, explosiveness, toxicity, corrosiveness and/or operation under high pressure.

2.5 Product stewardship and destruction facilities approvals

The product stewardship scheme for end-of-life management of ODS and SGG refrigerants has several parts: importer licence obligations, a ban on emission of ODS and SGGs, and control of end-use handling that requires the return of waste ODS and SGG refrigerants for disposal. Destruction of ODS and SGGs is carried out at approved destruction facilities to ensure the process meets international and domestic standards.

There are approximately 1200 import licence holders who have product stewardship obligations imposed through their licence. There are approximately 60 000 individuals and 18 000 businesses who participate in this scheme through end-use controls.

There is only one approved product stewardship scheme for ODS and SGGs in Australia: Refrigerant Reclaim Australia (RRA). RRA itself is an industry-led not-for-profit organisation that finances its operations by charging a fee to importers based on the quantity of gas imported. RRA manages the collection, transport and destruction of waste gas.

Since 1993 RRA has recovered and destroyed around 4500 tonnes of ODS and SGGs, which is the equivalent of preventing well over the equivalent of 10 million tonnes of CO2 being emitted into the atmosphere. This intervention alone has reduced emission of ODS and SGGs by 9.4 Mt CO2-e

11Flammability ratings are coded for industry identification and for regulatory purposes in terms of A3 which is highly flammable; A2 and A2L which are flammable and mildly flammable; and A1 which is not flammable.

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Halon extinguishers returned for halon reclamation/destruction

(6.0ODS/3.43.4SGG) between 2004 and 2014 and is expected to contribute a further 12.74 Mt CO2-e out to 2030.

2.6 Halon

Halons are potent ODS. The production and consumption of halons were phased out in developed countries from 1 January 1994 and in developing countries from 2010, except for essential uses, under the Montreal Protocol. Australia has satisfied its obligations under the Montreal Protocol by:

banning the import, export and manufacture of bulk new halons from 31 December 1992—the import of used or recycled halon is allowed if a used substance licence is held

developing the Australian Halon Management Strategy to manage Australia’s essential civilian halon stocks until alternatives are available for all applications.12

Australia supports emission reduction of halon, consistent with obligations under the Montreal Protocol13 by:

banning the import and manufacture of halon equipment, unless the product is essential (s38, 40 and Schedule 4). (One example of a product that may meet the criteria is a halon fire suppression system aboard an aircraft if required under Australian airworthiness standards.)

implementing an end-use domestic permit scheme for fire protection and licensing requirements for the handling and sale of halon

administering the National Halon Bank for decanting, purification, storage and disposal of halon from decommissioned halon equipment.

Halon is no longer used in the majority of fire protection applications where previously it was in common use for fire protection. However, there still remain applications where there is no practical alternative.

Civil aviation: Halon is used as a fire extinguishing agent in certain areas of most aircraft. There are no viable alternatives for some civil aviation applications, such as for cargo compartment fire suppression.

Civil maritime: Halon is also used in some civilian ships as it is impractical to replace a halon system in these vessels. The demand for halon for this purpose has progressively reduced as ships constructed from the early 1990s did not contain halon systems.

Defence: Some aircraft, helicopters, ships, submarines and land vehicles use halon systems as there are currently no viable alternatives.

The International Civil Aviation Organization (ICAO) has mandated the phase-out of halon products and equipment for a wider range of civil aviation uses. In June 2011, the ICAO Council approved 12 Decision X/7.13 ibid.

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Storage of halon containers at the Australian National Halon Bank in Melbourne; halon is a damaging ODS if emitted

amendments to the Chicago Convention on Civil Aviation, which established requirements and timeframes for the use of halon alternative fire-extinguishing agents in most civil aviation applications. In Australia, this is managed domestically by the Civil Aviation Safety Authority. There are still a limited number of aviation applications where ICAO has not mandated a timeframe for halon replacement due to lack of suitable alternatives such as in engine nacelles and cargo bays.

Halon under the Ozone Act and Ozone Protection and Synthetic Greenhouse Gas Management Programme (Ozone Programme)

The Ozone Act regulates the import, export and manufacture of halon, used halon and equipment. These controls satisfy Australia’s obligations under the Montreal Protocol (Article 2B). The use of halon is regulated through the fire protection end-use licensing scheme. End-use licensing supports the appropriate handling of ODS and SGGs to reduce their emission to the atmosphere. This intervention is supported by Decision X/7 of the Parties to the Montreal Protocol.

The Department also manages the Australian Halon Management Strategy (AHMS) required under Decision X/7 of the Parties to the Montreal Protocol. The strategy provides a framework for the responsible management of Australia’s essential civilian halon stocks in the lead up to replacement of all remaining halon uses once alternatives are commercially available. The AHMS has not been reviewed since it was developed in 2001. It is being reviewed as part of the Ozone Act review to reflect a whole-of-programme and whole-of-government approach.

Australia maintains a stock of halon, accumulated through collections of halon from decommissioned equipment, to meet essential (where no alternative exists and is required to safeguard health and safety and essential property) civilian requirement. The halon is stored in the National Halon Bank, which is administered by the Department. The main civilian user of halon stocks is the aviation sector. The Department of Defence has a separate stock for defence uses.

Halon stocks and future requirements

As Australia is largely a technology taker, the transition from halon systems will be dependent on the development of alternative technology and take up in key markets such as the US and the EU. Australia may be able to influence accelerated take-up through international fora including the Montreal Protocol and ICAO.

In 2012, the Department commissioned a report by Energy International Australia titled Review of Australia’s halon essential uses requirements to better understand Australia’s projected halon essential uses. The report found that halon would be required beyond 2030 to meet servicing demand arising from current airframe designs. It further found that there were sufficient stocks of halon held at the National Halon Bank to satisfy essential civilian usage in the medium term based on past sales and predicted equipment usage.

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Bottles of bromomethane in storage; bromomethane is commonly known as methyl bromide

Table 4 below provides estimates of civilian essential use requirements. The report assumes that no significant new uses of halon are introduced. If equipment requiring halon is introduced to the market, this may impact on the estimated strategic stock requirements. Projections have been confirmed by government and industry. Australia is therefore well positioned to meet future needs for bulk halon from the stock held at the National Halon Bank.

Table 5 Estimated future civilian essential use halon requirements

Halon 1211 (tonnes) Halon 1301 (tonnes)

Potential future requirements 35 tonnes (to year 2040)

To 55 tonnes (to year 2100)

139 tonnes (to year 2060)

To 229 tonnes (to year 2100)

Current NHB stocks (December 2014)

99 tonnes 189 tonnes

Surplus/Shortfall Potential surplus to 2100 Potential shortfall before 2100

*Current consumption figures in the table above are presumed to include some Australian Defence Force essential use.

2.7 Methyl bromide

Methyl bromide is used primarily as a fumigant. Controls differ depending on its use in quarantine and pre-shipment (QPS), non-QPS or feedstock applications. Key facts relating to QPS, non-QPS and feedstock use for methyl bromide are set out in Figure 5. The definitions for each type of use or application are set out under the Montreal Protocol and reflected in the Ozone Act or Regulations.

Figure 8 Key facts for methyl bromide use and the Montreal Protocol

A controlled substance licence for methyl bromide stipulates the maximum amount allowed for QPS, non-QPS and feedstock uses (section 16 (3)). This condition, along with end-user reports, allows Australia to identify non-QPS use and provide detailed reports to satisfy its Montreal Protocol Article 7 obligations.

Under the regulations, methyl bromide feedstock use requires a permit issued by the Department on an annual basis. There are controls over feedstock use that are built into the permit approval process under the regulations.

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2.8 Compliance and enforcement

The Department undertakes compliance and enforcement of the Ozone Act to achieve the objectives of the legislation to reduce emissions of ODS and SGGs. For the industry, enforcement is regarded as an important part of maintaining a level playing field for business and an essential element of fair and competitive arrangements.

Compliance and enforcement is connected to all activities covered by the Ozone Act, with requirements on licensed entities to manage and handle scheduled substances lawfully. This includes providing education, information and training support on user obligations under the Act, including, for example, how to comply with licensing requirements and through attending industry events.

There are criminal offences and civil penalties relating to breaching requirements under the Ozone Act. In addition, breaching the Ozone Act can result in cancellation or suspension of licences and the forfeiture of imported goods. These provisions are supported by a range of enforcement powers for inspectors under the Ozone Act.

The compliance and enforcement provisions in the Ozone Act interact with other Commonwealth legislation, including the Customs Act 1901, Crimes Act 1914 and Criminal Code Act 1995

2.9 Cost recovery arrangements

The Ozone Protection and Synthetic Greenhouse Gas Management Programme (Ozone Programme) operates on a cost recovery basis with a range of fee and levy revenue streams, through the Ozone Protection and SGG Special Account (the Special Account). The Special Account is established under Part VIIIA of the Ozone Act. The Special Account provides for the payment of the Australian Government’s costs associated with the administration of the Ozone Programme. This includes administration of the Ozone Act, programmes to support an ODS phase-out and ODS and SGG emission reduction, managing the National Halon Bank, and research relating to ODS and SGGs (section 65D).

The Special Account holds money collected through application fees, levies, penalties and income received from the operation of the National Halon Bank (section 65C). The import levies are currently set at $165 a tonne for SGGs, $3000 per ODP tonne for HCFCs and $135 a tonne for methyl bromide. The maximum levy rates are set by the Ozone and Synthetic Greenhouse Gas (import and manufacture) Levy Acts, and the current levies are at their maximum. The application fees for the various licences, approvals and authorities under the Ozone Act and regulations are also set in regulations. Cost recovery arrangements are set out in the Department’s Cost Recovery Impact Statement January 2012 to June 2016. The levy rate and import licence fees have not varied since the Act was amended in 2003. Further details are available on the Departments website at: www.environment.gov.au/about-us/accountability-reporting/cost-recovery.

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QPS is controlled under the Montreal Protocol but is not being phased-out. Amounts used for QPS purposes are reported under Article 7 of the Montreal Protocol but do not count towards Australia's annual consumption limits. Methly bromide for QPS use must be imported, exported or manufactured under a controlled substance licence.

QPS

Non-QPS use has been phased-out under the Montreal Protocol except for critical use exemptions approved annually by the Parties to the Montreal Protocol.Amounts used for non-QPS purposes are reported to the Montreal Protocol and count towards Australia's consumption of methyl bromide.Must be imported or manufactured under a controlled substance licence. If required, emergency use can be approved by the Minister and must be reported to the Montreal Protocol.

Non-QPS

Feedstock use is not being phased-out under the Montreal Protocol.Amounts used as feedstock are reported under Article 7 of the Montreal Protocol but do not count towards Australia's annual consumption.Exempted from licensing requirements unless imported with gas for other purposes, in which case a controlled substance licence must be held.

Feedstock

http://www.environment.gov.au/about-us/accountability-reporting/cost-recovery

Product containing hydrocarbons

3. SCOPEMany public submissions to the Ozone Act Review suggested additional coverage of refrigeration and air conditioning gases under the Ozone Act. Industry views on this issue included:

- providing a broad coverage of refrigerants to cover all gas types used in the RAC industrythis would include both synthetic and natural refrigerants, including HFO-1234yf, hydrocarbons and ammonia

- increasing the scope of the Ozone Act to impose import and end-use controls on blowing agents, aerosols and anaesthetics, some of which are also not scheduled substances.

One rationale put forward for regulating refrigerant gases, other than controlled ODS and SGGs, is that emission reductions could be achieved through improved equipment performance. Currently many classes of RAC equipment must comply with the Greenhouse and Energy Minimum Standards Act 2012. This sets minimum efficiency standards for equipment that is sold in the Australian market. However, there are no requirements for the equipment to be installed or serviced by a technician in a way that preserves the energy performance of the equipment.

It has also been suggested that regulating additional gases would provide a level playing field for industry members by ensuring oversight and competitiveness within the industry, with all equipment manufacturers, importers and technicians required to operate under the same regulatory conditions, not just when ODS and SGGs are being used.

However, other industry submissions specifically noted they did not want additional gases covered in the Ozone Act. These included not supporting the addition of:

low-GWP synthetic refrigerants

natural refrigerants.

Some industry views suggest that the Ozone Act is not the appropriate legislation to cover low-GWP refrigerants as regulation associated with management of these substances may result in greater emissions. For example, destroying a low-value GWP refrigerant gas once it has been recovered from a piece of equipment may result in greater emissions resulting from gas transportation or destruction processes. A differentiated system would need to be developed to manage the characteristics of different chemicals should low or no-GWP chemicals be included under the Ozone Act.

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The regulation of safety aspects for technicians and for consumers has been put forward as a further reason for regulation. As the GWP of refrigerant gases is

decreased there is a trend towards increased flammability. Many of the alternatives to high-GWP refrigerants have hazard characteristics including varying degrees of

flammability or toxicity.

Ammonia system (courtesy of WorkCover Qld)

It has also been suggested that while natural refrigerants may have safety concerns they are not harmful to the environment, and, therefore, the Ozone Act is not the appropriate legislation to regulate these gases. State and territory jurisdictions already regulate WHS, consumer protection and transport of dangerous goods. To include non-ODS and SGG refrigerants under the Ozone Act would increase regulation and could be introducing duplicate regulation.

Limitations for regulating non-ODS and SGG gases

The power of the Commonwealth to enact the Ozone Act is based on the external affairs power clause in s51 of the Australian Constitution, which allows the Commonwealth to legislate on matters related to external affairs including international treaties. This report details Australia’s international obligations to manage ODS and SGGs and the basis for the Ozone Act.

There is potential to regulate maintenance and installation of equipment where the gases used are not scheduled substances under the Montreal Protocol or listed in the Kyoto Protocol in certain circumstances. However, if the regulatory scheme extended beyond Australia’s international obligations—such as to cover safety or consumer protection—the Commonwealth could only regulate corporations and activities carried out on Commonwealth property, in a territory, or by a Commonwealth agency. There would be significant limitations to who would be covered by those regulatory requirements. The increasing use of non-ODS and SGG gases through maintenance of RAC equipment and management of end-use licensing in the longer term within the context of deregulation is considered in relevant sections.

4. EMISSION REDUCTION OPPORTUNITIES

4.1 Emission reduction measures

Table 8 summarises the emission reduction options considered in addition to a HFC phase down, their cost–benefit ratios and their regulatory burden. The estimated emission reduction from each option is modelled separately. It is anticipated that the emission reduction potential of each measure would change if more than one policy were adopted.

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Table 6 Emission reduction potential from continuing and new policy interventions, cost–benefit and regulatory burden measurement

Measure name Emissions reduction potential between 2017–2030 Mt CO2-e1

Preliminary Cost–benefit

ratioDirect

emissionsIndirect

emissions2

Total

SGGs

Continue current emission reduction schemes (end-use licensing and product stewardship)

39.813 7.0 46.81

Improved handling practices with mobile air-conditioning service

3.01 - 3.01

Ban import of equipment with high-GWP gas

6.77 - 6.77 2.9-0.45

1. Emission reduction estimates have been drawn from the Expert Group, Assessment of environmental impacts from the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989, 2015.

2. Indirect emissions avoided over the projection period as a result of the improved efficiency of certain classes of hard working commercial refrigeration and AC are projected to be at least 7 Mt CO2. This represents reductions in electricity consumption of at least 7600 GWh of electricity that would cost more than a billion dollars at 15 cents per kWh as an average electricity price.

3. This figure includes 29.82 Mt CO2-e in emissions reduction from the RAC end use licensing scheme and 1.31 Mt CO2-e from fire protection. It also includes 8.68 Mt CO2-e from continuing the product stewardship and destruction scheme.

4. This assumes that the administration of this scheme is streamlined. Further discussion on how the end-use licensing scheme could be streamlined is presented in the End Use section.

5. Cost– benefit ratio for MAC equipment ban is 0.4 (NPV 2016-2030), supermarket equipment is 2.9 (NPV 2016–2030). To ban both categories of equipment the ratio is 0.4 (NPV 2016–2030).

Three policies are not considered in detail here: the Emissions Reduction Fund, the introduction of a product stewardship scheme foer end of life RAC equipment and banning the import of high-GWP gases.

The Emissions Reduction Fund is the centrepiece of the Australian Government’s plan to meet the UNFCCC Cancun Agreement target to reduce emissions by 5 per cent below 2000 levels by 2020 (2020 target). It creates incentives for businesses and communities across the economy to reduce greenhouse gas emissions.

The Emissions Reduction Fund implements a long-term framework for stable and sustainable climate change policy. The Emissions Reduction Fund offers strong incentives to seek out actions that are in the interests of business as they reduce costs and in the interests of the environment as they reduce emissions. Specific additional methodologies under the ERF could be developed to reduce direct emission of SGGs and indirect emission from the use of RAC equipment. These methodologies will be considered through the established methodology process for the Emissions Reduction Fund and are not considered here.

The introduction of a product stewardship scheme for stationary domestic RAC equipment is not considered in this report. In 2013, the Department undertook a study into the feasibility of a product stewardship scheme for end-of-life stationary domestic RAC equipment (mainly

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refrigerators and air conditioners), including the materials and the gas. As part of the study, the Department commissioned a material flow analysis and cost-benefit analysis, as well as undertaking extensive industry consultation in relation to regulatory, co-regulatory and voluntary schemes. The study found that it would not be cost effective to introduce such a scheme at this time.

Opportunities to improve the rate of refrigerant recovery from end-of-life equipment through the existing mechanisms, that is, the Ozone legislation and Refrigerant Reclaim Australia, may be harnessed through targeted communications, compliance and enforcement work. This is considered further in the next section on improving the effectiveness and efficiency of the current end-use licensing and product stewardship scheme.

The Department initially considered the feasibility of banning certain high-GWP gases to reduce emissions of HFCs. However, this policy control yielded only modest emission reduction. In initial stakeholder consultation implementing this option to reduce emissions was also not supported. A cost–benefit analysis of banning the import of HFC-407C and HFC-410A in 2026 was also undertaken. The cost–benefit ratio for this policy intervention was 0.3.

4.2 Maintain current end-use licensing and product stewardship and improve their effectiveness and efficiency

RAC and fire protection end-use controls, including the product stewardship scheme for ODS and SGGs, could be maintained into the future and improved to achieve additional emissions reduction under the Ozone Act. The end-use licensing schemes alone are estimated to have reduced emission of SGGs by 6.83 Mt CO2-e and 3.6 Mt CO2-e indirect emissions between 2003 and 2013 and are estimated to contribute a further 46.81 Mt CO2-e in emissions reduction to 2030 if maintained in their current form14. The cost-benefit analysis undertaken by Jacobs also found that the costs of removing or transferring the end-use licensing schemes outweighed the benefits of doing so. Table 5 sets out how each part of the current end-use controls contribute to reducing emissions.

Industry feedback during the course of the Ozone Act Review has highlighted an opportunity to reduce emissions across end-use sectors by improving the level of compliance with the current regulations, including in regard to recovery of gas from end-of-life equipment. Some who provided this feedback recommended steps to improve compliance with the Ozone Act and to focus on areas where there is a perceived high degree of end-of-life issues. Table 5 includes additional measures that build on existing end-use licensing schemes.

One option is to improve refrigerant recovery from the MAC sector. The small MAC sector (characterised by private and light commercial vehicles) comprises approximately 21 per cent of Australia’s overall refrigerant bank (2012). Annual imports to service this equipment, replacing leaked refrigerant, are disproportionally high in this sector. The Expert Group’s modelling indicates that in a ‘business as usual’ (BAU) scenario, emissions from small MAC equipment to 2030 will amount to 20 Mt CO2-e. This estimate accounts for expected transition over the coming years to a greater proportion of low-GWP refrigerants. The Expert Group suggests that improved practices within the existing regulatory framework could reduce emissions by 3.01 Mt CO2-e between 2017 and 2030. Improving practices means improving compliance and greater enforcement activity.

14 39.81 Mt CO2-3 in direct and 7.0 Mt C02-e in indirect emissions. 39

Table 7 Summary of the estimated and projected direct and indirect emissions, 2003 to 2030 (in Mt)

Emissions avoided (Mt CO2e) 2003 to 2013 2014 to 2030

Direct emissions by improvement measureSGG

SGG Total

Improvements in reducing handling losses and leaks from all classes of RAC equipment

5.36 29.82

The continuation of Refrigerant Reclaim Australia’s industry stewardship scheme and its expansion to SGGs

1.14 8.68

Improvements in reducing handling losses and leaks from all classes of fire protection systems

0.33 1.31

Improved handling practices in the MAC sector - 3.01

Total direct emissions 6.83 42.82

Indirect emissions reductions, as a result of reduced energy use

3.6 7.0

Grand totals 10.42 49.82

Options to either transfer these end-use licensing schemes to the states and territories, to continue them on a voluntary basis or to remove them are considered in further detail in the End Use section.

4.3 Selective high-GWP equipment import bans

Emissions reductions could be achieved by banning the import and manufacture of equipment containing high-GWP HFCs. A decision to ban types of imported equipment containing high-GWP HFCs would reduce the bank of gas that could potentially be released into the atmosphere. Equipment bans have been used internationally as a mechanism to reduce emissions of SGGs.

