The government has proposed a more flexible compliance framework under the draft Corporate Average Fuel Efficiency-3 (CAFE-3) norms, easing penalty norms and allowing automakers to trade carbon credits to meet emission targets. The revised framework shifts the focus away from the earlier small-car versus large-vehicle debate and instead prioritises reducing overall fleet emissions. The objective is to push original equipment manufacturers (OEMs) to produce vehicles with lower CO₂ emissions while accelerating adoption of electric vehicles (EVs), hybrids, and alternative fuels such as biofuels, in line with India’s net-zero target for 2070. The five-year plan for CAFE-3 norms will kick in from April 2027 and will cover the financial years 2027-28 to 2031-32. A key feature of the draft norms is the introduction of a market-based compliance mechanism. Automakers that exceed emission reduction targets will be allowed to trade surplus carbon credits with manufacturers that fall short, subject to mutually agreed terms. Under the draft, the outcome of such credit trading must be completed and reported to the designated agency responsible for monitoring compliance. For instance, manufacturers that overachieve emission targets could monetise surplus credits by transferring them to companies struggling to meet prescribed limits, thereby reducing compliance costs across the industry. The move signals a shift toward flexibility-driven regulation, aimed at securing industry buy-in while maintaining pressure on manufacturers to progressively reduce fleet emissions. When calculating the weighted average CO2 of an OEM, clean vehicles such as electric vehicles (EVs), hybrids, plug-in hybrids, flex-fuel or flex-fuel hybrid vehicles, are assigned higher weightage. When a lower CO2 car is given higher weightage, it helps reduce overall weighted average CO2 of an OEM, thereby benefitting the OEM. (ICE NEW DELHI)

Fonte notizia: Business Line