From Fuel Economy to Clean Air: Strengthening Corporate Average Fuel Efficiency (CAFE) Norms for Passenger Vehicles in India
The transport sector is India’s third-largest emitter, accounting for approximately 12 per cent of energy-related CO₂ emissions, with road transport contributing over 90 per cent of total transport emissions. Passenger vehicles (PVs) are growing rapidly in India. Even though car ownership in India (cars per 1,000 population) remains low (~35) compared to Japan (496), China (195), the USA (588), and Germany (582), absolute vehicle numbers are rising quickly due to population growth and rising incomes.
As per TERI’s projections, demand for four-wheelers is expected to increase from 5.5 crore vehicles in 2024–25 to 24.4 crore by 2047–48, accounting for 138.1 Mtoe under a business-as-usual scenario (with 2019–20 as the base year). This anticipated growth underscores the critical role of fuel efficiency standards as a core policy instrument for accelerating the adoption of zero-emission vehicle (ZEV) technologies and limiting the future emissions footprint of PVs, leading to improved public health outcomes.
India mandated Corporate Average Fuel Efficiency (CAFE) norms in 2017 to steer original equipment manufacturers (OEMs) towards producing more fuel-efficient and lower-emitting PVs. These norms apply to petrol, diesel, liquefied petroleum gas (LPG), compressed natural gas (CNG), hybrid, and electric passenger vehicles with gross vehicle weight (GVW) below 3,500 kg.
While CAFE norms were primarily designed to reduce fuel consumption from PVs, their relevance in curbing CO₂ emissions has become increasingly evident. More efficient vehicles consume less fuel per kilometre, leading to lower emissions when scaled across large vehicle fleets. This policy brief provides analytical inputs to the proposed CAFE norms and examines how India’s CAFE framework can be recalibrated to strengthen its effectiveness.