Cool heads prevail: Managing Australia’s refrigerant market

By Refrigerants Australia executive director Dr Greg Picker

Recent speculation about the availability and future of refrigerants prices, unnecessary scaremongering and misinformation has increased the level of concern and uncertainty among the industry. 

This article looks to provide insight into the context, background, impacts and what consumers can expect to see in the near future when it comes to the price and availability of refrigerants in Australia. 

While change is inevitable, it provides great opportunity to work alongside our government counterparts to lead with innovation and achieve regulatory reform.

Background

The Kigali Amendment to the Montreal Protocol is the key driver for the changes we are seeing now. It causes HFCs (such as R134a, R404A and R410A) to be phased down.

The way it works is that the Australian government has put limits on the total import of all bulk refrigerants depending on their global warming potential (GWP), which compares their impact to carbon dioxide.

For example, R134a has a GWP of about 1400, R404A has a GWP of about 4000, and R410A has a GWP of about 2000. 

What does this mean? A kilogram of R134a equals about 1.4 tonnes of CO2 and a kilogram of R404A equals about four tonnes of CO2.

So, if an importer can import 10 tonnes of CO2, then they could import about 2.5 kilograms of R404A or about seven kilograms of R134a – or whatever combination of refrigerant they think best. 

But of course, there are other options available – and more are becoming available. In new cars, where R1234yf is used, there is a tremendous advantage. It has a GWP of less than one and is not considered an HFC, so importers can bring in as much as they like. In commercial refrigeration, R448A and R449A can both be used as replacements for R404A in existing systems and they have GWPs of about 1400. An importer can import about 2.5 times the amount of these refrigerants than R404A. R32 and other A2L refrigerants can be used in new equipment and this change further supports refrigerant transition. The Kigali Amendment is designed to foster these types of transitions.

What is going on now

There are two main factors impacting the refrigerant market today. The first, and the most predictable, is the HFC phasedown. The chart below details Australia’s commitments under the Kigali Amendment: our amount of refrigerant that can be imported – in CO2 terms – reduces every two years.

While the refrigerant market has long been projected to grow, when this was agreed in 2017 there was not expected to be a problem with refrigerant availability. 

Government and industry worked cooperatively together, as we had for 30 years,and identified three main areas where a transition would enable Australia to meet our requirements. These included increased use of R1234yf in car air-conditioners, R32 in split system air-conditioners, and a range of replacements for R404A in commercial refrigeration.

Additionally, in the phasedown legislation, the government gave itself the power to put in legislated GWP limits for new equipment. There was a broad expectation that this authority would not be needed as the phasedown would drive technology change.

Unfortunately – except for R32 – industry and government got it wrong. The transition away from the use of R404A in commercial refrigeration and R134a in new car air conditioners has not really happened yet, despite lower GWP refrigerants being available for a decade.

This was a surprise given the very rapid transition we saw around 1994 away from R12 in car air-conditioners. We thought the same thing would happen again – it didn’t.

The chart below displays the gap – in percentage terms – from how much refrigerant is available to be imported with the projections of what the demand will be in Cold Hard Facts 4.

Prior to 2024, the market was able to meet demand through reclamation, recycled refrigerants and stockpiles. By 2024, however, stockpiles were largely depleted and the gap between refrigerant usage (ie demand) and import levels increased from 18 per cent in 2023 to 29 per cent in 2024. By 2026, provided nothing changes, the gap between available refrigerant through imports and demand is projected to be 38 per cent.

Recycling and reclamation will be insufficient to make up this shortfall. By 2028, the gap between refrigerant availability and demand ie expected to be 50 per cent.

What does all this mean for the future

This analysis suggests a difficult time for the industry. But, while there will be costs and dislocation, the forces of supply and demand will encourage end users to switch to lower GWP refrigerants which will become, and are already becoming, increasingly cost competitive.

This news, however, is better over the long term. In the short term, it will take some time to sort out. The Australian government has the capacity to take action that would reduce pressure on the industries that rely on refrigerant and, while it would take a number of years to see significant impacts, the sooner we start, the quicker we see the benefits.

Refrigerants Australia has been calling for the Australian government to implement regulatory reform to address these issues for the past several years. These include action on commercial refrigeration and in car air-conditioning. 

Specifically:

• Introduce restrictions on commercial refrigeration
• GWP limit on new equipment from 2026
• Prohibition of bulk imports of R404A from 2028
• Service Ban on R404A from 2030
• GWP limit of 150 for car air-conditioners from 2026

If these measures were implemented, analysis using the facts provided in Cold Hard Facts 4 undertaken by Refrigerants Australia indicates there would be a reduction in refrigerant demand of about 1.8 million tonnes (CO2) by 2028. The chart below details the impact of government putting in the reforms described above.

So what does this mean for consumers?

It would be nice, but inaccurate, to suggest that the vulnerability described above will have no impact on purchasers of refrigerant. Of course it will. The forces of supply and demand will likely see prices rise and there may be moments of scarcity.

The months leading into summer will likely be the most pressured as demand increases and the quota year (which is a calendar year) comes to an end.

Smart buyers will look to engage proactively with their suppliers early to ensure supply and prices can be confirmed. Realising the need for extra supply in the first week of December could well be an unhappy experience.

Of course, the car air-conditioning sector (unlike others) has already moved to stretch supply through recovery, recycling and reuse. But it will be increasingly important to ensure used refrigerants are pure and have been cleaned of oil and moisture before reuse.

We would expect to see increased market opportunities for used refrigerant that is not up to specifications to be able to be reclaimed. As an industry we need to ensure those refrigerants that have been seen as waste are returned to their original quality and then returned to the market to make up some of the shortfall.

Other activities are just as important. It will be vital to ensure that leaks are proactively identified and fixed. Preventative maintenance will also become even more vital, as it delivers energy benefits and reduces the likelihood of leaks.

Refrigerants Australia recently hired the Expert Group – the same mob that does Cold Hard Facts – to do a deep dive on leak rates (www.refrigerantsaustralia.org).

Leak rates in mobile air-conditioning remain stuck at about 7.5 per cent. The sector needs to work to do better. To be clear, however, the main culprit is commercial refrigeration, where rates remain higher than any other sector at 15 per cent. We do know, however, smart focused companies can reduce that rate by half. All of these steps will help reduce demand – therefore prices – and make more refrigerant available to the market.

The industry does have a challenge facing it. It is manageable – and made much easier – if government responds promptly.

Regardless of this, clever buyers and users of refrigerants will be able to maintain supply and respond to market uncertainty as it appears.