Syllabus: 

GS3: Infrastructure: Energy, Ports, Roads, Airports, Railways etc. 

Context: 

The Ministry of Power issued the Draft Energy Conservation (Compliance Enforcement) Rules, 2025.

More on the News 

• The proposed rules allow the Bureau of Energy Efficiency to act against automakers that fail to meet Corporate Average Fuel Efficiency (CAFE) norms, currently in their second phase, as well as other schemes under the Act, including the Carbon Credit Trading Scheme (CCTS).

• The draft gives Bureau of Energy Efficiency (BEE) powers to 

• Monitor fuel efficiency compliance of each car model.
• Evaluate the degree of violations
• Forward cases to relevant State Electricity Regulatory Commissions (SERCs) for penalty decisions.
• Deposit fines into the CECF
• Enable a revenue-sharing model with states based on sales geography

• The SERC in question will depend on the state in which the non-compliant automaker’s registered head office is located.

• Penalty Mechanism: According to the draft rules, of the total penalties, 10% will go to the Central Energy Conservation Fund and 90% to state governments. 

• In cases involving CAFE violations, automakers must pay each state based on its share of the non-compliant model’s total sales.

• This policy shift could also intensify the push for cleaner production and faster adoption of energy-efficient technologies across the sector.

• Stakeholders have been invited to submit objections or suggestions within 30 days of the notification.

Corporate Average Fuel Efficiency (CAFE) norms

• These norms refer to fuel economy standards implemented by the government to reduce fuel consumption and CO2 emissions, thereby contributing to energy conservation and environmental protection.
• The primary goal of CAFE norms is to incentivise automakers to produce and sell more fuel-efficient vehicles, to reduce fuel consumption and CO2 emissions from passenger vehicles.

Carbon Credit Trading Scheme (CCTS)

• The Carbon Credit Trading Scheme (CCTS) in India is a mechanism designed to reduce greenhouse gas emissions through carbon pricing. 
• The CCTS aims to decarbonize the Indian economy by pricing greenhouse gas (GHG) emissions and facilitating carbon trading. CCTS laid the foundation for the Indian Carbon Market (ICM) by establishing the institutional framework.

It involves two key elements:

• A compliance mechanism for obligated entities (primarily industrial sectors).
• An offset mechanism for voluntary participation. 

Bureau of Energy Efficiency (BEE) 

• The Government of India has set up the Bureau of Energy Efficiency (BEE) on 1st March 2002 under the provisions of the Energy Conservation Act, 2001. 
• The Bureau of Energy Efficiency aims to develop policies promoting self-regulation and market-based approaches to reduce the energy intensity of India's economy under the Energy Conservation Act, 2001.
• This will be achieved with active participation of all stakeholders, resulting into accelerated and sustained adoption of energy efficiency in all sectors.

Sources:

https://indianexpress.com/article/business/2-years-after-key-law-centre-drafts-framework-to-penalise-polluting-automakers-10174020/ https://www.business-standard.com/industry/news/fuel-efficiency-rules-india-auto-makers-bee-draft-penalty-2025-125080700197_1.html