Since 2010, the US Environmental Protection Agency has required that all new HVAC units use a refrigerant called R410a, instead of the R22 (Freon) that was used previously. That’s because R410a is safe for the ozone layer, while R22 is not. Unfortunately for homeowners, the price of R410a has increased significantly over the past few months. There are two major reasons why this has happened.
The first reason is a simple matter of supply and demand. As R22 is phased out, the demand for R410a increases, and producers haven’t been able to keep up. R410a is actually a blend of two different refrigerants, one of which is called R125. There’s currently a world shortage of R125 because there aren’t enough plants to produce it. Without enough R125, producers can’t make enough R410a to keep up with the increasing demand. And as you know from your high school economics class, when demand for a product increases but supply doesn’t, the price of that product goes up.
The second reason for the increase in the price of R410a involves trade relations between the US and China. Some R410a is made in China, but some is made right here in the United States. For years, the Chinese manufacturers were able to sell their product in the US at a very low price because they had lower production costs and the Chinese government was subsidizing their industry. This meant that American manufacturers were having to keep their prices down in order to compete with the Chinese.
Because of this, American refrigerant manufacturers began asking the US International Trade Commission to put a tax on the imported Chinese refrigerants. Recently, the ITC agreed that the Chinese companies were selling refrigerant blends, including R410a, at prices below the “fair market value” and that it was hurting American companies. So the US Department of Commerce instituted an over 200% tax on imported Chinese refrigerants including R410a.
Of course, this caused the price of the Chinese refrigerants to go up, which means that the American companies were able to raise their prices as well. This is great for the American refrigerant manufacturers, but unfortunately not so great for American homeowners.
So that’s why the cost of R410a has increased significantly in the last few months. Who knew the economics of air conditioning could be so complicated?