Incremental change, Pg8

Key Highlights:

• In mid-April, Indian automakers agreed to new fuel efficiency and emissions reduction targets proposed by the Bureau of Energy Efficiency (BEE).
• The new Corporate Average Fuel Efficiency (CAFE) targets aim to reduce emissions from 113 grams of CO2 per kilometer to 77 g/km by 2031-32.
• The CAFE-III cycle is proposed to run from April 2027 to March 2032.
• The framework includes credits for higher ethanol blending and incremental efficiency technologies.

Detailed Insights:

• The earlier proposal had created a carve-out for small cars, accounting for about 14%-15% of passenger vehicle sales, delaying the shift to cleaner fuels and technologies.
• The explicit carve-out for small cars has been removed, but replaced by alternative compliance pathways like credits for E85-compatible vehicles.
• The BEE has proposed super-credits, where technologies like Battery Electric Vehicles (BEV) count multiple times towards compliance.
• Compliance will be assessed over three-year blocks rather than annually, reducing immediate pressure on manufacturers.
• The policy may be too weak to drive meaningful change in climate mitigation, India’s energy security, and macroeconomic stability.

Key Concepts Involved:

• Corporate Average Fuel Efficiency (CAFE): Regulations that set standards for the average fuel efficiency of a manufacturer's fleet of vehicles.
• Bureau of Energy Efficiency (BEE): An agency of the Government of India, responsible for promoting energy efficiency and conservation.
• Ethanol Blending: Mixing ethanol with gasoline to reduce greenhouse gas emissions and dependence on fossil fuels.

CAFE