The HFC phase-down: the Annex VII schedule up to 2050

Short answer

The system has three parts, and nearly every misunderstanding sits between them.

• The cap. Annex VII, point 1, fixes the maximum amount of hydrofluorocarbons allowed to be placed on the Union market in a given year, expressed in tonnes of CO2 equivalent. It falls in steps of two or three years and reaches 0 from 2050 onwards.
• The individual duty. Article 16(1): the placing on the market of hydrofluorocarbons is allowed only to the extent that producers and importers have been allocated quota by the Commission. The second subparagraph adds that they shall not exceed the quota available to them at the moment of placing on the market.
• The allocation. Article 17 and Annex VIII turn the cap into individual quota, starting from reference values and from a reserve.

What the Regulation does not say: anything about prices, availability or how the market will move. The cap is a maximum quantity for placing on the market, not a prohibition on using gas already lawfully inside the Union. Use prohibitions live elsewhere: Article 13 for servicing and Annex IV for placing equipment on the market.

The Annex VII table, as written

Annex VII is headed "Maximum quantities and calculation of reference values and quota for placing hydrofluorocarbons on the market referred to in Article 17". Point 1 contains the table below, reproduced in full.

Point 2 gives the benchmark everything is calculated against: "The 2015 base-value for the maximum quantity is set to be: 176 700 479 tonnes CO2 equivalent". A footnote to Annex VIII explains that this number is the maximum quantity established for 2015 at the beginning of the phase-down, taking into account the withdrawal of the United Kingdom from the Union.

Point 3 says how the figures are expressed: reference values and quota are calculated as the aggregated quantities of all hydrofluorocarbons, expressed in tonnes of CO2 equivalent rounded to the nearest tonne. The conversion between kilograms and tonnes of CO2 equivalent is set out in the CO2 equivalent calculation.

What falls under the cap and what does not

The rule. Article 16(1): the placing on the market of hydrofluorocarbons is allowed only to the extent that producers and importers have been allocated quota by the Commission as set out in Article 17.

The exceptions. Article 16(2) lists exhaustively the hydrofluorocarbons to which paragraph 1 does not apply:

• (a) imported into the Union for destruction;
• (b) used by a producer as feedstock or supplied directly by a producer or an importer to undertakings for use as feedstock;
• (c) supplied directly by a producer or an importer to undertakings for export out of the Union, not contained in products or equipment, where those hydrofluorocarbons are not subsequently made available to any other person within the Union prior to export;
• (d) supplied directly by a producer or an importer for use in military equipment;
• (e) supplied directly to an undertaking using them for the etching of semiconductor material or the cleaning of chemicals vapour deposition chambers within the semiconductor manufacturing sector.

Article 16(4) allows the Commission, exceptionally and by implementing acts, to authorise an exemption for up to 4 years for specific applications where it is demonstrated that alternatives are not available or cannot be used for technical or safety reasons or risks to public health, and that a sufficient supply cannot be ensured without entailing disproportionate costs.

Two points that change the arithmetic. Article 16(5): the emission of hydrofluorocarbons during production shall be considered as being placed on the market in the year in which it occurs. Article 16(6): Article 16, Article 17, Articles 20 to 29 and Article 31 also apply to hydrofluorocarbons contained in pre-blended polyols.

Pre-charged equipment. Article 19(1) prohibits the placing on the market of refrigeration and air-conditioning equipment, heat pumps and metered dose inhalers pre-charged with substances listed in Section 1 of Annex I unless those substances are accounted for within the quota system. Article 19(6) takes out of the scope of that article undertakings that placed on the market less than 10 tonnes of CO2 equivalent of hydrofluorocarbons per year contained in such products or equipment. The detail sits in importing pre-charged equipment.

From the cap to one undertaking’s quota

Step 1 — reference values. Article 17(1): by 31 October 2024 and at least every 3 years thereafter, the Commission shall determine reference values for producers and importers in accordance with Annex VII, by implementing act, for all those that placed hydrofluorocarbons on the market during the previous 3 years.

Annex VII, point 4, describes the calculation: point (a), a reference value based on the annual average of the quantities lawfully placed on the market from 1 January 2015 as reported, taking transfers received into consideration and excluding quantities for the usages referred to in Article 26(5); point (b), in addition, for producers and importers that reported the placing on the market for the usage referred to in Article 26(5), second subparagraph, a reference value based on the annual average from 1 January 2020.

Step 2 — allocation. Article 17(4): by 31 December 2024 and every year thereafter, the Commission shall allocate quota for each producer and importer pursuant to Annex VIII, notified via the F-gas Portal.

Annex VIII, point 1, gives the formula for undertakings with reference values:

• point (a): a quota corresponding to 89 % of the reference value referred to in Annex VII, point 4(a), multiplied by the maximum quantity for the year for which the quota is allocated, divided by the base value of 176 700 479 tonnes CO2 equivalent;
• point (b): where relevant, a quota corresponding to the reference value referred to in Annex VII, point 4(b); from 2027 that quota is obtained by multiplying the reference value with a factor of 0,85; from 2030 it corresponds to the reference value multiplied by the maximum quantity for the year divided by the maximum quantity for the year 2025.

Where, after allocating the full amount of quota, the maximum quantity is exceeded, all quota will be reduced proportionally.

Step 3 — the reserve. Annex VIII, point 2: the total sum of the quota allocated under point 1 is subtracted from the maximum quantity for the given year to determine the reserve. Who may declare and how the reserve is shared is treated separately in quota from the reserve. Annex VIII, point 3, adds that penalties established in accordance with Article 31 are taken into account in the calculations above.

The difference between registration, quota, authorisation and transfer is set out in the dedicated guide.

