The manufacturer economics and national benefits of cooling efficiency for air conditioners in Brazil
The revision of Brazil’s minimum energy performance standards (MEPS) for air conditioners (ACs) – which are currently set to a modest level compared with international standards – represents a major energy-saving opportunity. We analyze the technical requirements, manufacturer economics, and broader benefits of strengthening Brazil’s MEPS policies. First, we develop a cost-versus-efficiency curve based on more than 300 configurations of mini-split ACs rated at 1.0 refrigeration ton (3.5 kW). We use this curve and economic modeling to estimate the manufacturer costs and industry net present value (INPV) of higher MEPS levels. The change in INPV is highly positive and increasing for higher-efficiency variable-speed ACs, indicating that manufacturers will benefit most by switching their production to the variable-speed (inverter) technology. Achieving more modest efficiency levels require similar investments, which manufacturers do not recover through future revenues. Higher MEPS also provide larger consumer and national benefits. At the highest level analyzed (i.e., at the estimated technical potential), Brazilian consumers save R$27 billion through 2035, and the power sector avoids 4.5 GW of demand (worth an additional R$30 billion) – representing R$400 in consumer/national benefits for every R$1 invested in manufacturing high-efficiency ACs. In addition, higher MEPS result in substantial national CO2 reductions, which could be increased further by simultaneously and cost-effectively transitioning to refrigerants with low global warming potential (GWP) in accordance with the goals of the Kigali Amendment to the Montreal Protocol; our manufacturing analysis is applicable to ACs that use low-GWP refrigerants. Although we focus on MEPS, our analysis can also inform the design of complementary policies that promote high-efficiency ACs in Brazil. We offer several policy recommendations based on our findings.