The refrigerator revolution.

• Author: Ayres, Ed

How a simple, new technology threw the best-laid plans of the chemical and refrigerator industries into disarray - and provided a new perspective on how future environmental agreements can be reached.

In recent years, a series of massive business mergers has mesmerized the industrial world: publishing empires merging into entertainment empires; cigarette companies swallowing major food companies; giant banks pooling assets with other giant banks. The executives who have negotiated the deals - men like Sumner Redstone of the communications giant Viacom, and Michael Eisner of Disney - have been regarded by an awed business media as the very highest achievers of the new global economy.

In the early 1990s, when many of these deals were in the making, a German environmentalist, Wolfgang Lohbeck, put together a very different sort of deal. Unlike Redstone or Eisner, Lohbeck was not an executive in a major corporation and did not have the power to move giant amounts of capital. He had worked for a while as an architect for the German ministry of buildings, but had become disillusioned with the bureaucratic life, and in his late thirties he had quit the government to join Greenpeace. As an environmentalist, he had little standing among the movers and shakers of industry.

The deal Lohbeck made, compared to the mega-mergers being breathlessly chronicled in the Wall Street Journal or Economist, may have seemed too small to mention - yet may prove, in time, to have had far greater consequences for the world. The first impacts were felt in two multi-billion-dollar manufacturing industries - the global refrigerator business and the chemical industry that supplies it. In both, major changes had been expected as a result of the global mandate to phase out the use of ozone-depleting substances - particularly the chlorofluorocarbons, or "CFCs" used as coolants in refrigerators and air conditioners. But the changes Lohbeck triggered were not the ones the executives of those companies had expected.

In some respects, Lohbeck's story is a cautionary tale: it offers important insights into what can go wrong as the world struggles to set in motion the technological transformations that will be required to put the world on a sustainable course. It also offers new hope for international efforts both to stem the depletion of the Earth's ozone layer and to slow the onset of global warming.

The Context

The immediate setting for Lohbeck's deal was the small town of Marienbad in eastern Germany, just after reunification in the early 1990s. One of the town's main industries was a company called DKK Scharfenstein (or DKK), which had once been the largest manufacturer of refrigerators in East Germany. After the Berlin Wall was torn down, the company was thrown into competition with the more modernized manufacturers of western Germany, which were rapidly preparing for the new, more "ozone-friendly" substitutes for CFCs, called HCFCs (hydrochlorofluorocarbons) and HFCs (hydrofluorocarbons). Within months, DKK - run-down and hopelessly obsolescent - was struggling to stay afloat. It was on the verge of going under, when Lohbeck approached it with his proposal: that instead of trying to compete in the making of new, HCFC and HFC-based refrigerators, it make a bold leap into the future by designing a completely ozone-benign refrigerator, of a kind no company in the world was yet making. Such idealistic proposals, of course, are commonplace now. What made this one different was that within three years, it would compel major manufacturers all over the world to change their plans.

The broader setting for Lohbeck's deal was the growing urgency of the need to mend the ozone layer in the stratosphere, which protects the earth and its inhabitants from damaging ultraviolet radiation. In the 1970s, scientists had begun to theorize that widely used chlorine-containing industrial substances - including the CFCs - might be causing chemical reactions in the stratosphere that were ravaging the ozone shield. As excessive levels of ultraviolet radiation reached Earth, they warned, the consequences could include rises in the incidence of skin cancer, diminished crop yields, and extensive damage to marine life. But it was not until May 1985, when the British Antarctic Survey reported the discovery of an enormous "ozone hole" over Antarctica, that the issue was widely perceived as a crisis.

Just over two years later, in September 1987, the historic Montreal Protocol on Substances that Deplete the Ozone Layer was signed, initially by 26 countries. In its most important outcome, industrial nations agreed to cut production of CFCs in half by 1999. The agreement was subsequently strengthened three times, requiring that the production of CFCs in industrial countries be phased out altogether by 1996, and restricting the use of several other ozone-depleting chemicals. It gave developing countries a 10-year grace period. By 1996, the accord had been ratified by more than 150 nations.

The Race for Substitutes

In the early days of the ozone negotiations, the handful of large chemical companies that produced CFCs, including DuPont, AtoChem, and ICI, had resisted any moves for binding actions. However, as demands for action grew more forceful the companies began gradually to change course. Believing that regulation was inevitable, and sniffing profits from substitute chemicals, the industry - first in the United States but ultimately in other countries as well - decided to support the accord.

The chemical industry decided to stake its bets on the HFCs (used as coolants) and HCFCs (used to make insulating foam). DuPont, for one, invested half a billion dollars in these new chemicals, expecting that the payback period would likely be 10 years or more. To some extent, governments encouraged such investments, knowing that the availability of substitutes was a necessary precondition for phasing out CFCs. Yet these substitute chemicals had some important liabilities of their own. The HCFCs, while less damaging than what they replaced, are still ozone-depleting. And both HCFCs and HFCs are greenhouse gases, meaning that they contribute to yet another pressing global threat - that of climate change. For this reason, both types of chemicals were generally viewed as interim rather than permanent solutions to the problem, which could buy time for the development of fully benign replacements.

In 1990, treaty members gathered in London with an eye toward strengthening the accord in the face of evidence that depletion was proceeding far more rapidly than had originally been predicted. One of the questions...