Corporate Average Fuel Economy (CAFE)-III Framework |ForumIAS

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News: The government notified the final CAFE-III norms on September 29, which will apply to passenger vehicles from April 2027.

About Corporate Average Fuel Economy (CAFE)-III Framework

CAFE-III is a fleet-wide fuel-efficiency framework for passenger vehicles.
- It requires manufacturers to keep the average fuel consumption of eligible vehicles within prescribed limits.
Aim: It aims to improve fuel efficiency and reduce CO₂ emissions, while promoting cleaner technologies and alternative fuels.
Notified by: It was notified by the Ministry of Power.
Organisation Involved:
- Bureau of Energy Efficiency (BEE): It maintains the manufacturer passbook, receives compliance data and allows credit buyout.
- Ministry of Road Transport and Highways (MoRTH): It will enforce testing, calculation, reporting and certification-related provisions.
Origin: CAFE norms were first notified in 2017 under the Energy Conservation Act, 2001.
- CAFE-III was first proposed in 2024.
Applicability: CAFE-III applies to M1 category passenger vehicles manufactured or imported for sale in India.
- It covers petrol, diesel, LPG, CNG, hybrid, and electric passenger vehicles with a gross weight under 3,500 kg.
Different Phases of CAFE Norms:

Phase	Duration	Key Feature
CAFE-I	2017–18 to 2021–22	The first phase introduced fleet-level fuel-efficiency standards with a CO₂ limit of 130 g/km.
CAFE-II	2022–23 to 2026–27	The second phase tightened the standard to a CO₂ limit of 113 g/km.
CAFE-III	2027–28 to 2031–32	The third phase introduces weight-based fuel-consumption targets, credit trading, cleaner-vehicle benefits and technology credits.

Key Features of CAFE-III
- Progressive targets: Annual fuel-consumption targets become stricter and decline progressively between FY 2027-28 and FY 2031-32.
- Credit and debit system: Manufacturers earn credits when actual consumption is below the target and accumulate debits when it exceeds the target.
- Credit trading: Manufacturers can pool or trade credits with other manufacturers or buy them from the Bureau of Energy Efficiency (BEE) to offset deficits.
- Cleaner vehicles: Battery Electric Vehicles (BEVs) and Range-Extended Electric Vehicles (REEVs) receive a 3.0 volume factor, meaning each such vehicle is counted as three vehicles for the fleet calculation.
- Alternative fuels: Carbon Neutrality Factors (CNFs) provide a benefit by discounting declared tailpipe CO₂ emissions.
- Technology credits: Manufacturers can claim 1 g CO₂/km for each specified fuel-saving technology, subject to an overall limit of 9 g CO₂/km.
- Small manufacturers: Manufacturers with fewer than 1,000 eligible vehicles are exempt from the specific CAFE target but must still report their fuel consumption.

Bharat Stage (BS) emission standards regulate the output of air pollutants from internal combustion and spark-ignition engines, including motor vehicles.
Established by: These standards are established by the Central Pollution Control Board (CPCB) under the Ministry of Environment and Climate Change.
Based on: The BS regulations are based on European emission standards.
Key Difference between CAFE and BS-VI: CAFE primarily targets CO₂ emissions, while BS-VI addresses overall emissions, including Nitrogen Oxides (NOx) and Sulphur Oxides (SOx).