United States
Environmental Protection
Agency
Toxic Substances
Office of Pesticides and
Toxic Substances
Washington, DC 20460
EPA-560/12-80-001c
October 1980
Flexible Urethane Foams
and Chlorofluorocarbon
Emissions
Support Document for
Economic Implications of
Regulating Chlorofluorocarbon
Emissions from Nonaerosol
Applications
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EPA-560/12-80-00
October 1980
FLEXIBLE URETHANE FOAMS AND
CHLOROFLUOROCARBON EMISSIONS
A SUPPORT DOCUMENT FOR ECONOMIC
IMPLICATIONS OF REGULATING
CHLOROFLUOROCARBON EMISSIONS FROM
NONAEROSOL APPLICATIONS
Contract No. 68-01-3882
& 68-01-6111
Project Officer:
Ellen Warhit
REGULATORY IMPACTS BRANCH
ECONOMICS AND TECHNOLOGY DIVISION
OFFICE OF TOXIC SUBSTANCES
WASHINGTON, D.C. 20460
OFFICE OF PESTICIDES AND TOXIC SUBSTANCES
U.S. ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
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Disclaimer
This document is supportive of a contractor's study done
with the supervision and review of the Office of Pesticides and
Toxic Substances of the U.S. Environmental Protection Agency.
The purpose of the main study was to evaluate the economic
implications of alternative policy approaches for controlling
emissions of chlorofluorocarbons (CFCs) in the United States.
The support document was submitted in fulfillment of
Contracts No. 68-01-3882 and 68-01-6111 by the contractor, the
Rand Corporation, and by its subcontractor. International
Research and Technology, Inc. Work was completed in June 1980.
This support document is not an official EPA publication.
The document can not be cited, referenced, or presented in any
court proceedings as a statement of EPA's view regarding the
chlorofluorocarbon industries, or of the impact of the
regulations implementing the Toxic Substances Control Act.
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PREFACE
A theory advanced in 1974 suggested that emissions of fully
halogenated chlorofluorocarbons (CFC) into the earth's atmosphere
migrate upward to the stratosphere, where they take part in a series
of reactions resulting in depletion of the ozone layer there. The
consequences of ozone depletion were judged to be serious threats to
human and animal life, plants, and the weather. As a result, the U.S.
Environmental Protection Agency (EPA) took action to ban aerosol uses
of CFC, and began a series of investigations into non-aerosol uses of
these materials. Part of this effort was a study of the economic impli-
cations of regulating CFC emissions, performed by The Rand Corporation
under Contracts PC 68-01-3882 and 68-01-6111. The results of that study
are reported in Rand Report P.-2524-EPA, Economic Implications of Regu-
lating Chlorofluorocarbon Emissions from Nonaerosol Applications, by
Adele R. Palmer, William E. Mooz, Timothy H. Quinn, and Kathleen A. Wolf,
June 1980. Because R-2524-EPA deals with a large number of CFC uses,
it is ponderous to use for readers interested in only one product area,
such as flexible urethane foam. Also, the single-volume format of
R-2524-EPA required that much of the data and procedures used in each
product area be summarized.
The present report records the research in the single product area
of flexible urethane foams. It serves as a detailed exposition of the
data and of the methods used to proceed from the historical data to the
analysis of policies that might reduce CFC emissions. It should be
useful both to the large community of flexible-urethane-foam manufacturers
and to persons in other fields who are interested in the methods of
analysis used in a single product area. The economic aspects of regu-
lation, which are treated in detail in R-2524-EPA, are dealt with in
the present report only to the extent that they impinge upon the subject
of flexible urethane foams. Questions concerning taxes on CFC and con-
cerning marketable permits as economic incentives to reduce CFC emissions
are not discussed here, and the reader is referred to R-2524-EPA.
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SUMMARY
In 1974 a theory was advanced that postulated the* depletion of
the stratospheric ozone layer through reactions with chlorofluoro-
carbon (CFC) emissions on the earth. The results of this depletion
could be changes in climate, and serious impacts on animal, vegetable,
and human life. In response to this theory, aerosol uses of the CFC
were essentially banned in the U.S. in 1978, and the Environmental
Protection Agency (EPA) began a series of studies of the non-aerosol
uses of the CFC.
This document deals with a specific product area that uses CFC
that of flexible urethane foams. These foams made their appearance
about 1 cKif). They are a cushioning material that can be mnde with
characteristics ranging from the stiff support required of carpet
underlay, to the softness found in the back of a comfortable easy
chair. In addition, the material can be molded into any shape, or
can be made in a bulk form called slabstock which can be cut to size
as needed. The versatility of the product caused rapid penetration
in furniture, bedding, and automotive seating applications, where it
displaced springs, cotton hats, rubberized hair, felt, and other
cushioning materials. As a result, the production of flexible urethane
foams has grown from infancy in 1960 to a large industry. This
industry made about 1300 million pounds of foam in 1977, and employed
in the range of 13000-25000 people in plants located in the furniture
centers of the country, in the areas close to automobile manufacturing,
and in major population centers.
Flexible urethane foams owe their distinctive properties to their
cellular nature, and these cells are produced by a blowing agent.
CFC is a common blowing agent, and about 39 million pounds of CFC-11
were used and emitted during the production of foams in 1977. This
amounts to about 13 percent of all U.S. CFC emissions at present, and
projections indicate that this share of the emissions will remain
essentially constant until 1990. Emissions from the manufacture of
flexible urethane foams were the third largest source in 1977, and
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they are projected to be the fourth largest source in 1990. Thus this
product area requires careful analysis if it is desirable to reduce non-
aerosol CFC emissions.
There are two methods of reducing CFC use and emissions from the
manufacture of flexible foam. The first is to substitute an alternative
blowing agent, in this case, methylene chloride. Methylene chloride is
presently used by many slabstock fearners, but not by manufacturers of
molded foam, where technical characteristics of the product have essen-
tially precluded its use. There is the possibility of replacing more
of the CFC used as a blowing agent with methylene chloride, but in-
creased penetration of this substitute faces a number of obstacles.
Some of these concern the ability to substitute in certain foam formu-
lations, some concern the quality of the product, some concern the
manufacturing scrap rate. Others have to do with perceptions and prej-
udices of individuals in the business, who for one reason or another
would "rather fight than switch." And lastly, there is the question
of the relative costs of manufacturing with one blowing agent versus
the other. When all of these factors are combined, it appears that
slabstock foamers who would now have the option of switching from CFC-11
to methylene chloride are presently willing to incur a raw materials
cost penalty of 2 to 6 percent in order to retain the use of CFC. Even
if all of these could be converted, apparently 25 percent of the CFC
blown slabstock could not be converted for one reason or another, in
the judgment of the industry.
Since the use of methylene chloride to blow molded foam is also
precluded, the effect of a conversion of all the "eligible" slabstock
to methylene chloride would reduce emissions by about 50 percent.
The second method of reducing CFC emissions is the recovery and
recycle of the blowing agent during the manufacturing process. The
method of doing this is known, used in other manufacturing processes,
and appears applicable to flexible foam manufacture after the solution
of some technical problems that are not judged as severe. Capital in-
vestment is required, and at present CFC prices the keys to the eco-
nomics of the process are the ability to collect a large fraction of
the emitted CFC, and to maintain a high average use rate, or capacity
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factor, on the capital equipment. The first of these criteria, the
collection efficiency, is controlled by the ventilation and exhaust
system that is required on all foam lines for reasons other than CFC
emissions. Indications are that well-designed systems may presently
collect about 50 percent of the emitted CFC, and at least one patent
suggests that over 80 percent could be collected.
The second criterion is a function of the plant production rate.
Most plants have similarly sized equipment, and the production rate is
controlled by the amount of time the equipment is operated. Thus,
plants that have high production rates utilize their capital equipment
more fully. Recovery equipment in large plants would also be utilized
a greater percentage of the time than in small plants, and consequently
the process would be attractive to large foamers sooner than to small
ones.
At the present price of CFC-11, recovery and recycle of CFC ap-
pears economic for plants that use 1.5 million pounds or more of CFC
per year if the capital equipment can be purchased ex-factory for $30
per cubic foot of gas per minute of capacity (CFM), and under condi-
tions of a 4-year payback on the capital equipment. Roughly 50 percent
of present CFC use for flexible foam manufacture is in plants of this size.
The emissions reduction potential of recovery and recycle is ulti-
mately a function of the collection efficiency of the emitted CFC.
Since recovery and recycle can be used for both slabstock and molded
foam, emissions could be reduced by about 50 percent if the average
collection efficiency was about 50 percent.
Either of these methods of reducing emissions could be mandated
by regulation, but this study did not consider the substitution of
methylene chloride as a candidate for mandate. Reasons for this are
that if the mandate applied to all flexible foam, it would essentially
constitute a ban on the manufacture of molded foam and on the 25 per-
cent of slabstock that cannot be blown with methylene chloride. If
the mandate applied to only the 75 percent of slabstock for which
methylene chloride could be substituted, it might well be unenforce-
able, since in many cases plants would make both CFC blown and methy-
lene chloride blown foams, and constant surveillance would be required
to insure adherence to the regulation.
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Recovery and recycle is considered an enforceable method of re-
ducing emissions, since the presence of the equipment can be readily
confirmed. Further, the costs are such that once the equipment has
been purchased, it pays for the owner to use it. Mandated recovery
and recycle also allows foamers to escape the mandate by switching
blowing agents. Thus such a mandate might result in large plants in-
stalling the equipment, and small ones switching to methylene chloride.
Inducing higher CFC prices through either a tax or a marketable
permit system also induces the use of these emissions reduction methods
by making it profitable for a firm to either switch or to recover.
Demand schedules show that the 50 percent emissions reduction that is
possible by mandating either substitution or recovery can be induced
by a price increase from 34 cents per pound for CFC-11 to $1.04 per
pound. Moreover, higher price increases induce even further emissions
reductions, with a reduction of about 80 percent occurring at a CFC
price of about $1.52 per pound. The effects of still higher prices
were not studied.
Detailed comparisons of the effects of mandates versus economic
incentives, and discussions of the details of the economic incentives,
are treated in detail in the summary report of this entire study,
Economic Implications of Regulating Chlorofluorocarbon Emissions from
Nonaerosol Applications, R-2524-EPA, Adele R. Palmer, William E. Mooz,
Timothy H. Quinn, and Kathleen A. Wolf, June 1980.
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ACKNOWLEDGMENTS
The data from which this study resulted came from a large number
of firms. Manufacturers of precursor chemicals, blowing agent manu-
facturers and distributors, slabstock and molded fearners, furniture
manufacturers, trade associations, and many others gave of their time
and expertise, as well as of their data. Contacts were made in person,
by telephone and mail, and, importantly, through an anonymously replied
survey made possible by the Society of The Plastics Industry. Con-
sequently, our debt of gratitude extends not only to very many organ-
izations and individuals, but also to some who are anonymous. We can-
not name them all, for they number in the hundreds, but we acknowledge
here the efforts that were made in our behalf, and extend our thanks
to those who helped.
The authors also thank their internal collaborators. Joyce
Marshall typed the numerous drafts, Will Harriss made the report more
readable through careful editing, and David Jaquette provided a
perceptive technical review.
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CONTENTS
PREFACE iii
SUMMARY v
ACKNOWLEDGMENTS ix
Section
I. INTRODUCTION 1
II. SOME FACTS ABOUT THE FOAM INDUSTRY 5
III. HISTORICAL AND PROJECTED FLEXIBLE FOAM PRODUCTION 11
IV. HISTORICAL AND PROJECTED CFC USE AND EMISSIONS 14
Direct Estimates 14
Indirect Estimates 15
Combined Estimates 16
Projected CFC Consumption Rates 16
V. METHODS OF REDUCING CFC EMISSIONS 20
CFC Substitution 20
CFC Recovery/Recycle 30
Comparison of CFC Substitution and Recovery/Recycle .... 33
Changes in Foam Technology 34
Reducing Foam Output 34
VI. THE ECONOMICS OF EMISSIONS REDUCTION 35
CFC Substitution 35
Recovery and Recycle 38
Investment 38
Operating and Maintenance Costs 39
Return on Investment 40
VII. ESTIMATION OF CFC DEMAND SCHEDULES 47
Distribution of CFC Use by Plants 47
Choice of Technical Option 47
Responses to Higher CFC Prices 53
Control Candidates 57
Mandated Recovery and Recycle 58
Mandated Methylene Chloride Conversion ,. 63
Conclusion 64
BIBLIOGRAPHY 65
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I. INTRODUCTION
In 1974 a hypothesis was advanced that the atmospheric releases
of chlorofluorocarbons (CFC) resulted in depletion of stratospheric
ozone. The ozone layer in the stratosphere provides protection to the
earth, and its depletion could result in changed weather, and undesir-
able effects on plant and animal life. As a result, the use of the
CFCs for aerosol propellant was banned in late 1978, and the U.S.
Environmental Protection Agency began a series of investigations into
the non-aerosol uses of the CFCs. The work reported herein was per-
formed as part of research into the economic effects of regulating
these non-aerosol uses of the CFCs. Part of the research that is
reported deals with non-traditional regulating mechanisms, specifically
the use of economic incentives to reduce CFC emissions. The product
area that is covered in this report is flexible urethane foams.
Flexible urethane foams are a cushioning material that has some
resemblance to the "foam rubber" of the 1950's. It can be made in an
extremely wide range of physical properties that allow it to be used
in diverse applications. These physical properties can generally be
related to the density of the material, with very low densities being
the softest and most resilient, and with high densities being more
resistant to deformation. The appeal of these characteristics put the
material in direct competition with other cushioning materials, and
today urethane foams have displaced substantial proportions of the use
of cotton batting, coil springs, foamed latex rubber, rubberized hair,
felt bats, and other traditional cushioning materials. As a result,
flexible urethane foams are now an important component of furniture,
automobile seats, carpet underlay, bedding, and other products where
a durable and resilient material is required.
About 1300 million pounds of these products were manufactured
in 1977, and the approximate breakdown among the various markets is
shown in Table 1.
it
Based on estimates by chemical suppliers.
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Table 1
DISTRIBUTION OF FLEXIBLE FOAMS USE AMONG
FINAL PRODUCT MARKETS, 1977
.. . Percentage
Market , ,^
by Weight
Furniture 38
Transportation 29
Bedding 15
Prime carpet underlay 12
Packaging 2
Textiles 2
Other 2
SOURCES: Mobay Chemical Company (see Upjohn,
1977b); Mobay (1978); Olin Chemical Group, private
communication.