The EU has imposed mobile air conditioning bans for equipment designed to use a refrigerant with a GWP higher than 150. The ban is gradual. The first phase prevented car manufacturers from obtaining approvals for new vehicles types with air condition

equipment containing gases with a GWP higher than 150. This was followed by a requirement that all new car types be fitted with a refrigerant gas lower than 150. By

2017, the ban will apply to all new vehicles placed on the European market. This means that from 2017 no new vehicle with an air conditioner containing a high-GWP

air conditioning system can be registered, sold or enter into service in the EU.15

This policy has seen the MAC market trend strongly towards low-GWP alternatives with one early estimate from a leading gas manufacturer indicating that there are now over two million vehicles worldwide using low-GWP refrigerants, including R-1234yf.

15 European Directive 2006/40/EC. 40

A decision to ban equipment in Australia could be based on the following considerations:

banning equipment type would lead to emissions reductions

equipment type uses a high-GWP gas, banning could push transition to low-GWP

leak rate of equipment is high leading to high emission from the equipment type

large bank of gas that is likely to grow into the future without intervention

safe and efficient alternatives exist and are available on the Australian market or soon will be.

If equipment bans were selected as an effective policy mechanism to reduce emissions of HFCs, then legislation could be developed to allow additional bans to be added over time as appropriate. Alternatively, the Department could work to encourage voluntary or industry-led bans.

In the first instance, two equipment bans are presented for consideration:

high-GWP MAC equipment in passenger vehicles and light commercial vehicles

high-GWP commercial refrigeration.

High-GWP mobile air conditioning ban from 2017

Australia could implement import and manufacture bans of new high-GWP MAC equipment in passenger vehicles and light commercial vehicles. The ban could be imposed from, for example, 1 January 2017, an expected realistic timeframe for ability to implement the required legislative changes. The ban would be limited to MAC equipment in passenger vehicles and light commercial vehicles manufactured after this date. Similar to the ODS equipment bans imposed through the Ozone Act in the past, spare parts to allow for the servicing of existing equipment would also be exempted from the ban.

The MAC sector has been selected as equipment tends to have a higher leak rate and a reportedly poor recovery rate for refrigerant gas at end of life. Also, many global automotive manufacturers have agreed on a single platform for future MAC—R1234yf that has a GWP of less than 1, although some European manufacturers are now exploring CO2 systems. This sector also represents a large proportion of the total bank in equipment and consumes large quantities of bulk gas. The Expert Group estimates that the MAC sector will continue to consume approximately 550 tonnes per annum16 to service the existing bank of equipment i.e. the high level of bulk gas consumption will continue into the future.

Even though there is a trend away from high-GWP equipment in this sector, emission reduction potential of the ban would be 4.13 Mt CO2-e from 2016–2030 by bringing forward its introduction. The barriers to transition by original equipment manufacturers in this sector to some low and no-GWP alternatives are low, and replacement gases are available in international markets. By 2025, approximately 26 per cent of registered vehicles are modelled to be using low or no-GWP refrigerant gases without the equipment ban. Even taking this into account the Cost Benefit Analysis indicates that the costs of imposing this ban outweigh the benefits.

Based on current licence numbers, approximately 265 importers and manufacturers might be affected by this change. The actual number of businesses impacted is likely to be less as this figure

16

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includes all importers of MAC, including importers of second-hand vehicles and niche products. Assuming that they these importers no longer have to hold a licence under the Ozone Act, this ban presents a regulatory saving of $143 350.

Supermarket equipment containing gas with a GWP >2500 in 2020

An import and manufacture ban on specified commercial refrigeration equipment used in the cold food chain charged with gas with a GWP >2500 could be introduced from 2020. This would ban the import of equipment that uses of R404a in this sector. R404a is a potent SGG with a GWP of 3800 and is commonly used in this sector. The sector contains approximately 5070 tonnes of refrigerant gas with the majority being HFC-404a. Leak rates in the sector range between 3 per cent and 15 per cent, which are high when compared with other sectors.

Based on the current licence numbers, selectively banning equipment containing HFC-404a would affect up to approximately 215 licence holders. Similarly, with the MAC ban described above, replacement parts and servicing of existing equipment would not be banned under the option.

The direct emissions reduction from this policy intervention would be 2.42 Mt CO2-e for HFC-404a between 2016 and 2030. Unlike banning the import of MAC equipment, the benefits of banning supermarket equipment outweigh the costs. The ban also reduces the regulatory burden on the importer, assuming that all of them would no longer have to hold a licence by $100 363.

4.4 Reducing indirect and direct emissions—RAC maintenance

Regular maintenance of refrigeration and air conditioning systems will improve system performance, and, therefore, reduce indirect emissions from energy consumption. This provides an economic benefit to systems owners by reducing energy costs and prolonging equipment life.

The Expert Group study shows that imposing maintenance requirements for medium and large commercial RAC equipment containing scheduled substances may account for approximately 46.52 Mt CO2-e in emission reduction to 2030 across commercial air conditioning.

Regular equipment maintenance requirements could be limited to classes of systems where emission reduction gains are the greatest. The Expert Group found that the largest emissions reduction potential from maintenance was for medium air conditioning, commercial refrigeration with remote condensing units and large air conditioning. Table 13 summarises the direct and indirect emissions by equipment class.

The emissions estimates are based on the EU’s leak reduction requirements and ISO 5149-4: 2014 Refrigerating systems and heat pumps—Safety and environmental requirements—Part 4: Operation, maintenance, repair and recovery.

Table 8 Emission reduction from maintenance to 2030 for ODS and SGGs by major commercial equipment classes

Equipment class Estimated number of pieces of equipment

Direct emission reduction (Mt CO2-e)

Indirect emission reduction (Mt CO2-e)

Total emissions reduction (Mt CO2-e)SGG

RCFC: remote 285,100 4.44 10.8 15.24

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RCFC: supermarket 1900 0.48 1.1 1.58

Medium AC 1,495,200 3.10 18.2 21.3

Large AC 27,500 0.24 8.1 8.34

Large MAC 69,800 0.06 - 0.06

Grand total 1,879,500 8.32 38.1 46.52

The benefits of imposing a maintenance regime significantly outweigh the costs to industry (ratio 6.7) primarily due to energy savings. The cost–benefit ratio is so high for this option that it is questionable if regulation is required to ensure equipment owners undertake maintenance activity. The regulatory cost burden for a maintenance scheme is high at approximately $634 000 000. This cost would reasonably prevent the Department from regulating maintenance testing unless a very large regulatory offset could be found.

Non-regulatory mechanisms may be more appropriate to support increasing maintenance activity. The regulatory burden of undertaking a targeted education campaign is estimated to be $2 900 000. Targeted communications could focus on raising the awareness of equipment owners as to the environmental and economic advantages of regular maintenance. Good practice guides for both equipment owners and technicians could also be developed to promote awareness within the industry.

Similar to the leak testing scheme, the maintenance option does not cover fire protection equipment. As fire protection systems do not normally consume energy, the environmental benefits from intervention are likely to be the same as that for the leak testing option above. As such as similar approach could be taken.

4.5 Reducing indirect and direct emissions—leak reduction

Refrigeration and air conditioning equipment is inherently leaky. Leak monitoring can reduce direct emissions by identifying and repairing the leak earlier than otherwise would have occurred. Leak monitoring could reduce indirect emissions from electricity production as systems operate less efficiently when the refrigerant charge is below the optimal level. Regular leak monitoring also benefits equipment owners by reducing the costs of stock loss and unproductive down time when equipment fails unexpectedly.

The Expert Group estimates that introducing leak reduction strategies, similar to those being introduced in the EU, could reduce emissions in high gain equipment types by 12.02 Mt CO2-e. The intervention involves a mix of routine inspections (6- to 12-month frequency) and automatic leak monitoring equipment depending on the amount of refrigerant gas. The emission reductions achievable from this type of intervention in Australia are set out in Table 12.

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Indirect emissions from the RAC sector contribute around 11 per cent to Australia’s total emissions profile. RAC equipment consumes approximately 22 per cent of

Australia’s electricity annually.

Remote condenser units used in medium-sized commercial refrigeration applications consumed about 20 per cent of Australia’s total imports of high-GWP gases in 2013. This may be due to the high leak rates for this equipment type. The Expert Group estimates that emissions could be reduced by 5.54 Mt CO2-e if regular leak testing was introduced for this equipment class.

Medium air conditioning systems have average lower leak rates at approximately 4 per cent/per annum. However, with approximately 1 495 200 pieces of equipment using approximately 23 500 tonnes of refrigerant in Australia, this sector also has strong potential for additional emission reduction. The Expert Group estimated that by minimising leaks and improving the life-long running efficiency of equipment, for medium commercial air conditioning equipment there is the potential to avoid emitting a further 5.5 Mt CO2-e between 2017–2030.

Table 9 Emission reduction from leak reduction to 2030 for ODS and SGGs

Equipment class Annual leak rates (%) Direct emission reduction (Mt CO2-e)

Indirect emission reduction (Mt CO2-e)

Total emissions reduction (Mt CO2-e)

2013 2030 SGG

RCFC: remote 15.0 7.5 4.44 1.10 5.54

RCFC: supermarket 12.5 6.0 0.48 0.1 0.58

Medium AC 3.0 2.0 3.10 2.40 5.50

Large AC 4.0 3.0 0.24 0.1 0.34

Large MAC 12.0 6.0 0.06 - 0.06

Grand total 8.32 3.7 12.02

The Department has examined taking a regulatory approach to supporting leak testing. This would require equipment owners to regularly test their equipment, supported by having this work undertaken by an appropriately skilled and trained refrigeration and air-conditioning workforce. It would also require equipment owners to repair leaky equipment—this could be done by tightening the existing emissions ban.

The costs of imposing a leak testing scheme outweigh the benefits from reduced maintenance and gas leakage costs. The regulatory cost burden for a leak testing scheme is high at approximately $634 000 000. This cost would reasonably prevent the Department from regulating leak testing unless a regulatory offset could be found.

As the regulatory cost of requiring equipment maintenance is high, non-regulatory mechanisms may be more appropriate. The regulatory burden of undertaking a targeted education campaign is estimated to be $2 900 000. Targeted communications could focus on raising the awareness of equipment owners to the environmental and economic advantages of regular leak testing. Good practice guides for both equipment owners and technicians could also be developed to promote awareness within the industry.

This measure does not consider how a leak testing scheme could apply to fire protection equipment. Fire protection equipment is generally thought to have a lower leak rate than refrigeration and air-conditioning equipment due to equipment design and to the public safety

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requirements placed on fire protection equipment to ensure it functions as and when required. Further analysis of both the environmental gains and cost to industry would be required before the efficacy of a leak testing scheme or a targeted communication campaign could be accurately evaluated.

Where there is existing data relating to accidental discharges, and not leaks, from fire protection equipment, there may be cause for targeting existing communications efforts as a means of improving compliance with the regulatory requirements. If further regulation were to be proposed, however, particular effort would be made not to duplicate any existing state and territory building code and safety requirements or specific fire safety requirements in place for the aviation, mining and maritime industries.

4.6 Emission reduction of other SGGs—SF6 and PFC

The Ozone Act controls sulfur hexafluoride (SF6) and perfluorocarbons (PFCs). These gases form a very small part of Australia’s overall emissions profile, even with their very high-GWPs. SF6, for example, has a long atmospheric lifetime of around 3000 years and a global warming potential of 22 800. PFCs generally have GWPs, ranging from >7500 to 10 300.

SF6 is predominantly used in electrical switchgear equipment associated with the generation, transmission and distribution of electricity across Australia. It is estimated that the leak rate from small gas insulated switchgear is very low (<0.1% per year) with a leak rate from larger equipment that is not sealed slightly higher between <1 to 5% per year.

SF6 can also be used in medical and veterinary applications, used in the manufacture of semi-conductors and is produced as a by-product of manufacturing processes. These are minor uses when compared to its use in electrical switchgear equipment.

Emissions from SF6 are projected to increase gradually over the period to 2030. The main driver of this increase is the continuing additions of circuit breakers to the national electricity grid and the projected emissions rate from operating these circuit breakers. Historically the emissions rate has declined significantly but recent National Greenhouse and Energy Reporting Scheme data suggests the emissions rate has been stable over the period 2009 to 201317. The emissions rate, however, is projected to remain stable over the period to 2030. A projected gradual increase in the number of circuit breakers, along with projected increasing use in other applications such as medical and industry uses, produces the projected emissions increase.

Overall, there are very few issues associated with the treatment of SF6 under the Ozone Act with respect to emissions reduction. The leak rates associated with SF6 equipment are already very low, and maintaining low leak rates is supported by voluntary industry action (refer to the ENA Industry Guideline for SF6 Management, below), and appropriate training for end-use technicians through State and Territory-based occupational licensing schemes18. The industry has also taken leadership in developing SF6 recycling. Selected equipment bans could be considered in the future when alternatives are available and if industry is not voluntarily moving to alternatives. None-the-less the Government should continue to work with industry to improve gas containment and end-of-life practices.

17 In 1990 SF6 emissions accounted for 0.009 giga-grams, dropping to just under 0.006 in 2012 (http://ageis.climatechange.gov.au/Chart_KP.aspx?OD_ID=37948353079&TypeID=2).18 Training is covered Electrical Supply Industry and Electricity Generation Industry training requirements.

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http://ageis.climatechange.gov.au/Chart_KP.aspx?OD_ID=37948353079&TypeID=2

ENA Industry Guideline for SF6 ManagementIn 2008, the Department along with the Energy Networks Association, whose membership covers

large energy providers, developed the ENA Industry Guideline for SF6 Management. The guide complements existing regulation, Australian Standards, Codes and organisation policies and

practices. It seeks to promote effective management of SF6 and includes responsible use principles, leak detection, decommissioning, recycling and disposal.

Import data also shows that PFCs are used for laboratory and analytical purposes19 and in specialist manufacturing20. PFCs can also be produced as a by-product of aluminium production. The aluminium industry has introduced initiatives to reduce PFC by-product production. There is insufficient data on the bank of PFC to determine if additional, specific additional intervention to reduce emissions is appropriate at this time.

Additional emission reduction intervention is not considered a priority at this time for either SF6 or PFC.

19 Reported as research, research testing, test and research, medical nanofabrication. 20 For example, spectacle and semiconductor manufacture.

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5. EFFICIENCY AND EFFECTIVENESS MEASURES

5.1 Meeting international obligations – regulation of new gases

The Montreal Protocol, the UNFCCC and its Kyoto Protocol cover a specific set of ODS and SGGs. This section considers regulation of new ODS and SGGs. This section also considers the regulation of low and no-GWP alternatives under the Ozone Act.

International developments

Montreal Protocol

The Ozone Act covers all the gases Australia is obligated to regulate under the Montreal Protocol. Parties to the Montreal Protocol may consider controls on additional ODS in the future if they are likely to have a material impact on the recovery of the ozone layer. There are a number of uncontrolled ODS identified on the Ozone Secretariat’s website including countries where production is taking place. However, there is no information on sales or imports of these substances. There are over 50 ODS that are not controlled under the Montreal Protocol due to their low ozone-depletion potential or limited use. Controls have not been introduced due to their estimated limited impact on the ozone layer.

Decision X/8 of the Meeting of Parties notes that parties should report on new ODS being produced or sold in their territories. There is no provision in the Ozone Act to obtain information on uncontrolled ODS being imported or sold in Australia. In the past, the Department has obtained information on imports through a combination of Customs data and communication with importers and users. Responses have been useful but not of sufficient detail to inform policy. As an example, the two surveys on n-propyl bromide, which has an ODP of 0.013 to 0.018, to date indicate a wide discrepancy, with one showing imports at around 1 tonne and the other at 40 tonnes.

In the event of negotiations to regulate additional ODS in future, the current situation leaves Australia without reliable information to inform negotiations. It is important from a national interest perspective that reliable information is held on the type, quantity, location and use of ODS species in Australia.

UNFCCC and the Kyoto Protocol

Australia’s obligations under the Kyoto Protocol’s second commitment period, if ratified, will include three high-GWP gases not currently covered by the Ozone ActHFC (HFC-41-10mee), PFC C10F18 and nitrogen trifluoride. The inclusion of these gases in the second commitment period was made following recommendations from the UNFCCC Subsidiary Body for Scientific and Technological Advice. New recommendations are generally made as a result of new information. For example, increased use of the gas; identification of the gas in the atmosphere and/or affirmed high-GWP values.

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It is important for the integrity of the Montreal Protocol that any threats to the recovery of the ozone layer are identified, including the increased use of

uncontrolled ODS. It is also important for Australia’s national interest to have access to data to inform future negotiating positions.

HFC-41-10mee or decafluoropentane is a zero ozone-depletion alternative to HCFC and has a GWP of 1640. It is generally used as a carrier fluid, solvent, cleaning agent, aerosol and heat transfer agent.

PFC C-10F-18, or perfluorodecalin, has a GWP of 7200. It is generally used in medical applications that make use of its ability to dissolve gases. It is also reportedly used in cosmetics and beauty products to dissolve and deliver oxygen to the skin. It is currently known to be used in such small quantities that its emissions are not estimated in Australia’s National Inventory.

Nitrogen trifluoride has a GWP of 17 200. It is used in the electrical and semiconductor industries for the purpose of etching and chamber cleaning as an alternative to perfluorocarbons (PFCs). It is also reportedly used in the manufacture of some electronic applications including computer chips, flat-screen LCD televisions and roof-top solar systems. It is currently known to be used in such small quantities that its emissions are not estimated in Australia’s National Inventory.

HFEs have very low GWPs. They were originally developed as a replacement for CFCs, HFCs, HCFCs, and PFCs. HFEs have been developed for commercial uses as cleaning solvents, blowing agents, and dry etching agents in semiconductor manufacturing

PFPEs are reportedly used as industrial heat transfer fluids, in electronic reliability testing, metal and electronics cleaning, and lubricant applications. There is a scarcity of readily available information on the GWPs and information on use is not considered reliable. For these reasons, greater understanding of these gases is important.

The TWG was broadly supportive of a collection of data on these gases. However, it has been suggested that the use of existing reporting mechanisms, such as customs data, should be investigated before establishing new regulations.

Australia could maintain the status quo with respect to legislating these gases by not placing any new licensing requirements on additional ODS and SGGs (HFEs, PFPEs, HFC-41-10mee, PFC C10-F18 and nitrogen trifluoride). A non-legislative approach to collecting data on these substances that could involve accessing customs data, voluntary surveys of known businesses, cold calling of likely importers and reliance on anecdotal information. This will not provide the consistency and completeness of data that could be obtained through legislative means, but would provide a snapshot or overview of the situation.

Alternatively, uncontrolled ODS and HFE, PFPEs at this stage, could remain without licensing controls. HFC-41-10mee, PFC C10-F18 and nitrogen trifluoride as scheduled substances under UNFCCC could be covered under the legislation. It is not known how many importers there are of these gases. However, research undertaken by the Department suggests there are few importers of these gases as they are a speciality area, and it is likely that these importers will already be licensed under the Ozone Act. This option, therefore, would likely only increase the administrative requirements on businesses already

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At the Conference of the Parties to the Kyoto Protocol in November 2013, a decision was adopted on revised UNFCCC reporting guidelines. As part of this decision,

Parties are strongly encouraged to report on hydrofluoroethers (HFEs) and perfluoropolyethers (PFPEs). The gases are considered likely to have reporting and

emission reduction obligations in future.

subject to Ozone Act requirements. The proposed legislative change would require businesses importing HFC-43-10mee, PFC C10-F18 and nitrogen trifluoride to report imports.

The current risks to Australia if no action was undertaken, or if a non-regulatory course of action was taken, relate to the ‘new’ SGGs. The risks entail potential non-compliance with Australia’s reporting obligations under the UNFCCC and its Kyoto Protocol, and misrepresentation of its progress towards, and achievement of, international emissions reduction commitments under these treaties.

Each year, Australia must report to the UN estimated emissions of the ‘new’ SGGs that meet quality criteria including accuracy and minimisation of uncertainty. These reports provide the official basis to track Australia’s progress towards its international emission reduction commitments.

Future risk relates to the possibility of new ODS and SGGs controls being negotiated, without Australia having an informed negotiating position based on a full knowledge of its domestic situation and could lead to Australian industry being disadvantaged by a modified international agreement. In such an instance, Australia would not ratify any amendment until appropriate legislation was enacted, which would enable sufficient and targeted information to be collected to inform the regulatory impact assessment process. However, if a new ODS were to be added, Australia would likely eventually need to ratify the amendment due to the universal membership of the Montreal Protocol and and its restrictions on trade with non-parties.

5.2 Phase-out of HCFCs

The Australian Government and industry agreed an accelerated phase-out of HCFCs in the early 1990s. The accelerated phase-out will see Australia achieve 99.5 per cent phase-out from 2016, four years ahead of the Montreal Protocol obligations. The phase-out is managed through the quota system set out in Part IV of the Ozone Act. Quota is granted on a grandfathered system based on the ODP tonnage.

