Cooling Down Costs: Updated Energy Labels Save Brazilians Money

Summary: In 2021, Brazil updated its labeling policy for refrigerators – a near-universal appliance in the country – for the first time in over 15 years. After overcoming barriers posed by industry interests, the government approved a revised label that will bolster overall refrigerator efficiency in Brazil and protect consumers from high energy bills.

Context: The Brazilian National Institute of Metrology, Standardization, and Industrial Quality (Inmetro), responsible for the Brazilian Labeling Program, had last revised the Brazilian National Energy Conservation Label (ENCE in Portuguese) requirements for refrigerators in 2005.  Previous attempts to revise the policy had failed due to industry resistance to a more ambitious policy, particularly because a rapid revision would lead to their products losing a tax incentive and affect their marketing strategies. As a result, nearly all refrigerators in Brazil were labeled as “A” class, even though most of these refrigerators would not meet minimum energy performance standards (MEPS) in other countries.

This created a problem for Brazilian households, 98% of whom own a refrigerator. Consumers had no clear way to identify efficient products and often bought outdated, inefficient refrigerators. Low-income households, in particular, struggled with high electricity bills associated with inefficient refrigerators; in a 2022 CLASP study of energy justice in favelas in Rio de Janeiro, respondents’ average electricity bill amounted to 10% of respondents’ median household income, with more than two-thirds of respondents saying that they would spend any savings from reduced electricity bills on food.¹

Solution: In 2020, Inmetro, the Ministry of Mines and Energy (MME), the National Electricity Conservation Program (Procel), manufacturers, CLASP, and the Kigali Network of NGOs created a task force to work on updating the ENCE for refrigerators. This collaboration offers a roadmap for other governments that face significant industry pushback in vital efficiency policy processes and demonstrates how crucial cross-stakeholder flexibility and compromise are in achieving efficiency policy goals.

• The task force agreed to aim for an alignment with the United for Efficiency (U4E) model regulation and identified some key barriers including: the need for an updated test method, the need for manufacturers to invest in production line upgrades, and the potential adverse impacts from refrigerators losing the tax incentive for “A” class products in the short term. The U4E regulation represents an ambitious, simplified, and properly updated regulation that had already been validated by major international manufacturers.
• After extensive consultations and debates, Inmetro decided to adopt an updated ENCE policy in three phases.
  • 2022: Inmetro maintains the existing test method and “A” class level but adds categories up to “A+++” to differentiate more efficient products.
  • 2026: Inmetro changes the test method and returns to the A-G scale, based on the U4E model regulation but with some additional allowances.
  • 2031: Inmetro aligns almost completely with the U4E model regulation.

Impact

The revised ENCE is already bringing significant changes to the market as well as savings for Brazilian consumers.

• By 2023, the median annual energy consumption of refrigerators available on the Brazilian market had dropped approximately 10% compared to 2020.
• Consumers are now able to identify more efficient products and reap the corresponding electricity bill savings. Even just choosing an “A+” rated product over a simple “A” rated product saves consumers an average of R$137 (USD $28) over the lifetime of the product.

The second phase of the ENCE revision will bring even greater benefits.

• A consumer buying an “A” class refrigerator in 2026 will save, on average, R$1390 (USD $280) over the lifetime of the product, compared to buying the typical product available in 2020.
• By 2030, the revised policy is expected to result in a total national energy savings of 18.5 TWh through 2030, reducing consumers’ electricity bills by R$18.4 billion and reducing CO₂ emissions by 9.7 MT.

The ENCE revision, which is required ahead of any other policymaking measures, also cleared the way for the other outdated policies to be revised. With the updates to the label scale and the test method, MME was able to begin a process to revise MEPS; the current MEPS proposal would bring an average cost savings of R$822 for consumers and reduce CO₂ emissions by 4.5 Mt.

Procel is also revising their endorsement seal, used by electricity distribution utilities to identify products for their replacement programs. Replacement programs typically focus on low-income consumers, so an updated Procel seal will help ensure that they receive high efficiency fridges, reducing their electricity bills and leaving more of household budgets for essential items, such as food.

Lessons Learned

The experience of revising the refrigerator label brought some key lessons, both for policymakers and implementing agencies:

• Collaboration is key. The task force that was created to update the ENCE for refrigerators included a diverse group of stakeholders, including Inmetro, the Ministry of Mines and Energy, the National Electricity Conservation Program, manufacturers, and technical NGOs like CLASP. This collaborative approach allowed for a more comprehensive and balanced solution that considered the needs and concerns of all parties involved.
• Flexibility and compromise are critical. Adding label categories beyond “A”, such as “A+++”, is generally not considered best practice and does not have as much of an impact as a full revision to the A-G scale. However, in this case, being flexible and implementing a ‘second-best’ solution was essential to overcoming industry resistance related to the tax incentives for “A” class products, as the additional categories would not affect the tax incentives and allowed for an update to the label in the near term.
• A phased approach can be effective. In Brazil’s case, adopting the policy in phases gave manufacturers visibility on what the labeling policy would be for the coming decade, allowing them to plan investments in upgrading their production lines to achieve the new label levels. Giving manufactures greater regulatory certainty, can help minimize resistance from manufacturers and ensure a smoother transition towards more energy-efficient products.
• Avoid energy efficiency policies that can become barriers to improving efficiency. In this case, the tax incentives for “A” class products became a barrier to revising the ENCE and improving refrigerator efficiency, even though the tax incentives were intended to push the market towards more efficient technologies. Such a situation was avoided by making such incentives contingent on continued revisions to labeling policies, or by requiring that they only apply to the most efficient products available on the market. This helped ensure the policies remain relevant and encourages manufacturers to continually improve the energy efficiency of their products.