The important characteristics of flexible foams are imparted by
blowing agents, which form the holes (or cells) in the foam and give
it its flexibility. In all flexible urethane foams, the primary blow-
ing agent is carbon dioxide, which is formed by the reaction of water
and TDI (toluene diisocyanate). Foams with lower densities than are
possible by water blowing (as it is called) require an auxiliary blow-
ing agent. The two most often used auxiliary blowing agents are CFC-11
and methylene chloride and these are used in the range of less than
five percent to about 14 percent of the input chemicals depending upon
the product manufactured, and which auxiliary agent is used. (As will
be explained later, it takes fewer pounds of methylene chloride and
a somewhat different formula to make the same type of product as CFC.)
Emissions of the auxiliary blowing agent are prompt; that is,
essentially all of this agent disappears from the freshly made foam in
a matter of hours or a few days. The foam can be thought of as a
commodity that is manufactured by passing the auxiliary blowing agent
through, it. The blowing agent forms the cells, then leaves the foam
almost completely before the foam leaves the factory.
Flexible urethane foams can be either molded into their ultimate
shape, or produced in the form of a slabstock, a large, continuously-
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made bun, which is sawed into pieces that have dimensions of several
feet high and several feet wide, and lengths of 6 to over 200 feet.
Foam molding is done either by the hot molding process, or by the newer
high resiliency (HR) molding process, which uses warm molds.
Just as flexible urethane foams can be categorized as either
slabstock or molded foams, they can also be categorized as water blown,
CFC blown, or methylene chloride blown. Data to estimate the present
distribution of these types are sketchy, but a very rough percentage
breakdown based on the total pounds of foam appears in Table 2.
Table 2
FOAM PRODUCTION DISTRIBUTION
(percent) . S.
Slabstock Hot Molded HR Molded
Water blown Ccxr^?^ "^"^
CFC blown
Methylene chloride blown
Total Nfip^0"
20 20
©, f'. > 7 8
0 0
65. 35
Total
40
42
18
100
SOURCE: Estimates from marketing data from the following: Mobay
Chemical Company (see Upjohn, 1977b) ; Mobay (1978); Allied Chemical
Company, Statement to EPA, October 25-27, 1977; Olin Chemicals Group,
private communication.
The growth of output from the flexible urethane foam industry
between now and 1990 is variously estimated by industry sources to be
between 3 and 8 percent per year. Various forces acting on the molded
foam portion of the market make projections of the CFC use somewhat
less certain, but in general the same growth rates apply. Driving
this growth in flexible foam markets is the expectation of greater than
5 percent growth in furniture and bedding markets, over 4 percent in the
transportation market, and over 10 percent for carpet underlay and
packaging, which are both relatively small uses. Emissions of CFC from
the manufacture of flexible foams were about 13 percent of total esti-
mated CFC emissions in 1976, and we project them to be about the same
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fraction in 1990. Consequently, this product area deserves attention
in the study of ways to reduce CFC emissions.
This report begins by examining historical data on foam production,
and projections into the near future. Then these data are used to esti-
mate the historical and projected emissions of CFC that are likely in the
absence of any actions to modify them. Two technical methods of re-
ducing the emissions are then examined in some detail, and the emissions
reduction potential of each is estimated, as are the costs involved.
Demand schedules are then estimated, based upon these cost and emissions
reduction data. Finally, estimates are made of the emissions reduction
and costs to firms of imposing the using of the technical options to
reduce CFC emissions, and also of prompting their use by raising CFC
prices.
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II. SOME FACTS ABOUT THE FOAM INDUSTRY
Information about the structure of the industry relies mostly
upon chemical supplier estimates and upon the response to confi-
dential questionnaires that were sent to foam manufacturers by the
Society for the Plastics Industry in cooperation with this study.
Because of the relatively limited number of responses to the ques-
tionnaire, our characterizations must be viewed as qualitative.
There are sufficient differences between molded foam and slabstock
that it; is worthwhile to describe these separately.
SLABSTOCK FOAM
Slabstock foam is manufactured in a foam tunnel. The various
ingredients, including the blowing agent, are individually pumped as
liquids to a traversing mixing head and discharge nozzle that is
positioned at the entry to the tunnel. Once discharged, the mixed
liquids lie on a conveyor belt that travels through the tunnel. The
reaction of the various ingredients to form the urethane is exothermic,
and thus the temperature of the mixture rises, and as it does so, the
blowing agent is vaporized. It is this vaporization that forms the
cells in the foam, and that causes the liquid mixture to rise until it
is about four feet high. As the forming "bun" travels through the
tunnel, the vaporized blowing agent is emitted from it, along with a
variety of other gases that include unreacted TDI (toluene diisocyanate),
one of the raw materials. Since the TDI concentration must be kept low
because of its toxicity, the tunnel contains a ventilation system that
sweeps these emitted gases, together with substantial quantities of
excess air, out of the tunnel, and out of the plant, where they are
discharged to the atmosphere in diluted form. The tunnel itself may
vary in length from perhaps 50 to 100 feet, and the conveyor is de-
signed to travel at a speed such that the slabstock has sufficiently
"cured" to be sawed into pieces for warehousing after it has reached a
point that is typically over 100 feet from the discharge nozzle. The
sawed pieces, varying in length from perhaps 6 feet to 200 feet, are
then warehoused.
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There are about 50 companies that manufacture flexible slabstock.
Roughly one-third of these are large companies, some of which have mul-
tiple plants spread over the U.S. These large companies each have an
annual production volume in the range of 20 to 100 million pounds of
foam a year, which would imply that on average they each consume in the
range of 600,000 to three million pounds of CFC per year.
About 15 percent of the companies fall into the range of 10 to 20
million pounds of foam production annually, which would imply roughly
300,000 to 600,000 pounds of annual CFC use. The remaining companies
are smaller, manufacturing less than 20 million pounds of foam per year.
While foam plants may differ in size by a factor of 10 from the largest
to the smallest, large foam companies tend to be multiplant companies,
with each plant being located close to a market. A large company might
have half a dozen plants across the country.
In terms of foam plants, we estimate that there are about 10 plants
that are large enough to consume about one million pounds of CFC per
year. One or two of these consume two or more times this amount. There
are 30 to 60 plants that have an average consumption of 200,000 to
250,000 Ibs of CFC per year, but which range up to a few in the region
of 500,000 Ibs of CFC. Then there are another 30 to 60 plants that use
100,000 to 200,000 pounds of CFC per year.
Slabstock foam is a low-value, low-density product, and fearners
lose their competitive edge because of transport costs if located too
far from their markets. This causes foamers to locate in the midst of
their markets, which are predominantly furniture, bedding, and carpet
underlay. There is a large concentration of furniture manufacturers
in the Southeastern U.S., and many foam plants are located in North
Carolina, Tennessee, Arkansas, and Mississippi. Flexible foam plants
are also located in Southern California, another major furniture
manufacturing center. Rhode Island, Indiana, New Jersey, Iowa, Mas-
sachusetts, Pennsylvania, Maryland, and Colorado all have slabstock
foam plants, and it can be inferred that there is probably one near
every major metropolitan area where there are furniture or bedding
manufacturers. As might be expected given the importance of transport
costs, little or no flexible foam is imported or exported.
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Slabstock foam is not very capital intensive, and the technical
know-how is readily available from the chemical suppliers. Thus, an
individual with some key accounts in his control and some reasonable
financing can enter the business fairly easily. But small foamers
complain about the narrow margins they must live with, and just as a
few accounts can cause an entry into the market, their loss could
cause an exit. While large companies appear to be well established
businesses and have been around for a long time, small companies may
come and go. In fact, there are several companies whose sole business
is the manufacture of foam production lines and whose customers are
primarily new entrants into the foam production business.
Slabstock foam lines are all designed to produce a bun of similar
cross section. Because of this, there is a great deal of similarity
in the equipment used by large and small foamers, and the difference
in plant output is controlled by the number of hours per day that the
foam line is operated. A small foamer may only operate his line for
one hour per day, possibly even skipping one or more days per week. A
large foamer may operate for a full eight hour shift or longer. Con-
sequently, foam equipment is being operated on the average at less than
one-third of its capacity. Among the factors that might limit plant
output are limited local market size, warehousing and storage space
constraints, and transportation costs.
The industry does not appear very capital intensive, requiring
about half a million dollars to set up the equipment for a small foam
plant. The chemicals that are fed to the foam line frequently flow
at the rate of about $500 worth per minute, implying that in 1000
minutes (17 hours) of operation, more value in raw materials will pass
through the plant than was involved in setting it up. Larger plants
often require much more investment because they are vertically inte-
grated so as to process the slabstock into finished shapes for their
customers. Our survey indicated that large firms have individual in-
vestments in slabstock plants that typically range from 10 to 15
million dollars, with the investment in each of their plants ranging
from 2 to 4 million dollars. These same firms have annual sales of
25 to 75 million dollars. The ratio of capital inputs to total
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production costs seems to run about one to two percent, which is
far lower than most manufacturing operations.
Operation of the foam line generally requires about six people.
In small plants where the line operates for only a. few hours a day,
these people are used in warehousing activities when they are not
actually running the line. However, the bun product must be cut and
trimmed to its final shape before use, and the cutting and trimming
operations involve a great deal of hand work. Large multi-plant com-
panies, characterized by annual sales in the range of $25 million to
$75 million and CFC consumption of one million pounds or more, seem
to have about 19 employees per million dollars of sales; i.e., a com-
pany with annual sales of $52 million would have 1000 employees con-
nected with foam operations in 3 to 5 plants. In these plants, labor
represents about 13 percent of the manufacturing cost. The foam output
appears to sell for 50 cents to one dollar per pound, implying that,
on average, there are 10 to 19 employees per million pounds of output.
Foam plants that are involved only in slabstock production,
without cutting or trimming operations, may have substantially fewer
employees. But since the cutting, trimming, and fabricating operations
are an essential part of the conversion of the slabstock into a finished
and salable product, we must presume that the people involved in these
operations are simply on someone else's payroll, such as the furniture
manufacturer. In assessing the employment related to slabstock foam,
it would be shortsighted to overlook this. Total foam-related employ-
ment might be 13,000-25,000 people.
The output of the slabstock industry is closely related to the
output of the furniture, beddings, and carpet industries. Originally,
materials other than foam were used in furniture cushioning, but these
have been largely replaced by foam. Bedding is made both with and
without foam, but the desirable characteristics of foam probably mean
that penetration of this market will increase. Similarly, the superior
quality of foam carpet underlay probably means that penetration will
also increase in that market, in a continuation of the historic trend
to greater saturation.
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CFC use represents only a small part of the final product price,
and therefore, changes in CFC prices might have only a small effect
on the final consumer. For example, in the softest foam usually used
in furniture, the CFC presently accounts for about 13 percent of the
raw materials cost. For a medium softness foam, the CFC represents
only about 5 percent of material costs. According to furniture manu-
facturers, foam represents 10 to 15 percent of their manufacturing
costs, which means that the CFC accounts at most for about 2 percent
of the furniture manufacturing cost. Thus, changes in CFC price,
even if passed through to the consumer at full markup, have little
leverage on furniture prices.
Similarly, because the CFC content of carpet underlay is very low,
the CFC leverage on its price would be very small.
For bedding, in which expenditures for foam might be the major
component of bedding production costs, the situation is different. But
even if mattresses used all supersoft foam (which has the highest CFC
content), the CFC would only represent less than 13 percent of the foam
cost, and leverage on the price of bedding would be small.
MOLDED FOAM
Molded foam plants do not resemble slabstock plants. The equipment
is vastly different, with molds on an automated production line that
runs through curing ovens, demolding stations, automatic release agent
application, mold filling, product crushing, and wire filling operations.
The entire line might be computer controlled in order to achieve high
production levels and extremely accurate product quality control. We
do not have industry-wide estimates of capital costs in typical large
molded foam plants, due to limited responses to our questionnaire. But
the responses received indicate that the investment and employment
characteristics of large molded foam companies may not be too different
from their slabstock counterparts having a comparable dollar volume of
production. This may result in part from the fact that molded parts
require much less hand work than the fabrication of slabstock, and the
fact that the value per pound of molded foam output is about two or
more times greater than that of slabstock.
The major consumer of molded urethane foam is the automotive
industry, and this fact dominates the economic characteristics of this
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sector of the foam industry. There are less than 20 companies involved
(one source estimates 16), of which half make between 10 and 100
million pounds of foam per year. The balance consists of smaller
plants, averaging perhaps 5 million pounds per year of output.
Whereas large slabstock companies usually have multiple plants,
the same is not true for the molded foam companies, primarily because
a major portion of their output is destined for a small group of cus-
tomers in a relatively concentrated locationthe automotive industry.
Also the molding process lends itself to automation, and thus some
plants are huge. The large size of a few of these plants means that
they are also large single point sources of emissions, with several
plants emitting between one and four million pounds of CFC per year.
Molded foam plants are found close to automotive assembly plants,
with most of the molded foam being made in Ohio, Indiana, Michigan,
California, and New England.
The output of the molded foam industry is directly related to
the output of the automobile industry, and changes in automobile pro-
duction can be expected to relate almost exactly to changes in molded
foam production.
Molded auto seat bottoms are water-blown because of their stiffer
character, and thus do not use any auxiliary blowing agents. The
seat backs generally use CFC. According to foam molders, the HR
process uses about 25 percent less CFC per pound than the older hot
molded process. In either case, the CFC is a minor constituent of the
material costs. Because the end product is generally an automobile,
it is difficult to envisage any noticeable effect on final product
retail prices that could result from changes in the price of the CFC
used to make the seat backs.
Entry and exit from this market is rare, except perhaps for very
small specialty molders. Recent conversions from hot molding to high
resiliency (HR) molding processes have increased production capacity,
and a crude estimate of the unused production capacity of the molded
foam industry is about one third the level of current production.
-------
-11-
III. HISTORICAL AND PROJECTED FLEXIBLE FOAM PRODUCTION
To provide context for the projections of flexible foam pro-
duction, we first examine historical data. Table 3 lists these data,
with several industry projections. The diversity in the historical
figures demonstrates that there is no generally agreed upon source
for these data. Each source differes from every other source, and
while the industry totals are the values that are most in agreement,
there are wide differences of either opinion or definition regarding
consumption for each market segment. There are a number of reasonable
explanations for this. Those who have made the estimates are pre-
dominantly suppliers of raw materials to the foam blowers. Because
the foam blowers are their primary customers, their appraisal of the
size of the total foam market is probably very good.
