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Montreal Protocol: Refrigeration sector may face the heat

Environment ministry says the segment could take a Rs 90,000-crore hit if decisions at the meeting go against the Cabinet's red lines

Nitin Sethi  |  New Delhi 

A decision by the environment, forests and climate change secretary to not send the top-level negotiating team for a meeting on the United Nations (UN) on ozone-depleting substances, to be held in Paris in July, has sent the Indian scurrying to the national capital to protect its interests.

The sector, growing at a compounded annual rate of about 10 per cent, could take a Rs 90,000-crore hit over a few years if the decisions at the meeting go against the red lines drawn by the Union Cabinet, the has assessed.

The meeting, scheduled for July 11-17, is to consider whether the sector will be forced to phase out the use of a family of refrigerant gases called hydrofluorocarbons, or HFCs, and replace it with a new set of extremely expensive, patented and not entirely tested gases which, as of now, only a few multinational companies based in the US and Japan produce.

  • Rich countries want India and China to leapfrog to costly refrigerant gases under the Montreal Protocol
  • Some of these new gases are patented by select MNC chemical giants
  • only provides incremental costs of tech transfer from rich nations to developing countries for a year at best
  • But India says HFC is a global warming gas, to be dealt under the Framework Convention on Climate Change
  • Under the convention, rich countries have to transfer technologies and provide complete costs
  • India’s is growing the second-fastest, after China
  • Only one Indian firm uses an alternative environment friendly non-patented refrigerant gas, but it cannot be used on larger scales yet

Different associations of the Indian and industry leaders have sought appointments with the Union minister for environment, forests and climate change, Prakash Javadekar, as well as other senior bureaucrats in the ministry, who decided not to send the negotiators to participate at the Paris meeting.

Officials within the ministry, too, have said sending a relatively low-ranking official who has not dealt with the subject, instead of the officials who have handled Montreal Protocol negotiations since they began, could harm India's interests.

India faces a tough round of negotiations at the meeting, the officials have said.

US President has made it a priority piece of his climate diplomacy. His administration has pushed India and China hard to accept the changeover at bilateral meetings. In parallel, it has built a coalition of countries at multilateral fora such as Montreal Protocol and the climate convention to corner India and China. An attempt by senior US negotiators to get India to sign a bilateral agreement for a phase-out of HFCs was last thwarted by the United Progressive Alliance in 2013, when the external affairs and environment ministries stepped in to block a decision being taken by other power centres in the government.

The Montreal Protocol deals with substances that deplete the ozone layer, mostly refrigerants and solvents. Developed countries began shifting to HFCs from ozone-depleting gases long ago but unwilling to pay poor countries to do this, they instead paid countries such as India the incremental costs to move to another patented, but less costly, family of gases called hydrochlorofluorocarbons, or HCFCs.

These gases harmed the ozone layer less than the original refrigerant gases, but being patented replacements, foreign companies made good profits on the transition. Between 2013 and 2013, Indian companies have been tasked to make yet another technology change to HFCs, used in air-conditioning, refrigeration, cold-chains, fire extinguishers, medical treatment of asthma patients and defence equipment.

A few years ago, it emerged while HFCs did not harm the ozone layer, these added to some global warming, a subject covered by the other global environmental pact - the Framework Convention on Climate Change.

Despite the fact that the phase-out of HFCs was not covered under the Montreal Protocol (as these didn't harm the ozone layer) the US and other developed countries stepped up pressure at these meetings that developing countries such as India and China leapfrog HFCs to another new synthesised set of gases, which were proprietary chemicals of companies such as Dupont, Honeywell and Daiichi Sankyo. The demand for air-conditioning is rising the fastest in China and India. A mandatory transition imposed through the UN Montreal Protocol will create an instant monopoly market for these chemical manufacturers.

But in evaluating its options, the government assessed such a move would not just jeopardise India's growing refrigeration sector, but also drill a hole in India's negotiating stance at the UN Climate Convention. Earlier, the Cabinet had decided that India shouldn't agree such a transition until 2015, by when the new global climate change agreement will be stitched together.

The National Democratic Alliance government hasn't reversed this Cabinet decision.

Government documents accessed by Business Standard show it based its decision on several reasons. An internal note by the government reads, "Some of the alternatives proposed, especially for mobile air-conditioning (read automobiles) is about 20 times costlier than the gas used currently." It added, "Such technologies are not only process-patented, but also application-patented by a few US-based global chemical producers. There will be monopoly in the world of these producers."

"The financial mechanism of the Montreal Protocol provides only incremental capital costs and incremental operating costs for specific periods (ranging from six months to a year). The enterprises are to invest the additional funds in the conversion of the manufacturing facilities and bear the increased costs of products for a long time."

On addressing this set of gases before developed countries reduce their carbon emissions, the note said, "HFCs contribute only 0.7 per cent to current global warming trends, compared to major greenhouse gases (carbon dioxide and methane) emissions." The note also showed the use of HFCs was much higher and growing in developed countries.

The ministry also cautioned the new technologies weren't tested for Indian conditions and issues related to their flammability hadn't been resolved.

Another internal note said, "The proposed amendments (to the Montreal Protocol by the US and other countries for phase-out of HFCs) have legal, policy and technical issues and are not in the interest of Indian industry. There are no safe, technically proven, economically viable non-HFC technologies for most of the applications. It will cost the country about $15 billion in the near future; it will be a heavy burden on the industry."

India, China and other developing countries have demanded if HFCs, which cause global warming, are to be phased out, it should be done under the UN climate convention, as part of the new 2015 global deal to which the principle of equity and the principle of common but differentiated responsibilities applies. These principles under the climate convention oblige developed countries to transfer funds and provide costlier green technologies to poor countries, holding them responsible for a much larger contribution to climate change historically.

Recently, environment minister Prakash Javadekar proposed the Green Climate Fund be used to buy out the intellectual property right costs of clean technologies for poor countries. Expectedly, developed countries such as the US are against such ideas at climate negotiations.

At the last round of Montreal Protocol negotiations, it took a hard round of negotiations and lobbying by India and about two dozen other developing countries, including China, to block the US proposal. This has found support from several other developed countries, as well as smaller economies that do not stand to lose economically from it. The Paris round of talks now holds a new challenge for industry, as well as the government.

First Published: Sat, July 05 2014. 23:29 IST