The allocation payment: what it is and what it is not

It is a legal charge attached to the allocation of quota and owed to the Commission. It is not the price of the gas, it is not a levy on a cylinder, and it does not appear on any commercial invoice. Article 17(8) sets out where the money goes: the revenue constitutes external assigned revenue within the meaning of Article 21(5) of Regulation (EU, Euratom) 2018/1046 and is assigned to the LIFE programme and to Heading 7 of the multiannual financial framework, to cover the costs of external staff working on the management of the quota allocation, IT services and licensing systems; the revenue used to cover those costs shall not exceed the maximum annual amount of EUR 3 million, and any remainder is entered into the general budget of the Union.

Three further rules sit in the same paragraph:

• Partial payment. Producers and importers may pay only for a part of the calculated maximum quota allocation offered to them; in that case they are allocated the quota corresponding to the payment made by the deadline.
• Redistribution, until 31 December 2027. Quota for which a payment has not been made by the set deadline is redistributed by the Commission, free of charge, only to those producers and importers that have paid the total amount due and that have made a declaration as referred to in paragraph 3. The redistribution is made on the basis of each undertaking’s share of the sum of all the maximum calculated quota offered to and paid for in full.
• Cancellation, from 1 January 2028. Quota for which a payment has not been made by the set deadline shall be cancelled.

The last subparagraph of paragraph 5 gives the Commission technical room: it shall be authorised not to fully allocate the maximum quantity referred to in Annex VII, or to allocate additional quota, as contingency for implementation issues during the allocation period. Article 17(6) allows the amounts due to be amended by delegated act in order to compensate for inflation.

The heat pump safeguard

Article 17(7) contains the only mechanism in the Regulation that can temporarily raise the cap.

Every year, or more often following a substantiated request by a competent authority of a Member State, the Commission assesses the impact of the quota phase-down system laid down in Annex VII on the Union heat pump market, considering relevant factors, in particular the development of prices of fluorinated greenhouse gases listed in Section 1 of Annex I, the growth rate of heat pumps still requiring such gases, the market uptake of alternative technology and the state of the heat pump deployment rate target provided under the REPowerEU Plan. The conclusions go into the relevant Annual Activity Report on Climate Action.

Where the assessment demonstrates a severe shortage of gases listed in Section 1 of Annex I for the deployment of heat pumps which could endanger the attainment of the REPowerEU targets, the Commission shall adopt delegated acts amending Annex VII in order to allow the placing on the market of an additional quantity:

• up to 4 410 247 tonnes of CO2 equivalent per year for the period 2025-2026;
• up to 1 425 536 tonnes of CO2 equivalent per year for the period 2027-2029.

The additional quota is distributed to producers and importers that reported under Article 26, in the previous year, on heat pump use as one of the main categories of application in which the substance is used, following their request submitted via the F-gas Portal.

What a falling cap means for a service company

The cap bites on placing on the market, so it addresses importers and producers. The effect on a service company is indirect and shows up in the technical decisions taken today. The Regulation offers a few firm markers:

• Servicing bans are separate from quota. Article 13 prohibits the use of certain gases for the maintenance or servicing of equipment, with its own thresholds and dates. See the servicing bans.
• Placing-on-the-market bans for equipment are in Annex IV. They decide what may still be bought and installed, whatever the quota cap. See the ban timetable.
• Reclaimed and recycled gas has its own regime. Article 16(1) concerns the placing on the market of hydrofluorocarbons; the conditions under which reclaimed or recycled gas may be used for servicing are those in Article 13. See reclaimed, recycled, virgin.
• Recovery is not optional. Article 8 requires recovery at maintenance, repair and decommissioning. See refrigerant recovery.
• The gas chosen at design stage is the decision with the longest reach. See the decision tree.

Article 35 also shows the direction of the reviews: paragraph 1 allows Annexes I, II, III and VI to be amended as regards global warming potential; paragraph 2 allows the lists of gases to be amended; paragraph 5 requires a report by 1 January 2030 on the effects of the Regulation, including whether alternatives exist for the products and equipment listed in Annex IV covered by prohibitions that have not yet become applicable; paragraph 6 requires the 2050 figure to be reviewed before 1 January 2040.

Checklist

For anyone placing hydrofluorocarbons on the market, and for anyone who only uses them on the job.

• Check whether what you do is placing on the marketArticle 16(1) addresses producers and importers; Article 16(2) lists the exceptions to the quota requirement.
• Calculate in tonnes of CO2 equivalent, not in kilogramsAnnex VII, point 3: aggregated quantities of all hydrofluorocarbons, rounded to the nearest tonne.
• Do not confuse the Annex VII cap with the Annex IV bansThe first limits the quantity placed on the market; the second prohibits certain equipment.
• Follow the implementing act on reference valuesArticle 17(1): at least every 3 years, for all producers and importers.
• Respect the payment deadline notified in the PortalArticle 17(5): payment conditions the allocation; partial payment yields proportionate quota.
• Remember 1 January 2028From that date, quota unpaid by the deadline is cancelled rather than redistributed.
• Account for the gas in pre-charged equipmentArticle 19(1), with the 10 tonnes CO2 equivalent per year threshold in Article 19(6).
• Report every yearArticle 26(1), including the nil-report for quota holders that placed nothing on the market.
• Plan technically, not speculativelyThe useful decisions are design and servicing decisions; the Regulation contains no information about prices or availability.

Frequently asked questions

Official sources

Chapter IV of the Regulation and Annexes VII and VIII were read in full in the Official Journal text. The figures in the table are reproduced exactly as they appear in Annex VII, point 1.

How current this page is, and the limits of our liability

General information prepared by EgoLog from the official text of the Regulation and European Commission material. It is not legal, tax or commercial advice.

Annex VII may be amended by delegated act under Article 17(7) and Article 35. Check the text in force before taking a decision.