Govt to Remove Zero-Emission Tag from EVs – What Are CAFE Norms & How Do They Affect You?

Electric vehicles in India may lose their zero-emission tag under the upcoming CAFE norms. Recent reports suggest that the Prime Minister’s Office is examining the possibility of factoring in coal-based electricity while reconsidering the zero-emission status of EVs. If you’re confused about this news, unsure what these norms are, or wondering how this might impact you, don’t worry, EVINDIA has got you covered.

Pollution has long been a serious issue in India. From the odd-even scheme to BS emission norms, the government has tried various carrot-and-stick measures to control vehicular emissions—and rightly so, as nearly 90% of carbon emissions are attributed to vehicular pollution.

In this context, the Government of India introduced the Corporate Average Fuel Efficiency (CAFE) norms in FY 2017–18. These norms establish fuel efficiency benchmarks for vehicles. By design, they encourage the adoption and sale of electric vehicles. Let’s dive deeper to understand them better.

What Are CAFE Norms?

To control pollution, the government measures how much CO₂ a vehicle emits per kilometre.

Corporate Average Fuel Efficiency (CAFE) norms are government guidelines that require companies to improve their fuel efficiency.

As per CAFE norms, the government considers all the vehicles a company sells during a financial year (April to March) and calculates their average CO₂ emissions per kilometre. The rule is that this overall fleet average must not exceed 113 grams of CO₂ per kilometre (113 g/km). In simple terms, the limit does not apply to an individual car but to the combined average of all vehicles sold by the company in that year.

For example:

Suppose a company plans to sell 15 Internal Combustion Engine (ICE) SUVs.

Each SUV emits 160 g/km of CO₂. This is far above the prescribed CAFE average.

(160 × 15) / 15 = 160 g/km

To balance this out, the company may also sell 7 electric vehicles (EVs), since EVs are considered to have zero tailpipe emissions.

Total vehicles sold = 22

The inclusion of EVs will bring down the overall fleet average, potentially reducing it to around 109 g/km and helping the company comply with the norms.

(160 × 15 + 0 × 7) / 22 = 109.09 g/km

What’s the Recent CAFE Update?

After CAFE-I (FY 2017–18) and CAFE-II (2022–27), the government is planning to change certain norms for CAFE-III. One such change is that electric vehicles may not be considered as “zero” emission vehicles and may attract a certain kind of weightage in the CAFE norms.

This means that in the above calculation, EVs will not be able to offset the excess CO₂ emissions of ICE vehicles.

How Will This Impact You?

Companies

Automobile manufacturing companies are going to be at the centre of this change, especially those operating in both the ICE and EV markets. Companies may be compelled to launch more budget-friendly hybrids and EVs or improve the fuel efficiency of their existing petrol or diesel vehicles. This change will act as a push for companies that were already considering entering the EV market but were delaying their plans.

However, these norms may disincentivise foreign companies from entering the Indian market. Companies may see the South Asian market as a better alternative, where efficiency targets are more lenient and linked with fuel consumption rather than emissions.

Customers

Customers might not feel much turbulence from these norms. However, since companies are compelled to either make more fuel-efficient vehicles or transition to EVs, there is a good chance that this shift will also be reflected in upcoming prices. This could translate into ICE vehicles becoming more expensive or EVs becoming cheaper.

Overall Analysis

No doubt, the policy is good from an environmental perspective, which is a sign of a healthy, growing economy. However, the reaction of the market remains to be seen.

From a global perspective, in the European Union, the fleet-wide average is 95 g CO₂/km, which is lower than India’s limit. In the USA, it is 4.8 litres of petrol per 100 km, which translates into 111 g CO₂ emissions per km.

However, each of these countries accepts EVs as zero-emission vehicles. It is also true that almost half of Europe’s energy comes from renewable sources. The USA, on the other hand, has a similar scenario to India; around 22–23% of its total electricity comes from renewables. Although the USA does not recognise EVs based on lifecycle emissions, they still classify them as zero-emission vehicles for regulatory purposes and does not face a pollution problem like India, partly owing to its geography.

So, this change might act as a good norm for society as a whole, but may sting corporations a little.