1. THAILAND’S HALON BANK: AN INNOVATIVE DESCENTRALIZED APPROACH Steve Gorman GEF Executive Coordinator & MP/POPs Unit Team Leader The World Bank Tbilisi – April 10, 2006

2. Phasing out halons in Thailand Halon Banking Project At its 29 th Meeting, the Executive Committee approved the Halon Management and Banking Project for Thailand The project aimed at recovering halons for non-essential applications US$420,000 allocated, to be implemented between the Bank and the Government of Sweden Halon Conversion Project At its 30 th Meeting, the Executive Committee approved the Terminal Halon Conversion Project for Thailand The project provided assistance for the conversion of manufacturers of halon-based fire fighting equipment (portable and fixed systems) The Government’s strategy was to provide assistance to both end-users and suppliers, in order to achieve the phaseout of non-essential halons by 2010

3. The original Halon Banking and Management Project Objectives: 1.To eliminate the use of halon 1211 and 1301 by non- essential users – comprehensive approach including regulatory action, investment and technical assistance 2.To promote the use of non-halon based fire protection equipment - consistent with the objectives of the Terminal Halon Conversion project 3.To put in place a halon bank – set up a facility for the recycling and reclamation of halon 1211 and 1301 4.To provide capacity building on halon management – training and capacity building on issues related to halon management and halon alternatives

4. Three categories of halon users 1.Essential users – Will be allowed to continue using virgin halons (if available) beyond 2010. Own or operate critical facilities. Essential users include the Royal Thai Army, Navy and Air Force, the Ministry of Defense, Thai International Airways and other aviation companies. Palaces and museums are considered a special category of essential users, critical to the safety and integrity of national treasures 2.Non-essential users – Owners of halon-based systems installed prior to 1995. Temporarily allowed to maintain/refill their equipment and to use recycled halons beyond 2010 3.Halon Suppliers – Registered by DIW for importing and storing virgin and recycled halons.

5. The proposed halon banking facility Principle: Facility would receive halons taken off-line by non-essential users after dismantling their fire protection equipment Reclaimed halons would be stored and maintained for the use of essential-users and authorized non-essential users Recycling and banking facility included three components: 1.Electronic Clearing House - monitor halon stocks and halon consumption 2.Central reclamation and banking center –include equipment for reclamation and recycling of halon 1211 and 1301 3.Network of recycling centers - three recycling centers to be set up, in locations to be chosen according to regional demand patterns

6. Performance evaluation By mid-2005, six years after its approval, were project objectives met?

7. Objective 1: Elimination of non-essential halon use Halon 1211  ACHIEVED Terminal Halon Conversion Project assisted manufacturers of portable fire extinguishers to convert to alternative technologies Non-essential users had access to alternatives to replace their halon- based fire extinguishers once these were discharged  Phaseout of halon 1211 progressing smoothly Halon 1301  NOT ACHIEVED Registered non-essential users with systems installed prior to 1995 are allowed to service their systems No regulation exists that requires owners of halon-based fire extinguishing systems to dismantle their equipment Limited number of substitute technologies available in the market that do not involve replacing the entire fixed fire protection system  Economic disincentive to voluntary phaseout of systems

8. Why are non-essential users not dismantling their fixed halon-based systems? Based on a survey of users, incentives for phaseout include: Corporate mandate – Conversion delayed until corporate mandate is received Industrial certification – Systems dismantled in order to meet industry production standards (i.e. ISO) Cost of recycled halon 1301 – Systems will be replaced when the cost of recycled halon 1301 is greater than that of replacing existing system, considering the currently available non-ODS alternatives. Availability of safe alternatives - Palaces and museums will dismantle their systems when demonstrated technology becomes available

9. Objective 2: Promoting the use of non-halon fire protection technologies Halon 1211  ACHIEVED Technologies for the production of non-ODS based portable fire extinguishers (e.g. dry chemical powder and CO 2 ) have become widespread Halon-based extinguishers are no longer being produced in Thailand Imports of portable halon-based extinguishers are strictly controlled  Availability of non-ODS substitutes at competitive prices has been key to the successive phaseout of halon 1211 extinguishers Halon 1301  NOT ACHIEVED Promotion of halon 1301 alternatives has not been as successful, given that limited substitute technologies are available in the market The costs of completely overhauling systems are too high for users to cover  Lack of economic incentives to converting fixed halon-based system has resulted in low conversion rates