While Australia’s phase-out of HCFCs is progressing well, there are additional obligations in relation to HCFCs contained in the Montreal Protocol relating to:

restricting use of HCFC imports from 2020 to only servicing of existing refrigeration and air conditioning equipment (Montreal Protocol Article 2F, paragraph 6(a))

limiting HCFC use to applications where more environmentally suitable alternatives are not available (Montreal Protocol Article 2F, paragraph 7(a))

endeavouring to ensure that HCFCs are not used outside sectors where CFCs and halons were used (Montreal Protocol Article 2F, paragraph 7(b))

endeavouring to ensure that HCFCs are used in a manner that minimises ozone depletion (Montreal Protocol Article 2F, paragraph 7(c)).

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The quota system has demonstrated to be an efficient and effective intervention to progressively phase-out the import of HCFCs. Quota are required for all countries to

meet Montreal Protocol obligations.

These obligations are partially addressed through section 38 and section 45B of the Ozone Act, however, more specific action could be undertaken with respect to these obligations. The obligations under paragraph 7 of Article 2F to limit HCFC uses and emissions are best effort obligations, and, therefore, there is no effect on our obligations should Australia deviate from the requirements outlined. However, Ozone Act requirements that make it an offence to emit ODS (unless in accordance with the regulations) go part way to addressing obligations under paragraph 7.

In relation to paragraph 6(a) of Article 2F of the Montreal Protocol to limit imported HCFC to servicing RAC equipment from 2020 onwards, the Ozone Act currently has no specific requirements which would give effect to this Montreal Protocol obligation. Further measures to require that HCFC imported from 2020 were not used for a purpose other than servicing of existing RAC equipment would be needed to ensure compliance with the Montreal Protocol from that date. While it is likely that most HCFC imported after 2020 would be used for servicing RAC equipment, there are no controls in place currently which would prevent HCFC from being used for other purposes. For example, it is not clear to what extent the fire or solvent sector will be relying on new HCFC imports post-2020.

In order to address this, an additional legislated licence condition (e.g. through Section 16 or 18 of the Act) stipulating that HCFC imported after 2020 be supplied to service only existing RAC equipment could be imposed. This has the advantage of being visible (i.e. it is clear that Australia is addressing this particular Montreal Protocol obligation) and transparent (i.e. all importers and sellers of HCFC are aware from the outset of their obligations). This is also an advantage when it comes to compliance and enforcement activities. This option may require an adjustment of the licence application process to ensure full commitment to these obligations by a company executive. This approach was favoured by the TWG.

To support this legislative change, additional bans on the import and manufacture of equipment containing HCFCs could be imposed as well a new regulatory offence provision banning the use of HCFC for a purpose other than servicing HCFC RAC equipment imported or manufactured before 1 January 2020. The first complementary measure would reduce demand for use of HCFC for servicing purposes. In order to manage future uncertainty, limited exemption for essential equipment could be made available after 2020. The second complementary measure would reflect the Montreal Protocol obligation in regulation and provide a basis for clear enforcement action.

It is unclear whether by 2020 all HCFC use will be limited to the RAC sector, although it seems likely. This view has been supported by the TWG and Aerosol Association of Australia. The FPAA has indicated that NAF-S-111 and NAF-P-111 (which are HCFC blends) were common from the mid-1990s. However, these were being voluntarily phased out. The FPAA was not aware of any new systems being installed with these gases and estimated that around 80 per cent of installed systems used FM200, a HFC. An Australian business has established a bank of recovered HCFC for fire protection use and the FPAA considers that this bank will be adequate to meet future servicing requirements.

An alternative low-regulatory approach to addressing the obligation contained in 6(a) would be to add a licence condition to the current HCFC controlled substances licences to make it a condition of import that the HCFC being imported can only be supplied for servicing existing RAC equipment. This option has the advantage of not requiring legislative or regulatory change. Its administration would be handled more flexibly by the Minister. However, this option would be less transparent than a legislative approach and more difficult to ensure compliance.

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To support this low-regulation approach, a complementary condition could also be included in end-use licences that new HCFC be used to service only existing RAC equipment. This condition would largely reflect the existing situation and not be a significant burden on most end users who already use HCFC to service existing RAC equipment.

As with the legislative option, this non-regulatory option could also be supported by extending the current HCFC equipment bans.

5.3 Import, Manufacture and Export Controls

The Ozone Act bans the import, export and manufacture of bulk ODS or SGGs and equipment containing these gases unless a licence is held or an exemption is available.

The licence scheme also satisfies Australia’s reporting obligations for SGGs under the UNFCCC and its Kyoto Protocol21.

This section considers the appropriateness and efficiency of the operation of the import, manufacture and export controls. This section includes consideration of minor mechanical issues including:

determining the need for the fit and proper person test in the licence assessment process

consideration of how unpaid levy debts should be treated in the context of granting a licence

minor administrative changes to allow the Minister to address potential errors in HCFC quota allocation

definition of date of import, export and temporary import

definition of refrigeration/air-conditioning products, equipment and bulk scheduled substances

Clarifying the definition of stage-1 and stage-2 substances through restructuring Schedule 1 to the Act

ensuring aggrieved persons can have decisions made under the Ozone Act reviewed.

5.3.1 Mechanical Changes

In order for the licence scheme to operate efficiently, its operation needs to be clearly defined. The Ozone Act calls up the definition of import and export in the Customs Act 1901. However, the terms ‘import’ and ‘export’ are not defined. In practice, this means that it is necessary to rely on judicial consideration to define the point of import and the point of export. These common law definitions may change with judicial interpretation over time.

21

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Australia is required to have an ODS import and export licence scheme under Article 4B of the Montreal Protocol.

The absence of a clear definition has led to importers not seeking an appropriate licence at the correct time leading to inadvertent non-compliance, importing without a licence which is a contravention of the Ozone Act, or attempting to use a different entities’ licence to import the goods. The definition also does not make it clear that ships may be considered as imported into Australia.

There are similar problems associated with the absence of clear definitions for the terms ‘bulk’ ODS and SGG and ‘equipment’ or ‘product’.

The licensing scheme needs to be flexible enough to accommodate these uncertainties without unduly affecting importers or the integrity of the licensing scheme itself. It is important that there is a mechanism for importers to become compliant and join the licensing scheme in a timely manner. Delays at the border are costly for the importer and exporter as goods have to be warehoused before being entered for home consumption or released for export. The licensing scheme should aim to minimise such delays.

The Ozone Act controls imports, exports and manufacture of ODS and SGGs and equipment containing those gases. These gases are called ‘scheduled substances’ and are listed in Schedule 1 to the Act.

An effective and efficient way of structuring Schedule 1 is along the lines of phase-out schedules. This is not how schedule 1 is currently structured. One option is to develop a phase-out based structure, which best reflects what gases are being and have been phased out. This streamlined schedule would better mirror scheduled substance definitions in section 7 of the Act. This structure would link to licensing and bans under the Act in the most logical manner and would clarify the definition of stage 1 and stage 2 scheduled substances as per the Montreal Protocol.

Date of import

The date of import is currently defined under Common Law as being the date on which the goods are brought into a port with the intention of landing or when the goods are landed. This definition could be reflected in the Ozone Act. If this definition were to be brought into the Ozone Act, the associated offence provision might also need to be adjusted so that the provision can be appropriately enforced. A strict liability offence is not appropriate where it is necessary to prove intent. Alternatively, the date of import could be defined as the day the goods land in Australia.

A clear definition assists licence holders to understand when they need to hold a licence, report and pay the levy, all of which hinge from the date of import. Specific provision for ships is required under either definition.

Altering the date of import will affect all importers. These changes are minor and mechanical in nature.

Date of import and requirement to hold a licence

Some importers are unaware of the need under the Ozone Act to possess a licence to import ODS, SGGs or equipment containing these gases and fail to apply for a licence prior to import. In other

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In order to support an effective and efficient import licensing scheme based on clear definitions, the Ozone Act would require amendment. The intent of the

amendments is to clarify when a licence is required, clarify who needs to hold a licence and reduce the risk of illegal imports and non-compliance with the Ozone

Act.

cases, a licence application may be received too late to be processed by the Department prior to the date the goods land in Australia. These scenarios are more likely to apply to first-time importers.

Failure to obtain an import licence is a breach of the Ozone Act. In order to educate and encourage compliance a flexible approach is taken to bringing importers into the licensing scheme. This approach helps to balance the integrity of the licence scheme with its practical operation and avoids using enforcement powers as a first option. This could provide for the formal recognition of import licence backdating in the Act to maximise import licence compliance by importers, such as by clarifying that a licence may take effect from a date earlier than the decision to grant the licence.

In cases where the importer is unwilling to apply for the appropriate licence, the compliance and enforcement powers would continue to apply.

Definition of temporary import

The definition of import does not consider temporary imports, for example, ships that sail into Australia’s territorial waters for a limited period of time, the movement of military equipment and the temporary import of cars. This means that an import and, for bulk gases, an export licence is required. This is a costly and time-consuming requirement for importers and exporters while having little environmental value. This policy does not align with other Commonwealth legislation and policies, such as the Coastal Trading (Revitalising Australian Shipping) Act 2012.

One option is where goods are imported temporarily (see indicative list below) a licence would not be required. Any import/export that is not temporary in nature will require the appropriate licence under the Ozone Act. This would formally reduce the regulatory burden on approximately 600 importers per year who are currently captured by the scheme but are not subject to regulatory burden under an administrative arrangement with the Australian Customs and Border Protection Service.

Temporary imports to be included in regulation might include:

goods in transit—goods not intended to remain in Australia and which do not change ownership during the voyage—for example, refrigerated shipping containers, known as reefers, unloaded from one ship and transferred to another, or goods unloaded to bonded storehouse and then shipped out

products that are imported under Carnet or other international agreements relating to temporary imports

products that are regularly imported and exported from Australia, without changing ownership, for example, mining /earth moving equipment

products that are exported and re-imported (or vice versa) for repairs or exchange

importers who bring in a mix of ‘temporary’ and ‘permanent’ imports would still require a licence for ‘permanent’ imports. Only ‘permanent’ imports would be included in their

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Making allowances for temporary imports would also clarify the treatment of foreign flagged ships and appears to be consistent with the United Nations Convention on

the Law of the Sea to which Australia is a party.

quarterly activity statements (this is in line with the treatment of medical/veterinary equipment importers reporting obligations)

vessels engaged in a short period of coastal trade, for example, those which have been issued a 12-month temporary licence under the Coastal Trading (Revitalising Australian Shipping) Act 2012. This Act does not however cover the full range of vessels or circumstances that the Ozone Act requires, and it may be necessary to amend the Ozone Act to make it clear that all vessels are covered

extending the exemption for foreign ships and aircraft in section 12B of the Ozone Act so that it applies to vessels that are foreign flagged and temporarily operating within Australia (i.e. will operate for 12 months or less) regardless of voyage patterns. It is not intended that temporary importers would require HCFC quota to cover this type of import. This will provide for bulk scheduled substances (i.e. spare gas) on board the ship or aircraft, used to service the vessel’s air conditioning or refrigeration equipment to be considered as a temporary import. This would provide for consistent treatment of bulk gas and equipment in these circumstances.

Consideration would need to be given to compliance of imported temporary goods to ensure that the goods were not permanently imported. Further consideration of how the compliance and enforcement provisions apply is required.

Definition of export

There are nineteen licensed exporters of bulk gas under the Ozone Act. Exporters of ODS/SGG equipment do not require a licence to export, nor are there any export reporting requirements. The export licence is an extension of the import licence and no further fees apply. The definition is most relevant to licence holders who are eligible to apply for a refund under the Export Refund Scheme. The scheme ends on 31 December 2015.

Each of the options affects the reporting obligations of exporters and the ease with which the provisions can be enforced. The date of export could be defined as the day on which the goods are loaded onto a ship or aircraft with the intention of landing them in a place outside Australia. This definition allows for expedient processing of the remainder of the export refund applications, as there would be no time lag between loading of the goods onto the vessel and the actual landing of the goods outside of Australia. This definition also is most suited for use in Australia’s international reporting obligations.

This definition may, however, compromise Australia’s ability to comply with Montreal Protocol requirements through the ability to enforce the bans on exporting without a licence set out in section 13 of the Ozone Act as strict liability offences. This is because the Department would need to demonstrate that the person in question intended that the goods be landed outside Australia.

Alternatively, export could be defined as the date on which the goods are landed outside Australia. Under this definition it is likely that the Department could continue to enforce the offence provision on

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‘Export’ is not currently defined in the Ozone Act, which could give rise to uncertainty about reporting and the actual point of export. This uncertainty means

that the compliance and enforcement provisions are weakened.

exporting without a strict liability offences, and would need to prove that the goods were loaded onto a vessel and were subsequently landed outside Australia.

Option 5.1.13 defines export as either the date on which the goods are loaded with the intention to land them or when they are actually landed. This is effectively the current implied definition of export. This may compromise the Department’s ability to enforce the offence provisions of exporting without a licence set out in section 13 of the Ozone Act as strict liability offences, because the Department would need to demonstrate that the person in question intended that the goods be landed outside Australia and as such would need to be altered so that it was not a strict liability offence.

Definitions of ‘RAC (refrigeration and air conditioning)’, ‘equipment’, ‘product’ and ‘bulk’

While the Act provides specific definitions for ODS equipment and SGG equipment, these are defined primarily in relation to whether they contain certain types of scheduled substances. The definitions do not provide a general definition of equipment or product separate from the gas types that they might contain.

Various parts of the Ozone Act qualify the nature of the equipment as relating to refrigeration and air conditioning equipment (RAC equipment); while others describe non-RAC equipment interchangeably as products or equipment (e.g. aerosols are described as products in schedule 4 but fall within categories of reportable equipment for the purposes of section 46). Further, the term ‘RAC equipment’ is not defined in the Ozone Act, but is in the Ozone Regulations as equipment used for the cooling or heating of anything that uses a refrigerant. Therefore for ease of interpretation of the Ozone Act it is considered beneficial to establish a definition of ‘RAC equipment’ in the Ozone Act and include one definition of ‘equipment’ and ‘product(s)’ in the Ozone Act.

‘Bulk’ is not referenced at all in the Ozone legislation. It is, however, used informally as a useful catchall term for differentiating imports requiring a controlled substance licence (HCFC, SGG, methyl bromide) from imports that should be made under an ODS/SGG equipment licence. This reflects the clarification of the definition of controlled substances (in bulk) in Article 1, paragraph 4 of the Montreal Protocol made at the first Meeting of the Parties in Decision I/12A, which agreed:

‘(a) Article 1 of the Montreal Protocol excludes from consideration as a “controlled substance” any listed substance, whether alone or in a mixture, which is in a manufactured product other than a container used for transportation or storage;

(b) any amount of a controlled substance or a mixture of controlled substances which is not part of a use system containing the substance is a controlled substance for the purpose of the Protocol (i.e. a bulk chemical);

( c) if a substance or mixture must first be transferred from a bulk container to another container, vessel or piece of equipment in order to realise its intended use, the first container is in fact utilised only for storage and/or transport, and the substance or mixture so packaged is covered by Article 1, paragraph 4 of the Protocol;

(d) if, on the other hand, the mere dispensing of the product from a container constitutes the intended use of the substance, then that container is itself part of a use system and the substance contained in it is therefore excluded from the definition;’

While in most cases there is little ambiguity in the use of the terms ‘RAC’, ‘equipment’,‘product’, or ‘bulk’, the inclusion of specific and consistent definitions would clarify the type of licence required. It would also clarify when import quota is required.

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Control of disposable containers

Non-refillable cylinders are specifically manufactured, single use cylinders that are filled with ODS or SGGs and sold and used for servicing or commissioning equipment. After use, the cylinders should be sent for disposal and deliberately punctured, in accordance with pressure vessel regulations. However, puncturing the cylinder allows the residual amount of ODS or SGGs to be emitted to the atmosphere. Disposable, non-refillable cylinders are environmentally undesirable due to emissions, as well as being a wasteful form of packaging and contributing to the volume of waste going to landfill.

The Customs (Prohibited Imports) Regulations 1956 ban the import of HFC in non-refillable cylinders. In addition, it is a condition of Controlled substance licences granted under the Ozone Act that ODS and SGGs not be imported in disposable cylinders. Compliance and enforcement outcomes based on licence conditions and regulations under other legislation may be less reliable than if a ban on disposable cylinders was established under the Ozone Act.

Internal review of decisions under Ozone Act

Currently, decisions relating to the import, export and manufacture licensing system can only be appealed directly to the Administrative Appeals Tribunal (AAT). It may be more efficient and effective to allow for the internal review of these decisions prior to their review by the AAT. The option for an internal review is consistent with other legislation and the main Ozone Regulations that allow decisions made in relation to the end-use licensing schemes to be reconsidered by the relevant authority.

Section 66 of the Ozone Act currently provides that applications may be made to the AAT for the review of the decisions listed in that section. Appealable decisions include:

decisions refusing to grant licences or exemptions decisions in relation to HCFC quota decisions to revoke, vary or impose conditions decisions to terminate or cancel a licence or exemption.

The suggested amendment to the Ozone Act would insert an internal review procedure for the import, export and manufacture licensing system. This would allow an officer independent of the original decision to review the original decision. The option to seek review by the AAT would remain available, but only after an internal review procedure has been completed.

Requirements for low volume importers of equipment containing ODS and SGG

The primary purpose of licensing is to enable Australia to meet its international obligations to phase out bulk ODS and to report on our progress in meeting this goal and to report on SGG emissions. The specific purposes for controlling equipment import through the licence scheme have been to:

support Australia’s phase-out of HCFCs by providing a mechanism to assess and manage demand for bulk HCFCs

meet Australia’s greenhouse gas emission reporting requirements under the UNFCCC

support emission reduction from product stewardship arrangements.

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Low volume exemption criteria

The Ozone Act contains a refgulation making provision to exempt low volume imports. A low volume importer is considered as an importer who imports up to five pieces of equipment containing up to ten kilograms of gas once in a two year period. The TWG has indicated support for lifting the threshold. Further general consultation has indicated some dissatisfaction with licensing being placed on small imports.

The qualifying criteria for this exemption could be changed to focus import requirements on larger, regular importers, and remove the administrative burden on importers of low levels of gas that do not significantly impact on emissions and reporting. There are two steps to ensure that regulation is appropriately applied to low volume importers of ODS and SGG equipment: determining the mechanism and setting equipment thresholds. The following section considers whether the current criteria provide suitable mechanisms for the application of a low volume equipment exemption.

The TWG saw value in basing the low volume exemption on the Global Warming Potential (GWP) of an import rather than on its metric weight. The advantage of using a GWP based threshold is that it is based on the emissions capacity of an import. The disadvantage of using a GWP threshold is the difficulty importers may experience in calculating a GWP threshold. Each HFC has a specific GWP. This can be further complicated where the gas is a blend of scheduled and non-scheduled substances. The administrative burden on low volume importers of the GWP model could be high, though it could be reduced through access to an online GWP calculation tool (e.g. the existing online equipment licence application form).

Setting a threshold based on weight, that is, metric tonnes, removes the need to consult tables and is administratively simpler for low volume importers.

If the current low volume equipment exemption retains a metric threshold of imports of up to 10 kilograms of gas once in a two-year period, it could be simplified by removing some of the criteria such as the restriction on the number of items that could be imported. There has been feedback from both general consultation and the TWG that the current restriction on the number of items allowable under the exemptions should be removed. This is because the number of pieces of equipment has little correlation to either the gas species or the resulting emission potential.

There is no definition of consignment in the Ozone Act but in practice a consignment has been understood as a single shipment. Customs and Border Protection, however, consider a consignment to be goods that are shipped from one (1) consignor to one (1) consignee as a single consignment but which may not be packed in a single package or arrive in Australia at the same time. Using this definition, there is a risk that importers may attempt to avoid detection of cargos that exceed the low volume exemption thresholds by splitting consignments into separate cargos that can pass individually through Customs control. Customs data suggests that this risk is small. In March 2011, Customs22 undertook a compliance assessment of the use of the low-value threshold that exempts the collection of customs duty on goods imported into Australia with a value of less than $1000. This assessed the extent to which goods imported from overseas were being undervalued to avoid GST and duty; and the extent that shipments were being deliberately broken down into smaller imports to take

22 http://www.border.gov.au/Dutyratesandtaxes/Documents/cbpresponsestopc.pdf

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http://www.border.gov.au/Dutyratesandtaxes/Documents/cbpresponsestopc.pdf

advantage of this threshold. Results from the random sampling element of the campaign showed under-reporting rates of up to 9 per cent in air and sea cargo.

HFC equipment maximum metric weight threshold

An option is to set a metric tonnes threshold. The metric weight threshold could be raised from the current maximum of 10 kg per two years to 100 kg per two years. Based on 2012–2013 reporting data, the combined GWP of imports less than 100 kg was less than 1 per cent of total equipment imports by GWP. Extending the exemption to these importers would not have a significant effect on Australia’s ability to meet its international reporting obligations and is unlikely to provide a competitive advantage for the exempted importers. Removing these imports would exempt approximately 700 importers from the licensing scheme (Table 15).

