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This policy brief by the Climate Policy Initiative analyzes the air conditioning (AC) sector in Brazil, focusing on the impact of the Zona Franca de Manaus (ZFM) industrial policy. It argues that current tax incentives and the Basic Productive Process (PPB) requirements hinder energy and productive efficiency, leading to products with outdated technology and a deterioration in production indicators between 2003 and 2015.

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.