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28 November 2018

COMMENTS AND RECOMMENDATIONS FOR MDIC’S DRAFT

RESOLUTION ESTABLISHING EFFICIENCY TARGETS FOR NEW
ON-ROAD HEAVY-DUTY VEHICLES

SUMMARY

The International Council on Clean Transportation (ICCT) appreciates the opportunity to submit
the following comments and recommendations on Brazil’s Ministry of Development, Industry
and Foreign Trade’s (MDIC, in its acronym in Portuguese) proposal to establish efficiency
targets for new on-road heavy-duty vehicles (HDVs). We welcome and commend MDIC’s
decision to, for the first time in Brazil, develop an implementation plan for HDV efficiency
targets. We also welcome the decision to do so by means of a computational vehicle simulation
tool, as the use of standardized component testing plus vehicle simulation is the current state-
of-the-art methodology for HDV efficiency certification.

However, it is neither technically necessary nor in the public interest to take 15 years before
mandatory fuel efficiency targets are applied for HDVs. Based on ICCT’s expertise on vehicle
technologies and regulatory development, we believe Brazil risks losing industrial
competitiveness should this proposal be approved. Brazil can capitalize on the experiences and
tools developed in other major markets to accelerate its proposed timeline and achieve
substantial fuel and cost savings for freight operators and consumers within the next 5 years.
We therefore recommend the following changes to this proposal. Subsequent sections include
further details for each recommendation.

1. The proposal should require efficiency targets, which it currently fails to do. The
proposal’s language is ambiguous and conditions the establishment of actual targets on
the results of a study that will be completed by the end of Phase 2 (2027). Thus, the
proposal in effect delays the decision to adopt targets until 2027. The proposal should
clearly specify that HDV efficiency targets will indeed be set independently of the results
of the study.

2. The proposal should include a faster timeline to implement HDV efficiency targets
to keep pace with other vehicle markets. The proposal includes a very lenient timeline
that would not mandate efficiency improvements for over 15 years from today, and
would make Brazil the last major vehicle market to introduce HDV efficiency standards.
Contrary to industry claims, Brazil does not need to start from scratch, as both the EU
and US have already developed standardized methodologies for component testing and
vehicle simulation. Adapting these standards to the Brazilian market should take
considerably less time than the proposed timeline. Section “Timeline for HDV efficiency
targets” includes ICCT’s recommended timeline.
 3. The proposal should include separate efficiency targets for HD engines, in parallel
to the adoption of full vehicle standards and with the aim of aligning with world-class
HDV efficiency standards. The development of separate HD engine efficiency targets
could be accomplished much faster by using existing engine type-approval data for
setting baseline efficiency and the current regulatory framework for vehicle emission
standards. Separate engine standards would guarantee substantial emission reductions
since about one-third of the projected fuel-efficiency gains from HDVs come from engine
improvements. Section “Heavy-duty engine efficiency targets” includes ICCT’s
recommended timeline.

4. The proposal should make testing and certification data publicly available to
inform purchase decisions by truck buyers and enable independent monitoring of
compliance. The proposal foresees the requirement established by Decree 9.557 of
2018 (item II of paragraph 2) with respect to mandatory vehicle efficiency labeling, to be
published from 2023 onwards. However, the proposal does not provide details about
public access to its data. We recommend that the proposal be explicit with respect to the
release of public information in electronic and accessible format, to support purchase
decisions, the development of studies and analyses of energy efficiency and GHG
emissions, and program conformity.

5. The Management Committee should also include representatives from non-

governmental organizations (NGOs) to represent civil society, in addition to
government, academy, and industry. This would make the decision-making process
more balanced and transparent.

1. TARGET REQUIREMENTS

The proposal should require efficiency targets, which it currently fails to do. The proposal’s
language is ambiguous and conditions the establishment of actual targets on the results of a
study that will be completed by the end of Phase 2 (2027). Thus, the proposal in effect delays
the decision to adopt targets to 2027. The proposal should include clear language that HDV
efficiency targets will indeed be set independently of the results of the study.

