India cannot afford to delay and weaken fuel efficiency regulations for vehicles, says new CSE analysis

The country has fuel efficiency standards for cars, but these are already quite lenient. Weak fuel efficiency targets can encourage more consumption of fuel at a time when oil prices are skyrocketing and hurting consumers. It can also spell trouble for India’s energy security and climate change concerns 

• Standards are so lenient that car manufacturers have either met or exceeded current standards, and are close to meeting the next target
• Compliance with corporate average fuel consumption standards allows manufacturers to score extra points for adopting predefined technology approaches. As some of these are part of routine application, this stymies technology innovation in IC engines
• Weak fuel efficiency targets do not require or enable rapid electrification of vehicle fleet. This is a lost opportunity, says the CSE analysis
• Fuel inefficiency hurts consumers and increases out-of-the-pocket expenses.
• CSE recommends: While staying on track to meet the 2022-23 standards, take urgent action to set more stringent fuel efficiency targets for cars, heavy and light duty vehicles, and two-wheelers with four year periodicity between now and 2035 immediately  

Webinar on Fuel Economy Benchmarks proceedings Click here: 

Download the CSE analysis Click here: 

New Delhi, August 25, 2021: India has taken giant strides in introducing emission standards for reducing toxic emissions from vehicles with the adoption of Bharat Stage VI standards in 2020 – but it has not taken equally strident and strong measures to improve fuel efficiency and carbon footprints of vehicles, says a new Centre for Science and Environment (CSE) analysis released at a webinar. The report is titled India’s fuel economy benchmarks: How to make them work for an energy-efficient and climate-secure world. 

“This is a matter of serious concern.Vehicle numbers and freight transport are growing rapidly, leading to an exponential rise in fuel consumption at a time when the country –already combating energy insecurity and the impacts of climate change -- needs to raise the ambition for decarbonisation. Moreover, if fuel guzzling is not tamed, it can directly hurt consumers especially when fuel prices are skyrocketing,” said CSE executive director Anumita Roychowdhury, who anchored the discussions at the webinar.  

So far, only Stage 1 fuel efficiency standards have been implemented – that too, only for passenger cars; Stage 2 standards are facing a delay. “These standards are so lenient that most car models have either met or have exceeded them; many are also close to meeting the Stage 2 norms. A lenient benchmark cannot push technological innovations to maximise fuel and carbon savings, nor does it require large-scale electrification to meet fleet-wide fuel efficiency targets,” added Roychowdhury. 

“In the meantime, there has been considerable uncertainty around the implementation of the Stage 1 standards for heavy duty vehicles that are major guzzlers of fuel. Their implementation is now expected in January 2022 after a delay of four years. Moreover, so far two-wheelers are still outside the ambit of these regulations. Time has also come to expedite fuel economy labeling scheme to influence the consumer choice,” said Vivek Chattopadhyay, senior programme manager, Clean Air programme, CSE. 

Highlights of the analysis: 

Effective fuel efficiency regulations for vehicles are needed to tame oil guzzling: As per the International Energy Agency’s (IEA) India Energy Outlook 2021, the energy demand for road transport is projected to more than double over the next two decades, based on today’s policy settings.A total of 300 million vehicles of all types will be added to India’s fleet between now and 2040. Oil demand is expected to increase by almost four million barrels per day in 2040 – this could be the largest increase for any country. 

Over half of this growth will be fuelled by freight transport. Road freight activity will triple by 2040. Between 2005-06 and 2019-20, petrol and diesel consumption has already increased by three times and two times respectively. Over 80 per cent of crude oil is imported. Says Chattopadhyay: “India cannot keep the oil splurge in the vehicle sector untamed. Emissions of carbondioxide, a heat-trapping warming gas is directly related to the amount of fuel burnt and therefore, fuel efficiency of vehicles-kilometers per litre of fuel combusted.” 

Fuel efficiency standards have been implemented only for passenger cars: The first-ever Corporate Average Fuel Consumption (CAFC) standards for passenger cars were implemented in 2017-18. Stage 2 standards are scheduled for implementation in 2022-23. The Bureau of Energy Efficiency estimates that these standards can lead to a reduction of 22.97 million tonne in fuel consumption by 2025. 

