Cost-benefit analysis of Brazil's heavy-duty emission standards (P-8)
Left in the dust: Brazil might be the last major automotive market to adopt Euro VI standards
Brazil might be the last major automotive market without Euro VI-equivalent standards in place for heavy-duty trucks and buses. Emissions from new vehicles are controlled through regulatory standards that demand stricter pollutant limits over time, and Euro VI standards are the cleanest to date. All major automotive markets – United States, Canada, Europe, Japan, India, South Korea, Turkey, and Mexico – have already adopted Euro VI standards, and China has proposed standards starting in 2020 (see table). Some cities in Latin America, including Santiago and Bogotá, have also announced their commitment to Euro VI-equivalent urban buses, and more cities are likely to follow. Today almost 40% of new heavy-duty vehicles already meet Euro VI standards and this share will increase to over 65% by 2021 when standards are implemented in China, India and Mexico (assuming the relative sales contribution of each country remains the same).
|Region||2015 HDV Sales (%)||Euro VI Implementation|
|China *||20.2||2020 (proposed)|
|United States and Canada||15.8||2007 (PM) and 2010 (NOx)|
|Japan||8.2||2010 (PM) and 2016 (NOx)|
Euro VI standards are one of the most important policy tools available to Brazil to combat pollution and protect public health. First, most large cities in Brazil do not comply with the air quality guidelines recommended by the World Health Organization, and Euro VI standards would greatly contribute towards lower air pollution. Second, trucks and buses are an effective target for emissions control as they represent less than 5% of the on-road Brazilian fleet, but they are responsible for about 90% of pollutants (particulates and NOx) that worsen urban air quality and negatively impact human health. Third, by moving to the Euro VI standard, with the most stringent emission limits to date, from the P-7 standard currently in place in Brazil, particulates and NOx emission rates will be reduced by almost 90%. Finally, Euro VI standards are much more effective in reducing real-world emissions, and would resolve Brazil’s issues with ARLA-32 non-compliance if well implemented.
Brazil has already taken the first regulatory steps towards a Euro VI-equivalent standard, with its proposed P-8 standard. In February 2017, CETESB, São Paulo’s Environmental Agency, announced new phases for Brazil’s vehicle emission standards, starting with heavy-duty vehicles in 2019. Later in 2017, IBAMA, the agency under Brazil’s Ministry of Environment responsible for regulating vehicle emissions, issued a proposal for public comments with a planned implementation date of 2023, a 4-year delay from the original announcement. The next steps are unclear, but we expect a revised proposal to be discussed at CONAMA, a forum coordinated by the Ministry of Environment to establish environmental regulations.
This 4-year delay from the original timeline to implement P-8 standards could result in additional 10,000 premature deaths. The delay is also unnecessary since Brazil has already laid the foundation for Euro VI-equivalent standards, including access to 10ppm diesel and ARLA-32.
Euro VI-equivalent standards are one of the most cost effective public policies Brazil could adopt to address air pollution and will lead to substantial societal benefits. Technology costs of advanced emission controls would increase by less than 2%, but the economic benefits from fewer premature deaths would outweigh those costs by a ratio of 11 to 1. Specifically, Euro VI-equivalent standards in Brazil would prevent ~74,000 deaths and generate a net economic benefit of $67 billion over 30 years.
If all top vehicle markets have already moved towards Euro VI standards, Brazil has already laid the foundation for its implementation, and the standards are cost effective for society, why is Brazil delaying their adoption? The Brazilian auto industry is behind the delay, arguing that local costs to comply are much higher than elsewhere in the world and that they need additional time to comply. However, major automakers already produce Euro VI-equivalent vehicles for the United States, Europe, Japan, South Korea, and Turkey, which represent almost 40% of worldwide HDV sales. Some Brazilian auto makers are even producing Euro VI vehicles for export, including to Chile. It seems that automakers want Brazil to be the last producer of old technology to serve those markets that do not yet require Euro VI engines. And Brazilian lungs are paying the price in the meantime.
Local policies in Brazil, however, are taking the lead in implementing Euro VI standards, despite delays on a national level. São Paulo will need Euro VI technology to meet pollution targets for their urban clean buses established by their own local Climate Law. Indeed, our calculations illustrated in the chart below indicate that PM and NOx targets for São Paulo’s buses will only be met if Euro VI is implemented in 2019. Even if there are delays in the national implementation of Euro VI, automakers should have ability and flexibility to deliver Euro VI vehicles earlier to attend São Paulo’s goals.
Eventually all buses in São Paulo will need to be all-electric or moved by low-carbon fuels to meet the Climate Law’s CO2 targets. Our calculations indicate that all-electric buses are already more cost effective than current diesel technology, and costs are likely to go down as production volumes increase. However, those technologies face some initial hurdles before they can be implemented on a larger scale, namely stronger national production capacity, charging infrastructure, and more transparent business models for bus financing and operations.
Until electric bus technology matures, Euro VI can be an interim milestone before the eventual transition to zero emission buses. A recent study estimated that emissions from urban buses in São Paulo alone could result in 180,000 premature deaths through 2050 if buses do not become cleaner. Euro VI is certainly the quickest and most cost-effective way to offset these health impacts. If Brazilian regulators don’t want extra dust in their citizen’s lungs, they would do well to approve and implement Euro VI/P-8 standards immediately.
* UPDATE: Since the original publication of this article, China has approved Euro VI-equivalent standards with full implementation by 2021, when 85% of new HDVs sold worldwide will meet Euro VI standards.