It is already well documented that vehicle efficiency targets drive industry competitiveness and
force fuel efficient technologies that would not be adopted in the absence of standards.1 In
Europe, for example, in the absence of standards the average fuel-efficiency of heavy-duty
trucks and buses has remained roughly unchanged for more than a decade (Figure 1), even as
average fuel consumption per kilometer in light-duty vehicles—which are subject to an efficiency
regulation—has fallen steadily.

1 Muncrief, R (2017): Shell game? Debating real-world fuel consumption trends for heavy-duty vehicles in Europe.
International Council on Clean Transportation. Available at https://www.theicct.org/blogs/staff/debating-EU-HDV-
real-world-fuel-consumption-trends

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Figure 1. HDV fuel consumption trends in Europe (2002-2016)

There are multiple existing fuel efficiency technologies with attractive payback periods that have
not yet gained sufficient market penetration in Brazil, which indicates there are prevailing market
barriers to technology adoption.2 This warrants the introduction of stringent efficiency standards
to increase the adoption of these technologies. Heavy-duty vehicle efficiency standards are the
single largest regulatory lever that policy makers can adopt to enhance the energy efficiency of
the on-road freight sector. Fuel efficiency standards not only deliver cost savings to freight/bus
operators and consumers that far outweigh the initial technology costs, but they also promote
research and development efforts, and increase competitiveness.3

2. TIMELINE FOR HDV EFFICIENCY TARGETS

The proposal should include a faster timeline to implement HDV efficiency targets to keep pace
with other vehicle markets. The proposal includes a very lenient timeline that would not see
mandated efficiency improvements for over 15 years and would make Brazil the last major
vehicle market to introduce HDV efficiency standards. Contrary to industry claims, Brazil does
not need to start from scratch, as both the US and the EU have already developed standardized

2 Rodriguez, F et al (2017). Market penetration of fuel efficiency technologies for heavy-duty vehicles in the European
Union, the United States, and China. International Council on Clean Transportation. Available at
https://www.theicct.org/publications/market-penetration-fuel-efficiency-technologies-heavy-duty-vehicles-european-
union
3 Muncrief, R (2016): A heavy-duty economic growth engine. International Council on Clean Transportation. Available
at https://www.theicct.org/blogs/staff/heavy-duty-economic-growth-engine

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methodologies for component testing and vehicle simulation. Adapting these standards to the
Brazilian market should take considerably less time than the suggested timeline. ICCT’s
recommended timeline includes:

1. Adopt procedures for testing and certification of engines, tires, and aerodynamic
components by the end of 2019.
2. Concurrently with step 1, shorten the time period for the evaluation, selection, and
adaptation of a simulation tool to completion by the end of 2020. More details are
provided in sub-section “Evaluation and adaptation of vehicle simulation tools”.
3. Concurrently with steps 1 and 2, test and certify the performance of engines, tires, and
aerodynamic components commencing in 2020 (voluntary) and 2021 (mandatory).
Further details are provided in sub-section “Vehicle certification”.
4. Use the simulation tool in step 2 and the component testing results in step 3 to
implement voluntary certification in 2021 and mandatory certification in 2022 for all new
vehicle sales and registrations. The certification methodology should include, at a
minimum, vehicle inputs for the three largest levers of heavy-duty efficiency: engine
efficiency, aerodynamic drag, and tires rolling resistance.
5. From 2021 to 2022, develop mandatory vehicle efficiency targets for vehicle model years
2025 through 2032. These targets should be aligned with the stringency of standards in
other major vehicle markets such as the United States (U.S.), European Union (EU), and
China, and in line with the objectives of the G20 Energy Efficiency Leading Programme4,
which was affirmed by the energy ministers of the G20 in June 2018.5
6. From 2025 to 2032, verify compliance with energy efficiency targets and apply penalties
for non-compliance.

Major markets such as Japan, China, U.S., and India have set long-term fuel consumption
targets for HDVs and the EU is very close to finalize their standards (Figure 2).