The CAFC standards are sales-weighted corporate average standards that are different from the Bharat Stage emissions standards, in which each model of vehicle has to comply with the norms based on lab tests. CAFC standards are computed based on the sales of each make and model of vehicle of all manufacturers and their fuel efficiency levels for a given fiscal year. While the individual targets for each manufacturer varies depending on their product mix of small and heavy vehicles (small vehicles use less fuel than bigger vehicles etc), together they need to remain within the industry-wide target. The current Stage 1 corporate average standard in terms of fuel economy is 5.49 litre per 100 km – this translates into 129.8 CO₂g/km (CO₂ emissions depend on the amount of fuel burnt) at an average car weight of 1,037 kg. Stage 2 standard is 4.77 litre per 100 km or 113 CO₂g/km, at an average vehicle weight of 1,145 kg. 

Need stronger fuel efficiency benchmark for cars: An assessment of Stage 1 standards shows that all car companies have not only met but have also exceeded the 2017-18 requirement of fuel efficiency. The IEA evaluation shows that the average fuel consumption of new light-duty vehicles sold in 2018 was roughly 9 per cent above the target for that year. Thus, the industry has comfortably achieved its target. 

Estimates of the International Council of Clean Transportation (ICCT) shows the fleet is only 7 per cent away from meeting the next target in 2023.Moreover, at the current level of fleet-wide fuel efficiency or CO₂emissions level, only a small improvement is needed to meet the Stage 2 standard in 2022-23. The IEA assessment indicates that India’s annual improvement through norms is lower than the 2.1 per cent annual reductions that it achieved on its own during 2006 to 2017 – a period of 12 years. In future, standards need to be more aggressive as the average vehicle fleet weight is likely to increase due to the demand shifting towards SUVs, sedans and compact SUVs. CSE estimates further show that at a time when fuel prices are spiralling, improvement in fuel efficiency of car models directly translate into substantial fuel and cost savings for the consumers.  

Compliance mechanism that allows extra credit points for pre-defined technological approaches can further weaken the impact of the standards: To meet the corporate average standards, manufacturers are allowed to score extra credit points for adoption of certain technology approaches that can improve fuel efficiency. Impact of these parameters like weight and aerodynamics etc cannot be considered while testing emissions from the vehicles. Extra credit points are earned by car manufacturers for their annual calculation of compliance.Usually, such super-credits are also given for electrification (battery electric vehicles, plug-in hybrid electric vehicles, and strong hybrid electric vehicles) -- used effectively with stringent targets, this can help accelerate electrification. 

But credit points are also being given for regenerative braking, start-stop systems, tire pressure monitoring systems, and six-speed or more transmissions that are weak approaches. These are a part of regular applications in high-end brands; they merely make a marginal difference and do not push eco-innovation. These credits should be phased out.

Fuel economy regulations have failed to accelerate electrification of vehicles: Even though higher credit points are given to electric vehicles, a weak benchmark does not require expansion of electric vehicles in the fleet.This is a missed opportunity. Global experience has shown that a well-designed super-credit system combined with stringent fuel efficiency norms can help speed up technology transformation and electrification of the fleet. 

Europe, despite having heavier vehicles compared to the low-powered smaller cars of India, has set CO₂ standards at 95 CO₂ g/km in 2020-21, as opposed to 113 CO₂ g/km in India. The average weight of the car fleet in Europe is about 1,400 kg -- higher than in India. This has accelerated electrification of the fleet – EVs are now 10 per cent of new sales as opposed to less than 1 per cent in India. Europe is now aiming to meet 60 CO₂ g/km for cars in 2030: this is equivalent to what most two-wheelers in India meet. 

Tighten the testing parameters for vehicle certification: It is not only the norm value that matters, but also the testing parameters that have a direct bearing on the stringency of the norms and delivery of a real-world performance. India needs to quickly replace its current driving cycle that is used for testing and measuring emissions from vehicles in the lab for certification. Currently, the Modified Indian Driving Cycle (MIDC) which is a modified version of the European NEDC test cycle is used for testing cars in India. It is necessary that India adopts the WLTP – which is based on the new WLTC (see below for explanation) -- as a laboratory test to measure fuel consumption and CO₂ emissions from passenger cars, as well as other pollutant emissions. Only a more rigorous test cycle for certification can help lower the gap between certified levels of emissions and real-world performance. 

(WLTP and WLTC: Worldwide Harmonised Light Vehicle Test Procedure and Worldwide Harmonised Light-duty Vehicles Test Cycle. Basically, this refers to the driving cycle that is simulated on a test bed to approximate driving conditions where acceleration, deceleration, idling etc are all represented.) 

As India moves towards tighter fuel efficiency norms and electrification and labelling of cars, consumer demand for bridging this gap will become stronger. Consumers will become more sensitive to on-road performance of IC engines as well as the driving range of electric vehicles. 