Moving past the primary customer to the customers of the foam
blower involves much more uncertainty for a variety of reasons. For
example, a particular foam blower might sell 90 percent of his output
to the furniture industry, and 10 percent to the bedding industry (a
hypothetical example). His raw material suppliers might simply list
his total estimated output under the furniture category. Or the
output of a foam blower might be sold to a company that makes both
furniture and bedding, in proportions that are unknown to the foam
blower, and, in turn, to the raw material supplier who makes the
estimate.
Suppliers of raw materials are probably much more aware of the
size of the total market, and the agreement on the aggregated production
figures is much better than on the market sections. From these data,
and the projections, we have synthesized the information presented in
Table 4 as representative of the likely past production of flexible
foams, and of the reasonable range of production to 1990. This range
represents average annual growth rates of 3 to 8 percent. These
rates reflect the range of rates frequently quoted in conversation
-------
Table 3
FLEXIBLE URETHANE FOAM PRODUCTION DATA
(In million pounds)
Trans- Prime Rebond
Year Reference Bedding Furniture Packaging Textiles port at ion Other Carpet Total Carpet Scrap
q
23
52
60
100
1960
1965
1970
1971
1972
1973
1974
1975 i
1976
1977
1980
1982
a
a
a
b
b
a
t
g
c
g
(est.)
b
c
d.g
b
c
e
1
b
£
1
t
e
d.g
o
e
e
6
23
72
82
110
115
440
132
108
142
465
136.4
153
520
116
175
160
130
184
207
145
175
172
190
227
48
90
226
250
353
370
»
386
310
447
--
352.0
482
-V
410
476
479
458
480
710
530
670
535
587
654
Historical :'rc
3
3
11
12
7
18
18
17
10
19.8
11
24
19
12
27
25
t'rojeo\
15
38
50
34
43
54
3
22
66
36
15
32
31
52
21
26.4
23
25
14
25
27
30
fe-J :' (V
32
30
60
27
32
35
'.on
25
75
189
275
244
364
340
375
435
320
285
341.0
345
360
340
344
344
385
360
512
425
440
420
531
552
1
10
30
35
7
27
152
27
50
11
165
17.6
12
190
85
22
13
91
20
16
115
50
105
116
128
_
4
27
30
74
32
32
53
93
30.8
100
100
136
105
109
150
135
146
110
160
175
192
86
227
621
615
650
720
810
958
932 175
1001
1025
1044
915 140
924.0
1126
1070
1100
1186
1138
1437
1249
1627
1429
1555
1696
1942
2137
210
SOURCUS :
(1974).
Mobay Chemical Company (see Upjohn, 1977b).
cl'pjolm (1977a).
dAllied (1977).
243
268
295
Olin Chemical Group, private communication (1977).
'U.S. Department of Commerce.
EMod«?rn Plastics (1978).
Chemical Company (1977).
-------
-13-
about the future with knowledgeable industry sources, and the dispersion
of the estimates in 1990 simply reflects the various views of those
making them.
The above discussion concerns projections of total foam production.
The same practice could be used to project the foam production for each
of the foam consuming market sectors. However, as was demonstrated in
Table 3, the very great differences among the estimators, both for
historical data and projections, suggest that the exercise would not
be useful, and would simply lead to substantially wider dispersion in
the 1990 sector estimates than is already shown in Table 4 for total
foam production.
Table 4
ESTIMATED HISTORICAL AND PROJECTED FUTURE
FLEXIBLE URETHANE FOAM PRODUCTION
(millions of pounds)
Year Production
1960 86
1965 241
1966 307
1967 356
1968 480
1969 520
1970 618
1971 655
1972 746
1973 955
1974 979
1975 974
1976 1121
1977 1275
1980 1420-1690
1982 1696-2137
1990 1960-3240
SOURCE:Bedoit (1974); Mobay Chemical
Company (see Upjohn, 1977b); and Mobay (1978);
Upjohn (1975, 1976, and 1977); Allied Chemical
Company, Statement to EPA, October 27-27, 1977;
Olin Chemical Group, private communication.
-------
-14-
IV. HISTORICAL AND PROJECTED CFC USE AND EMISSIONS
Estimating the amount of CFC that has been used to make flexible
foams, and that will be used in the future, is complicated because
there are many types of foams that are made in a variety of ways, and
disaggregate data do not exist. Whereas there is a reasonable amount
of data available on the historical production of flexible foams, data
concerning the amount of CFC used to produce these foams are less
readily available. Part of the reason for this is that the blowing
agent is a minor expense in contrast to the other chemical raw materials,
usually representing less than 10 percent of the raw materials cost.
But another reason is that CKC is supplied by several producers, and
for them to estimate the market consumption of CFC requires that they
not only understand the position of the other makers of CFC, but also
the markets for foams blown without auxiliary blowing agents, and
those blown with methylene chloride.
Available estimates are of two types. The first is a direct
estimate of CFC use in the manufacture of flexible foams. This type
of estimate is available from producers of blowing agents. The second
is based upon an estimate of the fraction of total foam production
that was blown with CFC, and the unit CFC consumption of this fraction.
Direct Estimates
Table 5 lists direct estimates of CFC use in flexible poly-
urethanes for 1970, 1974, and 1976, as submitted to EPA by DuPont [4].
A second direct estimate was provided by another manufacturer of
blowing agents, and resulted from a proprietary survey of flexible
foam manufacturers. The survey estimated that 26 million pounds of
CFC were consumed in the manufacture of slabstock alone in 1976. Since
we know that CFC is also used in molded foam, there is clearly a dis-
parity between the value shown in Table 2 and this survey value.
*
Both the direct and indirect estimates of CFC use may be clouded
by the fact that CFC and methylene chloride may be used as a blend.
It is not known whether these blends have been counted as though they
were pure CFC, pure methylene chloride, or whether the appropriate
adjustments were made.
-------
-15-
Table 5
ESTIMATED USAGE OF CFC BLOWING AGENTS FOR
FLEXIBLE POLYURETHANE, MILLIONS OF POUNDS
1970 16.8
1973 Not available
1974 26.7
1975 Not available
1976 26.9
SOURCE: E. I. Du Pont de Nemours and
Company (1978a)
The survey value cannot be used directly to drav; an implication
about the total use of CFC for all flexible foams, because molded foams
which comprise the remaining portion of the production do not appear
to use CFC in the same proportions as slabstock.
Since the above data are the only published (and unpublished)
direct estimates of CFC use in flexible foams for the years 1970, 1974,
and 1976, the construction of a historical series of emissions esti-
mates must rely on other techniques. We already have reasonably good
estimates of the historical foam production, and with an idea of the
average unit consumption of CFC in the foam, the emissions estimates
could be made. The data presented above can be used to estimate
average unit CFC consumption, and similar estimates are avail-
able from previous work in the form of indirect estimates of CFC
emissions.
Indirect Estimates
Indirect estimates are taken from the MRI and BDC reports, which
are in turn based upon data from Modern Plastics, Mobay Chemical, and
the study made by ADL. The elements of the estimates are:
-------
-16-
a. total foam production
b. fraction of total production that used CFC
c. unit consumption of CFC by the CFC-blown foams.
Table 6 lists the factors and the computations that were carried out
in the source reports. From the factors, an estimate of the average
unit CFC consumption can be made by multiplying b and c above. The
accuracy of the factor will be contingent upon the accuracy of the
estimates of both the fraction of total production that uses CFC, and
the unit consumption of CFC by the CFC-using foams. Some idea of the
probable subjectiveness of these values is conveyed by the fact that
ADL estimated that 55 percent of flexible foams used CFC, and MRI esti-
mated that less than 1/3 of them used CFC, for time periods in which
there were similar types and amounts of foam produced. There is also a
similar difference in opinion on the average consumption of CFC by the
CFC using foams. These differences are partially offsetting, and when
the factors are multiplied the ADL estimate of the average CFC content
of total foam output is 3.85 percent, and the MRI estimate is about
3.17 percent.
Combined Estimates
The direct and indirect estimates are summarized in Table 7.
The lack of consistency of the data in Table 7 is disappointing,
but the data must be used as the basis for estimating past and future
CFC emissions from flexible foams.
Projected CFC Consumption Rates
We begin with the assumption that the 1976 survey results are
a reasonable estimate of average CFC consumption in slabstock. For
molded foam we have no comparable figures, and consequently, we shall
use the indirect estimate made by MRI and presented in Table 7. From
these two estimates, and the estimated division between slabstock and
molded foam of 65 percent and 35 percent, the combined average CFC
content of all foam is 2.92 percent. This estimate is lower than
suggested by the ADL and MRI estimates and higher than implied
-------
-17-
Table 6
AGGREGATE CFC-11 USE BY FLEXIBLE URETHANE FOAMS
Type of Foam
All
flexible foam
Flexible
slabstock
Flexible
molded foam
Data Year
ADL, 1973
MRI,? 1975
MRI, 1975
MRI,? 1975
MRI, 1975
Total
Foam
Output
(million
pounds)
960
660
775
264
269
Percent
Using
CFC
55%
33
33
30
30
Estimated
CFC-Blown
Foam
(million
pounds)
530
218
256
79
82
CFC as
Percent
of Foam
Weight
7.0%
10.4
10.4
8.3
8.3
Estimated
CFC Usage
(million
pounds)
35.4
22.8
26.2
7.0
7.3
SOURCES: ADL, p. LV-79, and MRI-III, p. IV-38 to 39.
biased on Modern Plastics data.
Based on Mobay data.
Q
Numbers for molded shapes do not compute exactly, because of
apparent computational errors in the MRI tables.
-------
-18-
by the DuPont data. In the projections to follow, 3 percent
will be used as the estimate for all flexible foams, 3.2 percent will
*
be used for slabstock, and 2.5 percent will be used for molded foam.
Where indicated, sensitivity analyses will illustrate the effects of
uncertainty in these values.
Table 7
ESTIMATES OF AVERAGE CFC USE IN FLEXIBLE FOAMS
Year
1970
1974
1976
1976
Year
1973
1975
Total CFC use,
millions of pounds
16.8
26.7
26.9
26. 0°
Source Slabstock, %
ADL
MRI 3.43
Direct Estimateb
Total Foam Production
millions of pounds
618
979
1121
825C
Indirect Estimates
CFC Molded Foams, % CFC
-
2.49
Average use ,
% CFC
2.69
2.72
2.45
3.15C
Ail Foams, % CFC
3.85
-
E.I.DuPont de Nemours and Company (1978a), except last entry from
proprietary survey.
Values from Table 4.
^Estimates refer to slabstock foam only.
Table 4 can be used as the basis for projecting CFC use and
emissions by making assumptions about the CFC consumption per unit of
foam. We have already seen that the historical data on this is subject
to some uncertainty, but compounding this is the fact that there are
7C
Note that these calculations have derived average values for
all flexible foams, and include water-blown foams and those using
methylene chloride as an auxiliary blowing agent.
-------
-19-
some trends underway that will affect these ratios. These trends will
be treated in some detail later in this document, but in summary, they
consist of actions affecting molded automobile seats. These seats are
changing size and shape as a result of car downsizing, their density
is being lowered, and most important, the manufacturing process is
rather rapidly changing from hot molding to the HR process. The net
effect of these changes is that average CFC consumption in molded foam
destined for car seats could be reduced eventually to about 2.0 percent
from the presently estimated 2.5 percent. We do not know the rate of
these changes, and how their interrelationships affect the total use
of CFC in molded foam seats. Consequently, we have assumed simply
that the eventual reduction of average CFC use to about 2 percent will
occur by 1990. Using these assumptions and the foam production esti-
mates of Table 4, we estimate historical and projected CFC use and
emissions, and list these estimates in Table 8.
Table 8
PROJECTIONS OF CFC USE IN FLEXIBLE FOAMS,
MILLIONS OF POUNDS
Year
1980
1982
1984
1986
1988
1990
Low Estimate
43
50
51
52
53
54
High Estimate
51
63
70
76
83
89
SOURCE: Projections in Table 4, average
CFC content developed in text, and an assumed
ratio of 65% slabstock and 35% molded foam.
-------
-20-
V. METHODS OF REDUCING CFC EMISSIONS
This section presents discussion on the known methods of reducing
CFC emissions. The technical characteristics of each emissions reduc-
tion method are explored, including those characteristics that bear
upon the economics of the method. A formal treatment of the economics
of emissions reduction is reserved for a later section that uses the
data discussed here.
CFC SUBSTITUTION
Low-density flexible urethane slabstock requires the use of an
auxiliary blowing agent. CFC is the predominant agent used, but methy-
lene chloride and CFC/methylene chloride blends are also used. Methy-
lene chloride is not an exact substitute for CFC, and therefore, a
discussion of substitution possibilities must focus on the differences
between the two blowing agents in terms of raw materials used, processing
control, quality of product, and costs, and other differences perceived
by foam blowers. Industry sources generally agree that about 60 percent
of the flexible foam that uses auxiliary blowing agents is blown with
CFC, and that 40 percent is blown with methylene chloride. Methylene
chloride owes its competitive position to its appealing economics. Two
factors make it desirable. First, since it has a lower molecular weight
than CFC-11, it takes fewer pounds of it to generate the same volume of
gas, which foams the urethane. Second, it has historically cost less
per pound than the CFC. The theoretical advantages of these two factors
are compelling; however, in practice they are somewhat reduced. Methy-
lene chloride has a higher boiling point than the CFC, and the amount of
heat required to vaporize it is greater than for the CFC. This causes
a somewhat later foaming action in the foam tunnel, and for some for-
mulations changes in other precursor chemicals are required. These other
changesboth in the type and quantity of ingredientstogether with
the lower blowing agent costs, result in estimated net savings of four
to seven percent of the input raw materials costs. Since the foam in-
dustry is highly competitive, the apparent advantage offered by using
-------
-21-
methylene chloride is an attractive one, and we found fearners who told
us that they relied on the use of this blowing agent to give them a
competitive edge, to extend their marketing area, and to increase their
profits.
With methylene chloride being offered as virtually a complete
replacement for CFC that would reduce foam material costs, one must
question why there has not been a wholesale conversion to its use, and
why it is that its use coexists with CFC in large marketing areas under
competitive conditions. The reasons are rooted in technological ques-
tions, economic uncertainties, and safety aspects. Each of these has
been addressed at length by the vendors of methylene chloride, but
either real or imagined problems with its use have impeded switching
from CFC, and the economic margin between foamers who use one or the
other appears insufficient to force the issues. We will look at each
of these subjects, since they describe what a foamer faces when making
a choice of auxiliary blowing agent for use on a slabstock line.