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Table 10 Total gas imports by Equipment Licence holders, years 2012 and 2013

Import brackets

Gas metric tonnes

CO2-e tonnes

% CO2-e tonnes

Running totals Thresholds

% CO2-e Number EQPLS

Number If Exempted

Remainder Licensed

0-20 kg 2.88 4,753.40 0.06% 0.06% 32.74% 405 832>20-50 kg 5.76 9,780.27 0.12% 0.17% 46.40% 574 663

>50-100 kg 10.44 16,894.62 0.20% 0.38% 58.04% 718 519>100-200

kg 18.05 29,541.18 0.36% 0.73% 67.91% 840 397

>200 kg 5,245.83 8,248,630.23 99.27% 100.00% 100.00% 1237 0Total 5,282.97 8,309,599.67 100.00%

Options—Setting an appropriate low volume threshold for SGG equipment

Option 5.2.3: No change to current arrangements.

Option 5.2.4: Change the low volume import exemption threshold based on metric weight imported, initially set at 100kg per year.

HCFC equipment threshold

Australia has introduced a complementary approach to supporting the phase-out of bulk HCFCs by banning the import and manufacture of HCFC RAC equipment. There are some exemptions to this ban, including for low volume importers of this equipment. In contemplating an appropriate threshold for HCFC RAC equipment, it is important to not encourage commercial import activity which would be counter to efforts supporting the phase-out of bulk HCFCs, noting that most commercial import of HCFC equipment has ceased.

Currently, the low volume equipment threshold is 10kg, five pieces of equipment once every two years, which applies to the sum of SGG equipment and HCFC RAC equipment. Setting an appropriate low volume threshold for SGG equipment is considered at option 5.2.3. The 100kg threshold proposed at 5.2.3 may be counter to HCFC phase-out efforts if applied to HCFCs.

One option, therefore, is to separate the HCFC equipment threshold from the SGG equipment threshold. This could be applied to a new low volume equipment threshold of 10kg, five pieces of equipment once every two years, which applies to the sum of HCFC RAC equipment, CFC equipment and Halon.

CFC equipment threshold

A small number of vehicles containing CFCs (vintage cars manufactured before 1990) and to a lesser extent older refrigerators are stopped at the border each year. This equipment must have the CFC removed and retrofitted, so it is no longer top operate using a CFC and, if it retrofitted to a controlled substance, an Equipment licence obtained before it is able to be imported. The Department estimates that there are approximately 10 of this type of import annually.

Given the low number of items, the likelihood of depleted charges, and low likelihood of being able to recharge the goods in Australia, an option is that such goods be allowed under a low volume threshold. No new equipment is manufactured containing CFCs and therefore allowing import of this

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type of equipment, within a threshold, is unlikely to impact on Australia’s ODS phase-out or impact on the phase-out in other countries.

However, it is worth noting that CFCs have been phased out in developing countries since 2010. There may be some possibility of dumping of CFC equipment in Australia. An appropriately low threshold may minimise this possibility.

One option is to apply a low volume equipment threshold of 10kg, five pieces of equipment once every two years, which applies to the sum of HCFC RAC equipment, CFC equipment and Halon equipment.

Halon equipment threshold

Under Montreal Protocol, the import of new bulk halon was phased out in developed countries from 1994. Under section 38 and Schedule 4 of the Ozone Act, products containing halon are prohibited from being manufactured or imported, except if a section 40 exemption has been granted. This and earlier state and territory bans on non-essential uses of halon have seen a shift away from using halon in applications where there are commercially available alternatives.

The provision of a section 40 exemption allows certain equipment that is necessary for medical, veterinary or defence uses, and there are no alternatives, to be imported or manufactured. Current exemptions are limited to halon fire systems.

The great majority of equipment imported under a section 40 exemption is either fire extinguishing systems aboard aircraft, as spare parts for existing equipment, or for defence purposes.

The section 40 exemption allows the import and manufacture of certain equipment where alternatives are not available and the equipment is essential for medical, veterinary, defence or public safety purposes. It also allows the Department to collect data on imports of equipment containing halon. It is important that the Australian Government is able to access accurate data on halon import and use

patterns in Australia. This helps inform Australia’s engagement on halon under the Montreal Protocol, such as understanding the global availability and sources of used and recycled halon and determine Australia’s future halon needs. Sound data is also

important in informing domestic treatment of the halon stock.

Imports of halon in equipment into Australia amounted to less than 1.4 metric tonnes in 2013 (around 12 ODP tonnes), most being halon 1301. There are currently 24 exemption holders bringing in products containing halon, mostly for use on board aircraft. These companies are required to apply for a Section 40 exemption ‘licence’ at a cost of $3000 for two years. There are currently 24 section 40 exemption holders. The Department estimates there are approximately two instances annually of section 40 exemption holders who could be classified as one-off importers (where only one import is reported and the importer reports nil in the subsequent reporting periods).

One option is to apply a low volume equipment threshold of 10 kg, five pieces of equipment once every two years, which applies to the sum of HCFC RAC equipment, CFC equipment and halon equipment. This option reduces the regulatory burden on low volume importers while retaining the ability to collect halon data from larger importers and appropriately manage essential uses.

Under option 5.2.6, the Schedule 4 prohibition would be retained with an exemption for essential uses such as known aviation and defence uses where the essential use criteria have been satisfied. This differs from current arrangements in that a section 40 exemption with its associated fee would not

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need to be applied for. While this would reduce costs to businesses that import halon products for aviation or defence uses, there would be no clear mechanism for collection of import data or to enable the government or industry to properly assess the volume and impact of activity on Australia’s phase-out.

Option 5.2.11 considers introducing a single equipment licence that includes coverage of appropriate halon equipment as well as RAC equipment. This would provide for data from larger importers to be collected through their quarterly activity reporting, as well as reducing compliance costs and application fee costs to business as a single licence may be required. For example, an aircraft currently requires a licence to cover air conditioning equipment and an s40 exemption to cover the halon equipment prior to import. A low volume halon equipment threshold as outlined at option 5.2.9 could also be included in this model.

Trade with Montreal Protocol Parties

The Ozone Act imposes a licence condition on ODS controlled substances licences, essential uses licences, used substances licences, and ODS equipment licences that the import is from or export is to a country that is listed on the register of Montreal Protocol Countries (section 18).

This requirement is consistent with Australia’s obligations under the Montreal Protocol with respect to controlled substances licences and essential uses licences. Under the Montreal Protocol, Parties to the Protocol are not permitted to trade with non-Parties. As an example, Australia would not be permitted to engage in the trade of HCFCs with any country that has not ratified the Beijing Amendment.

Even though all of the countries in the region have ratified the Montreal Protocol and relevant amendments, there remains the chance that a country in the region may be found non- compliant with its Montreal Protocol obligations and subject to the non-compliance procedure, which could result in it being treated as a non-Party for the purposes of Article 4. In this case, all countries would be obliged to suspend some or all trade of ODS with this Party, or risk their own non-compliance. Therefore, Australia should maintain the ability to restrict trade with a Party in the case of non-compliance, which is permissible under Section 41. This section allows the Minister (or delegate) discretion to remove Parties or substances from the register of Montreal Protocol Countries, should that be required. This provision should be carried forward in its current form.

HCFC quota allocation

The quota periods are described under the Ozone Act as a period of two years, or such longer or shorter period (if any) as the Minister determines in writing.

Under the current quota system, the quota is allocated in set two-year periods, with imports undertaken in the first year used to calculate the next two-year quota allocation. The Minister has no explicit power to retrospectively vary the size of quotas allocated to individual licensees in order to correct for a reporting error in a base year, whether the error is from the importer’s or the administrative side. Any error made in the base year discovered after quota allocation cannot be remedied and has an impact on all quota holders (as the percentage of quota has been distributed incorrectly).

The HCFC quota is coming to the final tail end following the 2016/17 quota allocation each year’s allocation will be the same, 2.5 ODP tonnes, to 2029, when the quota ends.

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The objective of this proposal is to establish a mechanism that allows a fair, efficient and effective allocation of HCFC quota into the tail end of the phase-down and allow for possible redistribution of HCFC quota if satisfied that the circumstances on which its allocation was based have changed or were incorrect.

An option to meet the above proposal criteria is to amend the Ozone Act to allow one Quota allocation for the 13-year period starting 2016 based on the 2014 base year. This would impact a total of six entities, who are current quota holders.

A further option is to include a percentage based ‘margin of error’ in quota allocation and international reporting based on HCFC quota holders reporting. This would account for small reporting errors and situations in which small amounts of gas are imported in parts of containers.

A further option is to allow importers to ‘offset’ any over-quota imports with exports, or through other mechanisms, while preserving the overall industry limit.

Administration of equipment import bans and exemptions

Under section 38 of the Ozone Act, the import and manufacture of some types of equipment listed in Schedule 4 of the Act is banned. The ban under Schedule 4 was introduced to support the phase-out of bulk ODS by restricting import and manufacture of equipment, thereby constraining demand for bulk gas for servicing.

There are limited exemptions to the Schedule 4 bans:

Section 40 exempts products from the Schedule 4 bans where a product is essential for medical, veterinary, defence, industrial safety or public safety purposes and no practical alternative exists. Current section 40 exemptions apply to halon fire extinguishing equipment (on board aircraft).

Regulations 70-73 provide a limited exemption for the import of RAC equipment charged with or containing HCFCs. The exemptions provided for HCFC equipment will be removed in a staged process.

There is currently a requirement to gazette and lay before Parliament section 40 exemptions when the exemption is granted or whenever a section 40 is varied (for example to change the end date as there is no provision to surrender a section 40 exemption). This is a time consuming and inefficient process and is inconsistent with how other exemptions in the Ozone Act are applied. The administration could be streamlined to remove the requirement to gazette and lay before Parliament section 40 exemptions. Instead, the information could be published on the department’s website.

While it is possible to surrender a licence under section 21 of the Ozone Act, there is no similar mechanism to surrender an exemption granted under section 40. It may be useful for businesses to have this option in response to changing circumstances.

Option 5.5.2 considers that the tabling and gazettal provision be removed and replaced with a requirement to publish on the Department’s website, and a new surrender provision be inserted. This aligns treatment of section 40 exemptions with licensing provisions

Option 5.5.3 considers introducing a single equipment licence that includes coverage of essential halon equipment as well as RAC equipment. Under this option provisions for transfer, amendment, cancellation, surrender and publication would apply under Part III of the Ozone Act. Gazettal and tabling requirements are removed under this option also.

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Exemptions from the import licensing scheme

The import licensing scheme does not cover certain types of bulk gas and equipment imports, exports and manufacture. Any import, export or manufacture of ODS, SGGs and equipment that is exempt, falls out of the scope of the Ozone Act. This section assesses the appropriateness and efficiency of these exemptions to the licensing scheme. The options would require minor or mechanical changes to the Ozone Act. The exemptions include:

import of bulk gas for use as feedstocks where they meet the requirements under section 12A

bulk gas for use on a ship or aircraft travelling to and from Australia under section 12B

SGG that will be destroyed in a manufacturing process (regulation 3AA)

SGGs formed as a by-product of the manufacture of aluminium (regulation 3(1)(b))

SGGs used in the production or casting of magnesium (regulation 3A)

medical or veterinary equipment containing SGGs (regulation 2A)

foam equipment or products other than expanding polyurethane foam aerosols (regulation 2A)

foam equipment or products (other than expanding polyurethane foam products) included in other imported products or equipment (regulation 2A)

ODS and SGG equipment that is kept by the importer, or by a member of the person’s household as personal equipment (section 13 (6A) (b)).

Feedstock

Feedstock use occurs where a chemical is used as an intermediate substance to manufacture other chemicals. Section 12A of the Ozone Act provides that scheduled substances exclusively for use as an intermediate substance to manufacture other chemicals are not subject to all of the controls in the Ozone Act. These substances are called feedstocks, and licensing and levy requirements do not apply. There is still a requirement for manufacturers or importers of feedstocks to report to the Department on the species and quantity imported each quarter. This requirement supports Australia’s international obligations under the Montreal Protocol.

Importers often use larger containers called ‘ISO tanks’ (15 000 to 40 000 litres) for the transport and storage of scheduled substances. Levy requirements are not intended to apply to any portion of the gas in an ISO tank that is used for feedstocks. However, due to the narrow reading of the Act importers of larger containers where only a portion of the gas is intended for feedstock use are in fact subject to the import levy for the feedstock portion.

The narrow reading of Section 12A also has an unintended flow-on effect for importers of hydrochlorofluorocarbon feedstock. Any non-feedstock import of bulk hydrochlorofluorocarbon requires a quota allocation under the Ozone Act. However, due to the narrow reading of the Act importers of larger containers where only a portion of the gas is intended for feedstock use are in fact subject to the hydrochlorofluorocarbon quota requirement. Due to the strict quota requirements under the Act, this effectively bans the import in these circumstances. This is not the intent of the Section 12A provision.

While it is important to ensure that importers bringing in a mix of gas for both feedstock and non-feedstock use are licensed, scheduled substances for feedstock use should not have levy applied,

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consistent with the wider approach to feedstock in section 12A. Similarly, HCFCs imported for feedstock use should not be included in quota calculations. Section 12A of the Ozone Act is unclear in this regard and should be amended to clearly indicate an exemption.

Feedstock definition

There is also an opportunity to further clarify the definition of feedstock in the Ozone Act. This would align the definition with Montreal Protocol reporting requirements23 and advice from the Technology and Economic Assessment Panel24. The change would clarify that a feedstock is transformed in the manufacturing process of a new chemical or converted from its original composition. As well as further aligning the Act with international obligations, the intent of the proposed amendment is to clarify circumstances where a feedstock licensing exemption may apply. The amendment will assist in identifying when a licence is or is not required, and reduce the risk of illegal imports and non-compliance with the Ozone Act.

Ships and aircraft

Section 12B of the Ozone Act regulates scheduled substances carried by, and used to, service air conditioning or refrigeration equipment aboard ships or aircraft. Section 12B has proved to be narrower in scope than intended because it does not cover coastal journeys or temporary imports. This issue has been examined in the context of temporary import above.

Substances destroyed in a manufacturing process, produced as a by-product of manufacture or used in the production or casting process

There are several provisions exempting SGGs from the licensing requirements: substances destroyed in a manufacturing process; substances manufactured as a by-product of aluminium manufacture; and substances used in the production or casting of magnesium. Each of these exemptions has different application and approval processes. At the time each was made, there was a valid policy reason for requiring higher levels of approval. For example, provision of exempt substances destroyed in a manufacturing process was introduced to ensure importers or manufacturers of this gas did not have to pay the equivalent carbon tax.

As the reasons for imposing higher levels of approvals have ceased, an option is to streamline the administration of these approvals by removing the requirement to hold a permit or seek Ministerial approval. Instead, there would be a provision for a general exemption, in line with the general exemption provided for SGGs manufactured as a by-product of aluminium production. This would remove the requirement to apply for an exemption for one entity.

A second option is to remove the requirement to hold a permit or seek Ministerial approval. However, in the case of SGGs, which will be destroyed in a manufacturing process, this option does not include replacing approval requirements with a general exemption. Instead, these importers would bring these substances in under a feedstock licensing exemption. Importers of SGG feedstock would be exempt from licensing but would be required to report imports.

Medical and veterinary equipment exemption

From 1 July 2013 medicines, veterinary medicines, medical devices and veterinary devices containing SGGs were exempted from the licensing and levy provisions of the legislation. Similar provisions were made to cover bulk SGGs imported for medical and veterinary purposes. This covers a broad range of 23 Annex VII in UNEP, Report of Ninth Meeting of the Parties to the Montreal Protocol, UNEP/OzL.Pro.9/12, 2009,.24 TEAP, Report of the Chemical Process Agents Working Group, section 2.1May 1995, p. 3.

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apparatus and medicines including for the diagnosis, prevention, monitoring and treatment of diseases, disabilities or injuries25. The exemption was made so that importers and manufacturers of this type of equipment did not have to pay the equivalent carbon tax. The exemption was made so as to not impact on the cost of these products, which might discourage people from accessing necessary and life-saving medicines.

Importers who import exempted goods only are not required to hold a licence or to report on their imports. This removes the regulatory burden for people importing necessary and life-saving medical and veterinary equipment.

Even though the equivalent carbon tax has now been repealed, the exemption is still considered an appropriate measure for veterinary or medical equipment and medicines.

Payment of small levy and levy penalty amounts and setting of levies

The Ozone Act currently imposes a levy on imports and manufacturing based on quarterly reporting of activity, and a penalty for late levy payments. Many of these levy and penalty debts are for very small amounts, and these small value transactions can impose a significant cost on import and manufacture licence holders. Administration of these debts is also not cost efficient for the Department.

A threshold for waiving small value debts under the Ozone Act could be introduced. Enabling provisions could be included in the Ozone Act to waive charges of $50 or less. This would save an excess of 2200 non-cost effective transactions per year between business and the Australian Government. Changing this requirement is consistent with the Australian Government’s deregulation agenda and would contribute to lower business costs. These small amounts would no longer require recording, invoicing, banking or debt management with efficiencies for both licensees and the Department. There should be a capacity to vary the threshold amount through the regulations to maintain the waiver amount at a reasonable level.

This change would not impact on the Special Account because the reduction in funds received would be offset by a corresponding reduction in the need for Departmental resources to administer small levy and penalty debts.

Alternatively, the Ozone Act could continue to require small amounts to be paid. Depending on the treatment of low volume importers under the Ozone Act, many small invoices may automatically be removed.

Maximum import and manufacturing levies are set in the import and manufacturing levy Acts, with the rate then determined through the Regulations. Removing these limits from the acts will allow timely adjustment to these if and as necessary consistent with the Australian Government’s cost recovery policy.

Methyl bromide

The current treatment of methyl bromide (CH3Br) under the Ozone Act and Regulations is generally considered appropriate. However, there are some options identified where minor change could be considered. Methyl bromide is used in Australia:

as a quarantine and pre-shipment (QPS) fumigation treatment for imports and exports

for non-QPS purposes that have been approved by Parties to the Montreal Protocol as a critical use exemption (CUE) for fumigation

25 Medical devices are defined in the Therapeutic Goods Act 1989 and are eligible for inclusion on the Australian Register of Therapeutic Goods Register.

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http://www.tga.gov.au/australian-register-therapeutic-goods

http://www.tga.gov.au/australian-register-therapeutic-goods

Critical use exemptions for methyl bromide use where no technically or economically viable alternatives are available—strawberry runners in Australia

as a feedstock in chemical reactions to create other chemicals.

The Ozone Act implements Australia’s obligations as a Party to the Montreal Protocol to:

control imports, exports and uses of methyl bromide

report on imports, exports and uses of methyl bromide (QPS, non-QPS and feedstock).

A controlled substances licence for methyl bromide, issued under section 13A(2)(b) of the Ozone Act must be held by any person intending to manufacture, import or export methyl bromide.

As there is no manufacture of methyl bromide in Australia, the licence sets limits on the amounts of methyl bromide the licence holder is permitted to import and, if required, export each year, by type of methyl bromide use (i.e. QPS, non-QPS or feedstock). The licences also specify certain conditions that the licence holder must comply with. These include the provision of quarterly import/export reports and payment of an activity fee (levy) on all imported methyl bromide. There are currently five businesses that hold licences for the commercial import, and if required, export of methyl bromide in Australia.

The Ozone Act also requires records to be kept by suppliers and users of methyl bromide, and for a variety of reports to be submitted to the Department, including reports given by:

suppliers detailing the sale of methyl bromide

exempt persons (CUE users), detailing the use of methyl bromide for the exempt application

buyers of methyl bromide who have a stockpile of the substance at time of purchase

holders of feedstock permits on the use of methyl bromide as a feedstock.

The majority of users of methyl bromide in Australia are QPS fumigation businesses operating at a Quarantine Approved Premises (QAP) as approved by the Department of Agriculture. There is one industry group representing ten businesses with an approved CUE for the use of methyl bromide in Australia as a soil fumigant. There is also one business that currently has a permit for the use of methyl bromide as a feedstock. These users are all subject to the requirements of the Ozone Act and Regulation

Laboratory and analytical use of methyl bromide

There is currently no allowable use of methyl bromide for laboratory or analytical purposes under the Ozone Act or Regulations. The Montreal Protocol, however, does provide for specific exempt uses of methyl bromide under Decision XXVI/5: Global laboratory and analytical-use exemption, which extended the exemptions for such uses to 31 December 2021. The Department has received several

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Since 1 January 2005, all uses of methyl bromide—other than for certified QPS, approved feedstock applications, or approved CUEs—have been prohibited in

Australia under the Ozone Act and Regulations.

enquiries about the use of methyl bromide for laboratory and analysis purposes, including skin exposure research into products containing methyl bromide. A change to the current ban arrangement would enable appropriate laboratory and analytical activities to occur if required.

The first option is to maintain the existing approach, which will result in ongoing regulatory uncertainty for those seeking approval to use methyl bromide for laboratory and analysis purposes.

The second option suggests that the Ozone Act or Regulations be amended to allow the import and use of methyl bromide for laboratory or analytical purposes, in line with the exemption under the Montreal Protocol.

Record keeping requirements for methyl bromide-QPS use

The requirement to keep summary records of use duplicates information already required under records of use (Regulation 221). The provision of summary records has not to date been requested by the Australian Government casting doubt on the need for ask business to continue to keep these records.

The first option is to maintain the existing approach, which will maintain a duplicate reporting requirement.