10. Objective 3: Fire protection capacity building Halon Advisory Panel established, which has provided technical advice and support to DIW on:  Policy and regulatory issues involving halon control  Review of terms of reference and of reports produced as part of the various project components, including draft guidelines for recycling and storing halons  Identification of target audience for public awareness and dissemination campaigns designed to promote the phaseout of halons. Training and capacity building activities for halon users have been carried around the country Objective 3  ACHIEVED

11. Objective 4: Establishment of halon bank Physical Bank (central facility and network of regional halon banks)  NOT ACHIEVED Feasibility study considered following criteria: Type of halon bank  Government owned and operated  Government owned - privately operated  Privately owned and operated facility Initial investment costs  Location of banking facilities  Purchase or lease of land  Specifications for design of facilities, (i.e. size, equipment type, capacity, etc.) Fixed operating costs  Staff and training  Standard operating costs (utilities, maintenance of utilities, etc.) Demand for recycled halon up to 2010 – Projections made on the basis of :  Survey of annual consumption  Historical consumption Halon clearinghouse  ACHIEVED All essential and non-essential halon users registered Will soon be available online Guidelines have been developed for:  Testing purity of halon  Transporting halons  Trading  Cost-sharing between traders Valuable tool for DIW  Monitoring halon consumption and halon stocks  Management of supply and demand of halon 1301  Monitoring of halon trade Valuable tool for users and sellers of halon  Exchange of information on buyers, sellers, stocks, prices  Electronic clearinghouse = halon virtual bank

12. Results of feasibility study for reclamation and banking facility  High upfront investment costs – In spite of MLF co- financing, costs of facility still very significant  Low demand for recycled halon – Annual demand estimated at less than 5% of installed capacity (roughly 8 MT) including that of essential users  High operating costs - Resources to finance four years of expected operation costs were approved by Excom. This amount would be insufficient to sustain the facility CONCLUSION: Centralized, government financed halon reclamation and banking facility not feasible due to high capital and operation costs and low demand for recycled halons  NO COST-RECOVERY

13. Revised Halon Management and Banking Project

14. New approach to halon management and banking Focus is on transferring the costs of a centralized banking facility to individual halon users  Decentralized halon banking  Costs of storing halon stocks transferred to individual users after their conversion  Costs of recycling and/or recovering halon transferred to users who do not to convert to alternative technologies  Focus on halon management at the user level, rather than on government-financed banking  Government’s role is to monitor and to ensure adequate conditions for the development of halon market Revised project proposal approved at the 47 th Excom Meeting

15. New project components 1.Regulatory action - Limiting the supply of halon 1301  Import control for virgin halon 1301 will continue according to MP phaseout schedule  Starting in 2008, DIW will set up an import schedule of recycled halon 1301 that will meet the essential needs of the country  Imports of recycled halon will be controlled. Licenses will only be issued to essential users or to their registered suppliers  Issuance of import quotas will take into account the amount of halon traded in the halon clearinghouse 2.Capacity building and technical assistance A. Training of government officials oTo strengthen monitoring capacity of DIW and customs officers B. Halon management training for registered halon users oNew regulations and their implications beyond 2008 oSystem monitoring and maintenance oAlternatives for replacing halon systems oStorage and management of halon stocks

16. New project components (2) 3.Develop action plans for phaseout of individual users  Large users: Action plans for replacing halon-based system, specific to each individual facilities, will be developed by experts as part of project  Small users: Will be invited to participate in a series of workshops, where action plans for phaseout of halons in standard applications, will be discussed 4. Demonstrate available alternative technologies  Twelve (12) demonstrations will be conducted to illustrate cost- effectiveness of alternatives to halon-based systems currently available in the market (e.g. HFC-227 and HFC-125, which do not require total dismantling of halon system)  Focus on removing barriers for conversion of non-essential halon users that may be based on economical, technical or regulatory misperceptions

17. New project components (3) 5.Monitoring  Maintain clearinghouse current and record all transfers  Consumption of halon 1301 will be closely monitored through the clearinghouse and through periodic inspections of converted facilities  Conditions of stored halon will be surveyed to verify that no venting of stocks has occurred 6.Public awareness and dissemination

18. Next steps Failure of numerous halon banking projects around the world has demonstrated that the traditional approach of a government-financed, centralized facility does not work Banking facilities are costly to set up and to maintain. In the current context of global halon supply the demand for recycled halon in developing countries is not sufficiently high to justify cost of a central facility New approach developed in Thailand is drastically different from traditional way of doing banking and recycling, as it is a demand-driven model Focus on halon management, which therefore relies on the commitment and the responsibility of end-users Success will require coordination between DIW and of the halon users, strong regulatory control and significant monitoring