DuPont and Honeywell: How Two Competitors Came Together to Fight Climate Change
Should competitors be able to join forces to fight climate change? This is exactly what DuPont and Honeywell did, banding together to invent a low global warming potential refrigerant.
Should competitors be able to join forces to fight climate change? This is exactly what DuPont and Honeywell did. In response to a 2006 European Union directive, they banded together to tackle the scientific obstacles of inventing a commercially viable low global warming potential (GWP) refrigerant.1 As two of the largest refrigerant chemical producers in the world, DuPont and Honeywell came to the realization that they needed to join their research and development resources in order to meet new European regulations. Racing against time, DuPont and Honeywell successfully developed a new class of commercially viable refrigerants called Hydrofluoroolefins (HFOs). These HFOs had not just a low GWP, but an ultra-low GWP. For example, Honeywell’s product boasted a 99.7 percent reduction in GWP compared to its next best refrigerant that was currently in use. 2 Once the science behind HFOs was proven, the two companies parted ways to pursue further product refinement and separate paths to production and commercialization. This breakthrough was just in time to meet an aggressive European Union directive requiring all new cars to use low GWP refrigerants by 2011.3
It may seem surprising to see such a coordinated effort to seek a product that would directly compete with the very products DuPont and Honeywell were currently producing. Why was the chemical industry willing to cannibalize this multi-billion dollar industry, while opposing stricter regulation in the cases of oil and coal? In a competitive environment with expiring intellectual property, DuPont and Honeywell saw an opportunity to do greater good while also making a healthy profit. The combination of the regulatory environment demanding new science and patents promising dividends on this science helped create an incentive for these companies to fight climate change.
Industry Background
The refrigerant industry had not always been receptive to such environmental pressures. Long before HFOs, chlorofluorocarbons (CFCs) were used in air-conditioning and refrigeration. However, scientists connected CFC emissions to ozone layer depletion. The chemical industry first resisted these claims. 4 Later though, they embraced the phase-out of CFC production, and in 1988 DuPont was the first company to announce their commitment to a total phase-out of CFCs. 5 CFCs were later replaced by hydrochlorofluorocarbons (HCFCs) and hydrofluorocarbons (HFCs), prompted by the 1987 Montreal Protocol. It is surprising to remember that only a few decades ago, scientists and environmentalists cheered the adoption of these alternatives. Thought the ozone problem was solved, a different problem became apparent. HFCs had a thousand times the GWP of carbon dioxide and were contributors to global climate change. 4 In the 2000’s, pressure mounted for the phase-out of HFCs. Just last month in a heralded action to fight global warming, 140 countries agreed to phase out HFCs in an amendment to the 1987 Montreal Protocol. This time though, Honeywell and DuPont (now in the form of its spin-off Chemours) were on the forefront. These companies were driving this regulatory change. In fact, Honeywell was one of the first companies to advocate for the amendment. 6
Going Forward
Can the unique collaboration of DuPont and Honeywell be replicated to other industries? While this successful story showed how companies can create successful products and then push for global regulations that both benefit the environment and these companies, it does raise antitrust concerns. Other competitors complained and the European Union did open an antitrust probe into agreement between DuPont and Honeywell. Although this did not come to fruition, such collaborations must be carefully regulated so they do not restrict competition in the market. The story of the refrigerant industry shows that regulation can drive innovation, even among competitors. If we are going to solve climate change before it is too late, then companies need to think differently, act now, and join together to rise to the occasion.
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1 Alex Barker, “Honeywell and DuPont hit by EU antitrust,” Financial Times, October 21, 2014, https://www.ft.com/content/dfc06f48-592c-11e4-a722-00144feab7de, accessed November 2016.
2 Low GWP Hydrofluoroolefins (HFO) Reducing the Impact on Climate Change, from Honywell website, https://www.honeywell-refrigerants.com/india/?document=reducing-the-impact-on-climate-change-low-gwp-hydrofluoroolefins-hfo&download=1, accessed November 2016.
3 Laurence Norman, “EU Probes Honeywell, DuPont in Refrigerant Case,” Wall Street Journal, December 16, 2011, http://www.wsj.com/articles/SB10001424052970204553904577102333912517216, accessed November 2016.
4 Hiroko Tabuchi and Danny Hakim, “How the Chemical Industry Joined the Fight Against Climate Change,” New York Times, October 16, 2016, http://www.nytimes.com/2016/10/17/business/how-the-chemical-industry-joined-the-fight-against-climate-change.html, accessed November 2016.
5 E. I. du Pont de Nemours and Company, “DuPont Position Statement on HCFCs and HFCs,” http://www.dupont.com/corporate-functions/our-company/insights/articles/position-statements/articles/hcfcs-hfcs.html, accessed November 2016.
6 Alexander Ovodenko, “140 countries will phase out HFCs. What are these and why do they matter?,” Washington Post, November 3, 2016, https://www.washingtonpost.com/news/monkey-cage/wp/2016/11/03/140-countries-will-now-phase-out-hfcs-what-are-these-and-why-do-they-matter/, accessed November 2016.
I think these are very important questions. Should large companies/competitors be able to collaborate? Does serving a “greater good,” such as reducing GWP for products, change this equation?
First, at least in the US, antitrust laws forbid companies from blatant industry rigging, such as price fixing or market division [1]. However, the need for collaboration is certainly acknowledged. Whether companies are able to collaborate is specific to the situation. So how far should the societally beneficial act of lowering GWP be able to push these boundaries? I don’t think industry rigging should be a question: companies should not be able to come together, like DuPont and Honeywell did, to create a product AND decide which customers each company will target to split up the profits. Beyond that, I think collaborating should be seen as a net positive. Antitrust laws should be created and used sparingly for this type of collaboration.
[1] https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-competitors
I think that competitors working together to overcome the challenges imposed by the climate change sends a very powerful message to the whole industry. For example, back to 2004, Coca-Cola joined with Unilever and McDonald´s to promote the sales of refrigeration units free of fluorinated gases. This new product could push for new regulatory frameworks, and ultimately benefit the companies involved in the partnership. Another example backs to 2011, when Unilever and P&G partnered to develop lower impact laundry detergents. This partnership, however, was considered to have breached the European anti-trust laws, according to “The Guardian”.
In order to avoid such issues, it is important to have respected third parties (ex.: federal agencies, NGOs, etc.) involved in the negotiations to guarantee that the companies works toward the greater good, keeping the level playing field in the competitive environment.
You raise an interesting issue around when company cooperation is appropriate. Assuming best intentions, I believe coming together to solve issues bigger than the company’s themselves is a noble thing. GE has expressed the sentiment that it is necessary for large companies to work together to tackle major challenges in society (http://www.gereports.com/lessons-in-collaboration-ecomagination-is-partnering-with-the-worlds-biggest-companies-to-solve-societys-toughest-resource-challenges/). I believe this sort of thinking will persist and so long as there are third parties monitoring such partnerships, this type of behavior should be encouraged.
I think the idea of partnering/collaborating to advance climate change mitigation/adaptation efforts should be expanded. There are a few examples of this taking place (See United Nations Global Compact (UNGC). Business and Climate Change Adaptation: Toward Resilient Companies and Communities. (2012).), but in general they are rare. It’s great to see two industrial giants see the light! There is substantial value that can be gained from these kinds of partnerships. Personally, I’d like to see more stakeholders get involved. Industry-academic and government partnerships may yield even better results.