The second option of removing the requirement to maintain ‘summary records of use’ reduces an unnecessary regulatory burden on users of methyl bromide saving compliance time and effort.

Methyl bromide stockpile reports

The first option maintains the existing approach, whereby retention of the requirement to submit stockpile reports would have no practical effect on buyers as the absence of stockpile capacity in Australia means there has been no need to provide these reports since 2005.

The second option would remove the requirement for stockpile reporting because Australia has no stockpiles of methyl bromide to be reported under this Regulation. Any savings from removing this regulatory requirement would be nominal due to the redundant nature of the Regulation itself. Retaining the requirement for stockpile reports has no impact on current requirements.

Licence requirements for methyl bromide import

Section 16 (3) of the Ozone Act imposes a limit on the amount of methyl bromide that may be imported for QPS applications. Any request for an increase likely to be approved by the Department, subject to undertaking due diligence, as there are no limits on

QPS under the Montreal Protocol. Seeking to maintain current restrictions that require a licence holder to apply for amendments to their licence when they intend to import additional amounts of methyl bromide for QPS purposes places an unnecessary administrative burden on the licence holder.

The first option maintains the existing approach. As the import, export and use of methyl bromide for QPS purposes are not limited under the Montreal Protocol this option maintains an unnecessary regulatory burden on the licence holder. Any request to increase the maximum amount of methyl bromide to be imported or exported for QPS purposes only is therefore likely be approved by the Department after undertaking due diligence.

The second option would maintain licence conditions relating to amounts of methyl bromide for non-QPS uses (CUE, emergency and potentially feedstock) because they provide an important control over these particular uses, to help Australia meet relevant obligations under the Montreal Protocol.

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Removing licence conditions for QPS only would reduce the compliance burden on business because they would not have to submit an application for a variation and reduce the administrative burden on licence holders.

Reporting under import, export and manufacture licences

Manufacturers, importers and exporters of ODS and SGGs are required to provide a quarterly report on the quantity of scheduled substance manufactured, imported or exported. The data collected in the reports must be consistent with Australia’s international treaty obligations and considered in conjunction with the data needed to reflect claimed emission reductions in the National Greenhouse Accounts.

The reports are required before the fifteenth day after the end of the quarter. The Department assesses the reports, issues invoices, statements, receipts payments and manages debtors quarterly. A quarterly reporting process requires licence holders to take compliance action four times a year.

While there is the need to have this information, the level of regulatory burden could be reduced. Changing reporting obligations to annual or six monthly would reduce business reporting requirements by up to three reports annually and would provide a benefit to licence holders as it is likely to reduce the time required to comply with the legislation. There could be some flexibility if reporting frequency requirements were reduced, with a voluntary option for more frequent reports a possibility, particularly for larger businesses.

The Department could also work with the Department of Industry to share information collected under the Ozone legislation and the Greenhouse and Energy Minimum Standards Act 2012 to reduce reporting requirements. Potential reporting under the GEMS Act is not regular and focuses on equipment sales rather than gas imports. Therefore, in order to satisfy Australia’s international reporting requirements, the current reporting framework would need to continue. However, there may be an opportunity in the future for equipment importers to use one reporting portal to satisfy both requirements.

The current reporting framework could be maintained. This recognises that reporting businesses are familiar with the current quarterly reporting requirement, and their business model is structured to comply with it. For example, some members of the TWG have indicated that quarterly reporting fits in with other reporting cycles, particularly Business Activity Statements, and helps them to progressively update their record keeping and compliance obligations while avoiding a more major annual effort to catch up. A change may have costs associated with implementing it, and while long-term costs may be reduced, short-term costs may increase.

If a change to reporting periods is pursued, it will be important to maintain clear compliance and enforcement provisions to ensure that the integrity of licence data collected under the Ozone Act remains at a high standard.

Restructure of the Act

The Ozone Act has been amended over time in response to Australia’s evolving international obligations. The Act has been amended in an incremental nature in response to those changing demands.

This has resulted in an Act where imports, exports and manufacture of gases and equipment containing those gases are controlled through a complex mixture of licensing, licensing exemptions, bans, and exemptions to those bans. These are scattered throughout the Ozone Act and associated

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Improved legislation that more accurately reflects import patterns and business practices will allow for Australia to better manage ODS and SGGs at its borders. Taking a streamlined approach when restructuring the Ozone Act will support

understanding and reduce complexity and the risk of non-compliance. It will also allow for more effective management of goods in a manner which imposes only an

appropriate level of regulatory burden.

regulations. This legislative structure is complicated and difficult to navigate and understand for users and does not always support efficient and effective administration. Its complexity also increases the risk of inadvertent non-compliance.

An option is to simplify the import, export and manufacture licence scheme by using two streams: goods that require a licence and goods that do not.

The intent and administrative changes described above would be reflected in a new structure. A new structure would also continue to reflect and support Australia’s international obligations under both the Montreal Protocol and the climate change treaties.

Any new structure should be sufficiently flexible to adapt to further changes in Australia’s international obligations as they occur so that the Australian Government can efficiently manage ODS/SGGs into the future.

There are several minor changes required that have not been considered already, specifically:

changing the current section 40 exemption to an equipment licence. This will reduce the regulatory burden on approximately 24 entities that currently hold ODS/SGG equipment licences and section 40 exemptions and how they are applied for and report under each separately. The anticipated saving for streamlining these provisions is $1006 per year

The current criteria ensuring only essential equipment is imported under the new equipment licence would be retained. This ensures that equipment that is currently banned continues to be banned, with limited low volume exemption.

applying a levy to equipment imported under an equipment licence, including equipment that would have been imported under a section 40 exemption. This is consistent with the treatment of other imports and the purposes of the Ozone Protection and SGG Special Account.

Table 11 Proposed import, export and manufacture licensing structure

Regulated goods (ODS/SGG equipment, products and bulk gas

No licence is requiredLicence is required

(Goods that are regulated but only allowed with a licence)

Goods that are regulated but allowed without a licence:

Temporary imports/returned goodsPersonal imports

Bulk Licences ODS

Bulk Licences SGG

Equipment licence

- Controlled substances HCFCs

- Controlled substances –HFCs

- ODS/SGG equipment- Special equipment

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Destruction of gases

Regulated goods (ODS/SGG equipment, products and bulk gas

Medical and veterinary equipment Foams blown with SGGsShips and aircraftFeedstockHCFC fire extinguishers, aerosols and HCFC-blown foamManufacture of SGGs as a by-product of magnesium manufacture Manufacture of SGGs as a by-product of aluminium manufacture SGGs destroyed in a manufacturing process Import of ODS/SGG equipment below the licensing thresholds.

HCFC—e.g. commensurate with non-commercial importation and HCFC equipment phase-down

- CFC—e.g. to cover non-commercial import of vintage cars or fridges

- Controlled substances methyl bromide- Essential uses - Used substances (ODS)

- Controlled substances other SGGs—(PFCs, SF6 and any new gases)

licence (e.g. halon equipment for use onboard aircraft)

5.4 Destruction and approval of destruction facilities

To reduce emissions of waste ODS and SGGs the Ozone Act allows regulation of the disposal of scheduled substances and requires destruction facilities to be approved. The Montreal Protocol provides guidelines for the destruction of CFCs, halon, carbon tetrachloride, methyl chloroform and HCFCs, including approved destruction technologies. Consistent with these guidelines, the Ozone Regulations allow the Minister to approve the operation of facilities for the destruction of refrigerant and extinguishing agents.

Destruction facilities for refrigerants and extinguishing agents must be approved separately. This requires applicants to submit two applications if they would like to destroy gas that has been used for different purposes. The prior use of the gas is largely irrelevant as it is the specific destruction technology that must be in accordance with Montreal Protocol guidelines and destruction efficiency.

5.5 End-use licensing schemes

5.5.1 Analyses of WHS issues facing the RAC industry

In 2012, the Department engaged Health, Safety and Environment consultants David Caple & Associates Pty Ltd to provide an independent baseline analysis of the WHS data and information for SGGs and their alternatives (including hydrocarbons, ammonia and carbon dioxide), and equipment containing these gases within Australia between 2007 to 2011 (the baseline WHS analysis).

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Commonwealth, state and territory work health and safety regulators participated in the analysis as well as a variety of industry organisations, including equipment manufacturers and retailers of SGGs and alternative gases and a number of tradespeople from various industry sectors.

The baseline WHS analysis found that SGGs and natural gases have been used extensively and safely in Australia for many years, and there was, at that stage, little formal evidence of WHS incidents associated with replacing SGGs with alternative gases in Australia. It identified that the probability of future WHS incidents is most likely in the RAC industry, given the increased exposure to gases with different hazard properties as that industry transitions to low-GWP technologies.

The response to date

Ten recommendations were made in the baseline WHS analysis. They focused on raising awareness of potential safety issues when using alternative gases; improving training, education and communication of appropriate workplace procedures and regulatory obligations to manage WHS risks; and increasing controls on the use of alternative gases including through a licensing scheme and specific codes of practice.

In 2014 the Department supported the Australian Institute of Refrigeration, Airconditioning and Heating (AIRAH) to develop fact sheets and run national seminars to inform technicians about the properties and risks of flammable refrigerants and to ensure technicians are aware of how to find accurate and trusted information on flammable refrigerants. AIRAH’s Flammable Refrigerants Safety Guide (2013) was developed by industry and with the support of the Department as a guide for technicians on how to safely handle flammable refrigerants in stationary RAC applications and on which regulatory frameworks and requirements applied to technicians when handling these substances. Although not endorsed by WorkSafe Australia as a formal code of practice, the guide provides a similar service. In the same year, the Department supported Refrigerants Australia to host a forum with mobile air conditioning and transport refrigeration and air conditioning sector representatives to discuss the current technological changes and issues affecting their industries.

In early 2015 the Department commissioned a review of the baseline WHS analysis to determine whether the risk profile of the RAC industry has changed since the repeal of the carbon tax; whether the recommendations of the first review have been adequately actioned and if not, whether they continue to be appropriate; and whether there is more required of regulators to address the current range of risks.

Current issues and risks and the 2015 review of the baseline analysis

In 2014 Caple & Associates successfully tendered to undertake a review of the first report and to gather and analyse the current issues and risks associated with ODS and SGGs and alternative gases used in the RAC industry. Caple & Associates consulted with over 80 government agencies, industry associations, gas and equipment suppliers, trainers, unions and international experts as part of the review.

The resulting 2015 report identified that there still have been no or very few notifiable WHS incidents in Australia’s states and territories. This observation was ostensibly supported by statistics from the workers’ compensation industry who indicated that the RAC industry has a notably lower rate of

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claims for workplace injury (between 1.05–1.68% claim rate) compared to higher-risk industries with a claim rate of high-risk industries which attract claim rates of up to 8 per cent. 26

Nevertheless, Caple & Associates recognised that, although currently low, there remains a growing risk of such incidents occurring with increased uptake of lower GWP refrigerants and that the consequences of realising this risk can be very serious.

The 2015 Report supported the notion that:

‘Since 2012, there have been two major industry changes in terms of WHS risk. There has been an expansion of the mid-range stationary RAC systems with the introduction of systems containing A2L (mildly flammable) gases, including consumer products such as split system air conditioners. More recently Australia has seen the commencement of imports of new vehicles from the United States (US), Japan and Europe which contain mildly flammable refrigerant as the new standard gas in car air-conditioning systems.’27

The introduction to the Australian market in 2013 of the mildly flammable refrigerant R32 heralded growing concern about the industry’s readiness to work with new refrigerants, particularly with flammability properties. A range of alternative, low-GWP synthetic refrigerants is expected to enter the Australian market over the next few years, both in the stationary and automotive sectors, as overseas manufacturers seek to meet strict regulatory requirements in the EU and consumer demands for more environmentally conscious products. Further, as consumer consciousness in Australia becomes increasingly concerned with environmental protection there is also a growing market for low-GWP ‘natural’ refrigerants, such as hydrocarbon, carbon dioxide and ammonia in OEM (original equipment manufacturer) and retrofit refrigeration and air-conditioning systems in both the stationary and the automotive sectors.

RAC technicians consulted as part of the review indicated that most technicians have continued to use the same refrigerants since 2012 and would only use alternatives that have been confirmed as safe to use by the manufacturer or gas supplier. Instead, the main risk identified by these technicians lay with unknown and unlabelled mixtures of gases being introduced to systems without adequate risk assessments and engineering modifications.

Industry experts in the EU, USA and Japan indicated that in those jurisdictions there are tight controls placed on retrofitting equipment still within warranty. Similarly, in Australia, manufacturers place tight controls on maintenance, including refrigerant choice, in equipment under warranty.

The greatest risks for the Australian market are in older equipment outside of the warranty period. Greater cultural similarities between the US and Australia indicated there are similar risks faced in the aftermarket sector, particularly in the automotive air-conditioning sector, where people are more likely to use cheaper alternatives to the gases recommended by the manufacturer. Representatives of the EU and Japanese RAC industries indicated that culturally their technicians tended to follow the manufacturer’s recommendations and, therefore, the risk of incidents occurring is considered to be very low.

26 David Caple & Associates, Analysis of work health and safety data for the use of synthetic greenhouse gases and substitutes in the refrigeration and air conditioning industry, 2015, p. 16.27 ibid., p. 5.

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As the RAC industry moves towards lower GWP refrigerants, there is a growing need for technicians, consumers and WHS agencies in all jurisdictions to be aware of the risks and how to use these refrigerants safely. This is a major theme of many of the submissions to this review and warrants specific consideration as part of the review of the Ozone legislation.

Industry concerns about the safe use of flammable refrigerants in Australia

Some groups within industry have voiced strong concerns about the ability to assure the safety of technicians and consumers in instances where natural refrigerants are used as replacements for ODS and SGGs. There is broad support within the refrigeration and air-conditioning industry for including alternative gases in the existing end-use licensing scheme. Industry’s support for end-use controls on all refrigerant gases is due to workplace health and safety concerns and, for some, a desire for regulatory equality across the refrigeration and air-conditioning industry. Some industry participants have also highlighted that end-use controls can reduce indirect emissions through improved equipment operation.

In regard to the automotive RAC industry, one suggestion by industry has been to ban all refrigerants where their use is not approved by the original equipment manufacturers. To enforce such a ban is outside the scope of the Ozone legislation. However, there are currently controls in place which, if considered in terms of improved communications and focus of compliance activity, may address many of the concerns raised by industry.

Any technician removing SGGs while undertaking modifications on a piece of RAC equipment requires a refrigerant handling licence under the Ozone Regulations. Further legislative and accountability requirements for technicians are detailed below.

Manufacturers are able to set the terms of their warranty arrangements as long as they do not unduly restrict consumer choice or mislead consumers about their rights under the Australian Consumer Law. To void a warranty on equipment that has been modified to use different refrigerants to those specified by the OEM is an option available to manufacturers. However, the circumstances where a warranty can be voided are limited.

Further, the Department is advised by the Australian Competition and Consumer Commission (ACCC) that where a service provider undertakes equipment modifications that may potentially impact a warranty against defect, the repairer needs to exercise due care and skill and make the consumer aware of this. Under the consumer guarantees, service providers must use an acceptable level of skill or technical knowledge when providing their services, and take all necessary care to avoid loss or damage. If a repairer indicates that they will service equipment according to the manufacturer’s specifications but does not do so, or does not perform the service satisfactorily, the consumer has rights and remedies against the technician under the Australian Consumer Law.

An alternative suggestion from industry was for the Department to implement and enforce a requirement that if a retrofitted refrigerant is used all scheduled substances must first be removed by an appropriately licensed person, and it is required to have a label and unique gas fitting. As detailed below, it is already a requirement under the current regulatory framework through a provision in the ozone regulations to implement listed Australian and New Zealand Standards and codes of practice to be licensed and to appropriately label equipment that has been modified to use an alternative refrigerant.

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A separate suggestion through industry consultation recommended regulation amendments covering both stationary and automotive RAC applications to address the lack of clarity about the contents of serviced RAC systems. The amendment would require technicians to assume that a system designed to use a scheduled substance contains a scheduled substance unless it is clearly labelled and has been re-engineered with new fittings suited to the labelled gas.

Natural refrigerants—such as carbon dioxide, ammonia and hydrocarbon—are not scheduled substances and as such are not subject to regulation under the ozone legislation. Many of the submissions in response to the terms of reference for the Review support the extension of the current end-use controls to encompass all refrigerants as a means of bringing the regulation of the whole refrigerant industry under a single set of training and regulatory requirements, reducing indirect emissions and to creating ‘a level playing field’ for the industry.

There is not the Constitutional power to regulate substances under the ozone legislation that do not fall within Australia’s international obligations under the Montreal Protocol, UNFCCC or Kyoto Protocol. To expand the scope of the current RAC end-use licensing scheme to cover all refrigerants would necessitate a change to the legislative basis of the scheme.

Some industry representatives have also raised concerns about growing, unregulated use of natural refrigerants in automotive air conditioning systems that have not been properly re-engineered to the specifications of the different gas. These concerns were also identified in the baseline analysis review:

‘Since 2012 changes are evident across all RAC sectors as the move to lower GWP gases is driving changes to plant designs. The gaps that relate to WHS risks arise from technicians using substitute gases in RAC systems not designed for their use and modified engineering systems not integrating intrinsically safe designs for flammable gases. This requires the elimination of leaks and removal of potential sources of ignition for the gases.’28

The reported increase in the amount of ‘mixed refrigerant’ being returned to Refrigerant Reclaim Australia in recent years29 supports some concerns within the RAC industry that some technicians are ‘topping up’ systems with refrigerant that is different to the original refrigerant for which the systems were designed. Pieces of equipment with unknown and unlabelled mixtures of scheduled and non-scheduled refrigerants present a risk to the technician, their colleagues, consumers and the recipients of reclaimed gas at end of life. Further, technicians’ ability to identify and safely recover A3 rated gases is currently highly compromised by the availability in Australia of equipment to carry out these processes. This technical challenge is the subject of work parallel to the review of the Act.

Current regulatory controls: Ozone and other legislation

Regulation 135 of the Ozone Regulations sets out the Australian and New Zealand Standards and codes of practice that licensed technicians must adhere to when they carry out their work on RAC equipment or in handling scheduled substances. Regulation 135 includes the Australia and New Zealand Refrigerant Handling Code of Practice 2007 and the Australian Automotive Air Conditioning Code of Practice 2008 covering work on RAC equipment during manufacture, installation, maintenance, decommissioning, retrofitting or re-engineering and the handling of refrigerants.

28 ibid., p. 32.29 Ibid., p. 34.

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Together these documents detail the practices required of technicians to ensure they are meeting both their safety and their environmental obligations. These requirements are not able to be enforced on technicians who do not hold an RHL and who choose to use only alternative refrigerants that are not ODS or SGGs; however, they do specify that if a retrofitted refrigerant is used all scheduled substances must first be removed by an appropriately licensed person, and the system is required to be clearly and accurately labelled. The label not only needs to identify the type and quantity of the new refrigerant and oil, but, under the automotive code of practice, the label must also include the company and licence number of the technician and the date on which that technician performed the retrofit work.

It is also a requirement of the codes of practice for the technician using an unscheduled substance to comply with the relevant state or territory legislation. The codes of practice also specify the handling, labelling and storage requirements for scheduled gases and call up relevant Australian and New Zealand Standards as the guide for practices in keeping with the codes of practice. Calling up these codes of practice in WHS legislation could strengthen their application across the industry as a whole.

Regulation 135 also places upon licensed technicians the obligation to appropriately store, maintain, leak test, label and handle gases they use in accordance with Australian and New Zealand Standards. Enforcement under the Ozone legislation of behaviour in relation to these standards is limited to environmental matters; however, in requiring technicians to operate in accordance with these standards for an environmental benefit they can help to ensure they are operating in a way that also assures workplace safety, in support of state and territory WHS requirements.

In addition to the Ozone legislation, technicians and others who handle, transport and use refrigerant gases under pressure are required to adhere to the WHS legislation in their state or territory; to the Australian Consumer Law under the Competition and Consumer Act 2010 which prohibits businesses from engaging in misleading or deceptive conduct or making misleading representations about some the good or service they are providing30; and the national model Dangerous Goods Code which sets out strict labelling and safe transport requirements for substances with include SGGs and alternative refrigerants.

Recommendations from the 2015 review of the WHS baseline analysis

In light of their observations, Caple & Associates’ key findings from the 2015 review focused on a need for active collaboration between the RAC industry associations and state and territory WHS; gas and electrical regulators to identify the most appropriate governance model for the sector; and the need for an extensive awareness and education programme for Australia’s RAC industry. Specifically:

Communication, education and regulation need to be coordinated and comprehensive, covering the whole supply chain, from supply, transport and storage through to end-use and destruction.

The key regulators for WHS, gas and electrical sectors from each jurisdiction should meet with the RAC industry to identify the respective roles they could undertake to ensure a nationally consistent approach to implement and enforce safe systems of work.

30 Further to this, the ACCC advises in relation to the ACL that an intention to mislead someone is not required to establish a breach and silence may even constitute misleading conduct in certain circumstances.

