The Nickel Report

As we approach the new year, several regulatory initiatives concerning hydrofluorocarbons (HFCs) are on the horizon with major implications to the retail industry with particular impact on the retail food industry. Since ozone depleting substances were phased out of the economy beginning in the 1990s, HFCs have been the most commonly used refrigerant in air conditioning and refrigeration appliances. Now EPA is phasing these refrigerants down based on their global warming potential (GWP).

Beginning on January 1, 2026, EPA’s HFC Leak Repair and Management Rule (HFC Management Rule) comes into effect, placing mandatory leak detection and repair requirements on owners or operators of HFC-containing appliances that have a refrigerant charge of 15 pounds or greater.

Additionally, on October 3, 2025, EPA published its proposed reconsideration of the Technology Transitions Rule which restricts the GWP of refrigerants used in new air conditioning and refrigeration systems. The comment period on EPA’s reconsideration proposal for the Technology Transitions Rule closed on November 21, 2025. If finalized, EPA’s proposal would provide regulatory relief to members in the retail food industry, industrial chillers and refrigeration systems in semiconductor manufacturing sector, and cold storage warehouses.

The HFC Management Rule and Technology Transitions Rule are two of three regulatory programs promulgated by EPA under the authority of the American Innovation and Manufacturing (AIM) Act of 2020. These regulatory programs seek to restrict and phase down the use of HFC-refrigerants in the U.S. based on their GWP and, ultimately, replace HFC-appliances and systems with new alternative technologies. This article provides an overview of the AIM Act, the regulatory programs created by EPA to fulfill the AIM Act, and EPA’s HFC regulatory programs, along with a status update of the HFC regulatory programs.

The AIM Act: Hydrofluorocarbon Regulations and the Current Legal Landscape

The American Innovation and Manufacturing (AIM) Act of 2020 passed through Congress with wide bipartisan support, touting domestic manufacturing and job creation while simultaneously aligning with international commitments under the Kigali Protocol. Focused on addressing the global warming potential (GWP) of hydrofluorocarbons (HFCs) commonly used in refrigerants, the AIM Act directs EPA to promulgate regulations to phase down HFCs to 15 percent of their historic baseline levels by 2036, restrict the usage of HFCs in industry sectors or subsectors, and establish requirements for the management, service, repair, disposal, and installation of equipment utilizing HFCs. 

In response, EPA has established the HFC Allowance Allocation Program, the Technology Transitions Rule, and the HFC Management Rule. Collectively, these regulations seek to reduce HFCs from the U.S. economy at a rapid pace and at a great cost to the industries that utilize and rely on refrigerants. These rules have a major impact on facilities that rely on large heating, ventilation, and air condition (HVAC) systems and refrigeration systems. They place significant and disproportionate burdens on the grocery industry and other retailers of food products, as well as producers and suppliers of refrigerant gases, resulting in increases in the cost of doing business and, in turn, increases in costs to consumers to offset the increased regulatory expenses. 

HFC Allowance Allocation Rule

As of January 1, 2022, the HFC Allowance Allocation Program created a consumption and production allowance expenditure program for HFCs with the goal of phasing down HFCs to 15 percent of their historic baseline level by 2036. Under the program, no person may produce or import bulk HFCs or bulk refrigerant blends containing HFCs unless that person expends production and/or consumption allowances in a quantity equal to the exchange value-weighted equivalent of the HFCs produced or imported.

Thus, in order to produce HFCs in the U.S. after January 1, 2022, an entity must possess both production and consumption allowances and expend the allowances at the time the HFCs are produced. Likewise, a bulk HFC importer must both possess and expend consumption allowances at the time the bulk HFCs enter U.S. jurisdiction. Production and consumption allowances must be expended in the year for which they were issued. Every kilogram of a produced or imported HFC in excess of the allowances expended constitutes a separate violation of the rules.

EPA allocates production and consumption allowances to eligible entities by October 1 of the year prior to the year in which the allowances can be used. In order to be eligible for production and/or consumption allowances, an entity must have produced or imported bulk HFCs in years 2021 and/or 2022. To calculate an entity’s consumption allowance allocation, EPA utilizes the average of the three highest annual exchange value-weighted production and/or consumption amounts that the eligible entity reported to EPA for calendar years 2011 through 2019. Currently, EPA is not offering production and consumption allowances to new market entrants. It provided a “one-time” opportunity in 2024 for eligible entities that had not previously applied for allowances to do so. The total consumption allowances available by year are as follows:

• 2026-2028: 181,522,990 MTEVe
• 2029-2033: 90,761,495 MTEVe
• 2034-2035: 60,507,663 MTEVe
• 2036 and thereafter: 45,380,747 MTEVe

The HFC Allowance Allocation Rule offers an exception to the consumption allowance expenditure requirement for bulk HFCs that are transshipped through the U.S.  and leaving U.S. jurisdiction within six months. However, to qualify for this exception, there are strict notification requirements that must be met, including notifying EPA at least 30 days prior to the import leaving its foreign port of export and within 10 days from when the bulk HFCs are exported out of the U.S. Additionally, the HFC Allowance Allocation Rule has specific and extensive reporting and recordkeeping requirements that participating entities must comply with, and the rule requires a third-party audit of its recordkeeping and reporting to be conducted by a certified public accountant.