Mandate public disclosure of super-credit flexibility mechanisms: While the industry has begun using super-credits to establish compliance with the standards, annual reports published by the Ministry of Road Transport and Highways (MoRTH) on compliance of the industry do not provide detailed information on how technological approaches have been adopted by different manufactures to earn super-credits. The official report needs to put this out for deeper understanding of the trends in technology adoption and innovation. 

Penalty: At this moment, there is no clarity about punitive action in case manufacturers fail to meet the standards. The draft regulations mention that if a manufacturer does not meet fuelconsumption standards for the reporting period, the designated agency shall report such non-compliance to the MoRTH and the Ministry of Power/BEE for suitable action.But there is no clarity on the measures the regulatory agencies can take.This clarity is needed in the new rules. There seems to be hesitation on the part of the government towards imposing penalties. But regulations of this kind require penal action to prevent leakages and deviation. 

Data disclosure: At present, the MoRTH publishes the basic summary of corporate average performance and targets along with credits accrued in the form of a simple table mentioning names of the corporate manufacturers. For compliance reporting, application of super-credits and trading of credits robust data in the public domain is a necessary requirement. 

The corporate fuel average system cannot work if it is not known how credits are being decided; details of make and models sold and their emissions status must be made available. To achieve transparency, complete disclosure of data to enable a proper assessment is needed. Both annual fuel consumption reports and manufacturers’ reports with details on eco-innovation and super-credits can help. 

Standards for heavy-duty vehicles: Even though heavy duty vehicles are expected to guzzle the maximum fuel action on this segment has been slowest so far despite making an early start to craft fuel consumption standards for heavy-duty vehicles in 2016-17. Their implementation was kept on hold until this year. In contrast to the CAFC standards for passenger cars, the standards for heavy-duty vehicles were designed as ‘per-vehicle standard’ in which each vehicle model is tested for certification and does not follow a corporate average level annually. The chassis and engines for heavy-duty vehicles are used for diverse application with a wide variety of body designs. These are often not tested as fully built vehicles. 

The vehicle industry had demanded flexibility to account for fleet-wide changes possible across the industry with a range of other innovations that also allow for a more diverse product portfolio. Also, in the meantime, the BSVI emissions standards were implemented and the norms required further revision. These norms are now expected to be implemented from January 2022. 

Presently, the vehicle fuel consumption is measured with constant speed fuel consumption test. In response to the industry demand a simulation tool (like VECTO that is used in Europe) is being developed. Bharat energy efficiency tool which will help to measure realtime fuel consumption through software. Its complex application will have to be evaluated properly. 

Need fuel efficiency standards for two-wheelers: Immediate steps are needed to set fuel efficiency standards for time-bound implementation. Even though these vehicles have the smallest carbon and energy footprints, given their sheer numbers and gradual migration to bigger and more powerful engines, and also the fact that they together use up as much as 60 per cent of petrol in the country the benefit of lower-powered vehicles on Indian roads may be soon eroded. BEE has started the discussion on fuel efficiency standards for two-wheelers. The process needs to be expedited and made to adhere to a specific timeline. 

Build consumer information system and a labelling programme: Create a well-structured consumer information system on fuel efficiency and emissions level of vehicles to stimulate consumer demand and catalyze the market for quicker uptake of more fuel efficient vehicles. This will save fuel and also out-of-pocket expenses for the consumer while setting new benchmarks for technology development for the industry. India needs robust labelling programme for vehicles within a year. A fuel economy guide is needed for consumers with detailed information about emissions, fuel and monetary savings, comparison with peer brands and front runners, etc. 

The next steps

In the face of the raging climate crisis, worsening of energy security and spiraling fuel prices, India cannot delay adoption of more stringent energy efficiency benchmarks for all segments of vehicles. The road ahead must focus on the following, says the CSE analysis: 

• Stay on track to meet the Stage 2 standards for cars in 2022-23.
• Tighten and set the next targets for all vehicle segments (cars, heavy and light duty vehicles, and two-wheelers) with four year periodicity between now and 2035 immediately.
• Adopt a dynamic approach to reflect changes in the market.
• Make targets ambitious to accelerate electrification.
• Reform testing methods for certification of cars to reduce the gap between lab-based and on-road fuel efficiency performance (adopt WLTP not later than April 2023).
• Design flexibility mechanism effectively – credits and trading.
• Incentive for early action and front runners – based on tighter benchmarks.
• Resolve standard making and notify the new timelines for implementation of norms for heavy duty and light commercial vehicle segment.
• Mandate public data disclosure and data on super-credit flexibility mechanisms. 
• Build consumer information systems. 

For more on this and for interviews: Souparno Banerjee, souparno@cseindia.org, 9910864339