Overcoming Consumer Behaviour Barriers

AS INDIA MOVES toward stricter fuel economy standards under the third and fourth phases of Corporate Average Fuel Economy (CAFE) regulations, debates about their economic and environmental impact persist.

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These regulations are primarily supply-side measures, shaping how automakers design and manufacture vehicles by pushing them to prioritize fuel efficiency over other attributes. While CAFE standards have significant potential to reduce emissions, they have limited influence on consumer behaviour related to fuel consumption. This limitation, combined with the growing preference for heavier vehicles, emphasizes the need for strategies that address these behavioural and market trends; without them, achieving substantial pollution reduction through CAFE standards alone may prove challenging.

The Corporate Average Fuel Economy (CAFE) norms are regulatory measures designed to reduce fuel consumption and carbon emissions by setting minimum efficiency standards for automakers. Introduced in India in 2015, these regulations were intended to curb fuel use and carbon dioxide emissions. The first phase, known as CAFE Stage I (2017-18), introduced weight-based efficiency limits, followed by the stricter Stage II standards in 2022-23. While CAFE regulations have generally been welcomed by environmental advocates for their potential to lower consumer costs, enhance energy security, and promote innovation, they have also faced criticism from automakers and researchers. A common concern raised by economists is regarding the unintended consequences linked to consumer behaviour, particularly the rebound effect and the scrappage effect.