Zone in sharp decline of efficiency
A study by CPI/PUC-Rio indicates that the model of the Manaus Free Trade Zone is an obstacle to the growth of energy efficiency in air conditioning devices
The air conditioners produced in Brazil have low energy efficiency when compared to international standards, with little improvement in recent years. As a comparison, national average efficiency increased 10.2% in 8 years, between 2010 and 2019, while in India the rise was 29% in 6 years (2011 to 2017) and in Vietnam 30.8% in 5 years (2013 to 2018). A study by EPE (Energy Research Company) shows how this makes a difference: if minimum and more rigorous indices of efficiency were implemented, the sector would avoid the emission of 6.3 Mt CO2 of greenhouse gases by 2035, which is the equivalent avoided consumption of 14.5 TWh – and a saving of around R$ 8 billion.
In order to evaluate the production of air conditioners in Brazil specifically considering the production efficiency and the energy efficiency, researchers from the Climate Policy Initiative/Pontifical Catholic University of Rio de Janeiro (CPI/PUC-Rio) developed a study with support from iCS in the which they observed that the efficiency levels of the air conditioning industry deteriorated between 2003-2015.
The conclusion? The industrial policy that affects the sector is the Manaus Free Trade Zone (ZFM), which is a policy of tax incentives in an area of the state of Amazonas that creates distortions and results in a final product with a low level of energy efficiency and low production efficiency. Furthermore, it stifles competition in the production stages. In other words, it is one of the least efficient industries of the ZFM.
The recommendations of the study are:
· The Basic Production Process (BPP) needs to be simple, clear and well defined. The BPP directly affects the production costs in the ZFM because it must be complied with in order to receive the tax incentives.
· The industrial policy and the energy policy need to be aligned for the advancement and the development of the air-conditioning sector in Brazil. The BPP requirements need to be adjusted with the labeling policy and the minimum standards of energy efficiency for air conditioning devices.
· The current industrial policy needs to be improved to encompass the entire production process, improving the mechanisms that directly influence the efficiency of the sector and the produced equipment and to promote a competitive environment.