The Addition of SF6 to DoD's Emerging Contaminants Action List
After years of controversy over the use of Sulfur Hexafluoride (SF6) in both the public and private sectors, the Department of Defense has added SF6 to its emerging contaminants action list – notably ahead of any potential domestic greenhouse gas regulation. DoD believes that it is necessary to develop risk management measures, such as replacement options and cleanup technologies, in order to ensure that they avoid future problems and expense.
SF6 has military uses in radar systems, such as Airborne Warning and Control Systems (AWACS), helicopter rotor-blade leak tests, discharge testing in fire suppression systems, electrical switch gear, and propulsion systems. But, more importantly, the addition of SF6 to the DoD action list will likely result in reduced use and availability. Defense acquisitions, research, and development will bear the greatest burden.
According to the Intergovernmental Panel on Climate Change (IPCC), SF6 is the most potent of the six main greenhouse gases with a global warming potential (GWP) of 23,900 times that of CO2 over 100 years.* Although the concentration of SF6 in the atmosphere is lower than that of other GHGs, SF6 emissions are still a major problem because the GWP and atmospheric lifetime (3200 years) are so much higher. This means that that implementing new practices to reduce the use of one pound of SF6 is equivalent to retiring 11 tons of carbon.
The Environmental Protection Agency (EPA) is working with the DoD to identify military uses of SF6 through such efforts as the fifth conference on "The Importance of Military Organizations in Protecting the Climate" which will be held this November in Paris. DoD’s addition of SF6 to the action list is one way of acknowledging that the military could play an important role in reducing greenhouse gas emissions – a point agreed upon 7 years ago at the 2001 conference – and will serve to stimulate technological innovation in both the public and private sectors. Additionally, with a market price of about US$25,000 per metric ton of SF6, the cost savings of finding alternatives to SF6 is surely appealing.
The EPA also has two voluntary Emission Reduction Partnerships in place that aim to reduce SF6 emissions through voluntary reductions, cost-efficient technologies, and other practices. Since the EPA’s implementation of the Emission Reduction Partnerships for Magnesium (in 1998) and Electric Power Systems (in 1999), SF6 emission rates in the US have gone down. Currently, the only other frameworks for curbing SF6 emissions are California’s proposed mandatory reporting under its reduction strategy for greenhouse gases and the Chicago Climate Exchange’s voluntary carbon reduction and trading program.
Approximately 8,000 metric tons of SF6 are produced annually, of which about 80 percent is used by the electrical power industry for arc interruption, cooling, and insulating. However, SF6 is also used to protect metals during the melting process, as a filler of double paned windows for soundproofing, as a tracer gas, and for medical procedures and testing. SF6 was, at one time, even used in the manufacturing of tennis balls, car tires, and sneakers. The point is, SF6 is an incredibly useful substance that is difficult to replace and, at the same time, it is clearly contributing to the decline of our environment.
Companies such as Nike have worked hard to replace SF6 with more environmentally friendly options like nitrogen, due to both the desire to be socially responsible and stakeholder pressure. In Nike’s case, it took nearly 14 years to develop an alternative technology to the SF6-filled Nike Air pockets. However, the company’s discovery that blow-molding 65 layers of plastic would allow for the use of nitrogen instead enabled Nike to actually improve their product line. The AirMax 360, for instance, has full length air cushioning in the sole that was made possible only by this new technology.
DoD’s plans to curtail uses and releases of SF6 in the procurement chain is consistent with its Green Procurement Strategy, which was implemented in 2004. The changes in procurement requirements will limit the ability of DoD contractors to sell products to the DoD that contain unnecessary amounts of SF6 as determined by DoD’s Phase II quantitative impact assessment. The decision by the DoD to cut back on SF6 use at all levels should push forward the timeline for increasing research and development on potential substitutes and clean up technologies.
In the future DoD may consider adding other GHGs to the list, which would place further restrictions on the supply chain. For the time being, the biggest hurdles for the DoD in reducing SF6 use will remain finding an alternative to SF6 for radar domes on AWACS aircraft and curbing its use in electrical equipment insulation. The good news is the Air Force has already begun to limit or eliminate the use of SF6 where possible which may yield best practices that the rest of DoD could follow. Additionally, DoD has implemented procedures for loading and tracking SF6 that have already resulted in a reductions of SF6 use; DoD continues to focus on reducing SF6 emissions through recapture and reuse; and DoD is supporting the research and development of substitutes, such as nitrogen, and new technologies.
* The only known substance to have a GWP higher than SF6 is Trifluoromethyl sulphur pentafluoride (SF5CF3), a close cousin and supposed byproduct from SF6 breakdown in high voltage electrical equipment, which is found in such small quantities that it has barely been discussed since its initial discovery in 2000.
The SEC is Getting Hot and Bothered over Climate Change
Publicly-traded companies should evaluate whether global warming (or, if you prefer, climate change) is reasonably likely to have a material impact on the company's future financial performance. If the company concludes that there is a material impact, it must disclose that conclusion to the US Securities Exchange Commission (SEC) in various periodic reports.
As the Intergovernmental Panel on Climate Change (IPCC) stated in its 2007 report, evidence of climate change "is unequivocal, as it is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice, and rising global average sea level" (see IPCC Report, Summary for Policymakers, in Climate Change 2007: The Physical Science Basis at 5). Thus, the only question is whether the potential consequences of these physical effects of global warming on the company - such as damage to company property, interruption of revenue streams that such property generate, increased costs to comply with regulations attempting to minimize global warming, and potential liability in lawsuits seeking damages from parties perceived as causing global warming - are "reasonably likely" to have a "material" impact on a company's financial performance.
How to interpret and apply these two expansive and as-yet poorly defined terms in the context of climate change, given the unknown time horizons during which the financial impacts may arise, is the $64 or $640 million question publicly traded companies must now answer. [summary]