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WHS regulators, gas regulators and electrical regulators should collaborate to develop nationally consistent WHS guidance for the RAC industry. This should clearly articulate what WHS compliance looks like in relation to the hazards relevant to the RAC industry.

Ensure equipment designers understand the engineering and user requirements for the safe use of new and emerging gases.

Registered training organisations (RTOs) should be provided support to understand and be able to teach the new requirements to trainees and updating technicians.

Training modules for the use and handling of hydrocarbons (UEENEEJ174A – ‘Apply safety awareness and legal requirements for hydrocarbon refrigerants’ and UEENEEJ175A—‘Service and repair self-contained hydrocarbon air conditioning and refrigeration systems’) should be mandated parts of RAC Certificate II and III training courses, and the module currently under development to cover flammable (A2) and low flammability (A2L) refrigerants should be fast tracked to be included in this list of mandated units.

Consideration should be given to requiring trained technicians to update their qualifications with relevant modules to supplement their understanding of the safe use of alternative gases.

5.5.2 Options for addressing industry concerns

In applying the Ozone legislation, the Department seeks to avoid exposing technicians to additional WHS matters. However, it is critical to note that the power and responsibility to regulate occupational matters—including WHS—rests with state and territory agencies.

There is scope to improve and increase communication activity and raise awareness about this issue that does not require amendments to the Ozone legislation. It is considered that an effective approach can be targeted communications that clearly set out for all stationary and automotive technicians what the requirements of the Ozone legislation are. Coupled with a revised approach to compliance and enforcement on the basis of risk, it is considered that the current regulatory framework exists to address these concerns to the extent possible under the objectives of the Ozone Act.

This work must not happen in isolation from state and territory regulators who have the greater role in informing businesses and individuals undertaking work in the RAC industry of their obligations under WHS and consumer law and that they are operating in accordance with those requirements.

There will continue to be a role for the RAC industry itself to provide businesses and technicians with up-to-date information about changing practices and properties of RAC equipment and the gases they use to operate. A cooperative approach across government and industry is necessary in what remains a complex regulatory setting.

It is clear from the 2015 Caple Report and consultation with members of the RAC industry that an agreed regulatory approach and targeted, carefully coordinated communications programme are priorities that require urgent attention.

The widening gap in the regulation of gases used in the RAC industry is with non-ODS and non-SGG substances. It is proposed that WHS regulators, gas regulators and electrical regulators meet with RAC industry associations and with the Department soon to agree on the most effective approach to

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regulation, communication and education in the safe use of the growing range of alternative refrigerants.

This conversation between regulators could also mark the beginning of longer term discussions about a future phase out of the Department’s role in regulating the RAC industry.

Addressing the longer term focus of RAC and fire protection licensing

Alternatives to ODS and high-GWP SGGs will often have a higher risk due to flammability and/or toxicity. Efforts in Australia and overseas to reduce the environmental effects of emissions are seeing an increase in the number and prevalence of gases with flammable and/or toxic characteristics, for example, hydrofluoroolefins (HFOs), lower GWP HFCs, hydrocarbons, CO2 and ammonia. The global drive to reduce environmental impact is increasing the use of flammable and toxic gases being used in both new equipment and, to some extent, retrofitted to existing equipment.

With this transition, the effectiveness of regulating the use of ODS and SGG in the RAC and fire protection industries through end-use licensing under the Ozone Act will diminish but the benefit of licensing in these industries will continue and possibly grow as a means of providing optimal energy performance benefits, consumer protection, WHS and/or public safety.31

Over time the opportunity to achieve emissions reduction through end-use intervention will decline as the CO2-e value of the bank reduces, and as such the regulation supporting end-use intervention for emissions reduction should also decline and be targeted towards the sectors that continue to use high-GWP substances. This draws the question: ‘at what stage of this process should Regulation for emissions reduction cease?’

Transitioning the regulatory basis for end-use controls

Responsibility to regulate the RAC and fire protection occupations rests with state and territory jurisdictions and, prior to the introduction of end-use licensing under the Ozone legislation in 2004, this included the regulation of environmental protections associated with those occupations. After a decade of end-use licensing the skills base of technicians has been established; and the structures, communication networks and ‘brand recognition’ associated with the schemes are in place. It could be argued that the schemes are now mature and are ready to hand back to industry and the jurisdictions to integrate with the way the broader industries are managed.

To continue to control emissions, however, without the current end-use controls there would be a need for training requirements to enforce work standards in all states and territories. Even then, it could be argued that to remove the regulatory requirements for minimising emissions would create a disincentive for industry participants to retain work practices such as recovering gases rather than venting them to the atmosphere. Regulatory requirements by state and territories may be a solution.

31 COAG, ibid., p. 7.77

Australia is undergoing a transition to gases with low or no GWP. The international manufacturers of gases and equipment are driving a trend towards lower-GWP

gases and equipment that use them. International manufacturers supply Australia’s increasing appetite for air conditioning and, as largely an importer of those products,

Australia’s bank of gases and stock of equipment is increasing and its composition is changing.

Australia’s bank of refrigerants and extinguishing agents is set to peak in terms of GWP by 2018 then commence a decline as alternative gases become the norm.32 The extent and pace of change will depend on regulatory or other incentives to encourage the transition. Further, with most equipment lasting from three to longer than 20 years, the need to maintain end-use controls for installed and end-of-life equipment will continue well beyond the transition of imported gases to low-GWP.

Transition, then, is a matter of timing. As Australia’s bank of working refrigerant and, to a lesser extent, extinguishing agent gases transitions to low-GWP alternatives there is a need to transition the focus of end-use licensing for RAC and fire protection to better reflect this trend. While there will still be a need to manage ODS and SGGs in these industries for some years, the time is right for considering how this transition can be efficiently and effectively managed.

There are three high-level options for consideration as a means for achieving this transition:

remove end-use licensing requirements under the ozone legislation but continue to provide transitional support for industry and the jurisdictions to ensure the benefits of the schemes are retained (non-regulatory)—this approach could be applied to one or both schemes

remove end-use licensing requirements under the ozone legislation and provide transitional support for handover of the schemes to jurisdictions (regulatory) – this approach could be applied to one or both schemes

retain end-use licensing requirements under the ozone legislation and refocus to maximise emissions reduction—this could be achieved using existing regulatory powers and functions (BAU or non-regulatory) and would apply to both schemes but would be tailored to suit different conditions for each scheme.

Transition out of end-use licensing under the legislation

This option would remove the end-use licensing provisions from the legislation and provide an opportunity for continuation of licensing and/or industry accreditation schemes on a voluntary basis. This could be implemented for either the RAC industry or the fire protection industry or both. A voluntary certification scheme was established under the National Refrigeration and Air Conditioning Council prior to the establishment of national RAC system.

Remove end-use licensing for RAC, or for fire protection, or for both industries

The Act provides for the regulations to specify end-use controls for the acquisition, storage, handling, sale and disposal of ODS and SGGs. The Regulations currently specify that these requirements will be met through separate but similar licensing schemes for RAC and fire protection. The Regulations set out governance arrangements, administrative requirements and licensing/authorisation requirements. This option removes the end-use licensing provisions from the Regulations so that the operation of one or both of these licensing systems is no longer a regulatory requirement under the ozone legislation.

Implementing the option effectively and responsibly would require a significant transition period during which the scheme/s would continue to operate but licence and authorisation end dates and application fees would need to be determined. The earliest the scheme could be discontinued is 2018 which would be a minimum timeframe for giving industry and regulators sufficient time to adapt.

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For the duration of the transition period, the Department would engage both with industry and with the relevant state and territory agencies responsible for regulating the industry or industries on occupational matters. For a period, potentially of two years, following the removal of the licensing requirements under the Regulations, the Commonwealth could continue to fund the ARC and FPAA to in an advisory capacity and as a coordination point for industry to raise emerging issues and to communicate to industry members.

By implementing the change over a two-year transition period and so that support for the ARC and FPAA is retained, it leaves open the option for transition to an industry accreditation model. This approach would enable industry to address one of the major issues raised during this review process and apply an industry-led scheme to all refrigerants, removing the limitation of the current regulatory framework which can only cover ODS and SGGs. The ancillary benefits of the scheme could be retained.

Treatment of fire protection controls and the role of halon management

The application of the Ozone Act to the fire protection industry is limited in scope and scale. At approximately 1500 members, the scale of the industry currently licensed under the Ozone Act is small. As alternatives for high-GWP gases continue to be developed this component of regulation under the Ozone Act will also diminish and focus more on the use of halon.

Regulation of the fire protection industry as a whole in Australia is covered by states and territories under building and plumbing regulations due to the clear link between fire protection and safety regulations. As detailed earlier in the report, the Expert Group’s modelling indicates that the scale of ODS and SGG consumption in the fire protection industry is small and limited to niche applications.

Halon special permits provide an important and effective mechanism for recording halon purchase and usage figures within Australia. As a substance in limited supply, it is important that usage be accurately tracked and limited to approved essential uses. With international expectations that the use of halon will cease where there are suitable alternatives available, the information collected through the administration of the halon special permit is an important resource. It is therefore assumed that if halon special permits were removed there would be a need to replace them with a similar alternative at a similar regulatory cost.

Removing end-use licensing for fire protection (although still retaining halon special permits) presents an opportunity particularly in relation the fire protection industry to reduce the regulatory burden for the industry sector that is regulated under the legislation while maintaining sufficient coverage to continue to reduce emissions across end-use.

The reduction in regulatory burden for business by removing end-use licensing requirements is $6.04 million per annum: $5.9 million for RAC and $114 000 for fire protection. These costs are predominantly due to the time required by technicians to stay up to date with the requirements of the scheme and to apply or reapply for a licence.

A cost–benefit analysis of the options to remove end-use licensing concluded that 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.33

33 Jacobs, Cost benefit analysis of ODS and SGG reduction policies, 2015, p. 9.79

There are other options for change set out below which mitigate the time costs to business associated with membership of these schemes without removing the environmental protections that the schemes provide.

Remove end-use licensing requirements except for technicians who handle halon

Similar to extinguishing agent handling licences, halon special permits place controls, including reporting requirements, upon businesses storing halon and providing it to technicians for essential use. It could be argued that to effectively implement the controls on halon it would be necessary to ensure that technicians who handle halon continue to be licensed, and newcomers continue to be trained to avoid emissions of halon to the atmosphere. Jacobs’s modelling estimated that by removing controls on halon it could result in an increase in halon emissions alone of approximately 0.93Mt Co2-e between 2017–2030.34

Almost half of the technicians who hold an EAHL also handle halon as part of their work (based on the number of licensees listed on halon special permits). An assessment of the reduction in the regulatory burden currently imposed on permit holders by the end-use licensing schemes indicates that the small reduction in the regulatory burden of approximately $68 600 per annum. Currently, there is some economy of scale brought by the number of licence holders. There would be little change in the cost to administer the scheme as it would require similar resources to administer a scheme half the size of the current membership.

It is worth noting in this context that, had end-use controls not been introduced for fire protection, modelling predicts that by 2030 Australia’s bank of extinguishing agents would have included at least an additional 197 tonnes of FM-200®/FE-227TM35 or the equivalent of more than 0.6Mt of CO2e.36

Voluntary end-use licensing

Should industry decide to continue the scheme/s on a voluntary basis it could retain national coordination by industry and would mitigate the risk of losing the benefit of national consistency.

Depending upon how industry chose to implement the change the option to move end-use licensing to a voluntary basis would reduce the regulatory burden on businesses and technicians to varying degrees. It is assumed for this option that the administrative and compliance costs for business owners or technicians who choose to remain with the voluntary scheme would remain the same. The option would result in no fees for businesses or technicians who opted out.

By removing the regulatory backing for end-use licensing there is a risk that it will introduce a free rider effect and open the market for RAC and/or fire protection services to less skilled technicians. This could also put pressure on currently licensed technicians to reduce some standards to compete. There is a greater level of consumer awareness of the professionalism that comes with scheme membership than may have been the case before mandatory licensing commenced. However, the risk of undermining the highly skilled segment of the industry would not be entirely removed. This report asks

34 ibid,p. 63.35 Expert Group, op. cit., p. 87.36 Based on the Fourth Assessment Report by the International Panel on Climate Change (IPCC), the GWP of FM200/FE 227 is 3 220, less than 2.2 times that of halon 1301 for which it is considered a replacement in some settings but still a potent greenhouse gas. IPCC, Climate change 2007: Synthesis report, Cambridge University Press, 2007, available at: www.ipcc.ch/publications_and_data/ar4/wg1/en/ch2s2-10-2.html.

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stakeholders the question as to whether the current level of ‘brand recognition’ associated with the current licensing systems would mitigate this free rider effect.

If end-use licensing provisions were removed from the regulations without the licensing schemes being taken up by industry on a voluntary basis it is anticipated that emissions at end-use would quickly revert to what the Expert Group described as a ‘no measures scenario’. This would see additional emissions between 2014–2030 of as much as 59.3 Mt CO2e (18ODS/41.3SGG) compared to business as usual. 37

Further research would be needed to estimate the likely level of emissions if licensing or an industry accreditation scheme is continued on a voluntary basis. However, given the current level of maturity of the schemes, it is anticipated that membership, and the standards associated with membership would not decline significantly for some existing participants. However, new entrants without the appropriate skills will have an impact, both from their work quality and reducing the quality of more skilled technicians work as they compete on a cost basis. The performance of the former voluntary scheme, the National Refrigeration and Air Conditioning Council, could be considered to gauge the success of voluntary schemes.

Cost-benefit analysis of the options to remove end-use licensing at this stage revealed that for both RAC and fire protection the costs would outweigh the benefits of maintaining the current regulatory requirements.

The reduction in the regulatory burden of pursuing voluntary licensing is calculated to be $1.76 million. This reduction is based on the relatively conservative estimate of 30 per cent of current scheme members choosing not to participate while the costs to business of being a member of the scheme would not change.

By applying this 30 per cent proportion of licensed technicians to the predicted increase in emissions under a no measures scenario, this option could result in an increase in emissions of at least 510 000 tonnes C02-e by 2030.38

Transfer the end-use licensing structures to state and territory jurisdictions

An alternative option for transitioning end-use licensing is to remove the licensing provisions of the ozone legislation and transfer to state and territory jurisdictions the end-use licensing schemes, allowing for better integration of the regulatory frameworks for the RAC industry, the fire protection industry or both, where they exist.

The process of transitioning one or both of the schemes to state and territory jurisdictions would be very similar to that for the option above. The Department would engage with industry and the relevant agencies within the jurisdictions to ensure a well-supported and smooth handover. There are some differences, however.

It is likely that each jurisdiction would need to administer and support its own licensing schemes. The alternative approach of retaining a centralised body or organisation to administer a scheme with support from and responsibilities to eight different jurisdictions is likely to be a more difficult option to

37 Expert Group, op. cit., p. 47.38 Based on figures presented by Jacobs, Cost benefit analysis of ozone depleting and synthetic greenhouse gas reduction policies, 2015, p. 62.

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implement due to governance and coordination challenges. This is, however, an option that is posed for comment.

A greater allocation of Departmental resources would be required to adequately support liaison with jurisdictions and with industry to ensure that licensing could be transferred successfully and effectively to each state and territory.

Each jurisdiction would need to review and amend legislation to accommodate the licensing schemes. Where occupational licensing for RAC is already in place, this may be a simpler process than for states and territories that regulate RAC less directly. Each jurisdiction would also need to increase resourcing to administer licensing schemes, including the provision of compliance and enforcement resources.

This change would provide a means for transitioning away from regulation for ozone and climate protection to a more occupational licensing basis while retaining the mechanism for regulating that the industry is familiar with.

The key advantage of this option is that it creates an opportunity for states and territories to integrate end-use licensing with their own regulatory frameworks that cover elements of RAC and fire protection but which aren’t currently comprehensive. If integrated in this way, the option would reduce duplication of licensing requirements across state and territory and Commonwealth tiers of government.

In order to carry out their day to day work as tradespeople, technicians and businesses are already required to be trained and to work in accordance with the relevant Australian and New Zealand standards. If the schemes were to be integrated into existing regulatory frameworks in each state and territory, it is likely that the administrative burden of the current schemes would be removed from businesses and technicians.

In relation to the RAC industry specifically, industry feedback throughout the review process has strongly supported coverage of all refrigerant gases under the end-use licensing scheme for RAC. While this is outside the scope of the Ozone Act, the option to transfer end-use licensing to the states and territories could be an opportunity to pursue this further.

The option would reduce the administrative burden on the Commonwealth in the medium to long term. Depending upon how the schemes are implemented, there may be little change to the administrative burden on states and territories in the medium to long term. However, in the short term it would increase administrative costs both for the Commonwealth and for state and territory governments as administrative, and governance arrangements were established in addition to business as usual during the transition period.

One of the key criticisms contained in the 2003 Regulation Impact Statement that informed the Regulation changes to bring in end-use licensing was the lack of consistency between state and territory systems. There is a risk with this option that, as individual state regulatory environments changed over time, this lack of consistency would resume and grow. This argument is consistent with the National Occupational Licensing Authority (NOLA) Consultation RIS39.

If a level of national coordination by industry is maintained, it will mitigate the risk of losing the benefit of national consistency. If the existing licensing structures maintained and handed over to states and

39 COAG, op. cit., p. 17.82

territories to legislate, the benefit of investment over the past decade in publicising the licensing schemes and their benefits would be retained.

By handing over end-use licensing to the states and territories without national coordination, there is a risk that the national consistency achieved through end-use licensing under the Ozone legislation could be eroded. However, given the level of maturity of both schemes and the continued interest in promoting best practice by national industry bodies, it could be argued that the nationally consistent elements of standards and eligibility could be maintained and that any changes made to the schemes could better integrate the requirements of allied occupational regulations in each jurisdiction.

If state and territory jurisdictions incorporated the current licensing requirements into their regulatory frameworks for RAC and fire protection, it is anticipated that emissions would remain at business as usual levels. Careful consideration of regulatory requirements by state and territory governments and the legislative amendment would be required to ensure that the environmental controls were not lost with the transfer.

Cost-benefit analysis found that the additional administrative cost for state and territory governments as well as some licence holders who operate across jurisdictions would be significant. The analysis found that the cost of transferring the current licensing framework across to individual state and territory governments would far outweigh the benefits of maintaining the status quo. The analysis found that the current regulatory framework has an economy of scale that could not be achieved with multiple jurisdictions operating individual licensing schemes. Jacobs did indicate that where state and territory governments could find ways to integrate licensing requirements with their existing regulatory frameworks the cost benefit could be markedly different.

Modelling for the cost-benefit analysis assumed that the requirements for technicians would not change under this scenario, and so it was assumed that carbon emissions would not change. 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 and alternative modelling through the regulatory burden measure which does assume some duplication demonstrated a significant increase in the burden on businesses that operated in more than one jurisdiction.

To transfer either the fire protection, RAC or both licensing schemes to state and territory governments would result in a large increase in cost for these governments, relative to a minor reduction in Australian Government costs. Jacobs modelling indicated an average increase in administrative costs for each state and territory government of approximately $3.5 million per annum in order to achieve a cost reduction for the Commonwealth of approximately $95 000 per annum.40

In addition, the regulatory burden for business of this measure would be approximately $101 000 per annum, split evenly between the Commonwealth and the state and territory jurisdictions as a whole. The costs are due mostly to the cost to some businesses of needing to apply for and hold multiple permits across different states and territories.

Retain end-use licensing with greater focus on significant emission reduction

The final option posed here is to retain the end-use licensing schemes with the Commonwealth and refocus their intent and structure to ensure they are achieving environmental outcomes at low cost for technicians and consumers. In this case, changes to the way in which the current Regulations for end-use licensing are implemented would be non-regulatory. A key part of this approach would be

40 Jacobs, op. cit., p. 60.83

implementing a targeted communications campaign to raise awareness among technicians and consumers about good gas handling practices and responsibility for gases at the equipment end of life. This could consider both environmental and economic motivations.

This option recognises the need to ensure that the focus of the legislation remains on reducing emissions and does not stray into the regulation of occupational matters that rest within the powers of state and territory jurisdictions. It also recognises the need to focus regulatory efforts on the sectors of the RAC and fire protection industries and stages of the equipment lifecycle where there is the greatest potential to further reduce emissions.

In refocusing end-use licensing, further work could be undertaken to align training requirements for licence holders with potential emission reduction opportunities. For example, additional training and awareness-raising could be focused towards appropriate sizing of equipment, decommissioning equipment, reducing leakage rates in some sectors or working with alternative refrigerants with different hazard characteristics.

Compliance and enforcement powers would be retained, and the focus of compliance would be on effective steps applied on the basis of risk. This could be achieved by reviewing the compliance and enforcement role of the ARC and FPAA and balancing this with federal government enforcement action.

A broader understanding within the community of the reasons for regulating ODS/SGG use and the importance of the scheme would support compliance. Targeted communication of the end-use licensing scheme, including to consumers and equipment owners, to support its effective operation could be implemented. The details of this approach and reasons why this is considered an effective option are set out above as a non-regulatory option for achieving emissions reduction.

The Australian Government could continue to work as appropriate with industry and state and territory governments to ensure the RAC and fire protection sectors are regulated in a way that supports appropriate coverage without regulatory duplication.

