August 14, 2018 at 5:00 am ET
If you remember the first mobile phones, you might also remember that they cost $4,000.
The price came down significantly over time, and it’s not difficult to understand why. Demand went up, mass production ensued, investments in research and development paid off, and competition did what it does best — drove prices down. Sounds like a capitalist’s dream, right?
This logic also applies to innovations from American heating, ventilation, air conditioning and refrigeration manufacturers — the companies that make and utilize refrigerants used in homes and businesses.
Over the last 40 years, this industry has gone through a number of technology transitions, constantly improving performance and efficiency based on the benefits of the refrigerants used in cooling products. And much like cellphones, the cost of the new technologies has decreased over time as they’ve been widely adopted in the market.
Now, countries all over the world are joining together to outline a practical path for the next generation of improved refrigerants. America’s ratification of the Kigali Amendment to the Montreal Protocol, first signed by Ronald Reagan, will provide important market clarity for American manufacturers to lead this effort.
The Kigali Amendment phases down the use of hydrofluorocarbons and phases in new refrigerants like hydrofluoroolefins and HFO blends. It sounds complicated, but it’s really very simple: This transition will allow new, innovative refrigerant blends to be used in air conditioning and refrigeration products, all while delivering more efficient, safe and sustainable products with minimal consumer impact.
In recent weeks, a small group of Washington, D.C., think tank elitists — who have zero experience actually working in industry — has misguidedly asserted that the Kigali Amendment will suddenly make air conditioning drastically more expensive. It’s simply not true, and history proves it.
Take, for example, window air-conditioning units. In 1973, an 8,000 British thermal unit room air conditioner cost $216.75 (or just over $1,200 in 2018 dollars due to inflation). Today, an 8,000 BTU room air conditioner is available for $269.99. The retail price, when adjusted for inflation, actually decreased 80 percent over the last 40 years, despite numerous refrigerant transitions. Department of Energy studies find that the cost of owning an air conditioner continues to decline because of innovation and efficiency improvements.
One reason previous transitions have been successful, and will continue to be under the Kigali Amendment, is that the framework calls for a gradual phasedown over the next 30 years. Owners of existing air-conditioning systems can continue to use them through the end of their useful life. A gradual transition does not force consumers to buy products they don’t need. When consumers decide to upgrade, they can do so at a time of their own choosing and will be buying a more efficient, next-generation product when that purchase occurs.
The misinformed like to compare the current price of existing refrigerants to the current price of next-generation refrigerants, which is yet to be widely adopted in the market. It is akin to comparing the first featureless $4,000 mobile phones to today’s feature-rich smartphones. The think tanks are forgetting a commonly accepted economic fundamental. As production volume, manufacturing efficiencies and commercialization increase, prices drop, just like they always have.
American manufacturers are ready and waiting for this transition and were active participants and leaders in the global negotiation to ensure a smooth transition for industry and consumers alike. Investments have already been made, and far greater investments will be made once the Kigali Amendment is ratified, providing certainty to the industry by standardizing the technologies used around the globe. Those investments-in-waiting will create 33,000 new, good-paying American jobs.
The United States has always been the global leader in air-conditioning and refrigeration technologies, in large part because previous international agreements provided a gradual technology transition period, allowing new products to be proven in our economy first, and then rapidly commercialized globally. This is what ultimately reduces the cost of new products.
Hopefully, the Washington, D.C., think tank elites won’t deceive President Donald Trump into missing this golden opportunity for American manufacturing and American jobs.
When it comes to “costs,” the only thing we can’t afford is to let the rest of the world ratify the Kigali Amendment without us, losing America’s rightful place as a global manufacturing leader.
Kevin Fay is executive director of The Alliance for Responsible Atmospheric Policy.
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