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This policy brief by the Climate Policy Initiative analyzes the air conditioning (AC) sector in Brazil, specifically the impact of the Manaus Free Trade Zone (ZFM) industrial policy. It finds that despite significant tax incentives, the sector has experienced declines in productive and energy efficiency between 2003 and 2015, lagging behind international peers and the broader Brazilian manufacturing industry. The authors argue that the Basic Production Process (PPB) requirements create distortions and hinder the adoption of efficient technologies, such as inverter compressors, and recommend aligning industrial policy with energy efficiency standards.

This report by the Climate Policy Initiative (CPI) and PUC-Rio analyzes whether the tax exemptions provided by the Manaus Free Trade Zone (ZFM) have improved the productive and energy efficiency of industries in the region compared to the rest of Brazil between 2003 and 2015. The study concludes that despite significant fiscal incentives, there is no evidence of efficiency gains at either the aggregate or sectoral levels.