CAFE 3 Norms Draft Eases Emission Targets for Smaller Vehicles

The Bureau of Energy Efficiency (BEE) has released a revised draft of the upcoming Corporate Average Fuel Economy (CAFE) 3 norms, which will make the average CO2 emissions stringent from April 2027. The revised draft proposes multiple changes, including the long-standing demand to offer emission relaxation to small, lightweight cars.

CAFE 3 Relaxation for Small Cars

The revised draft proposes the average CO2 emission limit to be 88.4 g CO2/km in the first year, against the earlier proposed average CO2 emission limit at WLTP of 91.7g CO2/km. For those unaware, the current limit is 113g CO2/km in CAFE 2 norms.

This will be followed by a series of progressively tighter targets in the following years, up to 71.5g. However, the new draft proposes relaxation for smaller petrol cars (under 4 meters and up to 909kg, with engine capacity under 1200cc), offering an additional reduction of 3g CO2/km in their manufacturer-declared CO2 performance. However, there is a maximum limit (cap) on this special relief — no single car model or any of its variants can claim more than 9g/km reduction in CO2 emissions in total for any given reporting year.

Small volume manufacturers, selling less than 1,000 cars yearly, are exempt from meeting specific emission targets under CAFE 2027. Furthermore, companies can form a “pool” (up to 3 companies) and meet the rules together. The manufacturer nominated as the ‘pool manager’ will be the contact point for the pool and will be responsible for paying any penalty imposed on the pool in accordance with the Energy Conservation Act, 2001 (52 of 2001).

CAFE 3 Norms: Credit System Explained

The draft proposes a credit system designed to help manufacturers offset the impact of higher-emission models. It does so by assigning extra “weight” or credit to cleaner vehicles—such as electric vehicles, range-extender hybrids, flex-fuel ethanol vehicles, and strong hybrids. These credits act as multipliers when calculating a manufacturer’s corporate average CO₂ performance, effectively balancing out emissions across the fleet.

In short, the upcoming CAFE 3 norms are about pushing all car companies to make and sell more fuel-efficient, less-polluting cars—especially encouraging electric and green-fuel models—without making small, affordable cars disappear. Those who do well get credits; those who don’t comply pay fines.