India Unveils 2027 CAFE-III Norms to Enhance Vehicle Emissions Standards

The Ministry of Power has released draft Corporate Average Fuel Economy 2027 Norms (CAFE-III) targeting M1 category passenger vehicles for 2027-32. It introduces Carbon Neutrality Factors for ethanol, biofuel, and CBG to reduce tailpipe CO2 emissions and encourages cleaner technologies with phased fuel consumption targets and super credits.

In a major step towards enhancing vehicle emissions standards, the Ministry of Power announced the draft Corporate Average Fuel Economy 2027 Norms, known as CAFE-III, on Thursday. These norms are set to apply to passenger vehicles in the M1 category manufactured or imported for sale in India during the 2027-28 to 2031-32 period.

The proposed norms pioneer the introduction of Carbon Neutrality Factors (CNFs) that recognize the carbon-neutrality of ethanol, biofuel, and Compressed Bio-Gas (CBG). This marks the first time carbon neutrality is considered in such norms, allowing reductions in declared tailpipe carbon dioxide emissions. Stakeholders and the public are invited to send suggestions and feedback by August 6, 2026.

Set to replace the existing CAFE-II norms, CAFE-III norms will commence on April 1, 2027, and last for five years. A phased tightening from 3.996 litres/100 km in 2027-28 to 3.3273 litres/100 km in 2031-32 creates a clear regulatory pathway for OEMs to enhance fuel efficiency. The policy also encourages electric and hybrid vehicle adoption with super credits and compliance credits mechanisms.