Japan established the first mandatory fuel-efficiency standards for HDVs in 2006, following a
“top-runner” approach in which the standards are based on the highest performing vehicles in
the market in the baseline year.6 Improvements were limited to engine modifications and
resulted in modest emissions reductions of 1.2% per year. A second stage, proposed in 2017,
incorporates additional technologies such as aerodynamics and tires. It targets 13% to 14%
reductions on average for trucks and buses but only 3.7% for tractors.

4 G20 (2016). G20 Energy Efficiency Leading Programme. Available at

https://ec.europa.eu/energy/sites/ener/files/documents/G20%20Energy%20Efficiency%20Leading%20Programme.
pdf
5 G20 (2018). Communiqué from G20 Meeting of Energy Ministers. Available at
https://g20.org/sites/default/files/media/energy_communique.pdf
6 Japan Ministry of Economy, Trade and Industry (2017). Top-runner HDV fuel-efficiency standards. Available at
http://www.meti.go.jp/report/whitepaper/data/20171212001.html

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China has issued three stages of progressively more stringent standards.7 The first stage, the
“Industry Standard,” was implemented in 2012 and covers three segments – tractors, straight
trucks, and coach buses. The second stage, the “National Standard,” went into effect in 2014. It
incorporated city buses and dump trucks and tightened the limits by an average of 10.5% to
14.5%, depending on vehicle category. The proposal for Stage 3 would tighten fuel-
consumption limits by an additional 12.5% to 15.9% and is scheduled to take effect in 2019.
China’s standards will reduce fuel consumption by up to 27% by 2019 from a 2012 baseline,
corresponding to annual improvements of over 4%.

The U.S. Phase 1 and Phase 2 GHG standards for HDVs are arguably the most comprehensive
standards yet as they incorporate a larger set of technologies, including separate standards for
engines and trailers.8 The highest fuel-consuming segment, tractor-trailers, will see reductions
from Phase 1 and Phase 2 of about 50% in 2027 from a 2010 baseline. The Phase 2 regulation
alone mandates efficiency improvements in long-haul tractor-trailers of between 23% and 27%
by 2027 (from a 2017 baseline), for an annual rate of improvement between 2.6% and 3.1%.

In 2017, India finalized its first fuel-efficiency standards for commercial HDVs.9 Phase 1 goes
into effect in 2018, and Phase 2, in 2021. The target reductions are about 11% on average.
Figure 5 shows the relative stringency of the different tractor-truck efficiency standards with
respect to the baseline defined when the standards were introduced.

In 2018, the European Commission released a regulatory proposal for setting CO2 emission
standards for new heavy-duty vehicles sold in the European Union.10 The proposed targets aim
to reduce the average CO2 emissions from new HDVs by 15% in 2025 and by 30% in 2030,
both relative to a 2019 baseline.

7 Delgado, O (2016). Stage 3 China fuel consumption standard for commercial heavy-duty vehicles. International
Council on Clean Transportation. Available at https://www.theicct.org/publications/stage-3-china-fuel-consumption-
standard-commercial-heavy-duty-vehicles
8 ICCT (2016). Final U.S. Phase 2 heavy-duty vehicle efficiency rule sets standards that are ambitious, far-sighted,
and achievable. Available at https://www.theicct.org/news/final-US-phase-2-HDV-efficiency-rule
9 Garg, M. et al (2017). Fuel consumption standards for heavy-duty vehicles in India. International Council on Clean
Transportation. Available at https://www.theicct.org/publications/fuel-consumption-stds-hdvs-india-update-201712
10 Rodriguez, F. (2018). The European Commission's proposed CO2 standards for heavy-duty vehicles. International
Council on Clean Transportation. Available at https://www.theicct.org/publications/european-commissions-
proposed-co2-standards-heavy-duty-vehicles

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CO2 reductions required by mandatory standards

0%
compared to baseline year (tractor trucks)

India
Japan
-10%
China EU

Proposed targets by
-20%
the European
Commission

-30% U.S. and

Canada (Tractor)

