Draft CAFE-III Norms 2027–2032: Fuel Efficiency, CO₂ Targets and Key Features

Subject: GS 3: Environment

Context: Recently, the Ministry of Power has released the Draft Corporate Average Fuel Economy (CAFE-III) Norms for 2027–2032, proposing stricter fuel efficiency and carbon emission standards for passenger vehicles. 

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Key Highlights of the Draft Corporate Average Fuel Economy (CAFE-III) Norms

• The Draft CAFE-III Norms aim to progressively improve fuel efficiency, reduce carbon dioxide (CO₂) emissions, and support India’s climate and energy conservation goals.
• Applicability: The norms will apply to M1 category passenger vehicles (vehicles with up to eight passenger seats besides the driver) manufactured or imported for sale in India during 2027–28 to 2031–32.
• Replacement of CAFE-II: The proposed norms will replace the existing CAFE-II norms, which are scheduled to expire on 31 March 2027.
• Progressive Tightening of Targets: The draft proposes reducing the corporate average fuel consumption target from 3.996 litres/100 km (94.76 gCO₂/km) in 2027–28 to 3.3273 litres/100 km (78.90 gCO₂/km) by 2031–32.
• Compliance Assessment: Compliance will be evaluated in two phases—an initial three-year block, followed by a two-year block, providing manufacturers with a predictable regulatory framework.
• Recognition of Low-Carbon Fuels: For the first time, the norms propose recognising the carbon neutrality of ethanol, biofuels and Compressed Biogas (CBG) by allowing specified reductions in declared tailpipe CO₂ emissions during compliance assessment.
• Carbon Neutrality Factor (CNF):
  • An 8% Carbon Neutrality Factor (CNF) has been proposed for the current level of ethanol blending.
  • For CBG and other biofuels, the reduction will depend on the prevailing actual blending level.
• Technology Incentives: Vehicle manufacturers will be eligible to claim up to 9 gCO₂/km as compliance benefits for approved fuel-saving technologies, subject to a maximum benefit of 1 gCO₂/km per technology.

About Corporate Average Fuel Economy (CAFE) Norms

• Corporate Average Fuel Economy (CAFE) norms prescribe the average fuel consumption and carbon dioxide (CO₂) emission limits that a vehicle manufacturer must achieve across its fleet of passenger vehicles sold in a financial year.
• Objective: To improve fuel efficiency, reduce dependence on fossil fuels, lower greenhouse gas emissions, enhance energy security, and help India meet its climate commitments.
• Implementation: The norms are implemented under the Energy Conservation Act, 2001 by the Bureau of Energy Efficiency (BEE) in consultation with the Ministry of Power.
• Compliance Principle: Compliance is assessed on the corporate fleet average of each manufacturer rather than on individual vehicle models, allowing flexibility in product design while ensuring overall emission reductions.
• Coverage: The norms currently apply to M1 category passenger vehicles, including cars with up to eight passenger seats in addition to the driver’s seat.
• CAFE norms in India began with CAFE-I (2017-2022) and CAFE-II (2022-2027); CAFE-III will be the third phase, indicating a progressively tightening regulatory trajectory consistent with India’s climate commitments 

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