India Draft CAFE-III Norms: Tighter Fuel Efficiency Targets and Carbon Credits for Automakers from 2027

India's Ministry of Power has released draft CAFE-III norms that set stricter fuel efficiency targets for passenger vehicles sold between 2027 and 2032. The rules include a carbon neutrality incentive, super credits for cleaner vehicles, and a compliance credit mechanism that automakers can trade or bank. Stakeholders have until August 6 to submit feedback. The draft is significant for carbon markets because it creates a formal framework for automakers to earn credits by exceeding efficiency targets. These credits can offset compliance gaps for other manufacturers, potentially creating a domestic carbon credit market tied to vehicle emissions. The policy also aligns with India's broader decarbonization goals for the transport sector. Key details still missing from the draft include the specific efficiency targets per vehicle class, the credit valuation formula, and how credits interact with existing carbon trading schemes. The final rules will determine whether this becomes a meaningful market or just another compliance checkbox.