Centre floats another draft of CAFE-III, gives special recognition to ethanol and biofuel cars
The government released a fresh draft of the CAFE-III (Corporate Average Fuel Efficiency, Phase III) norms for stakeholder consultation, with feedback invited until 6 August 2026
For the first time, the draft introduces Carbon Neutrality Factors (CNFs) that formally recognise the carbon-neutral contribution of ethanol, Compressed Bio-Gas (CBG), and other biofuels in a vehicle manufacturer's fleet-average compliance calculation
The draft proposes an 8% Carbon Neutrality Factor for current ethanol blending levels, with CBG and biofuel factors to be based on prevailing actual blending levels
To ease the transition to cleaner technologies, the draft proposes "super credits": battery electric and range-extended electric vehicles would count as three vehicles for compliance purposes, plug-in hybrids and flex-fuel strong hybrids get a 2.5 multiplier, strong hybrids 1.6, and flex-fuel ethanol vehicles 1.1
The proposed norms would take effect from 1 April 2027 and remain in force for five years, replacing the outgoing CAFE-II framework
Automobile manufacturers of smaller and larger vehicles have reportedly taken divergent positions on how the norms should be structured
CAFE Norms — Legal Basis and Evolution (CAFE-I to CAFE-III)
Corporate Average Fuel Efficiency (CAFE) norms regulate the average fuel consumption/CO2 emissions across an entire manufacturer's fleet sold in a given year, rather than regulating individual vehicle models. In India, CAFE norms are administered under the Energy Conservation Act, 2001, by the Bureau of Energy Efficiency (BEE) under the Union Ministry of Power.
Key Details
- CAFE-I (2017-2022): mandated a fleet-average corporate CO2 emission target of less than 130 grams/km
- CAFE-II (2022-2027): tightened the target to below 113 grams/km, a roughly 13% reduction from CAFE-I
- CAFE-III (proposed, 2027-28 to 2031-32): progressively tightens fuel consumption targets 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
- The norms apply to M1 category passenger vehicles (vehicles designed for carrying passengers, up to 8 seats besides the driver) manufactured or imported for sale in India
- Being fleet-average (not per-model) targets, manufacturers can offset less efficient models with more efficient ones (EVs, hybrids, flex-fuel vehicles) across their overall sales mix — which is the regulatory logic behind the "super credit" multipliers in the CAFE-III draft
The CAFE-III draft continues this fleet-average, multiplier-based architecture, but for the first time formally credits biofuel/ethanol carbon neutrality in the compliance formula, reflecting India's parallel push on ethanol blending as a decarbonisation and energy-security tool.
Carbon Neutrality Factor for Ethanol — Linking to the Ethanol Blending Programme
The CNF recognises that ethanol, being derived from biomass (sugarcane, foodgrain, etc.), is treated as carbon-neutral at combustion because the CO2 released was recently absorbed by the feedstock crop during photosynthesis — unlike fossil fuel combustion, which releases long-sequestered carbon.
Key Details
- India's Ethanol Blended Petrol (EBP) Programme, under the Ministry of Petroleum and Natural Gas, targets blending ethanol with petrol to reduce crude oil import dependence and vehicular emissions
- India achieved 20% ethanol blending (E20) ahead of its original 2030 target, prompting policy attention to how blended/flex-fuel vehicles should be treated in fuel efficiency regulation
- The CAFE-III draft's proposed 8% Carbon Neutrality Factor (for current ethanol blending levels) effectively reduces the calculated emissions attributed to ethanol-blended and flex-fuel vehicles for compliance purposes
- Compressed Bio-Gas (CBG), promoted under the SATAT (Sustainable Alternative Towards Affordable Transportation) scheme, is similarly treated as a carbon-neutral fuel source, with its CNF tied to actual blending/usage levels
By building a Carbon Neutrality Factor into CAFE-III, the government aligns vehicle fuel-efficiency regulation with its separate ethanol-blending and biofuel promotion policies, giving manufacturers a fleet-compliance incentive to produce flex-fuel and ethanol-compatible vehicles rather than only BEVs.
Alternative Powertrains and the "Super Credit" Multiplier Logic
The CAFE-III draft's multiplier system (3x for BEVs, 2.5x for plug-in hybrids/flex-fuel strong hybrids, 1.6x for strong hybrids, 1.1x for flex-fuel ethanol vehicles) is a regulatory design tool to accelerate adoption of progressively cleaner powertrains without an outright mandate.
Key Details
- BEV (Battery Electric Vehicle): zero tailpipe emissions, energy stored in battery, charged from the grid
- Strong hybrid: combines an internal combustion engine with a substantial electric motor/battery that can independently power the vehicle for short distances, improving fuel efficiency without plug-in charging
- Plug-in hybrid (PHEV): a strong hybrid with a larger battery that can be externally charged, allowing extended all-electric range
- Flex-fuel vehicle: designed to run on varying blends of petrol and ethanol (up to 100% ethanol, E100), distinguished from standard vehicles rated only for lower blends (e.g., E10/E20)
- The multiplier weighting (3 > 2.5 > 1.6 > 1.1) reflects a hierarchy of decarbonisation potential as assessed by the regulator, with BEVs weighted highest and flex-fuel ethanol vehicles weighted lowest among the credited categories
This multiplier system is the operational mechanism through which CAFE-III steers the fleet-average target — manufacturers selling more BEVs, hybrids, or flex-fuel vehicles get compliance "credit" multiplied, making it easier to meet the tightening fleet-average target while their conventional petrol/diesel models continue to sell.
- Draft CAFE-III feedback deadline: 6 August 2026; norms proposed to take effect 1 April 2027 for five years (through 2031-32)
- CAFE-III fuel consumption target trajectory: 3.996 litres/100 km (94.76 gCO2/km) in 2027-28, tightening to 3.3273 litres/100 km (78.90 gCO2/km) in 2031-32
- CAFE-I (2017-2022) target: below 130 gCO2/km; CAFE-II (2022-2027) target: below 113 gCO2/km (~13% reduction from CAFE-I)
- Proposed Carbon Neutrality Factor for current ethanol blending levels: 8%
- Proposed compliance multipliers: BEV/range-extended EV = 3x; plug-in hybrid & flex-fuel strong hybrid = 2.5x; strong hybrid = 1.6x; flex-fuel ethanol vehicle = 1.1x
- Administering body: Bureau of Energy Efficiency (BEE), Ministry of Power, under the Energy Conservation Act, 2001