Early foaming technology limited the use of methylene chloride to
foam formulations containing relatively modest amounts of auxiliary
blowing agent, primarily because amine catalysts capable of working
with higher concentrations were not available. In addition, foams
that were blown with methylene chloride tended to discolor, and even
though the technical characteristics of the product were satisfactory,
users preferred the color of CFC blown foam. This problem of discolo-
ration has been largely solved by the development of a special grade
of methylene chloride for foam blowing which eliminates the problem,
and, consequently, discoloration no longer appears to be a real issue.
With regard to the concentrations of methylene chloride that can be
used, there appears to still be a spirited debate. Dow Chemical has
worked extensively on the subject of foam chemistry, and advertises
that catalysts and surfactants are available to allow high concentrations
of methylene chloride to be used, even up to the super soft grades.
Supporting this position, we found at least one large foamer who supplies
the furniture industry (with soft foam) who claimed to use methylene
chloride alone to manufacture 95 percent of his output. The remaining
5 percent were said to be small production items on which the R&D
-------
-22-
necessary to effect conversion to methylene chloride exceeded the
relatively modest returns that might be had. But we also found wide-
spread disagreement with the statement that methylene chloride can be
used in super soft foams, even from some companies who presently use
it in other foam grades. Whether or not the question has a clear-cut
technological answer is unresolved. Suffice it to say that there is
spirited disagreement about the adequacy of the technology, and this
affects the willingness of some fearners to use methylene chloride.
While formulations using methylene chloride can be shown to have
a 4 to 7 percent lower material cost, foamers are quick to point out
that this is only one part of the picture, because it assumes that
equal amounts of salable product are made using each blowing agent.
Closer examination of this question shows that methylene chloride foam
formulations are more sensitive to the control of the catalysts than
are CFC foam formulations. The catalyst concentration can be varied
over a wider range when using CFC while still producing a high
quality foam than it can with methylene chloride. Consequently, the
use of methylene chloride may increase the level of -rejected product
(or scrap) in a slabstock plant. Moreover, as methylene chloride con-
centrations increase, this phenomenon becomes more pronounced. As a
result, the foam line operator must exercise more attention and skill
when using methylene chloride than when using CFC in order to produce
equivalent amounts of foam of acceptable quality.
Our interviews with slabstock fearners produced a surprising
variety of opinions on this question, and production practices that
conformed to these opinions. At one extreme, we found a number of
foamers who contended that the use of methylene chloride posed no
problems at all, and who felt that their scrap rate was no different
from anyone else's. These foamers also described the greater sensi-
tivity of the methylene chloride formulations by admitting that "the
gate was narrower than the gate of CFC formulations, but they are both
wide enough to drive a truck through." They also generally felt that
making super soft foams with methylene chloride was not a great problem,
and at least one of them was installing larger capacity methylene
-------
-23-
chloride measuring equipment so that he could make softer foams.
Generally, but not always, these opinions were voiced by small to
medium sized foamers.
At the other extreme, several large and very large foamers who
use both CFC and methylene chloride, alleged that they used methy-
lene chloride whenever it was the economically favored blowing agent,
and that there simply were formulations where the CFC was, on balance,
less expensive to use. Part of this reasoning had to do with the costs
of the other ingredients in the formulation, and part had to do with
the scrap rate. When questioned about scrap, the general conclusion
of these large foamers was that in general one can expect a
higher scrap rate when using methylene chloride. Confronting these
foamers with the opposite opinions of others brought the response that
some foamers have lower internal quality standards than others, and
that some foam users also have lower standards. To the extent that
neither a fearner nor his customer either perceives or cares about the
fact that some of the foam produced is of lesser quality than the rest,
the question of scrap rate becomes moot.
But there clearly are customers who do discriminate, and who do
demand high standards. In these cases, the foamers are very sensitive
to the quality of their output. As an example of this sensitivity, we
spoke to one foamer who has a number of plants, and who attempts to
maximize his use of methylene chloride. This foamer has found that in
those plants where he has strong technical support he can achieve
higher levels of methylene chloride use than he can in his other plants
without the scrap rate becoming excessive. Clearly, if a foamer is to
contemplate switching from CFC to methylene chloride, he must make
some assumptions about how his scrap rate will change. There are no
data on this subject, but one might easily surmise that there are
careful operations and some types of products for which the scrap rate
is no different, and also that there are more casual operations and
more demanding products where changes in the scrap rate may have can-
celled any apparent savings in raw materials. Whatever the actual
history may be, there are foamers whose opinion is that the case for
lower overall costs is far from clear. They believe that the theoretical
-------
-24-
savings of 4 to 7 percent are on the high side, and that there actually
could be a net loss in some cases.
In this connection, it could be expected that those small fearners
whose strength lies in marketing rather than in technical expertise.
might be biased towards the use of CFC based technology. These foamers
probably would he the least equipped to cope with the demands of a more
exacting technology, the misuse of which can result in a higher scrap
rate.
A second potential economic factor concerns the additional capital
investment required when methylene chloride is used. This results
mostly from the lower TLV of methylene chloride, maintenance of which
requires more ventilation than for the higher TLV of the CFC. However,
most foam plants are already well ventilated to control TDI concentra-
tions, and ventilation is relatively inexpensive to add. Consequently,
these capital additions, if required, are probably never large for any
well designed plant. We were advised by some foamers that methylene
chloride vapors in the foam plant cause additional corrosion, particu-
larly when ingested into the plant heating system. Checking this in-
formation with those using methylene chloride failed to uncover any
major problems of this type. Indeed, one foamer who has used both
blowing agents stated that CFC also caused corrosion in heating systems.
Here again, differences in cost appear modest.
What may be of more consequence in some particular applications may
be additional energy costs. Usually the curing and warehousing areas
of the plant are ventilated by the exhaust fans in the foam tunnel.
Air sweeps through the warehouse from outside the plant, into the
tunnel, and through the exhaust system to the outside. There may be
some cases where the warehousing and curing areas are physically sepa-
rated from the foam tunnel, so that a separate exhaust system is required
tor these areas. This results in a total air exhaust that is larger than
for an integral plant, and larger than for a CFC using plant, because
*
TLV stands for Threshold Limit Value, and is the maximum legal
average concentration of a substance that a worker can be exposed to
under Occupational Safety and Health Administration (OSHA) regulations.
-------
-25-
of the lower TLV of the methylene chloride, and because methylene
chloride emissions from fresh foam occur later than when using CFC.
In cold climates, the air must be heated, and the extra energy cost
of doing this would be an offsetting factor to the lower material
costs. It is not known how many foamers would be in this situation,
but the number is probably small.
When technological and economic hurdles have been crossed, there
is the question of the relative safety of the two blowing agents. CFC
has several enviable properties in this regard. First, it is an ex-
tremely stable compoundstable enough that it has resulted in sus-
pected problems in the upper atmosphere. Partially because of this
stability, it has a TLV of 1000 ppm, which is the highest value
assigned to gases. Supplementing the high TLV is the fact that CFC
are odorless. Those working in a foam plant using CFC detect no odors,
and the high TLV is assurance to both management and labor that the
use of CFC is safe, as presently practiced.
In contrast, the TLV of methylene chloride is presently 500 ppm,
as set by the Occupational Safety and Health Administration (OSHA).
The American Conference of Governmental Industrial Hygienists has re-
commended a reduction to 200 ppm, the same value recommended by Dow,
and established by the California State OSHA. Methylene chloride also
has a distinctive odor, which is detectable at about 300 ppm. Since the
TLV is a time weighted average, even though a TLV of 200 ppm may be
enforced, the concentrations may well exceed 300 ppm at times, and the
odor will be noticed.
Some CFC using foamers expressed alarm at this, since they felt
that their workers would complain and object to the change from the
odorless CFC. However, there are also positive aspects to the odor,
in that if it can be detected, it may be a warning that there may be a
ventilation system malfunction that would go undetected with an odor-
less gas. On the surface, there should be no problem with foamers
contending with the different TLV. While the CFC appears admittedly
more benign, the effluent gases from the foaming operation contain TDI,
which has a TLV of only 0.02 ppm. The TDI vapors exist regardless of
-------
-26-
the auxiliary blowing agent used, and fearners adequately handle them
despite the extremely low TLV. Further, a large amount of foam is
already blown with methylene chloride without serious problems in
handling the effluent gases.
Despite this, heated discussions about safety are almost guaran-
teed to result whenever the subject of methylene chloride is raised
with CFC using fearners. 'To develop information about methylene chloride,
Dow and others have conducted large (and expensive) studies of the
health effects of the chemical on animals and on workers exposed to the
material over long periods of time. The published results of these
studies appear to corroborate what the producers of methylene chloride
have alleged; i.e., that it is a safe material when handled with
regard for its properties. On the other hand, those who are supporters
of CFC state that the results of a study by the manufacturers of methy-
lene chloride must be expected to support their claims., and that there
are "other factors" that must be considered, or that "the whole story"
was not told. Little evidence is available in the way of systematic
studies to support this position, but if a foamer believes that a sub--
stance is toxic, he won't use it regardless of study results to the
contrary. If he suspects that his foam line operator will be subject
to some slight narcosis from the vapors, and that this will render him
less attentive, so that some bad quality foam will be made, he can easily
believe that any expected cost .savings will be wiped out.
Foamers who convert from CFC to methylene chloride essentially trade
one type of emission for another. In a social and political climate that
is increasingly sensitive to environmental issues, a foamer may very
likely consider that converting to methylene chloride from CFC in order
to reduce CFC emissions may provide only a temporary respite from emission
regulation, in that at some later date, methylene chloride emissions may
also be restricted.
Given the above perceptions about methylene chloride, one finds
that, the present major use of this blowing agent is either by itself
in medium softness foams,.or as blends with CFC where a desirable com-
bination of low material costs and wide operating latitude exists.
Some foamers have pioneered its use in supersoft foams, together with
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-27-
assistance from suppliers of precursor chemicals and methylene chloride.
One also finds that for the most part, fearners using the two auxiliary
blowing agents compete in.the same markets. As a result, it is easy
to conclude that the overall differences between using the two blowing
agents are insufficient to cause one of them' to predominate at the
present.
The above discussion presupposes certain attributes of the foam
produced by the two blowing agents, namely that the quality is equiva-
lent and that the price is the same. We found that there were foamers
who claimed to be able to tell the difference between CFC blown and
methylene chloride blown foam by handling it. Our interviews with
furniture manufacturers convinced us that some were unable to see any
difference. Some furniture companies buy both types of foam, but were
completely unaware of any differences between them, and in fact, were
surprised to learn that there was more than orte way to make it. It
would seem that the primary consumers of most grades of flexible
slabstock and their ultimate customers would observe little or no
changes in either price or quality if foamers were to switch to greater
use of methylene chloride.
Our present perceptions are that there is almost a standoff between
the two auxiliary blowing agents. If there is a movement towards one
or the other, it is slow, and relatively unimportant from the standpoint
of near term CFC emissions reduction. But the leverage on the material
cost savings is very great, and an increase of the price differential
between the two blowing agents could be expected to initiate shifts to
the use of methylene chloride. .
The actual conversion process cannot be done instantly because of
the required reformulation of the foam and some "fine tuning" of the
new formulas on the foam line itself. Also the operators need to be
schooled in the differences that they can expect when using the new
formulations. In practice, a trial formulation is designed to match the
foam that is being made. This formula is tested on the line, and the
product is evaluated. Adjustments are made as necessary until the formula
produces the desired product. For large foamers with their own technical
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-28-
staffs, it has been suggested that the bulk of this work would be done by the
foamer himself. For foamers without technical staffs, outside help in
the form of technical teams from the material suppliers would be relied
upon.
From the viewpoint of reducing CFC emissions, the substitution of
methylene chloride as an auxiliary blowing agent is 100 percent efficient,
in that substituting methylene chloride completely eliminates the CFC.
The question of interest then becomes the degree to which foamers could
convert, if they were motivated to do so. Despite the apparent avail-
ability of the technology for even the super soft foams, there are
special cases where attempting to use methylene chloride would either be
difficult, uneconomic, or where it would alter conditions so that some
foamers might go out of business. Taking these in order, substitution
might be difficult for some types of foam. We have not specifically
identified the characteristics or amounts of these, but we were advised by
foamers who presently use methylene chloride that there are certain foams
with which they have great difficulty achieving the required quality levels
when using methylene chloride. This is not a case of excessive scrap rate
on an otherwise successful formulation, but rather a case where it is
apparently difficult to match the required characteristics of the CFC
blown foam.
A certain number of cases may be initially uneconomic. The design of
formulations that use methylene chloride for the commonly produced foams
has been done by the chemical suppliers through the investment of R & D
funds. They have expended this effort, and made the investment in the
hopes of realizing a return through the sale of the methylene chloride
and precursor chemicals that are the formulation ingredients. There are
many types of foam that are blown in relatively small quantities, and for
specialty purposes, where the investment required to develop alternative
formulations has not been made and may not appear economically attractive.
Foamers making these types of foam would be unable to switch, and also
unable to pay for the R & D. This problem may only be a short-term problem
since if CFC were either too expensive or unavailable, the development of
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-29-
new specialty foams would be confined to those that could use methylene
chloride. How long the intervening period might be is unknown.
The last case is one that has been previously raised, and concerns
the increased sensitivity of the methylene chloride blown foams to the
control of catalysts. The operation of the foam line with these
formulations requires more care, and the penalty for not exercising it
is a higher scrap rate. There is apparently a proportion of the foaming
industry that is made up of fearners who may have one or more of the
attributes of being small, marginally capable, or marginally economic
operations. For these fearners who may understand very little about
the control of their operation, the conversion to methylene chloride
might bring disaster.
Assessing the effect of these three categories is difficult, since
there are no data by which the estimates could be made. Subjectively,
a group of industry knowledgeable individuals responding to our interim
report under the SPI letterhead suggested that the above groups might
collectively represent 25 percent of the CFC emissions. Accepting this
estimate would indicate that a conversion to the use of raethylene
chloride could reduce present CFC emissions from flexible slabstock
fearners by 75 percent.