Further, emission reduction interventions with a low benefit—such as the domestic refrigeration sector with low leak rates and increasing use of low-GWP refrigerant—could be progressively repealed and redundant licence types be removed.

Each of these proposed interventions would be achieved either without regulatory change, or they suggest regulatory change into the future. These options are put forward for consultation. However, consideration of how these outcomes could be achieved will be considered subsequent to the Ozone Act review process.

Streamlining the structure and scope of current end-use licensing

The current structure of end-use licences is complex and can be duplicative. Options to reduce this level of complexity and to potentially re-scope the structure of end-use licensing provide an opportunity to streamline the administration requirements for business and regulators alike.

Eligibility for particular licences is determined by relevant trade qualifications and units of competency. By establishing a number of specific licence types, and especially restricted licence types, a balance could be reached whereby technicians with very limited roles in using RAC or fire protection equipment could undertake training that was limited to their work needs. In some cases, where

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A complex RAC system

participation was limited, specialised training was tailored to the role and not necessarily nationally endorsed.

The RAC licensing scheme establishes a different restricted licence type for each restricted activity within the RAC industry. When a new, specialised activity emerges that does not require the skills of a fully qualified RAC technician, generally a new licence type is created.

While there are some practicalities to this approach, its level of complexity has helped to develop the perception and some of the attributes of an occupational licensing scheme, rather than focusing only on the objectives of the Ozone Act. Its level of specialisation means that there is scope for some industry sectors to use the system to create a barrier to entry and reduce competition. Finally, the system of establishing a specialised licence type for each specialty application has entrenched a need for ever-increasing licence types. This complexity places a significant administrative burden on the body that administers the scheme, which may not be the most effective use of resources. There is currently a benefit for technicians in niche industries or highly specific applications whereby their training requirements can be limited to only what they need to do their work. Any restructure would need to retain these benefits.

By focusing the scope of end-use licences on reduction of emissions of ODS and SGGs, the role of the licence could be made clearer, and the process of ensuring that licence holders were acting in accordance with the relevant standards and codes of practice becomes a clearer issue of communication targeted to industry sectors. For RAC licensing in particular, it could reduce the time required by applicants and administrators to navigate the system, thereby reducing the level of administrative burden without compromising the regulatory basis for the scheme.

Restructure of end-use licensing, simplifying licences to a basic ODS/SGG licence

One option raised during industry consultation is to simplify all end-use licensing to a single permit with conditions placed upon the holder to restrict them to certain activities. The eligible permit holder would need to have completed one or more units of competency which are structured to inform the technician of how to minimise emissions during the course of their work and explain their legal obligations and the environmental reasons for doing so. Eligibility to undertake RAC or fire protection work would continue to be regulated by the states and territories.

A key benefit of this approach would be the avoidance of perceived or actual duplication in the regulation of activities undertaken in the course of a technician’s work. Breaches of WHS legislation would have a clear link to the state or territory agency responsible for WHS matters. Actions such as poor installation or maintenance would have a clear link to consumer protection laws in the relevant state or territory. By structurally separating the regulation of ODS and SGGs from regulation of these other matters the regulatory lines of enquiry could be more easily communicated to licence holders and consumers alike.

Industry consultation has revealed a preference of some industry organisations for installation and/or maintenance to be better regulated. While the option proposed here would clarify the role of consumer protection as opposed to environmental regulation, it does not offer a means of improving standards of workmanship. Some licence holders will be competent but choose not to apply some relevant work standards where there may be a stronger financial incentive to emit. Options that may

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offer a better assurance of installation and maintenance are proposed in section 2 of this report in relation to emissions reduction and would not be mutually exclusive to changing the scope of end-use licences.

This option would require a combination of administrative and legislative change. Simplifying the end-use licence structure to a single ‘ODS/SGG licence’ could reduce the scope of administrative work for the organisations contracted to administer the schemes, thereby reducing the administration costs of the schemes. Further, the proposed new structure of two-year licences only; and support systems to allow for fire protection scheme members to apply online could significantly reduce the regulatory burden for business.

Including the additional costs associated with learning about changes to the scheme and introducing some additional training requirements focused on reducing emissions, this option would reduce regulatory burden for business by over $66 000 per annum.

Allow for a single ‘licence card’ that includes all licence types in one place and retain licence conditions in supplementary material to avoid duplicative administration

One means of maintaining the current level of regulatory coverage but potentially streamlining the administrative burden on businesses and individual technicians is an option to replace the range of over 30 individual physical licence cards with a single licence card. This option would enable licence and trading authorisation holders to show their ‘licensed status’ to customers or salespeople.

One card would be issued to each trading authorisation holder and one card would be issued to each licence holder.

Trading authorisations would be reduced to a single type for RAC, a single type for fire protection and a halon special permit.

RAC licence types would be reduced to a single licence and a trainee licence. Fire protection licence types would be reduced to a single licence type and a trainee licence

type.

The current range of regulatory conditions set out for authorisation and licence holders would remain with all relevant licence types and conditions placed on a licence would be provided to the holder in supporting documentation and retained for compliance purposes by the relevant authority and potentially linked via a quick response code (QR code), a form of graphical barcode that links the reader, via their mobile device, to a web page. The code would be printed on the licence card to enable licensees to easily share the details of their licence conditions with salespeople and customers, if required.

Currently, almost 1400 RAC licence holders hold two separate physical licences for which they need to apply separately. There is potential for this number to increase and also for licence holders to obtain more than two licences, in which case the benefits of this approach would increase.

As with all options to change the way in which licensing is currently administered would come at some regulatory and direct financial cost. The regulatory burden for scheme members to become familiar

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this option with such changes would be a one-off time cost of $57 000, however, taking this cost into account, the minimum reduction in regulatory burden is calculated at approximately $21 500 per annum.

Minor changes to the current end-use licence structure to streamline the application process and address compliance gaps

There is an option to make relatively minor changes to the current structure for RAC permits which still presents an opportunity to streamline the administrative burden for business.

Under the RAC end-use licensing scheme there are currently twenty-eight different permit types: three trading authorisations, four main licences and twenty-one restricted licence types. In cases where technicians seek to undertake a range of restricted activities, they need to either train to be eligible for a full RAC licence or apply for multiple restricted licences to suit their workplace requirements over time.

One option suggested through industry consultation is to condense the restricted licence types into a single restricted licence, instead of applying conditions progressively to define what the licence holder is eligible to do. This would eliminate the need for multiple restricted licences, which would reduce the administrative burden on applicants and potentially also prevent applicants from needing to undertake more formal education than they need to do their work.

The approach of adding conditions to a single restricted licence type increases the flexibility of defining eligibility requirements and, therefore, provides a mechanism for ensuring that restrictions are not used as a barrier to entry.

Industry consultation indicated that a streamlined but not over-simplified system of licences for RAC would allow for sufficient differentiation between licensing for different industry sectors. Industry consultation also revealed support for maintaining the current fire protection licensing structure without change. The reduction in regulatory burden for business would be small, approximately $3 900 per annum. However, it would also reduce the administrative costs associated with regular, minor changes to licence administration in response to small changes to the industry over time.

Maintain the current licence structure for RAC and fire protection without change

There are benefits to maintaining the current structure of licensing for RAC and fire protection. A common theme of industry feedback, particularly from the RAC industry, was general support for the schemes. Analysis of the effectiveness of end-use licensing indicates that the schemes are successfully reducing emissions.

The schemes have been in operation for almost ten years, and technicians are familiar with the requirements and processes for complying with the conditions of their permits and, in doing so, with the regulations.

This option would avoid the cost of changing end-use licensing. However, the drawback of maintaining the status quo is that a number of options to reduce the regulatory and administrative burden for businesses, individuals and government could not be realised. There is some duplication in administering two separate schemes and there is a level of complexity in the current structure—particularly for RAC licences—that could be reduced to gain efficiency in the way the Ozone Act is administered.

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Improve the flexibility of administering licence requirements

Section 45A of the Act provides that the regulations may make provision for the end-use of scheduled substances. The regulations provide the terms and conditions of licences for the RAC and fire protection industries. This includes the training requirements to be eligible for a licence and the standards and codes of practice to which licence holders must adhere.

Rapid technology change, particularly in the RAC industry, can mean that the training and standards set out in the regulations can quickly become outdated. This results in the need to frequently make minor updates to the regulations and risks the provision of outdated information. There is a need to enable amendments to be made to licence requirements more quickly than the regulation amendment process allows for. However, these requirements must retain the same level of legitimacy.

One simple way to streamline and improve the way in which licence requirements are maintained and updated is to make a minor amendment to Part VIA of the Act to allow for the making of legislative instruments as well as Regulations. The intention of allowing for legislative instruments is to maintain oversight of licence requirements but introduce a greater level of flexibility around when it can be amended.

This amendment would not change the regulatory requirements that business is already obliged to meet. The amendment would not result in a change to regulatory burden but rather a potential reduction in delays to updating details of regulatory requirements.

Reporting under end-use licences

The Ozone Regulations set out separate conditions for holders of refrigerant trading authorisations (RTA) and holders of extinguishing agent handling authorisations (EATA). The reporting requirements for RTA and EATA holders are inconsistent and, for EATA holders, place administrative requirements on businesses and on the Fire Protection Industry Board that may be unnecessary.

Under Regulation 141, RTA holders are required to record any checks, leak testing, maintenance or other relevant activity relating to storage cylinders and the specific equipment they need to keep so that anyone handling their refrigerant can carry out their work in a way that minimises emissions. It also requires RTA holders to list any licensees working under their RTA for the relevant quarter. These records must be kept on a quarterly basis and, if requested, each RTA holder must be able to provide the records of the previous quarter to the RAC Industry Board.

Under Regulation 332, EATA holders are required to collect and provide to the Fire Protection Industry Board records of their usage of regulated extinguishing agents on a quarterly basis. It does not require EATAs to record maintenance activity in the same way as the RAC requirements specify.

The fire protection quarterly usage reports are collected and entered into a database by the Fire Protection Industry Board, however, to date this information has yet to be used in any significant way. Therefore, there is a need to change the way in which reporting is conducted for end-use to remove the unnecessary administrative burden.

There are three broad options proposed for public consultation to address these issues of inconsistency and potentially excessive administrative burden. A definitive answer to the problems requires further analysis that is beyond the scope of this Review; however, it is important to seek the feedback of those in the industry who must meet the regulatory requirements as well as those who

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may utilise the data collected through those requirements. The options below are therefore put forward for public consultation.

Remove the requirement for fire protection permit holders to report extinguishing agent usage to the Board.

This option would reduce the regulatory burden on businesses needing to report extinguishing agent usage. It is expected that businesses would continue to record their usage as part of normal business practice, however, the option would remove the need to understand the process of reporting and the time taken to provide those reports to the Fire Protection Industry Board. It would also reduce the administrative burden on the Board which would enable the allocation of those resources to other priorities. This option would reduce the regulatory burden on fire protection businesses by approximately $18 200 per annum.

The drawback of this option is the loss of what is potentially a valuable source of data on the trends of extinguishing agent usage in Australia. This could meaningfully inform a better understanding of the industry in the present time and allow for much more accurate forecasting of extinguishing agent usage into the future. Further analysis is needed to determine the value of this data source and whether the most appropriate approach is to retain it in its current form; to retain it but amend the way it is recorded or reported to reduce regulatory burden; or remove the requirement to collect this data because its value is outweighed by the burden of collecting it.

Retain the usage reporting requirements for fire protection and extend them to RAC businesses.

There may be significant benefits to collecting usage data for scheduled substances and the options set out above for amendments to the fire protection are equally applicable to the RAC industry. There may be value in extending the quarterly usage reporting requirements to RTA holders. If the quarterly usage reporting requirements for fire protection were to be extended to the RAC industry without changing the nature of those requirements the regulatory cost of this additional requirement would be approximately $5 312 100 per annum.

There may be nee efficiencies in lengthening the duration of usage reporting period to an annual or even five-yearly basis to provide a census-style snapshot of gas usage across both industries. If the reporting period for both fire protection and RAC businesses were to be extended to an annual basis, this option would result in an additional regulatory cost of approximately $1 336 000 per annum.

Harmonise the reporting requirements for RTA and EATA holders

The intention of the quarterly reporting requirements for RTA holders and EATA holders to encourage good storage and maintenance activity and ensure there is a record of compliance and enforcement of the regulatory requirements for trading authorisation holders to minimise the emission of the substances they store and provide for their employees to use. It may be beneficial to harmonise the reporting requirements for end-use trading authorisation holders. What these requirements should be is dependent upon further analysis, as outlined for the options detailed above. Regardless of what are the most appropriate requirements for reporting, there are ways in which the process of collecting and organising the information is done. This can be addressed through regulatory change, non-regulatory changes to administrative processes, or a combination of the two. A detailed evaluation of the options available will be included in the final report for this Review, taking into account stakeholder feedback on the options suggested above.

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5.6 Compliance and Enforcement

The Ozone Act review and industry feedback has highlighted opportunities to improve compliance and enforcement actions taken under the Ozone Act. These relate to the:

range of offences included in the Ozone Act and Regulations

powers available to enforce the offences

implementation of the compliance and enforcement regime.

Several industry bodies have noted that some of their members hold a perception that the Department could do more to detect and enforce breaches of the Ozone Act and Regulations.

Submissions to the Ozone Act Review have suggested changes to the existing compliance and enforcement levels and put forward ideas to amend the Ozone Act, which are set out below. Many of these ideas will increase compliance and enforcement provisions while others are requesting consideration for exemption from certain compliance and enforcement provisions.

The Department undertakes compliance and enforcement of the Ozone Act to promote the protection of the environment, support compliance with our international obligations and achieve the objectives of the legislation to reduce emissions of ODS and SGGs. For the industry, enforcement is regarded as an important measure in ensuring a level playing field and an essential element of fair competitive arrangements between businesses.

The Ozone Act sets out the requirements for stakeholders to follow when dealing with scheduled substances and equipment containing scheduled substances including:

import, export and manufacture of scheduled substances and/or equipment containing scheduled substances

acquisition and storage of scheduled substances

disposal of scheduled substances

use and handling of scheduled substances

reporting

payment of levies and fees

record keeping.

There are criminal offences and civil penalties relating to breaching requirements under the Ozone Act. Criminal offences may include imprisonment for up to two years. Depending on the provision breached, civil penalties range from 1 penalty unit ($170 presently, increasing to $180 from 31 July 2015) for individuals and up to 10 000 penalty units ($1 700 000 presently, increasing to $ 1 800 000 from 31 July 2015) for corporations. In addition, breaching the Ozone Act can result in cancellation or suspension of licences (only end-use licences can be suspended) and in the forfeiture of imported

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Compliance and enforcement is connected to all activities covered by the Ozone Act, requiring industry to manage their interaction

with scheduled substances in a lawful way.

goods. These provisions under the Ozone Act are supported by a range of enforcement powers for inspectors under the Ozone Act.

Compliance and enforcement provisions in the Ozone Act interacts with other Commonwealth legislation, including the Customs Act 1901, Crimes Act 1914 and the Criminal Code Act 1995. There are also potential synergies with the Regulatory Powers (Standard Provisions) Act 2014 which will be investigated.

Appropriate mechanisms are required to identify breaches of the Ozone Act and ensure that breaches are dealt with appropriately under Australian law. It is important that compliance provisions are consistent and easy to understand, and enforcement activities are consistent, transparent and appropriate.

As indicated in Figure 11 in the top of the inverted compliance pyramid, the Department’s primary focus is to encourage voluntary compliance with the Ozone Act. Educating users of the Ozone Act and providing support and encouragement to comply helps to increase compliance and limit the need for government intervention. However, the regulatory response from the Australian Government should be responsive to the attitude to compliance shown by users. Increasing penalties and enforcement options must be progressively available so the Department can pursue those disengaged or unwilling to comply as indicated in the lower levels of the compliance pyramid diagram below.

Figure 9 Responsive Regulation—compliance pyramid

The range of offences in the Ozone Act92

Provisions to penalise breaking or destroying goods to prevent seizure

The Ozone Act currently includes a provision to seize goods but none that prevent a person from breaking or destroying goods to prevent seizure. A new offence relating to destroying or breaking goods to prevent their seizure can be considered. This provision exists in other Commonwealth legislation and could be adapted for the Ozone Act.

This provision could be used to cover other goods, for example, computers and record-keeping systems, in addition to ODS and SGG equipment. This will provide the Department with additional enforcement options for suspected breaches.

Penalties already exist in the Ozone Act for the deliberate discharge of substances, and this offence is dealt with separately below.

Reviewing penalties for breaches

The Department is reviewing penalty units for breaches of the Ozone Act. This will help ensure available penalties remain a deterrent to illegal activity.

When setting penalties for breaches of the Ozone Act the Department must consider several areas. These include what penalties are allowable under Commonwealth law, the interaction of other Commonwealth legislation with the Ozone Act, existing penalties for similar acts in other Commonwealth legislation, and the appropriateness of a penalty for an act in terms of true costs of avoiding compliance and impact/damage to the environment.

Expansion of the infringement notice scheme

In 2010, a civil penalty regime, including an infringement notice scheme, was introduced to mirror the criminal offence provisions. The infringement notice scheme allows ‘on the spot fines’ to be issued for breaches. Its operation is currently limited to offences included in the Ozone Act (import and export provisions). The scheme could be expanded to domestic end-use in the associated Regulations.

Industry representatives have suggested that infringement notices should be issued by the ARC and FPAA, who administer the end-use permit schemes for RAC and fire protection. Giving powers to the ARC and FPAA is considered further below.

The introduction of a notice to undertake additional training

Some industry representatives have raised concerns that lack of training may lead to breaches of the Ozone Act. They have requested that those in breach be required to undertake additional training. This type of requirement can already be included, where appropriate, in existing compliance and enforcement undertakings by the Department, the ARC or FPAA.

Addressing allowable emissions

The discharge of a scheduled substance, unless in accordance with the Regulations (including regulation 400–500), is illegal. The list of exemptions is managed to ensure that the appropriate handling of scheduled substances is supported and emissions are avoided.

Regulations 400 and 500 include a list of circumstances where discharge is allowable. The list does not currently contain several circumstances where emissions could be allowed including, emissions during the use of perfluorocarbon tracer technology to detect leaks in electricity cables, semiconductor manufacture, and the operation of medical and veterinary equipment. The list can help manage perverse outcomes or conflicting regulatory obligations, such as where avoiding emission would lead to safety risks or where emission is required by other standards.

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Provisions to penalise false representations for fire protection

There is currently no offence for a person who makes a false representation of an extinguishing agent licence. Incorporating this provision would provide a penalty and would align provisions for fire protection with those in place for RAC. Including this provision will help maintain the integrity of the licensing system.

Powers available to enforce the Ozone Act

Suspending an import/export licence

There are currently provisions to cancel an import/export licence, but no provisions to suspend a licence. An option is to amend the Ozone Act to allow the Minister or delegate to suspend a licence if they are satisfied that the licensee has breached a licence condition or is not complying with the Ozone Act, for example, by late or non-reporting and payment of levies. This provision would offer the Minister or delegate the opportunity to suspend a licence to encourage compliance rather than the more drastic action of cancelling a licence or prosecuting the licence holder.

Audits of individual end-use licence holders

Currently some RHL holders, including some sole traders and split system air conditioner installers, do not require access to bulk stocks of refrigerant gas and, therefore, do not need to hold an RTA. Under the current compliance and enforcement arrangements, these businesses are not covered by the ARC auditing program that focuses on the premises and regulatory requirements of RTA holders. This includes checks on maintenance and record keeping, risk assessment and functionality of specific equipment required to be held by the RTA holder in order to minimise emissions of the gas they stock.

In most cases the businesses that do not require an RTA do not undertake activities that run the risks of emissions that are controlled by the RTA. However, there may be some circumstances where there are risks of emissions that are not subject to the same checks and balances as for RTA holders. The lack of an equivalent check for businesses without an RTA has led to a perceived gap in compliance and enforcement and may be a real gap in some circumstances. The Department is considering options for broadening the ARC’s auditing scope to ensure appropriate/full coverage of RHL and RTA holders. This may require changes to licence conditions where record keeping and/or monitoring requirements do not adequately facilitate comprehensive auditing processes.

Increased enforcement powers to industry licensing bodies

Some submissions to the Review have suggested that licensing bodies be given enforcement powers. This might include a right of entry, to be able to issue infringement notices and powers to cancel or suspend licences, including doing this on the spot.

Auditors for the ARC and FPAA currently undertake compliance visits. Auditors employed by the ARC and FPAA do not have any powers under the legislation, including right of entry or issuing of infringement notices. Generally, the Commonwealth does not give coercive powers to non-government employees. This is to ensure there is proper accountability for the exercise of those powers. Commonwealth employees are subject to a variety of accountability measures by virtue of their employment (e.g. the Privacy Act 1988, the Freedom of Information Act 1982, the Public Service Act 1999 and the Ombudsman Act 1976).

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The introduction of ‘name and shame’ for breaches

The Department acknowledges the importance of the industry for having compliance and enforcement activities publicised. However, additional ‘name and shame’ provisions are not considered appropriate.

