Domestic quota compliance plan (2024-2030) of Refrigerant Gas

The domestic quota compliance plan (2024-2030) is released for comments, and the refrigerant boom is expected to continue

The Plan insists on quota compliance management for HCFCs/HFCs and other substances, and earnestly fulfills the obligations of international environmental conventions. According to the content of the Plan, China will carry out the elimination and reduction of ozone-depleting substances by industry and substance, with the following main goals: 

(1) HCFCs, in 2025, the production/use of controlled purposes (based on the average of 2009-2010) will be reduced by 67.5%/73.2% respectively, and in 2030, the production/use will be eliminated by 97.5% of the baseline value, and 2.5% will be retained for air conditioning maintenance and other needs; 

(2) HFCs, in 2024, the production/use of controlled purposes will be frozen at the baseline value (based on the average of 2020-22 + 65% of the HCFCs baseline value) of 1.835 billion/905 billion tons of CO2 equivalent, and in 2029, the average annual reduction will be 10%. The Plan also clarifies that HCFCs/HFCs will be subject to quota licensing management, according to the arrangements of annual quota issuance, annual reduction and elimination. We believe that under the strict compliance agreement, domestic refrigerants will usher in a strong supply constraint cycle.

HCFCs: 

The quota will be reduced in 2025, and the market is expected to rise under the support of maintenance/export demand. According to the Ministry of Ecology and Environment, the domestic HCFCs production/internal production quota in 24 is 213,000/128,000 tons. R22 is the main type of HCFCs, and the production/internal production quota in 24 is 181,000/111,000 tons. The concentration of R22 is high under the quota system. Since the HCFCs quota will continue to be reduced in 25 years, and considering that the existing air-conditioning maintenance market and export demand using HCFCs are still large, we believe that the R22 market may rise. At the same time, the "Plan" clearly stipulates that R141b, as a controlled substance, must be completely phased out by 2026, and the use of HCFCs such as R141b in fields such as foaming and cleaning agents will also be banned in July 2027.

HFCs:

Strictly implement quota management and gradually ban the use of high-GDP products in various fields. In addition to strictly implementing HFCs quota management starting in 2024, the Plan also proposes a timetable for banning high-GWP refrigerants in the automotive/home appliance/industrial and commercial refrigeration fields.

 (1) In the automotive field, the main refrigerant is currently R134a. Considering that its GWP value (about 1430) is much higher than 150, the requirement to ban it in 2030 may prompt manufacturers to pay more attention to "profit over quantity" during the limited use period, while accelerating the development and application of HFOs, etc.; 

(2) In the refrigerator and freezer field, considering that HFCs are currently used less, we believe that the impact of banning HFCs in 2026 will be relatively limited; 

(3) In the air-conditioning field, R410a will be banned from 2029, which we believe will also be conducive to the replacement of lower GWP products such as R32/HFOs; 

(4) In the industrial and commercial refrigeration field, the use of high-GWP products will also be banned in 2029.