A rough estimate of the amount of CFC used in the manufacture of
flexible slabstock is about 30 million pounds in 1976. Substitution by
methylene chloride in 75 percent of the slabstock would bring about a
reduction in CFC emissions of 22.5 million pounds. Molded foam presently
uses and emits about 11 million pounds of CFC, so total emissions could
be reduced from about 39 million pounds to about 18.5 million pounds by
switching to methylene chloride, or by about 55 percent.
A reduction in CFC emissions would be accompanied by an increase
in methylene chloride emissions. As explained earlier, the replacement
of one pound of CFC requires about 15 percent less than one pound of
methylene chloride, so the increase in methylene chloride emissions
would be about 16.5 million pounds. Thus this substitution scenario
would roughly halve the present CFC emissions and double the present
*
Note that this is based upon the assumption of an equal scrap rate.
Should the scrap rate be higher than with CFC, more production (and more
methylene chloride) must be used to obtain the same output of foam.
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-30-
methylene chloride emissions in the manufacture of flexible urethane foams.
Emissions reductions in 1990 would be proportionately the same under
conditions where the present product mix of slabstock, hot molded, and HR
molded foams is assumed. This is not likely to be the case, as we have
discussed, due to the dynamic changes occurring in the manufacture of
molded foams. We have assumed that the conversion to the HR process will
be completed; then CFC emissions from molded foam plants will be reduced
to about 80 percent of the present rate. The effect of this would be
that total emissions from flexible urethane foam manufacture would be
reduced by about 60 percent from the emissions that are projected in the
previous sections.
The above discussion has concentrated on the substitution of methylene
chloride for CFC in flexible slabstock, and a logical question is whether
this substitution can also be made in molded foam. Both molded foamers
and methylene chloride manufacturers have devoted some time and effort
to this question, but with only qualified success Apparently blends of
up to 20 percent methylene chloride with CFC can be used fairly satisfac-
torily, but attempts to use greater substitution adversely affect the foam
quality. For this reason, the potential of substituting methylene chloride
is probably limited to 20 percent in molded foam. Little additional
research is being done regarding methylene chloride, because an area of more
promise is the development of soft molded foams that use no auxiliary
blowing agents. Research on this appears that it will be fruitful, with
the main problems being the maintenance of low densities. This is
discussed at greater length in a later section.
CFC RE CO VERY/RE CYCLE
The principle behind CFC recovery and recycle is simple. Flexible
urethane foams are prompt emitters, and the basic idea is to capture the
CFC emissions during the period when the foam is under the manufacturer's
control. The captured CFC would then be recycled back into the foaming
process.
The basic technology of CFC recovery is fairly well known. Carbon beds
are used in a cycle that alternates between adsorption and desorption. CFC-11
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is a gas that is amenable to collection by carbon adsorption, and there
are a reasonable number of industrial applications where the recycle
and recovery of CFC-11 is economically practiced today. None of these
applications include foam blowers, and the only presently known attempt
to capture and recycle CFC on a foam line was made in 1968 by the
General Tire and Rubber Company [6]. Little information survives from
this test, but we were told that an insufficient amount of the CFC
could be captured to make the process economical, and that the foam
line operators were not enthusiastic about the additional equipment
involved. Although there is no more recent experience with the tech-
nology as applied to flexible foam, there appears to be no technical
reason why it would not work.
While not mentioned in reference to the trial, others have pointed
out that while carbon adsorption works well with pure CFC, the gases
collected from a foam line contain amines and TDI vapors. These vapors
must be dealt with either by pretreating to remove them, or by desig-
nating a portion of the carbon bed specifically to adsorb them. In
either case the presence of these vapors complicates the process
somewhat and increases the capital cost of the equipment. Many
foamers and their trade organizations doubt the potential of carbon
adsorption, but two knowledgeable concerns believe that it merits
*
investigation.
The parameters that control the emission reduction potential are
the collection efficiency and the adsorption-desorption efficiency.
The overall efficiency of the recovery/recycle process is the product
of these. Collection efficiency refers to the ability to collect the CFC
vapors as they are emitted from the foam and the adsorption-desorption
efficiency is a characteristic of the carbon beds themselves, and is con-
trolled by the design and manufacture of the device.
In practice the manufacturer usually guarantees the adsorption-
desorption efficiency of the carbon beds to be greater than 90 percent.
In the 1968 test referred to above, the efficiency of the carbon beds
was stated to be about 95 percent [7]. Because the efficiency of the
*
DuPont and Vic Manufacturing.
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carbon beds is quite high and can be expected to be known with
certainty, we can treat it as a known constant with a value close to
unity for the purpose of making estimates for this study.
The overall efficiency of the recovery/recycle process then
becomes a function of the collection efficiency. Estimating the
collection efficiency of present day foam plants is difficult because
the foam lines differ, the ventilation systems also differ, and be-
cause there are few measurements that have ever been made on the CFC
content of the exhaust gases. The motivation behind all foam line
exhaust systems is the reduction of TDI vapor concentration, because
TDI has a TLV of 0.02. This extremely low TLV has resulted in fearners
usually using large exhaust fans, with the general idea that it is far
better to err on the safe side than to risk having toxic TDI vapors in
the working place.
We do know that the 1968 test had collection efficiencies of
dbout 33 percent. DuPont has made some recent measurements at three
foam plants that yielded results of 53 percent, 33 percent and 9 percent
*
respectively. We also know that a Japanese patent on CFC recovery and
recycle has been issued that claims a collection efficiency of 86
percent. For the purpose of evaluating the emissions reduction po-
tential of recovery and recycle, we will examine a range of the combined
collection and adsorption efficiencies from 30 to 80 percent.
This range has been selected because it encompasses the reported
collection efficiency of the 1968 test on slabstock at the low end,
and probably approaches what extensive collection modifications to
slabstock lines could achieve on the high end. There is less expe-
rience with molded foams, but estimates made by MRI [8] indicate that
30 to 40 percent of the CFC emissions occur in the molding cycle and
that perhaps 60 percent of the CFC are emitted during post-curing and
crushing. Thus the 30 percent to 80 percent range is probably equally
applicable to molded foam.
*
Patent Application 1976-242544, Japan Patent Agency.
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-33-
Comparison of CFG Substitution and Recovery/Recycle
From a purely technical standpoint there is an interesting
comparison between CFC substitution and CFC recovery/recycle. The
maximum potential to reduce CFC emissions by using CFC substitution
is limited by the present inability to use alternative blowing agents
in molded foam and in about 25 percent of slabstock. Thus, absent any
changes in these factors, the maximum emissions reduction potential
appears to be about 56 percent in 1990.
CFC recovery and recycle can be used on both slabstock and molded
foam lines, and would be equivalent to CFC substitution if collection/
adsorption efficiencies of 56 percent could be realized. Given that
at least one actual plant measurement of 53 percent has been made, it
seems reasonable to assume that recovery/recycle could be at least
*
equivalent to CFC substitution in its emissions reduction potential.
If emissions reductions greater than 56 percent were desired, one
must estimate the potential for each of these methods. We have discussed
some of the factors concerning CFC substitution, and for CFC recovery
and recycle we can say that improved collection efficiency is the key.
In this regard there have been a number of suggestions by industry re-
presentatives that suggest that relatively straightforward changes to
the existing ventilation systems might provide such improvements. The
limiting factor could be the degree to which all of the CFC is emitted
while the foam is still under the influence of the existing ventilation
system. For example, CFC emissions from slabstock might be fairly easy
to collect while the slabstock is either in the foam tunnel, or even
outside the tunnel but still on the conveyor system, if the tunnel were
extended. But once off the conveyor, the foam is stacked in the ware-
house to cure. The amount of emissions occurring in the warehouse is
unknown, and collection of the CFC may be difficult because it is not
very concentrated. This subject would clearly require more study
before the ultimate potential of recovery/recycle could be assessed.
This is based, in part, on CFC substitution only being possible
for 75 percent of the CFC blown slabstock. If this value should increase,
increased collection/adsorption efficiencies would be required for the
two methods to have equivalent emissions reductions.
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CHANGES IN FOAM TECHNOLOGY
An ideal solution to the question of emissions of auxiliary
blowing agents from flexible foam manufacture would be the development
of foam technology that made these blowing agents unnecessary. The
HR process for making molded foam is one approach to this. The HR foam
process usually requires less auxiliary blowing agent to make a product
than does the non-HR process. Further research into still greater re-
ductions in CFC use is actively under way. Widespread conversion to HR
foams is unlikely. They require substantially more material inputs,
and these materials are more expensive than those used in conventional
formulations. HR foams can be regarded as a specialty item that has
found a particular niche in the economy. The lower CFC consumption of
these foams is built into the estimates of CFC emissions made earlier.
Present and anticipated efforts to further reduce CFC use. in HR foam
have also been built into the CFC emission projections, and thus are
part of the "base case."
REDUCING FOAM OUTPUT
One last method of reducing CFC use and emissions is to reduce the
output of flexible foam. The softest foams use the most CFC, and
banning the manufacture of these grades of foam could effectively
reduce emissions, albeit not without drastic effects on some businesses.
No further analysis of this option was made.
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VI. THE ECONOMICS OF EMISSIONS REDUCTION
In the previous section, we have identified two technical methods by
which CFC use and emissions could be reduced while still preserving the
availability of flexible urethane foam. One, CFC substitution, is already
in partial use. We have suggested that while there appear to be cases
where this use is based upon favorable economics, in general the picture is
not crystal clear. The implied economic similarity of the use of CFC and
methylene chloride is emphasized by the fact that there are markets where
foams produced by both methods compete with each other. The second, CFC
recovery and recycle, has an intrinsically strong appeal. Why purchase
CFC, pass it through a foam formulation, enjoying only minutes or hours of
its use, and then discharge it to the atmosphere in a form, that could
probably be reused for the same purpose? But this system is not in use on
flexible foam lines anywhere, even though other industries have found that
the idea is technically sound and have adopted the practice as a cost saving
measure. This circumstance is evidence that flexible foamers do not believe
that CFC recovery and recycle is economically viable for them at current CFC
prices.
If CFC use and emissions are to be reduced through the use of control
strategies such as the imposition of rules and regulation, it is important
"»
to understand what costs this will impose upon the industry. Similarly, if
CFC emissions reductions are to be stimulated by economic incentives, an
understanding of the economics of the technical means of reducing them is
essential to the design of the incentives.^ This section will explore, the
economics of CFC substitution and of CFC recovery and recycle.
CFC SUBSTITUTION
We have previously noted that CFC substitution presently appears
practical for about 75 percent of the flexible slabstock that currently
uses CFC as an auxiliary blowing agent, and that it is not presently a
commercial possibility for flexible molded foam. The discussion that
follows will assume that these conditions are immutable. However, it
should be realized that the limits of CFC substitution were established
through discussions with industry that assumed present CFC prices. Should
economic incentives be instituted to move foamers away from the use of
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CFC, the picture might well change. For example, the 75 percent substitution
limit on slabstock was partially based upon the premise that some formulations
were not produced in sufficient volume to merit the R&D expenditures necessary
to design substitute formulations. This judgment clearly requires assumptions
about CFC prices, which, if increased, could be expected to alter the percep-
tions of whether R&D was economic. We do not have data with which to address
this question, and consequently will assume that the limits of CFC emissions
reduction through CFC substitution are fixed. This assumption biases the
estimates of emissions reduction, which in actuality will be larger than
estimated.
We begin by looking at slabstock since molded foam cannot substitute
blowing agents. The CFC using slabstock industry, by the definition above,
consists of 75 percent that can be converted to methylene chloride, and 25
percent that cannot. We also assume that the foamers who can use either
blowing agent will substitute methylene chloride for CFC when the cost of
using it is less. The following expression identifies the condition under
which this will happen: *
(P A + P M)a < (P C + P M)
am cm
or
[CC0.85P 4- 2.28)]a < [C(P + 2.28)],
3, C
for a super soft formulation,
where :
P - CFC-11 price, $/lb
C = CFC use per plant, pounds/year
= methylene chloride price, = $0.22/lb
= methylene chloride use per plant, pounds/year
P - Price of non-blowing agent materials, $/lb
M = Quantity of non-blowing agent materials, pounds/year
fj. = weighting factor (see text)
As written, this expression assumes that Pra and M are identical for both
CFC and methylene chloride formulations. This is not strictly true, and the
equation has been written as shown in order to capture the differences in the
weighting factor, a.
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The above relationship is such that a fearner's decision about which blowing
agent to use depends only on the relative prices of the two agents, and the
value of the weighting factor, a. Since only 85 percent as many pounds of
methylene chloride are required compared to CFC, and since the price of
methylene chloride has always been less than that of CFC, the present
relative equilibrium in the use of the two blowing agents can be ascribed
to the weighting factor. Various perceptions affect the value of a. First,
formulations that use methylene chloride must use adjusted amounts of
catalysts and other ingredients that tend to be more costly than those used
in CFC blown formulas. Second, the scrap rate may change, so that the
fraction of salable first quality product is reduced. Third, whatever biases,
prejudices, or fears, whether well founded or not, that some fearners might
have concerning the use of methylene chloride can be reflected in a. Last,
to the extent that some additional capital inputs are required, such as
improved ventilation, these effects can also be captured in this weighting
factor.
The above equation can be solved for an equilibrium condition, and this
solution yields a value of 1.062 for a. This can be interpreted to mean
that all of the various quantifiable and non-quantifiable factors that have
been Identified above (plus others that have not) result in about a 6
*
percent weighting against methylene chloride use in comparison to what the
blowing agents alone would cost. This can be thought of as the additional
costs of using methylene chloride that are perceived by foamers that
presently use CFC, and whose circumstances are such that they are right at
the margin of shifting. Those foamers who presently use methylene chloride
have an a value less than 1.062, and there are CFC using foamers whose
perceptions of a is much larger than 1.062.
Estimating the costs to foamers that convert requires that the value
of a be estimated. As might be expected from the components of this factor,
data are unavailable. Therefore we have made aggregate estimates. For
Six percent derives from the material costs of a super soft formulation
where the CFC represents 13 percent of the material costs. The value of a
depends upon the fraction of material costs that are represented by CFC. For
a medium softness foam, CFC represent about 5 percent of material costs, and
a is about 1.02.
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large foam plants, where more technical support can be expected, we
have estimated that a = 1.125, or that the weighting against methylene
chloride is about twice the equilibrium value. For small foam plants
we have estimated that a = 1.2. This implies that small plants would
convert to methylene chloride when their material costs were about 20
percent higher due to using CFC.
