New CAFE draft expands credits, cuts penalty risks

THE REVISED DRAFT of the Corporate Average Fuel Efficiency (CAFE 3) rules, shared by the government with automakers, has recast the compliance framework for passenger vehicles by expanding the use of credits and widening technology pathways.

- NITIN KUMAR

This is expected to significantly reduce the likelihood of penalties while addressing fault lines that had split the auto industry under the earlier proposal.At the core of the draft is a more flexible credit regime. Carmakers that outperform their fleet-average fuel consumption targets will accumulate credits, while those falling short can offset deficits by carrying forward past surpluses, trading with other manufacturers, or purchasing credits from the Bureau of Energy Efficiency at pre-declared prices rising from 2,500 to 4,500 per unit over the period. The system will operate through a passbook that will track annual balances, with settlement allowed within defined compliance bloc