Title and Status: The title of this group is Expert Group on the Production of Substitutes for Ozone- Depleting Substances.
The Group would have an advisory status with the Executive Committee. It may attend the Meetings of the Executive Committee or a future production sector sub-committee if so requested by the Committee.
This Expert Group would:
(a) advise on operational policies and guidelines on various technical and economic issues associated with the production of substitutes for ozone-depleting substances (ODS). In formulating such advice, consideration should be given to non-global warming alternatives, wherever possible.
(b) draft the terms of reference for an audit of the ODS producing industries in each of the ODS producing Article 5 countries.
The purpose of such an audit is to examine:
- the structure and status of the existing plants;
- the current technologies applied;
- the likely conversion paths, taking into consideration the countries' strategies for phasing out ODS, the industrial policy of the country, the economies of scale and the market development; and
- estimate at national level a minimum the country should receive as incremental capital and operating costs to convert/close all of its existing ODS producing industries.
The end product from this audit will serve as the framework against which the Executive Committee will review production sector projects from that country.
(c) advise on any other issues in the production sector as may be requested by the Executive Committee.
The composition of the Group would be as follows:
(a) fields of expertise required:
- chemical engineering, with emphasis on process engineering in fluorochemical industry and not-in-kind substitutes such as high purity hydrocarbons and ammonia;
- technology transfer with background in fluorocarbon and chlorofluorocarbon production; and
- knowledge in ODS and substitute production and marketing.
(b) principles in selecting membership
Bearing in mind that this is an Expert Group established for a very specialized subject, the following principles are proposed to be followed in selecting the membership:
- members of the Group serve on the Group in their own capacity and not as representatives of the organizations they belong to;
- technical and professional expertise;
- balance between Article 5 and non-Article 5 countries with due regard for geographical representation; and
- independence of the individuals.
For effective conduct of business, it is proposed to limit the size of the Expert Group to ten members.
The Group will work closely with the Fund Secretariat. The Chief Officer will be the contact point between the Group and the Executive Committee, and is responsible for providing Secretariat assistance to the Group in conducting its business. Meetings of the Group will be attended by representatives of the relevant Implementing Agencies that are likely to be involved in production sector projects.
The proceedings and the report of the meetings of the Expert Group remain confidential until they are cleared by the Group and presented to the Executive Committee.
The preliminary list of issues to be reviewed by the expert group includes:
Types of anticipated projects
1. conversion or partial conversion of existing CFC-11/12 manufacturing facilities to produce substitutes: e.g. HFCs (HFC-134a, HFC-152a), hydrocarbons (cyclopentane, iso-butane, etc.) ammonia, HCFCs.
2. shut down of equivalent ODS production capacities.
3. production of halon substitutes (e.g. ABC powder, CO2, nitrogen).
4. shut down of equivalent halon production facilities.
5. establishing production facilities for the processing, production, storage or distribution of nonfluorocarbons, e.g. high purity hydrocarbons and ammonia.
6. enforced idleness of ODS plants.
Policy issues that are likely to be encountered
(a) availability of technologies to Article 5 countries;
(b) terms and conditions of technology transfer from non-Article 5 country suppliers
· transfer to one enterprise, group of enterprises, or to the country
· modalities of license payment, lump-sum, royalties, etc.
(c) development of indigenous technology
· feasibility
· scope of support from the fund
· intellectual property rights
Incremental costs
· conversion and establishment of new production facilities
· what would be the baseline scenario?
· what would be the capital costs?
· what would be the operating costs?
· duration
· future revenues (and future price and sales estimate).
· designed or utilized capacities, growth projection.
Double-counting
· linkage with consumer sector in the country
· export potential to Article 5 vs. non-Article 5 countries
· certain costs which could be incurred in the shut-down of the old plant can be balanced at the stage when the new plant is constructed (e.g. unemployment insurance and foregone profits).
· project lifetime to be used as the basis for calculation.
· production vs. imports (cost effectiveness, tariffs).
· preferential exports from Article 5 countries vs. savings to the Multilateral Fund.
· economies of scale: size of plants and project specific vs sector phase-out plans.
Shut down of ODS production facilities
· remaining useful life
· computation of profit foregone
· production capacity vs actual production and replacement of specific chemicals
Modernization and expansion of production
· How to measure direct (increased output) and indirect benefits (environmental, socio-environmental)?
Choice of technology
Possibility of developing cost norms on the basis of type of technology employed.
Other issues:
1. eligibility of funding raw material and feedstock production
· new chlorinated solvents production facilities
· production of raw material vs. import (cost effectiveness, safety concerns).
2. eligibility of funding production of chemicals and materials indirectly involved in ODS phase-out (optional).
· polyols for foam-blowing, polyalkylene glycol and polyester lubricants
(UNEP/OzL.Pro/ExCom/15/45, para. 157).
(Supporting document: UNEP/OzL.Pro/ExCom/15/45, Annex III).