RECOVERY AND RECYCLE
Recovery and recycle of the CFC appears technically feasible for
both slabstock and molded foams, but is not practiced today because of
some technological unknowns that affect capital costs of the equipment
and because of uncertainties surrounding the efficiency with which the
emitted CFC could be collected. In the previous discussion of CFC
recovery, we noted that recent tests made in foam plants had shown that
at least one plant presently collected slightly more than half of the
CFC inputs in the existing ventilation system. Since these systems are
not designed primarily for CFC collection, and since the systems are
not sophisticated, complex, or costly, it is reasonable to assume that
an average collection/adsorption efficiency of 50 percent can be
expected. This assumption will be used in the estimates that follow.
Investment
The capital cost of a carbon adsorption recovery recycle system is
usually quoted F.O.B. the manufacturer, and excluding installation.
Vic Manufacturing, of Minneapolis, Minnesota, has stated that an
allowance of 60 percent of the F.O.B. factory price is ample for trans-
portation and installation of a unit. No one in the industry disputes
this estimate, and therefore we estimate that the unit installed
capital cost of recovery/recycle equipment is 1.6P, where P is the
manufacturer's unit price per cubic foot per minute (CFM) of gas to
be treated and the complete cost is 1.6(p)(CFM).
The price of carbon adsorption units is generally in the range of
$6 - 12 per CFM, but because of the complication of the trace gases,
it is agreed that this range may be too low for a flexible foam plant.
The actual range is open to speculation, but Vic, for one, does not
feel that the additional equipment will be very expensive. One
estimate made by Vic together with a pessimistic party, suggested
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$35 ± 10 per CFM. No one has suggested a price greater than $45 per
CFM. For this exercise we will adopt a range of $15 to $45 per CFM as
the manufacturer's unit price, and 1.6 times this for the installed
capital cost to the foamer. The carbon adsorption beds must be sized
to handle the entire exhaust gas stream. Since the capital cost is
a linear function of the size of the exhaust gas stream, it is obvi-
ously desireable to minimize the exhaust rate. We have not estimated
how low it could be; this involves the subject of TDI, which is a
separate issue. Rather, we will use 20,000 CFM as an adequate, if not
abundant, exhaust rate. DuPont found exhaust systems as small as 2500
CFM, and our plant visits found one system that was at least 30,000
CFM. This latter system was at a rather small plant, and the plant
manager commented that their exhaust was strong enough that it some-
times sucked flecks of foam off the surface of the freshly forming
bun. In our plant visits we were unable to detect any particular
relation between exhaust system size and equipment size, and it was
clear that exhaust system capacity is inexpensive, and is generally
used lavishly so as to avoid TDI vapor concentrations. The use of
20,000 CFM as a "standard" exhaust system size will overstate capital
costs somewhat, and will perhaps bias the analysis slightly in favor
of large foam plants (large foam plants sometimes, but not always,
have larger equipment). The installed capital cost can then be es-
timated to be 1.6 (20,000)P, or for values of P from $15 to $45
between $480,000 and $1,440,000, with a midpoint of $960,000.
Operating and Maintenance Costs
A carbon adsorption recovery system is a relatively simple piece
of equipment that is mostly automatic in operation. The use of carbon
adsorption systems in coin operated dry cleaners attests to the sim-
plicity and reliability of the equipment. The major operating cost is
for steam, that is used to desorb the CFC from the carbon bed. The
cost of this has been estimated by Vic to be about 1.4 cents per
pound of recovered CFC. Requirements for operating labor appear minor
and maintenance appears limited to annual lubrication of motors and
occasional changing of the carbon bed. To allow for this, we have
estimated $7600/year. We also include insurance at 2 percent of the
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capital cost.
Annual operating costs can then be estimated as (0.014)(0.5)C +
0.02 K + 7600, where K = capital cost. For a unit that costs $960,000
(the midpoint of the capital cost range), operating and maintenance costs
are 0.0007C + 26,800 dollars per year.
Return on Investment
We attempted to determine what kind of return on investment would
be necessary to attract fearners to use recovery and recycle equipment,
but were unable to generalize what we learned. Typically, small fearners
are uninterested. One small to medium foamer alleged that he would not
install anything on his foam line if he didn't recover the capital cost
in six months. Other small to medium sized fearners were clearly uncom-
fortable at the thought of a capital investment, and stated that the
foam business inherently had so much uncertainty for them that they
were unable to think about investments that might require several
years to recoup.
Large fearners tended to look at the question objectively and with
the attitude that they expected to be in business for a long time.
But they still were unable to describe to us what return they would
require in order for equipment to be attractive, often stating that
there were other criteria besides rate of return, but being rather
vague about what these criteria might be. In the last analysis, we
can conclude only that small foamers would be uninterested except at
extremely high rates of return, and that large foamers would be
attracted if it appeared to be a reasonable financial investment.
To test the attractiveness of recovery/recycle units, we have solved
for the capital cost that will obtain by discounting the annual
stream of returns, and have done this for several conditions of
equipment life and rate of return. The equation used is
investment = annual return
where i = rate of return
n = life of equipment
annual return = pounds of CFC recovered per year
multiplied by the CFC value
The equipment would physically last longer than 15 years.
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The annual return multiplier in brackets above can be solved for values
of n of 5, 10, and 15 years, and values of i of 10, 20, and 30 percent.
The extremes are a return of 10 percent over 15 years, which, if accept-
able to a firm might be viewed either as philanthropic on their part,
or accepted only because they had no other option to stay in business,
and the return of 30 percent over 5 years. The latter is not as severe
as a six month return of investment, but it is still a high rate. The
factors themselves are as follows:
n
i
10%
20%
30%
5
3.74
2.99
2.44
10
6.14
4.19
3.09
15
7.61
4.67
3.27
The annual return can be represented as the value of the recovered CFC
less the operating and maintenance costs of the recovery equipment.
Thus,
annual return = 0.5 ?CC - [0.5(0.014)C + 0.02K + 7600]
where K - capital cost of the recovery equipment, and the
fraction of the CFC recovered = 0.5
For a market price, PC, of CFC equal to 34 cents/pound,
annual return = 0.163C - 0.02K - 7600.
The investment that is equivalent to the discounted stream of
annual returns is in turn equal to
K = k[0.!63C - 0.02K - 7699].
Solving this equation for various values of k produces the
following results:
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k = 7.61 (15 years, 10%) K = 1.076C-50196
k = 4.19 (10 years, 20%) K = 0.63C-29382
k = 3.09 (10 years, 30%) K = 0.474C-22117
k = 2.<*4 ( 5 years, 30%) K = 0.38C -17681
Using these equations allows us to plot curves that relate the investment
to the amount of CFC used per year. These appear in Fig. 1 for several
cases, including the extremes. Fig. 1 also incorporates horizontal lines
that represent our estimate of the range of cost of the equipment itself,
as derived from the estimates of $15 to $45 per CFM.
Small and medium foam plants, using up to 350,000 pounds of CFC per
year cannot justify recovery and recycle at current CFC prices and even
the most lenient financial demands on their investnent. But large foam
plants, using one million pounds or more of CFC, are in a much different
position, and there are several combinations of equipment prices and
rates of return that might make recovery/recycle attractive to them at
today's CFC prices.
There are three ways to make recovery and recycle more attractive; to
lower the unit cost of the recovery equipment, in terms of dollars per CFM,
to reduce the exhaust system capacity, in CFM, or to increase the value of
the recovered CFC. The first two of these are subject to constraints that
limit the depth of analysis that can be performed here. The last is much
more amenable to analysis, and its effect is easily tested. Fig. 2
displays the same information as the previous figure, but for a CFC market
price of 68c/pound, or double the assumed present price. Here the leverage
of the CFC market price is quite apparent. What might have been of only
casual interest to large foam plants at a CFC price of 34c/pound now becomes
much more attractive, and would become very interesting at capital costs of
$30/CFM or lower. Also, whereas at a CFC price of 34$/pound, only the large
foam plants might show interest, at 68c/pound plants using as little as
500,000 pounds of CFC might be interested. This price is still insufficient
to attract fearners whose plants use in the range of 250,000 pounds of CFC
per year, or the smallest plants, which use about 100,000 pounds per year.
-------
2
'a.
S
«
5
o
u>
I
10 15
Hundreds of thousands of pounds of CFC used per year
20
25
Fig. 1
Investment-return relationships for CFC recovery/recycle equipment
at CFC market prices = 34 C /Ib
-------
1.5
1.0
8
o
0.5
S30/CFM
S15/CFM
I
I
10 15
Hundreds of thousands of pounds of CFG used per year
20
25
Fig. 2 I nvestment - return relationships f or CFC recovery / recycle equipment
at CFC market price = 68$/lb
-------
-45-
One last chart has been prepared to illustrate the effect of a
CFG market price of $1.50 per pound, and appears as Fig. 3. At this
price there now appears to be some potential to attract foamers whose
plants use as little as 250,000 pounds of CFC per year. The very
large plants find the recovery/recycle process extremely attractive,
and depending upon the capital costs, even plants using 500,000
pounds per year might be strongly motivated towards the process. The
smallest plants- -those using about 100,000 pounds per year- -are still
unattracted to the process, and to create favorable economic condi-
tions for these plants to recover their CFC would require very high
CFC prices.
-------
1J6
I 1.0
3
5
"
o
$45/CFM
S30/CFM
S15/CFM
10 15
Hundreds of thousands of pounds of CFC used per year
20
Fig. 3 Investment return relationships for CFC recovery/recycle equipment
at CFC market price = $ 1.50/lb
-------
-47-
VII. ESTIMATION OF CFC DEMAND SCHEDULES
The previous section has dealt with the general economics of CFC
substitution and CFC recovery and recycle. The principles developed
there may be expanded to estimate what the actions of foamers might be
to increases in CFC prices that are deliberately intended to reduce
CFC use. This involves the synthesis of a CFC demand schedule, and is
based upon the estimated economics of the technical options that are
available to the foamer, and upon the structure of the foam industry.
The demand schedule estimation assumes that any foamer will act to
minimize his costs. The way in which he does this will depend upon
his size (in terms of annual CFC use), the relative costs of the tech-
nical options available to him, and the price of CFC-11.
DISTRIBUTION OF CFC USE BY PLANTS
For the purpose of estimating the demand schedule, the data pre-
sented in Section II can be synthesized into a size distribution of
foam plants. We first distinguish five types of flexible foam produc-
tion facilities: large and small molded plants, and large, medium, and
small slabstock plants. In addition, we assume that slabstock plants
produce a 50-50 mixture of medium-soft and soft CFC blown foams.
*
Table 9 illustrates the distribution used.
CHOICE OF TECHNICAL OPTION
These have been treated in generalities in the previous section.
Here we assume that any single foam plant will respond to any increase
in CFC prices by acting to minimize its costs, by selecting a proper
technical option.
*While the actual size distribution of plants is somewhat more
diverse than Table 9 indicates, these data appear to be a reasonable
summary of the variety of plants in the industry and simplify the
demand schedule estimation procedure considerably.
-------
-48-
Table 9
APPROXIMATE DISTRIBUTION OF CFC USE PER PLANT
BY TYPE OF FLEXIBLE URETHANE FOAM
Type of Foam
Molded Foam
Large plants
Small plants
Slab stock
Large plants
Medium plants
Small plants
SOURCE: Based on
CFC Use
(thousands of
2500
500
1200
225
150
Tables 2, 4 and
Share Of
Total CFC Use
pounds) (percent)
20
16
34
18
12
industry sources.
Essentially, the estimation procedure involves two steps. First,
production costs are estimated for each technical option that might be
adopted by foam producers at higher CFC prices. Because the costs of
these alternative production processes differ in their sensitivity to
higher CFC prices, and involve different levels of initial capital
outlays, the least-cost option for a firm depends upon the expected CFC
price. The second step simply involves determining which option mini-
mizes production costs, given the regulated price at which CFC-1.1. is
expected to stabilize.
When confronted with higher CFC prices, the possible responses of
*
foam producers include:
1. Simply pay the higher CFC price;
2. CFC recovery and recycle;
3. Conversion to alternative blowing agents; and
4. Conversion to alternative blowing agents where feasible,
with recovery of both CFC and the alternative blowing agent.
We recognize, but do not analyze, the option of going out of
business.
-------
-49-
Because the adoption of any of these options is unlikely to affect
significantly a foam producer's costs of labor, capital, and other
nonmaterial inputs, the demand analysis focuses on material costs.
For the responses listed above, annual material costs are described
in equations (1) to (4), respectively (Table 10 contains the
definitions of all variables).
(1) TC = [P C + P M]
i c m
(2) TC0 = [P (l-e)C + beC + P M + 0 ] + XK
f- c m r r
(3) TC. = [(P 0 + P M)f + (P A + P M)(l-f)a]
j c ID n m
(4) TC. = [(P (l-e)C + beC + P M) f + (P (l-e)A + beA + P M) (1-f)a+0 ]+XK
*» c ma m r r
In equations (1) to (4), the bracketed terms describe the cost of mate-
rials plus annual labor and insurance costs associated with CFC recovery.
The unbracketed term, XK , refers to the amortized capital expenses for
the option, where X is a discount factor determined by the investment
criteria of the firm. The capital expenses appear in these equations for
material costs because the cost of the recovered blowing agent includes
amortization of the capital equipment with which it is recovered.
As an illustration, consider the alternative costs of production
for a flexible urethane slabstock producer manufacturing a super soft
foam. In this case, the alternative blowing agent is methylene chloride,
which can be used to produce all but 25 percent of a slabstock producer's
output on average. Moreover, the use of this chemical is presently un-
attractive, as reflected in the value of a.
The discount factor X is based on a 10 year average life for equip-
ment and 20 percent pretax annual opportunity cost of capital (or equi-
valently a 4.2 year payback period requirement). Because 15 percent less
methylene chloride than CFC is required to produce a given amount of
foam (ignoring scrap), we also have A=0.85C. Finally, available evidence
*
indicates that at the current CFC price of $0.34 per pound, CFC accounts
Blowing agent prices appear to vary from producer to producer. As
a base case, the prices of CFC and methylene chloride are assumed to be
$0.34 and $0.22 per pound. Methylene chloride consumption by the flexible
-------
-50-
*
for about 13 percent of total material costs; this implies the cost
of non-blowing agent materials is P M = ' 0.87. = 2.28C/yr.
