F-GAS Regulation

Introduction

In 2006 the EU made the decision to address climate change by introducing the first F-GAS Regulation affecting only certain industries of the sector. This was Regulation (EC) 842/2006 (the first F-GAS Regulation). This was the preparatory step for the forthcoming second F-GAS Regulation which would aggressively address the environmental issue caused by hydrofluorocarbons (HFC).

Regulation (EU) 517/2014 (the second F-GAS Regulation) was introduced at the end of 2014 to set the rules of engagement for the placement on the EU Market of Greenhouse Fluorinated Gas (HFC).

After a series of Implementing Regulations aimed at addressing rules of engagement in terms of Registration on the HFC Registry (adopting the definition of the Beneficiary Owners as per DIRECTIVE (EU) 2015/849 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL published on May the 20^th 2014), on March the 11^th 2024 the new F-GAS Regulation (the third F-GAS Regulation) was published: REGULATION (EU) 573/2024 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL.

This Regulation is addressing the climate change issue in a far more aggressive and restrictive matter and the key changes versus the previous version can be summarised below:

• New phase down target for 2030: 89% (was 79%) reduction versus 2015 Quota baseline.
• Introduction of MDI (Metered-dosed inhalers) in the Quota System.
• Introduction of a fee of 3€/tCO2eq to be paid in 2025 to be able to use 2026 Quota.
• New bans for products and equipment precharged with HFCs.
• Removal of the possibility for New Entrant Undertakings to Authorise their New Entrant Quota to importers of equipment precharged with HFCs.

In 2021, when the United Kingdom left the EU, two separate Quota systems were established:

• GB Quota system – covering England, Scotland and Wales.
• EU Quota system – covering EU27 + Northern Ireland.

It is important to understand the implications of this event: the United Kingdom of Gret Britain and Northern Ireland has left the EU at the end of the transition period, however Northern Ireland remained within the remit of the EU F-GAS Regulation. Companies moving HFCs between Great Britain and Northern Ireland (and vice versa) should be very careful in understanding which F-Gas Regulation they need to comply with.

HFCs PHASE-DOWN steps

The second “F-Gas Regulation” is a game changer for the industries trading these gases or products relying on these gases such as Air-Conditioning business.

A third revision of the F-GAS Regulation is currently underway and the signs are pointing to a more restrictive approach to HFC gases.

Regulatory Framework

Regulation (EU) No 517/2014 of the European Parliament and of the Council of 16 April 2014. This is the current F-GAS Regulation with the Quota System covering the EU and Northern Ireland. GB (England, Scotland and Wales) has adopted the same Regulation “as amended”.

Commission Implementing Regulation (EU) No 1191/2014 of 30 October 2014. This Regulation set forth the guidelines to report correctly the HFCs placed on the market both in bulk and in equipment.

Commission Implementing Regulation (EU) 879/2016 of 02 June 2016 – This Regulation introduces the format of the Declaration of Conformity as required by Article 14 of the second F-GAS Regulation.

Commission Implementing Decision (EU) 2023/2018 of 17 December 2018. This is to acknowledge the decision taken by UK to leave the EU (Brexit).

Commission Implementing Regulation (EU) 661/2019 of 25 April 2019. This Regulation is introducing more stringent criteria in the registration process of the EU F-GAS Portal, thus to prevent multiple applications for EU Quota for Companies with the same Beneficiary Owner(s). It was part of the actions taken to fight the illegal trade of HFC which flourished after the introduction of the second F-GAS Regulation and it refers to Directive (EU) 849/2015 of the European Parliament and of the Council 0f 20 May 2015.

Commission Implementing Regulation (EU) 980/2021 of 17 June 2021. This Regulation sets a new requirement for Non-Eu Undertaking: to apply for an EU EORI number to be able to use their EU Quota to place HFC in Bulk on the EU Market.

REGULATION (EU) 573.2024 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 07 February 2024, entered into force on 11 March 2024. This is the THIRD REVISION of the F-GAS Regulation, creating now an even greater divide with the GB F-GAS Regulation, still using the same criteria (mutatis mutanda) of the previous EU F-GAS Regulation 517/2014.

Industries impacted by the F-GAS Regulation

The range of Industries impacted by this Regulation is really wide, but it may be broken down into two major categories:

• Importer/Producers of HFC in bulk
• Importer/Producers of equipment whose functioning relies on HFCs (precharged equipment).

The most affected businesses and products are listed below:

• Automotive
• Air-Conditioning
• Refrigeration
• White goods (i.e. tumble dryers and water dispensers)
• Laser medical equipment
• Aerosols
• Fire protection equipment
• Solar

Outline of the F-GAS Regulation

The F-GAS Regulation introduced a Quota System starting from Jan the 1st 2015.
The Quota to place on the Market HFC in bulk is released on a yearly basis and it has only one year validity.
If by December the 31st it is not used in full, the unused part is lost.

In order to allow new businesses to enter this sector, it was decided to split the yearly Quota as follows:

• 89% to be assigned to Incumbent Companies
• 11% available to New Entrant Companies

There is a specific time frame to make the application for the subsequent year. This time frame is announced by DG Clima on the Official Journal of the EC.

As a result of this approach, there are two types of Undertaking currently active on the EU and GB F-GAS Portals:

• Incumbent Companies: these Undertakings were in scope of the First F-GAS Regulation with the obligation to report their activities since 2009. Based on their average activities between 2009 and 2012, these Companies have built a reference value which secures a share of the 89% of the Quota released every year.
• New Entrant Companies: Companies with no Reference Value. There are a few restrictions in what these Undertaking can do compared to the Incumbent ones. More restrictive.

The “Reference Value” for an undertaking is an average of the placement on the market of HFCs from 2015 onwards.
Every three years this “Reference Value” is recalculated to make sure that there is a fair share of the EU Quota year on year.

F-Gas Reporting: each undertaking placing on the market HFCs has the obligation to report its activities for the previous year within March the 31st of the following year.

If this activity exceeds certain thresholds, then there is the legal requirement for an F-Gas Audit.

Here are the thresholds to have an independent verification:

• HFC in Bulk: from 10,000 tonnes of CO₂eq/year up.
• HFC precharged in equipment: from 100 tonnes of CO₂eq/year up.

Types of Quota

There are three types of Quota:

• Quota to import Bulk Gas -> it is released by the EU Commission on a yearly basis both to Incumbent and New Entrant Companies.
  This type of quota can be:
  • Used to import GAS
  • Transferred to another undertaking to import Gas
  • Authorised to another undertaking to import equipment precharged with HFC
• Authorisation of Quota to import equipment precharged with HFC.
  This type of Quota can be Delegated to another undertaking to import equipment precharged with HFC
• Delegation of Quota to import equipment precharged with HFC.
  Must be used by the beneficiary.

Penalties

Article 25 of the F-GAS Regulation sets a Quota penalty for undertaking importing in excess of their available Quota and it also calls for heavy penalties to be imposed by the Member States.
Quota Penalty: 200% of the tonnes of CO₂eq placed on the Market in excess of the available Quota as in the example below:

GWP converter

Dealing with HFC requires Quota.
It is important to have sufficient Quota to cover your imports.

• This Regulation is using the Ton of CO₂eq (environmental impact of Greenhouse Gases) as unit of measure.
• Each Refrigerant is converted into tonnes of CO₂eq based on its GWP (Global Warming Potential) according to Annex I table of the Regulation (EU) 517/2014*.
• The higher the GWP, the higher the environmental impact of the Refrigerant.

* Regulation (EU) No. 517/2014 - Annex I

The GWP Converter below can be used to check the tonnes of CO₂eq needed for the Gas.