Generally, the Commonwealth does not release information on specific compliance and enforcement activities, such as active investigations, to the public unless it is absolutely necessary or required by the investigative process (e.g. to seek information from potential witnesses). Information may be shared with co-regulators for the purpose of law enforcement and subject to relevant information security and privacy provisions, as allowed by the information sharing provisions included in the Ozone Act.

Even after completion, the details of the investigative activities will normally remain confidential. However, most court proceedings are open to the public. In this case, the enforcement outcome may be publicised where appropriate.

Streamlining information sharing between the Department, state and territory and Australian Government agencies

Amendments could be considered to allow for information sharing to facilitate other Commonwealth and state and territory agencies to administer their legislation, for example, consumer protection law or tax law. Similar provisions already exist in other Commonwealth legislation and could be adopted for Ozone Act. A broad provision will enable the Department to disclose information to other agencies if it falls within one or more categories of ‘authorised disclosure’. Disclosures could be made for the purposes of:

1. performing a duty or function, or exercising a power, under or in relation to the Ozone Act; or

2. enabling another person to perform duties or functions, or exercise powers, under or in relation to the Ozone Act; or

3. assisting in the administration or enforcement of another law of the Commonwealth, a state or a territory.

There is the potential for this provision to provide benefits to industry members by enabling entities to report once to meet two legislative requirements. This could be achieved, for example, by allowing information sharing on the manufacture, import, supply or export of products as required by the Greenhouse and Energy Minimum Standards Act 2012 (GEMS Act).

Provisions that would allow the taking of samples for testing in a manner that would be defensible in court

The capacity to sample and test ODS and SGGs will provide greater compliance and enforcement options to the Department. This will enable the Department to examine the characteristics and type of substances available in Australia, ensuring scheduled substances are not being used illegally or imported without a licence. Provisions of the Ozone Act currently exist to allow for regulations to be made to support sampling and testing of ODS and SGGs. Expanding these provisions will improve the capacity of the Department to gather evidence on possible illegal behaviour with the manufacture, import, export, distribution, use, handling and destruction of ODS and SGGs. The ability to prove

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substance characteristics and type will assist the Department in undertaking proceedings for infringement notices, civil penalty orders or criminal prosecutions.

Provisions to allow for Notice to Produce

There is no provision to allow for a Notice to Produce. Making this an explicit power in the Ozone Act, and incorporating an offence provision for non-compliance, will assist the Department in undertaking compliance activities.

A Notice to Produce provides time and money savings for both the licence holder and the Department. These provisions would enable the Department to request a licence holder to provide documents to the Department via the post or email rather than requiring an inspector to undertake a site visit to look at paperwork. Similar provisions exist in other Commonwealth legislation.

Forfeiture and penalty for distribution of goods containing a scheduled substance

There are currently no provisions for the Department to prosecute a person who is distributing goods containing a scheduled substance where they were illegally imported, and where the distributor is not the importer. Unless a successful prosecution of the person is achieved, the goods cannot be forfeited to the Commonwealth. Without forfeiture, the Department is unable to remove these goods from distribution. Amendments to the Ozone Act are required to ensure that illegally imported goods can be forfeited to the Commonwealth, even if they have entered the supply chain.

The management of seized and surrendered goods

Currently, some importers surrender unlicensed goods to Customs and Border Protection to avoid becoming compliant by obtaining a licence, generally when the cost of compliance is greater than the value of the goods. Those surrendered goods are given to the Department for removal and subsequent destruction. The Department is currently limited in what action it can take with these goods. The Department is unable to recoup costs incurred in disposing of these goods. This includes costs associated with storage, transport and destruction. The Ozone Act may need to be amended to provide greater guidance in this area.

Provisions to include requesting reasonable assistance from the owner/occupier during a search

A provision allowing inspectors to request reasonable assistance during a search could be included in the Ozone Act. This provision exists in other Commonwealth legislation. It provides a mechanism for inspectors to request assistance from owner/occupiers when searching for evidence in premises under warrant. This provision would provide time savings for both the owner/occupier and the Department.

Implementation of compliance and enforcement

Increased compliance and enforcement resources

It has been suggested that increased compliance and enforcement resources could assist in to improve the rate of compliance with the legislation. The costs of compliance and enforcement activities undertaken by the Department and the education and awareness activities undertaken by the ARC and FPAA come from the Ozone Protection and SGG Special Account. Any increase in any activity under the Ozone Protection and Synthetic Greenhouse Gas Management Programme (Ozone Programme) has cost implications.

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Summary of options for changing compliance and enforcement provisions

The compliance and enforcement provisions of the Ozone Act could continue with no changes to address the compliance and enforcement issues set out above. However, this would continue to restrict the Department’s ability to manage issues arising from the current compliance and enforcement regime. It is expected that some offences will continue, and those complying with the requirements may continue to be discouraged by the perceived lack of punishment of offenders, this may lead to increased breaches. This option is not preferred as some issues identified currently prevent the Ozone Act from being enforced.

The Ozone Act could be strengthened and streamlined to address the issues set out above. This would provide the Department with an enhanced ability to manage known risks. This would also make it easier for industry to comply and for the Department to administer. Options to reduce the burden on stakeholders to fulfil compliance requirements have also been considered.

Where appropriate, compliance and enforcement provisions will align with the Regulatory Powers (Standard Provisions) Act 2014.

5.7 Cost recovery

Ozone Protection and SGG Special Account

The purpose of the Ozone Protection and SGG Special Account (the Special Account) is to allow for the payment and reimbursement of the Australian Governments costs associated with the administration of the Ozone Act and Programme. In particular, the purpose of the account is to pay or reimburse the costs incurred by the Australian Government in administering the Ozone Act and Regulations, including Australia’s international obligations to phase out ODS, minimise emissions, and undertake related research. Financial details of the Special Account are published in the Department’s Portfolio Budget Statements and annual reports.

The Special Account balance is impacted by the annual shortfall between receipts and expenditure arising from the operation of the National Halon Bank. Its sustainability is compromised by this. Options to address halon management are addressed in the Halon Management section.

Under the Government’s cost recovery framework, the level of licence fees and levies should reflect the efficient and effective cost of the services provided and activities funded. The current licence fees and levy rates were established through the 2012–2016 Cost Recovery Impact Statement, now known as the Cost Recovery Implementation Statement (CRIS), and implemented through the Ozone Act and Regulations. A new CRIS will be developed in consultation with industry reflecting the outcome of the Ozone Act review for consideration by Government. This review and the review of the Ozone Act may lead to a change in the level of the levies and licence fees.

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The administration of Australia’s obligations under the Ozone Act operates largely on a cost recovery basis with a range of fee and levy income streams through the Special Account. It is essential that the Special Account operates on a sustainable basis with income received covering the costs of running the various obligations

under the Ozone Act.

In advance of the CRIS review, there are two minor and mechanical amendments that could be made to the Ozone Act to improve the efficiency of cost recovery activities:

remove the maximum levy rates set in the Ozone and Synthetic Greenhouse Gas (import and Manufacture) Levy Acts and set in the Regulations

insert a provision for the Minister to determine minimum threshold for low-value levy payments and penalty payments.

Methyl bromide

Importers of methyl bromide currently pay a levy of $135 per metric tonne. The import levies are currently set at $165 a tonne for SGGs and $3000 per ODP tonne for HCFCs. There is not a clear rationale for why this levy rate is different to that for other ODS and SGGs.

Members of the methyl bromide industry have been consulted on proposed changes and a variety of responses on whether to increase, retain or decrease the import levy on this ODS have been received to date. There is no clear consensus on the levy rate at this stage and no changes are proposed at this time.

Halon management

The import and manufacture of halon equipment does not currently have a levy applied as the import occurs under an exemption, rather than a licence. The management of the National Halon Bank is a significant draw on the Special Account and as such, this part of the Ozone Protection and Synthetic Greenhouse Gas Management Programme (Ozone Programme) may only be partly cost recovered. Applying a levy to the import of halon equipment may support the administration of the National Halon Bank, however revenue is likely to be insignificant if a similar cost structure is applied to halon as for other controlled substances.

As is the case with changes to all of the levies and licence fees applied through the Ozone Act, the appropriate rate for each will be set through a CRIS review process. Changes may be made to the levies after this time.

Ongoing management of the National Halon Bank

Under the Montreal Protocol, the manufacture and import of halon has been phased out in developed countries since 1994. The use of used halon is permitted to meet essential uses. A long-term supply of halon is required in Australia to meet the needs of essential users where there are no alternatives are available. Currently, the aviation sector is the primary user of halon where alternatives are not available for cargo bays and engine nacelles. Modelling for the Department indicates one scenario where halon could still be required until 2100.

The price of halon had only risen marginally since the National Halon Bank commenced when halon 1211 sold for $30 and halon 1301 sold for $50. The current price of halon 1211 is $32.57 and halon 1301 $54.28.

The National Halon Bank is a halon decanting, purification and storage facility. The halon held at the National Halon Bank comes from decommissioned end-of-life halon fire protection systems, or systems upgraded to non-halon alternatives. The fire protection industry has played a key role in facilitating the return of used halon.

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Stock held at the National Halon Bank can be bought by appropriately licensed civilian essential users. Currently the major user of the National Halon Bank is the aviation industry, although the community, in general, as airline passengers benefits from the protection afforded by halon systems. Some halon is bought by civilian contractors for the Australian Defence Force.

The excess costs of running the National Halon Bank are taken from the Special Account. Analysis of total revenue and expense from all Ozone and SGG Programme activities indicates that the Special Account reserves are likely to be fully depleted by 2020-2021 at the present level of revenue and expenditure.

The National Halon Bank is operating at a significant annual loss. The cost of managing the halon essential use stock is greater than revenue from halon sales, effectively providing a subsidy to the businesses that continue to use halon.

However, operating the National Halon Bank also provides a public good, as:

the stock is managed to high environmental standards, minimising preventable emissions

it avoids demand for new production

it is a means for connecting high-quality recycled halon to appropriate users, for example, aviation users both commercial and private can access stocks, reducing risks for all aviation passengers

it is a place for unwanted halon to be surrendered, safely stored and not emitted

the halon available from the National Halon Bank meets the required standard of purity, therefore enhancing air safety.

Managing the National Halon Bank into the future

Australia has met its international obligations with regards to halon, including from an environmental perspective.

The phase-out of the import, export and manufacture of new bulk halon has been completed.

Halon equipment import is limited to essential uses under the Ozone Act.

Australia has developed a halon management strategy.

End-use licensing supports the appropriate handling of halons to reduce their emission to the atmosphere.

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The cost to the Department in managing the National Halon Bank is about $1 900 000 per year. This cost is only partially offset (approximately $570 000)

by storage charges and sales revenue.

The United Nations Environment Programme (UNEP)41 has raised the issue of the global strategic approach to halon bank management in order to avoid a supply disruption that would lead to an Essential Use Nomination for the production of new halon. It could be argued that the National Halon Bank contributes to the international movement of halons for essential uses, thus minimising the need for an Essential Use Nomination.

Legacy uses of halon remain. The aviation industry and defence sectors still require a domestic reserve of halon stock to service/supply their essential use equipment. The National Halon Bank is serving these industry and strategic sector needs, and not international obligations, which have already been met. In this context, the Department may not be the appropriate entity to manage the National Halon Bank with either other portfolios or private sector operators being more suitable. This raises the question of how the halon stock should be managed and who should do it.

Future management options for the National Halon Bank include:

the National Halon Bank remaining as a Commonwealth-managed facility. This might be through the Department, the Civil Aviation Safety Authority, the Department of Infrastructure and Regional Development or the Department of Defence, noting that the Australian Defence Force a is also a user of Halon. If the management of the National Halon Bank remains with the Department, the cost recovery arrangements to ensure the facility is sustainable will need to be revisited. Cost recovery arrangements could include:

- the imposition of a management fee on strategic users, based on covering the cost of running the halon bank year by year. Airlines as strategic users could choose to recoup these costs as suits their business needs. For example, a fee of ten cents added to every domestic airline ticket would achieve cost recovery. It is assumed that airlines would already have sophisticated ticketing systems in place and costs involved in administering such a fee would be minimal

- raising the price of halon. For example, to achieve cost recovery by this means only would require the price of halon to increase from approximately $50 per kilogram to approximately $550 per kilogram, assuming the same level of sales at approximately 3 tonnes annually

- increasing import and end-use licence and levy fees associated with halon equipment. For example, raising the cost of a halon special permit from $263 for the approximately 40 permit holders to approximately $40 000 would achieve cost recovery

divest the halon stock to users for their own ongoing management and to satisfy their strategic needs. For example, the stock could be divested to the aviation industry, as well as the Department of Defence. There is a case for the current and potential users of the bank to be those responsible for it. Divesting the stock could involve its sale. Private sector owners would be required to adhere to handling and storage conditions consistent with the provisions of the Ozone Act

privatise the National halon Bank to one or more halon suppliers. This option assumes all halon is divested to one or more halon suppliers and not to halon users (airlines and Defence).

41 UNEP Halons Technical Options Committee, Report of the Halons Technical Options Committee, (Volume 1: 2014 Assessment Report), December 2014, available at http://ozone.unep.org/en/Assessment_Panels/TEAP/Reports/HTOC/HTOC%202014%20Assessment%20Report.pdf.

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If the stock were to be divested to industry for management, some reporting requirements might be required to support Australia’s estimation of annual usage and future strategic requirements.

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Appendix 1: Fire protection and refrigeration and air-conditioning permitsFire protection permits

Table A1 Fire protection permits—authorisations

Permits 1. Authorisations

Extinguishing agent handling licence (up to 24 months)

2. Buy, sell, possess ODS/SGG extinguishing agent or to fill/recover extinguishing agent

3. halon special permit 4. Possess halon that is or is to be used in fire protection equipment

Table A2 Fire protection permits—licences

5. Fire Protection Licences

6. Licence 1 7. Portable fire extinguisher maintenance

8. Licence 2 9. Fixed system installation and decommissioning

10. Licence 3 11. Fixed system testing and maintenance

Licence 4 12. Recovery, reclamation, fill and recycle

13. Licence 5 14. Warehouse maintenance

15. Licence 6 16. Control system installation, commissioning and decommissioning

Refrigerant and air-conditioning permits

Table A3 RAC permits—authorisations

17. RAC Permits 18. Authorisations

19. Refrigerant Trading Authorisation (RTA)

20. For an individual or business that acquires, stores and/or disposes of refrigerant (other than halon). For example, wholesalers, RAC and automotive businesses, sole traders and contractors

21. Refrigeration and Air Conditioning Equipment Manufacturing Authorisation (RAEMA)

22. For businesses that need to acquire refrigerant (other than halon) for use in the manufacture of RAC equipment

23. Restricted Refrigerant Trading Authorisation (RRTA)

24. For businesses that are authorised to recover refrigerant from RAC equipment, store and dispose of refrigerant. For example, metal recyclers, auto parts recyclers and waste management businesses

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Table A4 RAC Permits—Licences

25. Licences

26. RAC01 27. Refrigeration Handling Licence –qualified persons (full refrigeration and air-conditioning licence)

28. AAC02 29. Refrigeration Handling Licence – qualified persons (automotive air conditioning licence

30. RSS03 Refrigerant handling licence—qualified persons (restricted heat pump—split systems—installation and decommissioning licence: two years)

31. RDR04 32. Refrigeration handling licence – qualified persons (restricted domestic refrigeration and air-conditioning appliance Licence

33. TL000 34. Refrigeration and air-conditioning trainee licence

35. CL000 36. Refrigeration and air-conditioning trainee licence classroom

37. ATL05 38. Restricted refrigeration and air-conditioning licence (aviation) —handling a refrigerant for any work undertaken on air-conditioning equipment on aircraft

39. MTL06 40. Restricted refrigeration and air-conditioning licence (marine)—handling refrigerant on vessels at sea (except AMSA certified vessels/technicians)

41. TRT07 42. Restricted refrigeration and air-conditioning licence (transport)—mobile refrigeration systems other than air-conditioning systems in the cabin of a motor vehicle

43. RHTL09 44. Restricted refrigeration and air-conditioning licence (handler) – to handle a refrigerant while decanting cylinders

45. RRR10 46. Restricted refrigeration and air-conditioning licence (recovery)—stationary and RAC recovery

47. RRR11 48. Restricted refrigeration and air-conditioning licence (auto recovery)—auto recovery only

49. RRR12 50. Restricted refrigeration and air-conditioning licence (auto recovery)—stationary recovery only

Note: In addition to the thirteen licence types above, there are nine ‘transitional’ licence types that allow for very specific activities to be carried out in specific segments of the industry.

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Appendix 2: Greenhouse and Energy Minimum Standards Act 2012 (GEMS)

Background

On 1 October 2012, the Greenhouse and Energy Minimum Standards (GEMS) Act 2012 (GEMS) came into effect.

GEMS gives effect to Australia’s UNFCCC obligations to adopt national policies to mitigate climate change, limit emissions and promote the development and application of technologies and practices that control emissions of greenhouse gases. GEMS allows the Australian Government to set mandatory minimum efficiency requirements for products, to drive great energy efficiency for regulated products. GEMS also allows for a nationally consistent labelling scheme. The labelling requirements for energy efficiency has been very successful with 83 per cent of Australian consumers surveyed reporting that the scheme influenced their purchasing behaviour in 2005.

This Commonwealth legislation replaces complementary state and territory legislation that formed the Mandatory Energy Performance Standards (MEPS) under the Equipment Energy Efficiency (E3) Programme. The E3 Programme has also been found to be a very successful policy intervention to reduce emissions. In 2010, the energy savings arising from the more energy efficient air conditioners and refrigerators by the E3 Programme was calculated at 6.6 terawatt hours, a benefit of over $1 billion42.

The GEMS legislation provides:

a nationally consistent framework for the regulation of equipment energy efficiency

business certainty through consistency across all states and territories

strengthened monitoring, verification and enforcement activities

the foundation for expanding energy efficiency regulations into new product areas.

GEMS applies to a range of RAC equipment (regulated products), including:

commercial refrigeration

domestic refrigeration

air conditioners

chillers

close control air conditioners

spot coolers

heat pumps.

Obligations of manufacturers, importers and suppliers under the GEMS Act

The product must be tested to prove its energy performance. A test report demonstrates whether a product meets minimum energy performance standards and determines what is included on the product’s energy rating label. A test report may need to be provided with an application for registration.

42 Explanatory Memorandum, GEMS Act, available at: www.comlaw.gov.au/Details/C2012B00107. 104

http://www.comlaw.gov.au/Details/C2012B00107

The product must comply with the requirements set out in the Australia and New Zealand regulations and may include minimum energy performance standards. The product must also be registered with the Australian and New Zealand Regulator

The Australian GEMS Regulator is currently considering data reporting requirements under Section 56 of the GEMS Act for Australia.

There is a range of compliance activities to ensure that manufacturers and suppliers comply with the regulations. These include monitoring, verification and enforcement activities including check testing.

Obligations of retailers

Retailers can only offer a product for supply if the product is registered with the Australian GEMS Regulator and it complies with the regulations. When displayed, a retailer must ensure that an approved label is affixed to the product, that label is not obscured when it is on display and that other conflicting information is not shown near the label.

Reporting

Section 56 of the GEMS Act defines the requirement for a registrant to provide information on the import and manufacture of products. It advises that the Regulator may require the registrant to provide specified information on a periodic basis.

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Appendix 3: List of Global Warming Potential for SGGs in Regulations

The relevant Regulation is the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Regulations 2004. (1) For subsection 2B (1) of the Ozone Act, the value is the GWP amount in the following table for a kind of SGG.

Table A5 Value for calculation of carbon dioxide equivalence of an amount of SGG

Table A6 Item Table A7 Kind of SGG Table A8 GWP (Value)

Hydroflurocarbons

1 HFC-23 (CHF3) 11 7002 HFC-32 (CH2F2) 6503 HFC-41 (CH3F) 1504 HFC-43-10mee (C5H2F10) 1 3005 HFC-125 (C2HF5) 2 8006 HFC-134 (C2H2F4 (CHF2CHF2)) 1 0007 HFC-134a (C2H2F4 (CH2FCF3)) 1 3008 HFC-143 (C2H3F3 (CHF2CH2F)) 3009 HFC-143a (C2H3F3 (CF3CH3)) 3 800

10 HFC-152a (C2H4F2 (CH3CHF3)) 14011 HFC-227ea (C3HF7) 2 90012 HFC-236fa (C3H2F6) 6 30013 HFC-245ca (C3H3F5) 560

Perfluorocarbons

14 Perfluromethane (tetrafluromethane)

(CF4) 6 500

15 Perfluroethane (hexafluroethane)

(C2F6) 9 200

16 Perfluropropane (C3F8) 7 00017 Perflurobutane (C4F10) 7 00018 Perflurocyclobutane (c-C4F8) 8 70019 Perfluoropentane (C5F12) 7 50020 Perfluorohexane (C6F14) 7 400

Sulfur hexafluoride

21 Sulfur hexafluoride (SF6) 23 900

Note: The values in the table are derived from Table 4 of Climate change 1995—The science of climate change: Contribution of Working Group I to the second assessment report of the Intergovernmental Panel on Climate Change, Cambridge University Press, p. 22, 1996.