TH U -L J
Table 10
VARIABLE DEFINITIONS FOR ESTIMATING CFC DEMAND
SCHEDULES IN PLASTIC FOAM MARKETS
Variable Definition
TC. Materials cost of ith option (i=l,..,4).
p CFC price
p Price of alternative blowing agent
d
m Price of non-blowing agent materials
C Quantity of CFC use
A Quantity of alternative blowing agent
M Quantity of non-blowing agent materials
K Initial capital costs for CFC recovery
r Other annual costs for CFC recovery
X Discount factor
e Fraction of CFC reused under CFC recovery
b Operating cost of CFC recovery unit per pound
of recovered CFC
a Material cost weighting factor of conversion
to alternative blowing agent (a 2. 1.0)
f Fraction of CFC use that technically cannot
be converted to alternative blowing agent
foam industry is a small fraction of total methylene chloride con-
sumption. We have assumed that its ptice will not change as a result
of CFC price changes.
*
This value is different for less soft foams, and has been pro-
perly used in development of the demand curves. The example used here
is presented to demonstrate the technique.
-------
-51-
Based on these observations and the cost data presented above
for flexible slabstock we have the following parameters for equations
(1) to (4):*
Pa = $0.22 b = 0.014
Kr = $960,000 a = 1.125
Or = $26,800 f = 0.25
A = $0-85C PmM = $2.28C/year
X = 0.24
e = 0.014
Substituting these values into equations (1) to (4), total material
costs (in millions of dollars) for a flexible urethane foam producer
are:
(la) TC-L = (p + 2.28)C
(2a) TC_ = (0.5 p -I- 2.29)C + 0.256
i c
(3a) TC3 = (0.25 PC + 2.65)C
(4a) TC. = (0.13 p + 2.58)C + 0.256
4 c
Equations (la) to (4a) describe material costs under each respec-
tive option as a function of the CFC price and the amount of CFC the
firm would use in the absence of regulation. Figure 4 illustrates these
annual material cost curves for a large flexible slabstock plant, where
the value of C is 1.2 million pounds per year (see Table 9).
The kinked bold line at the bottom of the figure shows which
option is characterized by the lowest material costs over several ranges
of the price of CFC-11. Not surprisingly, at CFC-11 prices near the
current level ($0.34 per pound in 1976 dollars), the most profitable
Note that the value of a corresponds to a large slabstock plant.
For smaller foam plants a value of a=1.2 is assumed
-------
-52-
0.34 0.44
0.61 1.13
CFC price {dollars per pound)
Fig. 4 Annual material costs for a large flexible siabstock plant
-------
-53-
action for the firm is simply to pay the higher price. However, material
costs rise rapidly under this option as the price of CFC is increased
by regulation. If the regulated price is between 0.44 and 0.61, the
least-cost response of the firm is CFC recovery. While CFC recovery
requires a large initial investment, this cost is more than offset by
the savings realized by the firm because it purchases less CFC blowing
agent. Similarly, if the regulated CFC-11 price is between $0.61 and
$1.13 per pound, the firm's most profitable course of action is to
convert to methylene chloride. Above the price of $1.13 per pound, the
firm further reduces its use of CFC by conversion to methylene chloride
for the products that can be produced with this chemical and using
recovery equipment to reuse both CFC and methylene chloride.
The exercise above is illustrative of the process used to determine
the least-cost options for each plant. In practice, the parameters of
the model change for each size of plant and type of foam produced.
Development of the demand schedules relied upon a rigorous treatment of
each of these, according to the method just described.
RESPONSES TO HIGHER CFC PRICES
For producers of molded flexible urethane foam, the only possible
response to higher CFC prices (other than reduced output levels) is to
pay the higher price of CFC recovery. On the basis of the recovery
costs described above, recovery and recycle appears cost effective at
or near current CFC-11 price levels for large molded plants, which use
**
extremely large amounts of CFC-11.
That is, the slope of TC^ is greater than the slope of the other
cost functions.
Recovery appears economical at current prices for these large
CFC users even at the upper bound estimate of capital costs ($1.44
million per plant). There are several possible explanations of why
recovery does not occur at the present time. First, firm manager.- may be
uncertain about what overall recovery efficiencies are actually achievable
and about actual volumes of exhaust gas to be treated. Second, some cost
variables may have been omitted from the analysis. Third, and perhaps
most important, the uncertain regulatory climate in the recent past may
have discouraged recovery efforts. For example, despite the seemingly
attractive economics, recovery would be discouraged if firms anticipated
-------
-54-
For smaller producers of molded foam, the total value of recovered
CFC is only 20 percent of that for large CFC users, and CFC recovery
will probably not occur unless the price of CFC-11 exceeds $1.04 per
pound.
For large slabstock plants, no emissions reduction activity is
expected at long run CFC-11 prices below $0.44 per pound. Above this
price level, reducing CFC use (and emissions) is a profitable activity.
From the cost parameters presented above, at prices from $0.44 to $0.61
per pound, all large slabstock plants would minimize production costs
by employing CFC recovery equipment. If firms expect a regulated price
of CFC-11 from $0.61 to $1.13, methylene chloride conversion (rather
than CFC recovery) will occur in large plants that primarily produce
soft foam products, reducing emissions by 75 percent. However, for
large slabstock plants that primarily produce medium soft foams, CFC
recovery always results in lower costs than methylene chloride conversion
in the range of CFC prices considered in this study. Finally, if firms
can recover methylene chloride as well as CFC-11 (as available evidence
suggests), the analysis suggests that at prices above $1.13 per pound
large slabstock plants that produce softer foams would convert to me-
thylene chloride where possible and purchase recovery equipment in order
to reuse both auxiliary blowing agents.
For smaller slabstock producers, CFC recovery is an extremely un-
likely outcome of higher CFC prices regardless of the type of foam
*
produced because of their relatively low CFC use levels per plant.
Instead, we expect small slabstock producers to respond to higher CFC
prices by switching blowing agents. However, because of the material
a future ban on CFC blowing agents, as occurred in the aerosol regula-
tions, or if substantial subsidies were anticipated for future purchases
of recovery equipment. In any case, all available evidence strongly
suggests that CFC recovery in large molded foam plants would be among
the first responses observed as the CFC price increases.
*
For smaller slabstock producers, CFC recovery does not result in
lower production costs than methylene chloride conversion at any CFC
price, on the basis of the cost parameters defined above. If a small
plant cannot convert any of its output to methylene chloride, CFC re-
covery would be induced at a CFC price of $2.29 for medium slabstock
plants and $3.42 for the smallest slabstock plants in Table 9.
-------
-55-
and other costs associated with methylene chloride, conversion by small
plants that produce softer products is not expected unless the CFC
price exceeds $0.68 per pound. At this price, these producers convert
75 percent of their CFC-blown production to methylene chloride and are
assumed to incur higher prices for the remaining CFC. For small plants
that primarily produce medium soft foam, conversion to methylene chloride
is not expected unless the CFC price reaches Si.52 per pound.
Finally, higher CFC prices would also induce improved collection
efficiencies for CFC recovery in both molded and slabstock plants.
Although existing plants appear to collect a significant fraction of
CFC use at central points in their ventilation systems, plants have not
been designed with this purpose in mind. Higher CFC prices would create
strong incentives to recycle as much CFC-11 as possible, given that a
firm employs recovery equipment. While exact information on the costs
of improving collection efficiencies is unavailable, in some cases
relatively modest capital costs may be involved. However, even assuming
that capital costs are high leads us to expect that a CFC-11 price of
about $1.50 would be sufficient to induce an increase in overall recovery
efficiencies to 80 percent of CFC use.
Table 11 presents the demand schedule for CFC use in flexible ure-
thane foams, based on the above analysis and assumptions. According to
the analysis, an increase in the CFC price of only 10 cents per pound
will reduce CFC use by an estimated 27 percent. If CFC-11 prices were
to double, CFC use in flexible foam products would decline by over 42
percent, with most of the emissions reduction activity occurring in
large foam plants. Because flexible foams are prompt emitters, the
annual use reductions in Table 11 equal annual reductions in CFC-11
emissions.
The increase in CFC-11 prices required to induce the use of a tech-
nical option measures the cost of the option per unit reduction in CFC-11
use. Thus, the first technical option to be induced, recovery in large
molded slabstock plants, reduces use by 12.6 million pounds at a cost of
*For a molded foam producer using 500,000 pounds of CFC annually,
modifying the plant to achieve this higher collection efficiency at a CFC
price of $1.50 will be profitable so long as the capital costs involved are
less than an estimated $920,000.
-------
Table 11
CFC-11 DEMAND SCHEDULE FOR FLEXIBLE URETHANE
FOAM: 1980 AND 1990
(millions of pounds)
CFC-11 1980 1990
Price
($ 1976 per pound)
$0.34
$0.44
$0.61
$0.68
$1.04
$1.13
$1.50
$1.52
CFC
Induced Activity12 Reduction^
None
Large MD and all large
SL plants recover
Large SL, SF plants
convert
Smaller SL, SF plants
convert
Small MD plants
recover
Large SL, SF plants
recover and
convert
Improved collection
efficiency
Smaller SL, MF plants
w
12.6
2.0
5.3
3.7
1.0
8.0
5.3
Total
CFC Use
46.8
34.2
32.2
26.9
23.2
22.2
14.2
8.9
CFC b
Reduction
_
19.3
3.0
8.0
5.7
1.5
12.3
8.0
Total
CFC Use
71.5
52.2
49.2
41.2
35.5 i
i
.34.0
21.7
13.7
convert
SOURCE: See text for explanation of calculations. Estimates based on distribu-
tion of CFC use in Table 9.
Abbreviations: MD denotes molded foam, SL denotes flexible slabstock, SF denotes
soft slabstock foam, and MF denotes medium soft slabstock foam.
Shows incremental reduction induced in price ranges shown.
cShows total CFC-11 use at indicated price.level.
-------
-57-
just 10 cents per pound of reduction. However, achieving further
reductions imposes increasingly higher costs per unit reduction in
CFC use. For example, the cost of the last technical option that is
induced by higher prices (methylene chloride conversion by small
slabstock plants producing medium soft foam) is $1.18 per pound
In part, the higher costs required for eacn additional emissions
reduction activity reflect the differential economic impact of restric-
tions on CFC use for large and small foamers. Because of their lack
of sufficient technical expertise for using methylene chloride and lack
of large size for CFC recovery, small plants find it relatively costly
to reduce CFC use. Thus, while large foamers find it cost-saving to
substitute away from CFC at relatively low CFC prices, small fearners
will absorb the full impact of higher CFC prices until the CFC-11
price increase is substantial.
The demand schedule of Table 11 can be used to derive information
regarding the use of methylene chloride. At a CFC price of $0.68, we
estimate methylene chloride use will be at least 11 million pounds
higher than in the baseline case in 1980 and nearly 17 million pounds
higher in 1990. However, at prices in excess of $1.13 for CFC-11,
methylene chloride may be recovered along with CFC-11 by large slabstock
plants. In this CFC price range, methylene chloride use is higher
than in the baseline forecast, but only by about 8 million pounds in
1980 and 13 million pounds in 1990. Finally, at CFC-11 prices in
excess of $1.52, we estimate that methylene chloride use will increase
by about 12 million pounds in 1980 and by over 18 million pounds in 1990.
Control Candidates
The two technical options for reducing CFC-11 use and emissions
from flexible foamsrecovery and recycle and methylene chloride con-
versionare discussed here as candidates for mandatory control policy
in contrast to the economic incentives described above. The first of
the options could be mandated; as explained below, this analysis presumes
Note that this estimate differs from that on page 32, which
referred to a methylene chloride mandate. Also note that since the con-
sumption of methylene chloride is only a small fraction of total
-------
-58-
that CFC recovery and recycle would be implemented in the absence
of any other regulatory restrictions limiting the use of methylene
chloride, thus allowing fearners who would find the CFC recovery man-
date especially costly to avoid the mandate by converting to methy-
lene chloride. For reasons given below, mandated methylene chloride
conversion is not included as a control, though the implications of
required conversion are spelled out here.
Mandated Recovery and Recycle
Recovery and recycle could be successfully mandated: The man-
date appears enforceable because once each plant has made the invest-
ment in recovery equipment it is cost-saving to use the equipment
rather than to let it stand idle; hence, enforcement consists of
making sure each plant acquires the necessary equipment. The mandate
would be effective in reducing CFC-11 emissions by 1990 because annual
use equals annual emissions in the flexible foams product area. There
are also sufficient data about recovery and recycle to make a rea-
sonable judgment about the costs and effectiveness of a recovery
mandate. Moreover, the recovery option is technically feasible for
all types of foams, so a recovery mandate would not require exemptions
in order to avoid eliminating the production of certain foams.
A CFC recovery mandate for flexible foams could be implemented
as a new source standard, requiring compliance only in plants con-
structed after a specified date, or as a retrofit standard, requiring
compliance by existing plants as well. However, new source standards
are unlikely to be an effective means of controlling emissions from
flexible foam plants. These plants typically operate for only one
to five hours per working day and appear capable of significant
increases in output levels. Because new source standards dramatically
increase production costs in new plants relative to existing facilities,
a likely outcome is that existing foam plants would be operated more
hours than otherwise and industry growth would occur primarily through
expansion of output in existing plants where emissions controls are
not required.
methylene chloride use in the U.S., prices would not be expected
to rise solely because of this increase in use.
-------
-59-
In contrast, mandatory controls requiring recovery in existing
as well as in new plants do not increase production costs in new
foam plants relative to old plants, and no incentives are created
to avoid new plant construction in order to circumvent the intent of
*
the regulation. As a result, while new source standards would
have little impact on pre-1990 CFC emissions in this industry, retro-
fitting could significantly reduce emissions levels. The following
analysis concentrates on mandatory controls for both existing and
new plants.
Under a CFC recovery mandate, producers of molded flexible
urethane foams would purchase recovery equipment and reduce emissions
by about 50 percent. For large molded CFC users, recovery currently
appears economical (or nearly so) and no compliance costs for the
regulation are imputed to these firms. For smaller molded foam
plants, a CFC recovery mandate increases the fixed costs of pro-
duction by an estimated $256,000 annuall} (including amortized capital
expenses, insurance, and other costs) and reduces material expenditures
by only $81,000, resulting in a net cost to each plant of approxi-
mately $175,000 annually, or $0.70 per pound of CFC emissions avoided.
For large flexible slabstock plants, the use of mandated CFC
recovery devices also increases fixed production costs by $256,000
annually. However, because of the greater quantities of CFC re-
covered, material expenditures are reduced by aearly $196,000, and
the net annual costs of the mandate are estimated at about $60,000,
or $0.10 per pound of emissions avoided.