-40%

U.S. and Canada

(Tractor + Trailer)
-50%

-60%
2000 2005 2010 2015 2020 2025 2030 2035

Figure 2. Tractor-truck standards around the world

The two key determinants of fuel and CO2 savings from a mandatory performance standard are
the start date of the standard and the stringency (i.e., the annual efficiency improvement
required). Of the two, the start date is the most critical. Brazil cannot risk waiting almost 15
years to implement measures to reduce the fuel consumption of the fleet. As an illustrative
example, Figure 3 below shows cumulative CO2 savings in 2050 from EU heavy-duty vehicle
standards under a range of starting year and stringency scenarios, calculated using the
ICCT’s Transportation Roadmap Model. In order to match the benefits by 2050 of initiating
standards in 2015 that mandated an annual overall improvement in fuel efficiency of new heavy-
duty vehicles of 2%, a standard taking effect in 2020 would have to require double the rate of
improvement—4% per year. If Brazil were to put in place a standard today that mandated only
1% per year improvement, they would not be able to achieve an equivalent 2050 benefit if they
start 15 years from now – even at an annual improvement rate of 4% per year. For reference,
the current U.S. heavy-duty vehicle standards require approximately 2.5% per year efficiency
improvements when combining the targets of Phase 1 and Phase 2.11

11 Lutsey, N. et al (2015). U.S. efficiency and greenhouse gas emission regulations for MY 2018–2027 heavy-duty
vehicles, engines, and trailers. International Council on Clean Transportation. Available at
https://www.theicct.org/publications/us-efficiency-and-greenhouse-gas-emission-regulations-my-
2018%E2%80%932027-heavy-duty-vehicles

6
Figure 3. Cumulative HDV emissions reduction in 2050 based on different implementation
dates and annual improvement rates

Evaluation and adaptation of vehicle simulation tools

The proposal should shorten the time period set for the evaluation, selection, and adaptation of
a simulation tool to by the end of 2020. The proposal currently allows five years for the
evaluation and adaptation of vehicle simulation tools. The simulation models from the EU and
US can be adapted to the Brazilian market without major hurdles in a few months. Therefore,
MDIC should significantly shorten the time to evaluate and adapt international vehicle simulation
models.

The diversity of vehicle configurations in the heavy-duty sector and associated testing
challenges, requires a simulation-based approach to determine the CO2 emissions and fuel
consumption of HDVs. Internationally, the use of component testing and vehicle simulation for
the CO2 certification of HDVs is not a new approach; the U.S., Canada, China, and Japan use
vehicle simulation in some form for certification in their HDV CO2 standards.

VECTO and GEM, the selected vehicle simulation tools in Europe and U.S. respectively, show
general agreement when simulated over a large set of identical vehicles. The accurate
simulation of CO2 emissions of HDVs is more dependent on the component input data than on
the selected model. The development of component certification methodologies has been
finalized in the U.S. and the EU and can be directly applied in the Brazilian market.

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The required adaptation to VECTO or GEM to reflect the particularities of the Brazilian market
(e.g., market segmentation, duty cycles, payload, default component values, etc.) do not require
the modification of the physical models, but just minor adaptations in the user interface. This
can be accomplished in a few months.

Monitoring and reporting regulations in the EU would make data available as early as 2019.
European manufacturers, with a large presence in the Brazilian market will be already familiar
with component testing and use of vehicle simulation by then facilitating a faster timeline than
suggested.

Vehicle certification

The proposal should include voluntary certification of vehicles in 2021 and mandatory
certification in 2022 for all new vehicle sales and registrations. This timeline is consistent with
the requirements in Decree 9.557 of 2018 (item II of paragraph 2), which establishes mandatory
vehicle efficiency labeling from 2023 onwards. In its current version, the proposal includes a
very lenient timeline for setting a baseline definition. Once the standardized methodologies are
adapted to the Brazilian context and put into place, the data gathering necessary to define a
baseline should not take more than one year.

MDIC does not need to wait for P8 (Euro VI-equivalent) standards implementation in 2023
before determining the baseline because of consistent correlations between P7 (Euro V-
equivalent) and P8 test cycles. In addition, the required data for the P8 baseline definition will be
available from the monitored data in the European market. The monitoring and reporting
regulation in the EU will provide transparent information on the efficiency performance of Euro
VI engines and vehicles.

