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Stunning Agreement On HFCs Offers Huge Opportunities

Business, Company Strategy, Environment, India, Sustainability, Technology
By John Richardson on 24-Oct-2016

imageBy John Richardson

THE DELHI bank manager’s priority was to make sure his son got through medical school. He obviously therefore didn’t have that much time or energy to worry about global warming before he bought a hydrofluorocarbon (HFC)-fuelled air-conditioning unit. The aim was to instead make sure his son could stay awake and night and study for his exams.

And the bank manager’s neighbours had for years suffered in the same stifling Delhi heat with up to six adults sleeping in one non-air conditioned room. So the family eventually saved enough money to buy their first air-conditioning unit. They, too, were just relieved that they no longer had to live in an uncomfortable and unhealthy environment.

But India and other emerging countries well understood that they would suffer many more days of intense heat if the growth in the use of HFCs hadn’t been controlled. HFCs have 1,000 times the heat-trapping potency of carbon dioxide. In the case of India again, its rapid economic growth promised perhaps nothing short of an environmental disaster: Only 6-9% of Indian household today own an air-conditioning unit.

This is the context behind the quite stunning legally-binding deal signed by 170 countries in Kigali, Rwanda, earlier this month to freeze and phase-out  the use of HFCs:

  • No deal would have been done if developed countries hadn’t agreed to provide the financial and technological assistance necessary for countries such as India to mitigate the extra cost of sustainable air-conditioning. The alternative to HFCs are hydrofluoroolefins (HFOs). These chemicals are more expensive and are flammable, and thus require more careful handling.
  • The developing world might well have also walked away from the negotiating table if developed countries hadn’t agreed to move at a quicker pace in freezing and phasing-out the use of HFCs. Given that 65% of all HFCs are consumed by developed countries, with the US alone accounting for 37% of global consumption, it was only reasonable that the rich world took the lead. But this still the first time that an international climate deal has been differentiated in this way.

The Kigali agreement is a further reminder of a seismic and permanent shift in public and thus political opinion. As last year’s Cop21 agreement in Paris also told us, it doesn’t really matter whether or not you agree with the scientific consensus that climate change is man-made. This is an entirely moot point. Any chemicals company that doesn’t “walk the talk” on sustainability will lose out.

Chemicals companies will also lose out if they are too hung-up on narrow Western definitions of returns on investment. This will be an affordability game, where the volume gains for those with the right cost base will be huge. Again, just imagine if you end up supplying most of the HFOs or the plastics that will be used to make the many millions more air-conditioning units that will be sold in India.