Editorial-26/04/2026
Incremental change: On Corporate Average Fuel Efficiency-III
Introduction
India’s transport sector is a major contributor to greenhouse gas emissions, accounting for nearly 14% of total emissions. To address climate commitments under the Paris Agreement, India has adopted fuel efficiency standards for vehicles known as Corporate Average Fuel Efficiency (CAFE) norms. The upcoming CAFE-III phase signals a gradual tightening of emission standards but has sparked debate over whether the pace of change is sufficient.
What are CAFE Norms?
CAFE norms regulate the average fuel consumption (or CO₂ emissions) of a manufacturer’s fleet of vehicles.
- Introduced in India based on global best practices
- Implemented by the Bureau of Energy Efficiency under the Ministry of Power
- Measured in grams of CO₂ per km
Phases in India
- CAFE-I (2017–2022): Initial moderate targets
- CAFE-II (2022–2027): Stricter emission limits
- CAFE-III (proposed ~2027 onwards): Further tightening, currently under discussion
Key Features of CAFE-III (Proposed)
- Tighter Emission Targets
- Expected reduction in CO₂ emissions per km
- Push toward cleaner technologies
- Flexibility for Automakers
- Credits for electric vehicles (EVs)
- Super-credits for low-emission vehicles
- Gradual (Incremental) Approach
- Instead of drastic cuts, India is opting for phased tightening
- Balances environmental goals with industry readiness
Rationale Behind Incrementalism
1. Economic Considerations
- Indian automobile sector contributes ~7% to GDP
- Sudden stringent norms could increase vehicle costs
- Protects jobs and manufacturing competitiveness
2. Technological Constraints
- EV ecosystem (charging infrastructure, battery supply) still developing
- Dependence on imports (e.g., lithium)
3. Consumer Sensitivity
- Price-sensitive market like India
- Rapid cost escalation may reduce vehicle demand
Concerns and Criticism
1. Insufficient Climate Ambition
- Incremental changes may delay emissions reduction
- Could undermine India’s long-term net-zero (2070) target
2. Global Comparison
- EU and other advanced economies are moving faster toward electrification
- India risks technological lag
3. Loopholes in Credits
- Over-reliance on EV credits may allow continued sale of inefficient ICE vehicles
Link with Broader Policies
CAFE-III must be seen alongside:
- FAME Scheme – incentivizing EV adoption
- National Electric Mobility Mission Plan – long-term EV roadmap
- Production Linked Incentive Scheme – boosting domestic manufacturing
Way Forward
1. Gradual but Firm Targets
- Maintain incremental approach but ensure clear long-term trajectory
2. Strengthen EV Ecosystem
- Expand charging infrastructure
- Promote battery recycling and localization
3. Policy Convergence
- Align CAFE norms with emission standards (BS-VI, etc.)
4. Encourage Innovation
- Incentivize hybrid technologies and alternative fuels (hydrogen, biofuels)
5. Transparency and Monitoring
- Strict compliance and penalty mechanisms
Conclusion
The proposed CAFE-III norms reflect a cautious and pragmatic approach—balancing environmental responsibility with economic realities. However, incremental change must not become an excuse for inaction. India needs a calibrated yet forward-looking strategy that accelerates the transition to clean mobility while safeguarding industrial growth.
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