Auto companies may soon get to trade BEE credits for easier fuel-efficiency compliance

Synopsis

The power ministry has introduced a new credit trading system aimed at Corporate Average Fuel Efficiency standards. Under this initiative, manufacturers can trade excess compliance credits and purchase them from the Bureau of Energy Efficiency. The framework includes credit and debit accounting, allowing manufacturers who surpass targets to earn credits, while those who don't accumulate debits.

New Delhi: The power ministry has proposed a credit trading mechanism under thenation's Corporate Average Fuel Efficiency (CAFE) norms, allowing passenger vehicle manufacturers to trade surplus compliance credits and buy credits from the Bureau of Energy Efficiency (BEE) to meet fuel-efficiency targets.

Draft amendments to the CAFE norms issued by the ministry Monday under the Energy Conservation Act propose a formal framework for credit and debit accounting, passbooks, pooling arrangements and compliance assessment. The CAFE norms, in force since FY23, require vehicle manufacturers to meet a prescribed fleet-average fuel-efficiency standard to reduce fuel consumption and carbon dioxide emissions. The ministry has invited public comments within 14 days of publication of the draft notification.

Under the proposal, manufacturers whose fleet-average fuel consumption is better than the prescribed target will earn compliance credits, while those that miss the target will accumulate debits. The credits can be carried forward, transferred to other manufacturers through voluntary pooling arrangements or used for future compliance.

The draft also allows manufacturers to offset debit balances by purchasing credits from the BEE at ₹2,500 per gram of carbon dioxide per kilometre for each reporting period from FY23 to FY27. The ministry said the buyout option would provide a compliance route at a cost lower than the statutory penalty under the Energy Conservation Act. Manufacturers will be required to maintain a credit and debit passbook recording credits earned, used, transferred and carried forward across compliance periods.

According to the explanatory note, the amendments are intended to operationalise compliance provisions already contained in the existing CAFE framework, including pooling arrangements, for which detailed procedures had not previously been specified.

The ministry said the proposed changes would improve regulatory certainty, establish a transparent compliance mechanism and incentivise manufacturers that outperform the prescribed fuel-efficiency standards while retaining the overall objectives of the CAFE programme.