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Environmental concerns often present trade-offs between economic performance and the environment, but sometimes a new technology comes along that represents an environmental advance and also gives U.S. companies a leg up on their competitors. The Kigali Amendment to the Montreal Protocol on ozone-depleting substances establishes a gradual, market-driven phasedown of current-generation hydrofluorocarbons (HFCs) and transition to next-generation technologies.
In 1987 the Montreal Protocol became the first multi-national agreement to limit ozone-depleting substances. Over the years – and through multiple revisions – it serves as a case study on international cooperation to address environmental issues.
The Montreal Protocol has been successful because of its ability to harness market forces to foster the development of new technologies. This innovation-fostering framework has allowed U.S. manufacturers to become world leaders in providing the safest, most effective HFC technologies for the heating, cooling, and refrigeration industries.
The most recent revision to the Montreal Protocol, called the Kigali Amendment, is currently awaiting ratification by the Senate. The Kigali Amendment, named for the capital city of Rwanda where it was negotiated, furthers the innovation-fostering model by providing a gradual, market-based phasedown of currently-used hydrofluorocarbons (HFCs) to allow for a more cost-effective transition to next-generation technologies, such as hydrofluroolefins (HFOs) which have significantly less environmental impact. U.S. companies have already invested billions of dollars in research to develop and produce these new technologies, and ratification of the Kigali Amendment will help ensure that American firms and workers will supply the world with these important products.
World demand for heating, cooling, and refrigeration equipment is expected to grow dramatically over the next decade, as developing nations rapidly expand the number of customers for these products. The Air-Conditioning, Heating & Refrigeration Institute and the Alliance for Responsible Atmospheric Policy recently released a study, Economic Impacts of U.S. Ratification of the Kigali Amendment, which highlights how ratification of the Kigali Amendment will help the U.S. maintain and grow its technology and manufacturing leadership in these industry sectors.
According to the study, ratifying the Kigali Amendment will support U.S. industry sectors that produce heating, air-conditioning and vehicle air-conditioning, and refrigeration equipment by expanding their share of world markets. Ratification would increase U.S direct manufacturing employment by 33,000 over the next decade, in addition to the already-projected 47% baseline increase over that same period. In addition, ratification would indirectly add 117,000 more jobs, for a grand total of 150,000 additional by 2027. This growth all due to increased demand in these key sectors.
Similarly, ratification of the Kigali Amendment will boost output in the U.S. manufacturing sector by an additional $12.5 billion by 2027, on top of an already-projected increase of $27.3 billion due to growth in global demand. With the Kigali Amendment in place, total industry output is projected to grow by over 70% by 2027. Importantly, the Kigali Amendment’s ratification will grow the U.S. share of the world market for heating, air-conditioning, and refrigeration equipment by 25% over its current share – without ratification that share will decline by nearly 14%.
Ratification of the Kigali Amendment would improve the environment by further reducing ozone-depleting substances, which are also potent greenhouse gases. However, in addition to improving the environment, ratification would be a big win for the U.S. economy and American workers by allowing U.S. firms to capture a greater share of a growing global market in heating, cooling, and refrigeration.
The Kigali Amendment shows that by harnessing the power of markets and encouraging innovative technologies it is possible to ensure a healthy, clean environment while promoting economic growth and job creation.