On the basis of the earlier demand analysis, firms that pro-
duce flexible slabstock in smaller plants will not respond to a
recovery mandate by purchasing recovery equipment. Rather, if allowed
to do so, they will convert foam lines to the use of methylene
Currently, several factors, such as transportation and ware-
housing costs, constrain optimal plant output levels. A CFC recovery
mandate increases the fixed costs of production while reducing variable
costs by substituting reclaimed for virgin CFC. Consequently, optimal
plant output levels under the mandate would increase slightly (see
R-2524-EPA) and there would be fewer flexible urethane foam plants than
in the baseline case. However, this does not imply that plant closings
would occur. Rather, fewer plants would be constructed to meet the
anticipated growth of the industry.
-------
Table 12
EFFECTS OF MANDATED CFC RECOVERY IN FLEXIBLE
URETHANE FOAM PLANTS
Type of Foam,
Plant size
Molded
Large Plants
Small Plants
Slabstock
Large Plants
Medium and
Small Plants6
Total
Emissions Reduction
(millions of pounds)
1980
8.3
4.6
3.7
18.2
7.9
10.3
26.5
1990
12.6
7.0
5.6
27.9
12.1
15.8
40.5
1980-1990^
114.7
63.8
50.9
253.8
110.3
143.5
368.5
Total Compliance Costs
(millions of dollars)
1980 1990 1980-1990*>
$2.4
2.4
8.5
0.7
7.8
10.9
$3.8
3.8
13.2
1.2
12.0
17.0
$21.3
21.3
72.0
6.6
65.4
93.3
Cost
per pound
(dollars)
$0,31
0.70
0.47
0.10
0.76
0.41
SOURCE: See text for explanation of calculations. Assumes mandate applies to
existing and new plants, and no restrictions on methylene chloride use. Cost es-
timates are in constant (1976) dollars.
^Cumulative emissions reduction from 1980 to 1990, inclusive.
Present value of annual 1980 to 1990 net costs, discounted at 11 percent.
Q
Calculated from individual plant data.
Recovery assumed economic at or near current CFC prices.
^Emissions reductions and estimated costs based on methylene chloride con-
version, rather than CFC recovery. Estimates include plants producing both medium
soft and soft flexible foams.
o
I
-------
-61-
chloride. For softer foam output that can be converted, the costs
of substituting raethylene chloride may be as high as $65,000 per
plant annually, or $0.34 per pound of CFC emissions avoided. For
smaller slabstock plants that primarily produce medium soft products,
the estimated costs of conversion are much higher, although still
less than if these plants were to recover their CFC. For these
plants, the recovery/recycle mandate could impose costs as high as
$221,000 per plant, or $1.18 per pound of emissions avoided.
Small plants that produce flexible slabstock would probably
lose any foam markets that depended on products that cannot be
converted to methylene chloride at the present time. The most likely
outcome is that these markets would be supplied by increased output
from larger plants. Consequently, this analysis does not estimate
the costs of forgone production of these products.
Table 12 summarizes the costs of mandated CFC recovery for the
flexible urethane foam industry, assuming that small slabstock plants
convert to methylene chloride. With an overall recovery efficiency
of 50 percent, the mandate could reduce annual emissions by over 40
million pounds in 1990 and cumulative emissions by nearly 370 million
pounds from 1980 through 1990.
Estimates of costs in Table 12 implicitly assume that the number
of flexible foam plants in each category increases proportionately
**
with industry output. The total estimated costs of a CFC recovery
mandate are $10.9 million in 1980 and $17.0 million in 1990 (in 1976
dollars), averaging about $0.41 per pound of emissions avoided.
From 1980 to 1990, the present value of the estimated costs generated
by the regulation are $93.3 million (discounted at 11 percent annually)
The above analysis assumes that no regulatory action is taken
to discourage the use of methylene chloride blowing agents. If a
Based on cost assumptions presented on pages 35-38.
&&
Because average output per plant is likely to increase slightly,
and because the net costs of CFC recovery decrease as plant size in-
creases, the assumption of constant per plant output levels over time
biases cost estimates upward.
-------
-62-
CFC recovery mandate required that small slabstock foamers use CFC
recovery, rather than convert to methylene chloride, the costs of
the regulation would be higher. Assuming annual CFC use levels of
225,000 pounds for medium sized plants and 150,000 pounds for small
plants, the net costs of using recovery equipment are an estimated
$1.95 and $3.08 per pound of emissions avoided for those plants,
*
respectively. While the level of emissions reduction declines
because only 50 percent of CFC emissions are assumed recovered,
total compliance costs for these firms increase sharply to about
$17 million in 1980 and $25 million in 1990.
In short, if a CFC recovery mandate is designed to force smaller
slabstock foam plants to purchase and use recovery equipment, the
net costs imposed on all smaller plants would be more than five times
the total costs incurred by all other firms combined, despite the
fact that the total emissions reduction of the larger plants would
be twice as great. Obviously, it is unlikely that small plants could
survive such an extreme cost disadvantage. Consequently, under a
CFC recovery mandate combined with restrictions on the use of methy-
lene chloride, many small plants may be forced to close. Currently,
there are at least 60 plants that might be affected, located in all
regions of the country. The markets previously supplied by this
sector of the industry would be gained by non-foam substitute products
or, as appears more likely, by larger foam plants.
Ultimately, the cost impacts of mandated CFC recovery will be
born primarily by the final consumers of products that use flexible
urethane foam. Although the total costs of the control strategy
(assuming small slabstock plants convert to methylene chloride) are
significant through 1990, the impact on prices of individual products
will probably be small. In markets where foam is only one component
of the final good, final product prices would probably rise by no
more than 1 percent for furniture products and by much less in the
transportation markets. In other cases where foam makes up a larger
fraction of final product costs, such as foamed mattresses and carpet
Note that the costs of CFC recovery and recycle are not affected
by the type of foam produced.
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-63-
underlay, the relative increase in prices will be larger. The cost ..
of the flexible foam itself would increase by less than 5 percent on
average, with greater increases for smaller slabs tock and molded
plants than for other producers.
The employment effects of mandated CFC recovery are exceedingly ;;
difficult to estimate. However, even under the assumption of. com-
' ' ' * 1 '
pletcly inelastic foam demand » the above analysis suggests fcbat spjie'
t i ' ."
smaller plants, which are -placed , at a relative cost disadvantage,'
may reduce employment levels or close down as to&m markets are lost
to larger competitors. Although total industry employment may not
be significantly affected, temporary employment 'dislocations will
almost certainly occur, affecting perhaps as many as l.,500 yrprkers .
Mandated Methylene Cfeleri^e Co-ovejcsipa ' ; | ;y ; ; . (
At present, most melded ; foams and some slabs tock foams cafrnot , <. '-
' T *" ' * * * ' I
be made witb'metlhyienp chloride. , Thus , -unless some foam products are
'-'".- '. ' '.'}.,':'"-.-.
exempted, a methylene chloride 'conversion mandate might' amount to a -
<'''''''*' ' ' ' ' '' ' ' J V ' ' v '"
product ban on 25--pe£e$nt of slabstocH foam a,nd virtually all molded .,
1 * - , - ' " I ' ; .'
foams, which together currently account 'for over half of all CFC ""
/ -.-.^
blown output. In £hese 'segments of the .industry, the promulgation ''
( ' . . , -. . i ' .^ ,*-£.
of a conversion mandate ;wdui.''',.-*
effects as well ? as sabs tantia.l l4sse;s 1 in terras of the- yaluei of* ;' -'
: ' , : : ' '* ; -. ' "- . ' . v;. -, rf -
forgone output. , Because ^Bfirod^ct-baus ,are no<; a focus, of th?, cur-re.nfc-'-"
', "' . ,'-''*'" ' .."' ": ' ':
analysis, we, do not Include t;«e ftge'xeiftpted conversipn 'man,date 'iij : .the '
1 ? ' '. ' ''..'" r'. f '*''' ', J '
benchmark mandatory Controls, '-.i *'. ;\ i'i ,:' . ~'*s /''?*''-
' ' " ' ,' i '''... - _ . . ' ..
For (slabs tock) -foams that; can be .conyerted to methylene ' '_-'-
chloride, an effectively anfarce'.'-
of the total^ ': ; ; ' ' ;' \ - r '._' ' ' . " , ' " "..',''"'
I.t is unlikely that a 'ooilveusibn mandate that exempts iirtain ',
.'''' ''..'.- .. ' ' J ; ' >':.-'.
foams could be effectively enforced. Since. ah individual- slabs tock .
plant produces several 'different .tiyp-es of 'foams, exemptions^ for . ' -;
slabs tock foams that 'cannot b& made with methylene chloride ^bvfld, t.
allow both CFC-^ll and methylene chloride blowing agents to^]?e used
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-64-
in the same plant. Because the alternative blowing agents can be
used on the same production line, enforcement of a regulation in-
volving exemptions would be difficult and costly, requiring a
constant threat of inspection at every plant. Consequently, the
option of mandating methylene chloride conversion is omitted on
the grounds that it is unlikely to be enforceable.
CONCLUSION
Flexible urethane foam plants are a significant source of CFC
emissions. Total emissions from flexible urethane foam are among
the largest of all nonaerosol CFC uses and may be as high as 90
million pounds of CFC-11 in 1990. Moreover, each plant represents
an extremely large point source of emissions, with hundreds of
thousands of pounds of CFC-11 used and emitted annually per facility.
In contrast to many other nonaerosol CFC uses, emissions from
flexible urethane foam appear susceptible to regulatory action.
Either CFC recovery or methylene chloride conversion could sub-
stantially reduce CFC releases to the atmosphere, and CFC recovery
appears to be an enforceable candidate for mandatory controls.
However, the most efficient means of reducing emissions for a flexible
foam producer depends upon the characteristics of the firm, such as
the level of CFC use per plant and the types of foam products produced.
Thus, mandatory recovery would impose vastly different levels of
costs on different firms.
The use of CFC in foam products is sensitive to the price of
CFC-11. The analysis suggests that substantial reductions in use
can be induced by moderate price increases, and that total industry
use could be reduced by as much as 80 percent if the price of CFC-11
increased by slightly more than $1.00 per pound.
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-65-
BIBLIOGRAPHY
Allied Chemical Corporation, Statement of Allied Chemical Corporation
on Some Nonaerosol Uses of Fully Halogenated Halocarbons,
October 1977.
Arthur D. Little, Inc., Preliminary Economic Impact Assessment of
Possible Regulatory Actions to Control Atmospheric Emissions
of Fluorocarbons, September 1975.
Bedoit, W. C., Jr., "Urethanes in the Seventies," Journal of Cellular
Plastics, Vol. 10, No. 2, 1974.
E. I. DuPont de Nemours and Company, Information Requested by EPA on
Nonaerosol Propellant Uses of Fully Halogenated Halocarbons,
Wilmington, Delaware, March 15, 1978(a).
Midwest Research Institute, Chemical Technology and Economics in
Environmental Perspectives, Task ITechnical Alternatives to
Selected Chlorofluorocarbons, February 1976(a).
Midwest Research Institute, Chemical Technology and Economics in
Environmental Perspectives, Task IIIChlorofluorocarbon Emission
Control in Selected Applications, November 1976(b).
Mobay Chemical Corporation, Polyurethane Division, 1977 Urethane
Market Summary, June 1978.
Modern Plastics, August 1978.
The Upjohn Company, Urethane Market Summaries, 1975, 1976, and 1977(a).
The Upjohn Company, U.S. Foamed Plastics: Markets and Directory, 1977(b)
U.S. Department of Commerce, Office of Business Research and Analysis,
Bureau of Domestic Commerce, Economic Significance of Fluorocarbons,
Washington, D.C., December 1975.
-------
TECHNICAL REPORT DATA
(Please read JnanicHons on ilie nrene before complctrnj)
1. REPORT NO.
EPA-560/12-SO-OOlc
2.
4, TITLE AND SUBTITLE
Flexible Urethane Foams and Chlorofluoro-
carbon Emissions
June I9BQ ^
6. PERFbRMTNGOHG-ANl'ZATIC
now CODE
7. AUrHOR(S)
William E. M.ooz & Timothy Quinn
8. PSBFORMIf-3 ORGANIZATION
N-1472-EPA
9. PERFORMING ORGANISATION NAMS AND ADDRESS
The Rand Corporation
1700 Main Street
Santa Monica, California 90406
^ ^-., Sr -' 'I
12. SPONSO^TN(J'AG@/V;CY NAIVE AND ADDRESS
10. PROGRAM i-
B2CL2S
2VE.\T NO.
11. CONTRACT aRA
68-01-3882
68-01-6111
U.S. Environmental Protection Agency
OTS/ETD/RIB (TS-779)
401 M Street, S.W.
Washington, D.C. 20460
13 TYPE O- =! = 3tST AMD fERiCD COV
Final - Support
14. S?ONaORI\3 AGENCY CODc
',a. S'-'FP-E.VIENTArtY NOTES
This report records the research in the single product area
i'o. A9^-Fii^ieX3-^^e ttrgt'hdrne ludiuu. It IB "used to support the TTand Corp-
oration's original report: R-2524-EPA, Adele R. Palmer, et,al.',
Economic Implications of Regulating Chlorof luorocarbon Emissions
from Nonaerosol Applications. It s
of the data and of the methods used
data to the analysis of policies th
Flexible urethane foam plants
CFC emissions. Each plant represen
source of emissions, xvith hundreds
used and emitted annually per facil
methylene chloride conversion could
to the atmosphere. The use of CFC
sensitive to the price of CFC-11.
tantial reductions in use can be in
erves as a detailed exposition
to proceed from the historical
at might reduce CFC emissions.
are a significant source of
ts an extremely large point
of thousands of pounds of CFC-11
ity. Either CFC recovery or
substantially reduce CFC releases
in foam produc.ts is very
The analysis suggests that sub-
duced by moderate price increases.
17. KEY WORDS AND DOCUMENT ANALYSIS
a. DESCRIPTORS
13. DISTRIBUTION STATEMENT
Unlimited
b.lOENTI = IERS/OPEN ENDED TE^'.'S
19. SECUR^Tv <-' ASS 'This Report,
non-sensitive
20. SECURITY CLASS iThis page!
non-sensitive
C. COS4TI ri-.'Ici/CiOup
21. NO. Of- P-.GrS
74
22. PRICE
EPA Form 2220-1 (9-73)
19M 431-08S/4611
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