CAFE 3 Norms and India’s Climate Targets: Key Features, Emission Standards and Impact

Context

• The Prime Minister’s Office (PMO) recently reviewed the proposed Corporate Average Fuel Efficiency (CAFE)-3 norms for passenger vehicles, which are scheduled to take effect from 2027.

Key Features of the Revised Draft of CAFE-3 Norms

• Removal of Small-Car CO₂ Waiver: Earlier drafts allowed a relaxation of 0 g CO₂/km for small cars (below 909 kg and 1200 cc engine capacity).
  • The revised draft removes this benefit, meaning small cars must now meet stricter emission targets like other vehicles.
• Flatter Weight-Based Emission Slope: The “emission slope” (which adjusts allowed emissions based on vehicle weight) has been reduced from 002 to 0.00153 initially, gradually declining to 0.00128 by the fifth year.
  • This reduces the advantage heavier vehicles previously had and tightens overall compliance requirements.
• Lower Permissible Emissions for Heavier Vehicles: Under the revised slope, heavier cars (SUVs, larger sedans) will now be allowed lower emissions than earlier proposed, pushing manufacturers to improve engine efficiency or adopt cleaner technologies.
• Reduced Flexibility for Automakers: The revised formula narrows the margin manufacturers had to balance high-emission and low-emission vehicles within their fleet.
  • Companies must now redesign product strategies to meet stricter fleet-wide averages.
• Indirect Push Toward Electric & Hybrid Vehicles: Stricter emission limits make it harder for conventional petrol/diesel vehicles to comply.
  This encourages companies to introduce electric vehicles (EVs), hybrids, or lightweight designs to meet average emission targets.
• Phased Tightening Over Five Years: Instead of one abrupt cut, the emission slope gradually tightens each year.
  • This provides a transition window for manufacturers to adapt technology and production processes.

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