1. The
Executive Committee of the Multilateral Fund wishes to
undertake a study to examine the economic aspects of conversion
from CFCs in the rigid foam subsector. The purpose of the study
is to provide transparency and comprehensive information
on:
- the
factors leading to the choice of alternative technologies in Article 5 countries at the producing enterprise
level. Factors to be considered are, inter alia cost, availability of
alternatives, the interim or final
nature of the alternative, effects of local safety
regulations or concerns, availability of Fund
assistance, etc.;
the
short-term and long-term economic consequences for firms converting to various
alternatives to CFCs.
2. The
objective of the study is to provide to firms in Article 5 countries a greater
understanding of the economic impacts of conversion to
various alternatives. The Executive Committee should gain
a clearer picture of how Fund policies may influence the choice of
alternatives.
3. The
following key factors shall be considered in the study:
- the
study should cover the full range of alternative technologies to CFCs in the rigid foam sector,
i.e. hydrocarbons, water, CO2, HCFCs, HFCs, etc.;
- the
study should examine the relevant funding rules of the
Multilateral Fund and analyze the impacts on the
choice of alternatives and (future) implications for
the Multilateral Fund. As a starting point it should consider projects
funded to date, their choices of technologies and all completion reports
available on those projects;
- the
study should carry out an analysis of capital costs
associated with the foam projects. This would include the
equipment directly needed to make the transitions to
the technologies investigated, and the changes necessary to make certain
transitions. It should also consider the useful life of foaming and other
related equipment that will need to be procured to enable the conversion
from CFCs;
- the
study should examine the operational cost or benefit associated with the
use of the alternative technology selected. Related costs should also
include costs for changes in the starting material and additives taking
into account the prevalent use of premixed systems and
costs for performing changes of the properties of the product (for example
density, R-factor, etc.). The focus should be on estimating total
operational cost, as well as any costs that may be incurred by the firm
that are not compensable under Fund rules. The latter may
include costs for relevant country firms that face project costs exceeding
the Fund’s cost-effectiveness thresholds,
project term cost or benefit (beyond the compensable 2 years) of providing
the alternative chemical at a level needed to sustain current output, and
costs of secondary conversions from HCFCs considering
factors related to the timing of compliance
with the Montreal Protocol’s HCFC
provisions, as well as factors related to the useful life, usability, or
retrofit potential for the use of current equipment,
cost of conversion and evolving market
acceptability issues;
- in
order to enable enterprises to clearly understand short-term and long-term
economic implications they may be facing, the study should make
assumptions regarding the cost of CFCs and the various alternatives.
With regard to alternatives under advanced development
but not currently commercially available, the study should make a range of
reasonable assumptions on the basis of probable scenarios ahead. The study
should also consider the added cost/benefit of conversion
using each of the various technologies. In that regard, it should assume a
4-, 10- and 15-year project lifetime;
- while,
to the extent found relevant, the above factors should be considered, they
are not meant to be overly limiting. In developing a
consistent evaluative methodology, the consultant
should contact purveyors of the different technological options. In the
conduct of the study, efforts should also be made to utilize local
expertise gained in Article 5
countries by the Implementing Agencies;
- the
total cost (both capital and operational) associated with using different
alternatives should be presented in terms of net
present value using at least two assumptions for a discount rate;
- the
study should contain case studies as well as (a) table(s) providing
information relevant to different foam
applications, alternatives, size of firms and
economies of scale (measured by current use of
tons of CFCs). Representative samples should be considered from the point
of view of the end users. In that regard, total net-present-value costs of
using the different options for the different project lifetimes for firms
of different sizes should be presented.
4. The
Secretariat of the Multilateral Fund shall contract for
the services of a qualified independent consultant
experienced in conducting economic evaluations at the enterprise level and
familiar with conversions to related technologies to carry out the study.
5. If possible, the Executive Committee believes
it would be desirable to have at least a summary of findings delivered to the
Executive Committee at its Thirty-second meeting.
(UNEP/OzL.Pro/ExCom/31/61, Decision 31/49, para. 81).
(UNEP/OzL.Pro/ExCom/31/61, Decision 31/59/Rev.1).