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issue: January 2007 APPLIANCE Magazine

Air-Conditioning and Refrigeration Institute
2007: ARI Looks Ahead

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by William G. Sutton, president, Air-Conditioning & Refrigeration Institute (ARI)

2006 was a year of challenge for our industry.  Shortly after the year began—on January 23, to be exact—the new federal minimum efficiency standard of 13 SEER went into effect for residential central air-conditioners and heat pumps. 

While our members had been preparing for the changeover for many months, we predicted that the implementation of the new rule would affect our overall shipment figures, and we were correct.  After 5 years of record shipments, our combined residential AC and heat pump shipments were down about 10 percent in 2006.
While few in the industry expect any type of continued downward trend, there are ongoing, significant challenges facing our industry in the areas of energy supply and demand; federal, state, and international regulation; career and technical education; and environmental stewardship.  While I certainly don’t claim to possess any type of crystal ball, I can discuss these challenges and ways we will meet them in 2007.
Our industry is also well positioned for growth, however, particularly overseas, and I’ll discuss that a bit, as well.
The 2007 elections resulted in both Houses of Congress and several state houses and state legislatures changing political hands, presenting us with perhaps our biggest challenge—and our biggest opportunity—for 2007.  In past years, we’ve spent a great deal of time and money working with legislators and government agency officials in Washington and in the states, primarily about regulatory issues of concern to the industry.  The election results would seem to indicate that our task will be more difficult with party control changes, but that would be a simplistic view, particularly for the next 2 years.
A close analysis of the election reveals that many of the new Democratic members of the House of Representatives are a bit more conservative than their party as a whole.  And the slim margin of majority in both Houses, but particularly in the Senate where Democrats hold a one-seat edge, will make it all but impossible for any legislation outside the mainstream to pass.  With control of Congress moving to the other party, we can also expect President Bush to exercise his veto a bit more (in his first 6 years, with his own party in control, he vetoed only one bill).  In short, while many bills that might adversely affect our industry are likely to be introduced at the federal level—and we will closely follow them and try to make them more to our liking—it is unlikely that major regulatory changes will occur over the next 2 years.
Though minimal federal action might seem like a good thing for the industry—and in most cases it is—on issues like global warming in particular, lack of a comprehensive federal policy creates a vacuum that certain states are eager to fill.  Led by California, which passed comprehensive emission-reduction legislation last year, several states can be expected to try to pass similar legislation in the coming years.  Often, such legislation places in jeopardy our continued ability to use hydrofluorocarbon-based refrigerants because of their greenhouse gas potential.  ARI and its allies will closely monitor any introduced legislation on the federal and state levels, and will work to ensure continued use of HFC-based refrigerants, which are vital to many of our members.  At the same time, we will continue to work with our members to implement our initiative on Responsible Refrigerant Use to minimize environmental releases of HFC-based refrigerants.
Regulatory initiatives overseas will continue to occupy our time and test our lobbying clout and ingenuity in 2007.  While we were successful in forestalling any HFC bans in Europe for the next several years, other environmental initiatives on that continent and in other places around the globe will challenge our ability to tell our positive environmental story and explain our strong environmental track record.
The energy efficiency initiatives the industry is undertaking are necessitated by continued high worldwide demand for energy.  Increased demand, particularly by developing nations such as China and India, has placed a strain on world supply and has resulted in sharply higher prices.  The resulting squeeze has caused higher costs for manufacturers, while decreasing the economic security of our customer base.
While gasoline prices have moderated somewhat in recent months, prices for natural gas, coal and even nuclear power continue to be high, which can be expected for the foreseeable future.
While tight energy supplies cause economic uncertainty for manufacturers here in America, the cause of them presents opportunities abroad.  Simply put, the reason energy demand is up in developing nations is because they are growing economically.  High economic growth translates to a greater demand for manufactured goods.  That is good news for our industry, and we are, as I stated earlier, poised for strong growth abroad because of it.
Finally, our products can be as energy efficient and as high quality as any in the world (and in most cases, they are), but if we do not have an educated, technically skilled workforce to manufacture and install them, we will not continue to be successful.  In 2007, ARI will continue its dynamic partnerships with other industry organizations such as North American Technician Excellence (NATE), The Air Conditioning Contractors of America (ACCA), and others to promote career and technical education across the country.
The continuum of educational excellence embodied by the the Rees Scholarship Foundation, the Partnership for Air-conditioning, Heating, and Refrigeration Accreditation (PAHRA), Industry Competency Exams (ICE), and NATE will continue to guide our programs and activities.
The coming year will be a strong one for our industry.  As we continue the incredible pace of innovation that has resulted in product energy efficiency increases of more than 50 percent over the past decade, as we continue to expand our opportunities overseas, and as we continue to attract the best and brightest to install our products here at home, we can look toward 2007 and beyond with hope and confidence.


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