Effects of off-cycle credits on passenger vehicle efficiency in Brazil

In October 2012, Brazil’s Ministry of Development, Industry and Foreign Trade (MDIC) approved a policy to foster vehicle technology innovation and industrial competitiveness. Inovar-Auto provides fiscal incentives to automakers that invest in national vehicle manufacturing, and produce safer and more efficient vehicles utilizing advanced technologies. Off-cycle credits can be awarded for the use of technologies or designs that increase efficiency and reduce fuel consumption in the real world, but whose benefits are not captured via the standard testing procedure.

Although off-cycle credits can have technical merit and result in real-world energy savings if well implemented, inappropriate credits can weaken the stringency of vehicle energy consumption targets. Therefore, Brazil should reject proposals to amend Inovar-Auto to include credits for gear-shift indicators, tire-pressure monitoring systems, and ethanol and flex-fuel engines, which will undermine the standard and do little or nothing to improve the overall energy efficiency of the country’s new-vehicle fleet.