Under the Biden Administration, EPA prioritized enforcement against entities producing or importing HFCs without expending the necessary production or consumption allowances. In its March 12, 2025 memorandum, EPA’s Office of Enforcement and Compliance Assurance states that enforcement “regarding hydrofluorocarbons (HFCs) shall focus on the unlawful import and subsequent sale of HFCs.” Thus, enforcement of this program will continue with a likely focus on the import of bulk HFCs without expending consumption allowances.

Technology Transitions Rule

Beginning January 1, 2025, the Technology Transitions Rule restricts the manufacture, sale, distribution, import, and export of appliances containing HFCs in certain residential, commercial, and industrial sectors beyond specified dates and based on a GWP limit established for each sector. The rule divides industries by subcategories and applies a specific low GWP limit – 150 or 300 GWP for most refrigeration systems and 700 GWP for most HVAC systems – on the entire industry subcategory.

While the goal of the Technology Transitions Rule is to encourage and incentivize technological advancement in HFC-alternative refrigerant systems, the rule is based on a series of assumptions that have proven to be false. First, there is a lack of available, EPA-approved alternative refrigerants on the market, thus driving up the costs of the “new” refrigerants. Second, many of the alternative refrigerants pose safety risks due to flammability or toxicity concerns, and the vast majority of US building codes do not currently allow for their use or installation. Third, the alternative systems are severely inefficient, uneconomical, or technologically infeasible for their proposed usage. Accordingly, industry initiated litigation to challenge the Technology Transitions Rule that is pending in the D.C. Circuit. 

On March 12, 2025, EPA announced reconsideration of the Technology Transitions Rule as one of its 31 deregulation priorities and released its reconsideration proposal on October 3, 2025. Under its reconsideration proposal, EPA is proposing to adjust the GWP threshold for remote condensing units and supermarket systems from 150 or 300 (depending on the charge size and type of system) to 1,400 starting on January 1, 2026. The GWP thresholds for these systems will later adjust back to the original proposed of GWP limit of 150 or 300 beginning on January 1, 2032. EPA is also proposing to delay the compliance for certain industrial chillers and refrigeration systems in the semiconductor manufacturing sector from January 1, 2026 and January 1, 2028, to January 1, 2030.

HFC Management Rule

Beginning January 1, 2026, the HFC Management Rule imposes burdensome leak detection and repair requirements on existing refrigeration or HVAC systems that mandate the retrofitting and retirement of existing equipment in certain scenarios. The rule requires a leak rate calculation to be performed every time refrigerant is added to the system, and, if the leak rate is above a certain threshold, a complicated leak repair process is triggered which may compel the retrofitting or retirement of the system if the repair is not made within 30 days. 

This leak detection process will be required on any refrigeration-containing appliances with a full charge of 15 or more pounds of HFC refrigerants or substitutes with a GWP greater than 53. The low applicability threshold greatly expands the scope of the rule beyond similar leak detection and repair requirements for refrigeration systems containing ozone depleting substances, which applies only to systems with a full charge of 50 pounds or more. Thus, for the first time, appliances containing 15-49 pounds of HFC refrigerants would be subject to leak detection and repair requirements.

If system owners are unable to make a verified repair within 30 days of exceeding an applicable leak rate threshold, they are required to develop a retrofit or retirement plan and must fulfill the retrofitting or retirement of the system within one year. Thus, the HFC Management Plan provides very little time to repair a system before a system owner must begin to plan and implement the complete overhaul, retirement, and/or replacement of their system.

The HFC Management Rule also requires installation of automatic leak detection systems on new and existing refrigerant-containing appliances in the industrial process and commercial refrigeration subsectors with a charge size of 1,500 pounds or more. The automatic leak detection systems must be installed by January 1, 2026, for new systems and by January 1, 2027, for existing systems. And, while the rule places burdensome restrictions and requirements on the process of reclaiming and recycling HFCs, the servicing and repair of refrigerant-containing appliances in the supermarket systems, refrigerated transport, and automatic commercial ice maker subsectors must be done with reclaimed HFCs after January 1, 2029.

Hunton’s Refrigerant Management Team is able to assist industry navigating EPA’s HFC regulations as well as refrigerant management programs implemented by states, including California, New York, New Jersey, and Washington.