New CAFE 3 proposal seeks to relax emission norms for small Cars, promotes range extender hybrid

The Bureau of Energy Efficiency (BEE) has come out with a revised draft of the third iteration of Corporate Average Fuel Economy (CAFE) norms that proposes to make average CO2 emissions stringent from April 2027, but gives relief for sub-4 m petrol cars. The proposal seeks to incentivize electric vehicles and range-extender hybrid electric (REE) vehicles in the same way, while offering incentives for plug-in hybrid, strong hybrid, and flex-fuel vehicles.

CAFE norms, first introduced in 2017 under the Energy Conservation Act, 2001, form a key part of India’s strategy to reduce fossil fuel dependence and mitigate air pollution from road transport. These fuel efficiency regulations are issued by the BEE and specifically apply to M1 category vehicles, which include passenger cars designed to seat up to nine persons and weigh a maximum of 3,500 kg.

The first phase of the norms, implemented during 2017-18, capped the average fuel consumption at 5.5 litres/100 km and emissions at less than 130 gm/km. The second phase, which has been in force since, further tightened these limits to 4.78 litres/100 km for fuel consumption and less than 113 gm/km for emissions."

The initial draft of CAFE 3, published last year, proposed to reduce the average CO2 emission limit under CAFE 3 at WLTP (Worldwide Harmonized Light Vehicle Test Procedure) to 91.7 g CO2/Km from 113 g CO2/Km under the current CAFÉ 2 norms.

The newly revised draft proposal mandates a further reduction in the average emission limit over five years, beginning in 2027-28. Under this plan, the permissible fuel consumption per is reportedly expected to decrease progressively every year from 3.7 to 3.0 litres per 100 km, with emissions estimated to fall below the 91.7 g CO2/Km level proposed earlier.

Industry insiders estimate that under the new proposal, the average CO₂ emission limit will be significantly reduced, starting at 88.4 g CO₂/km in the first year when the fleet’s weighted average unladen mass is around 1,200 kg. This will be followed by a series of progressively tighter targets in the following years.

However, the new draft proposes that sub-4 m petrol vehicles can claim an additional reduction of 3.0 g CO₂/km in their manufacturer-declared CO₂ performance, with a cap on the total benefit at 9 g/km per model per year.

“Considering the limited potential for efficiency improvements in petrol vehicle models with an unladen mass up to 909 kg, engine capacity not exceeding 1200 cc and length not exceeding 4000 mm, said motor vehicle model ‘i’ shall be eligible to claim, in addition to certified technology-based savings, a further reduction of 3.0 g CO₂/km in its manufacturer-declared CO₂ performance (pi) for calculation of performance under CAFE 2027,” the draft said.

While the proposal grants relaxation in the emission limit for small cars, a senior executive for a major carmaker noted that there is a cap on the relaxation, and the policy's net effect seems to be more stringent overall emissions requirement for a manufacturer's fleet from their early observation. The shift to annual changes in emission limit targets, unlike earlier, could make both product planning and compliance procedures more difficult.

Clean tech push

CAFE norms compel carmakers to increase the overall fuel efficiency of their entire fleet of vehicles, not just individual models. Automakers' fuel emissions are measured by calculating the average grams of CO₂ emitted per kilometer across their entire fleet of vehicles. Rather than a per-car limit, these norms set a maximum for a manufacturer's sales-weighted average CO₂ emissions.

This system pushes companies to produce and sell a mix of vehicles that includes more fuel-efficient options, such as electric vehicles and hybrids, to offset the higher emissions from larger, less-efficient models. Essentially, the more gas-guzzling vehicles a company sells, the more fuel-sipping or zero-emission cars it needs to sell to meet its required fleet-wide average.

In a bid to promote the use of cleaner technology vehicles, the draft proposes a credit system that could help manufacturers to offset the impact of models with higher emissions by giving extra “weight” to electric, range extender hybrids, flex-fuel ethanol and strong hybrid vehicles. These credits are multipliers applied to vehicle types when calculating a manufacturer’s corporate average CO₂ performance.

As per the new draft, one battery electric vehicle and a range-extender hybrid electric vehicle will be counted as three vehicles in the fleet-average calculation. One plug-in hybrid electric vehicle or one strong hybrid electric vehicle (using flex-fuel ethanol) will be counted as 2.5 vehicles, while one strong hybrid will be counted as 2 vehicles and one flex-fuel ethanol will be counted as 1.5 vehicles.

A range extender in a vehicle is a small engine or generator used to recharge the battery or provide additional power when the battery runs low. Vehicles equipped with this technology run primarily on battery power and the small ICE or generator that kicks in only to recharge the battery when it gets low, not to directly power the wheels. However, in some architectures, vehicles with a range extender are designed in such a way that wheels can be driven by the motor as well as the engine.

The draft also introduces a new metric - Carbon Neutrality Factor (CNF) - which grants further emissions relaxation based on the fuel type used. Vehicles running on petrol blended with E20 to E30 will receive an 8% reduction in their tailpipe figures. Flex-fuel and strong hybrid vehicles are eligible for a 22.3% deduction, while for CNG vehicles, the reduction will be 5%, with the potential for a higher deduction based on the share of compressed biogas in the fuel mix.

Emissions pooling

The draft also proposes a new concept of pooling where manufacturers can form compliance pools of up to three OEMs. Each pool will be treated as a single entity for regulatory purposes, with its fleet-average CO₂ emissions calculated from the combined sales of all member companies.

This could enable strategic partnerships where manufacturers can balance fleet emissions, reduce compliance costs, and jointly meet regulatory targets. The manufacturer nominated as the 'pool manager' will be the contact point for the pool and will be responsible for paying any penalty imposed on the pool in accordance with the Energy Conservation Act, 2001.