Corporate Average Fuel Efficiency (CAFE-III) Norms

Context

Recently, the Ministry of Power, through the Bureau of Energy Efficiency (BEE), finalized the draft for the third phase of fuel efficiency standards, known as CAFE-III norms, which are set to take effect from April 1, 2027. This move comes as the government seeks to balance India’s ambitious “Net Zero 2070” goals with the practical challenges faced by the domestic automobile industry, particularly regarding the revival of the small car segment and the transition to electric mobility.

1. What are CAFE Norms?

CAFE stands for Corporate Average Fuel Efficiency. These are regulations aimed at lowering the fuel consumption (and thus CO₂ emissions) of a manufacturer’s entire fleet of vehicles rather than focusing on a single model.

• Mechanism: It is a “sales-weighted average.” A manufacturer can sell high-emission vehicles (like heavy SUVs) as long as they balance them by selling enough low-emission vehicles (like EVs or Hybrids) to keep the average within the prescribed limit.
• Legal Basis: These norms are notified by the Ministry of Power under the Energy Conservation Act, 2001.
• Applicability: They apply to passenger vehicles weighing less than 3,500 kg, including petrol, diesel, CNG, LPG, hybrids, and electric vehicles.

2. Key Features of CAFE-III (2027–2032)

The CAFE-III phase introduces several strategic shifts compared to its predecessors:

• Stricter Emission Targets: The fleet-wide CO₂ emission target is proposed to be reduced significantly. While CAFE-II (2022-2027) set a limit of 113 g/km, CAFE-III aims for approximately 91.7 g/km.
• The “Super Credit” System: To incentivize green technology, manufacturers earn “super credits” for selling EVs and hybrids. In the calculation of the fleet average:
  • Electric Vehicles (EVs): Counted as 3 units.
  • Plug-in Hybrids: Counted as 2.5 units.
  • Strong Hybrids: Counted as 2 units.
• Incentives for Small Cars: To revive the declining small car market, a relaxation of up to 9 g/km of CO₂ is provided for compact cars (under 4m length, <1200cc engine, and <909 kg weight).
• Emissions Pooling: Up to three automakers can form a “pool” to meet targets jointly. This allows a company lagging in EV tech to partner with an EV-only manufacturer to avoid penalties.
• Block Period Compliance: Unlike the annual assessment in CAFE-II, CAFE-III proposes a 3-year block period (followed by a 2-year phase), allowing manufacturers more flexibility to time their new model launches.

3. CAFE Norms vs. Bharat Stage (BS) Norms

Q. With reference to the Corporate Average Fuel Efficiency (CAFE) norms in India, consider the following statements:
1. These norms are notified by the Ministry of Environment, Forest and Climate Change (MoEFCC) under the Environment Protection Act, 1986.
2. Under the CAFE-III norms, a "Super Credit" system exists where a single Electric Vehicle sold is counted as three units for the purpose of fleet average calculation.
3. CAFE norms focus on the reduction of individual vehicle pollutants like Nitrogen Oxides (NOx) and Particulate Matter (PM).

Which of the statements given above is/are correct?
A) 1 and 2 only
B) 2 only
C) 2 and 3 only
D) 1, 2 and 3

Solution: B
STATEMENT 1 INCORRECT: CAFE norms are notified by the Ministry of Power under the Energy Conservation Act, 2001, not the MoEFCC.
STATEMENT 2 CORRECT: The draft CAFE-III norms provide a multiplier (Super Credit) of 3 for Battery Electric Vehicles to encourage their adoption.
STATEMENT 3 INCORRECT: CAFE norms focus on $CO_2$ emissions and fuel efficiency of the entire fleet. The reduction of individual pollutants like NOx and PM is the primary objective of Bharat Stage (BS) norms.