A regulatory baseline can be defined using technology penetration, registrations, and sales
data, combined with findings from literature review, consultation with experts, purchase of
component data from engineering service providers, and collaboration with the industry.

3. HEAVY-DUTY ENGINE EFFICIENCY TARGETS

The proposal should include separate efficiency targets for HD engines, in parallel to the
adoption of full vehicle standards and with the aim of aligning with world-class HDV efficiency
standards. The development of a separate HD engine efficiency standard could be
accomplished much faster by using the existing engine type-approval data for setting the
baseline and the current regulatory framework for vehicle emission standards. Separate engine
standards would guarantee substantial emission reductions since about one-third of the
projected fuel-efficiency gains from HDVs come from engine improvements. ICCT’s
recommended timeline includes:

• By mid-2019, collect, process and analyze CO2 engine certification data for P-7 engines,
thus establishing a baseline by mid-2019. These activities can be accomplished
immediately since data already exist. A preliminary analysis with partial data is included
in ICCT’s memo to MDIC dated 28 June 2017 (Annex 2).
• By the end of 2019, establish targets for Phase 1 HD engine efficiency, with
implementation between 2023 and 2027. Establish a robust mechanism for public data
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 provision to ensure transparency for target compliance. It is not necessary to wait for the
implementation of P-8 standards in 2023 to define Phase 1 targets, because there is a
strong correlation between P-7/P-8 test cycles, which can thus be easily converted.
• In 2022 and 2023, collect, process, and analyze CO2 engine certification data for P-8
engines, thus establishing a baseline for Phase 2 HD engine efficiency standards.
Establish targets for Phase 2 HD engine efficiency.
• From 2023 through 2027, verify compliance with Phase 1 HD engine efficiency targets
and apply penalties for non-compliance. Establish targets for Phase 3 HD engine
efficiency.
• From 2028 through 2032, verify compliance with Phase 2 HD engine efficiency targets
and apply penalties for non-compliance.

As communicated to MDIC through an ICCT memo dated 28 June 2017, there are a number of
benefits of instituting a separate engine standard in conjunction with a full vehicle standard.
These benefits outweigh the potential disadvantages and include:

• Establishing a link between NOx and CO2 emissions, therefore ensuring that future NOx
emissions targets under the P-8 standards are met without compromising the fuel
consumption and CO2 emissions of future engines.
• Engine efficiency improvements translate into CO2 benefits across a wide range of
vehicle duty cycles and payloads. In contrast to aerodynamic and rolling resistance
improvements, engine standards directly address the source of CO2 emissions.
• Acknowledging the diversity of applications in the HDV sector, a separate engine
standard enables the exemption from whole vehicle standards of certain vehicle classes
with special applications without foregoing measurable CO2 emissions improvements.
• Engine CO2 standards do not require a new test protocol to be developed, as the CO2 is
measured during the existing engine certification test.
• Engine standards specify direct, multiyear targets for engine efficiency improvements,
creating a secure environment for substantial, sustained, long-term investment in engine
efficiency technology R&D.

Technical supporting information is included in ICCT’s memo to MDIC dated 28 June 2017.

4. DATA AVAILABILITY AND TRANSPARENCY

The proposal should make testing and certification data publicly available to support informed
purchase decisions by truck buyers and enable independent monitoring of standard compliance.
The proposal currently does not require the release of public HDV efficiency and emissions
data. Although MDIC’s proposal requires the release of HDV energy efficiency beginning on 1
August 2023, the proposal should be explicit with respect to the release of information to the
public in electronic and accessible format.

Lack of consistent fuel efficiency information for truck buyers is a barrier to greater fleet
efficiency. The data collected should be made publicly available to guarantee transparency and
verifiability. This would positively influence the market as it would enable better informed
purchasing decisions to be made to ensure fuel savings and would foster competition among

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manufacturers. This would also allow for an effective implementation of potential standards by
reducing the risk of an increasing gap between certification and real-world emission values.

The Management Committee should also include representatives from non-governmental

organizations (NGOs) to represent civil society, in addition to government, academy, and
industry. This would make the decision-making process more balanced and transparent.

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