India’s Biofuel Boom Faces a Carbon Accounting Crossroads

India’s biofuel economy is no longer a niche experiment — it is now a thriving, interconnected ecosystem that links farmers, fuel producers, automakers, policymakers, and even everyday drivers. From the widespread use of E10 (10 per cent ethanol blend) to the push toward E20 and higher, ethanol blending is reducing crude oil imports, cutting emissions, and creating fresh income streams for rural communities. But as the sector matures, so do the complexities that threaten to slow its momentum.

One pressing challenge is aligning the industry’s growth with Corporate Average Fuel Economy (CAFE) norms — the regulatory standards that set limits on fuel consumption and carbon emissions for automakers. For years, carmakers have been re-engineering vehicles to run efficiently on higher ethanol blends. Now, they are urging the Government to recognise a key scientific distinction in emissions reporting: the difference between fossil CO2 and biogenic CO2.

CAFE norms work like a fleet-wide report card for carmakers. The Government doesn’t just check the fuel efficiency of each model — it calculates the average across all vehicles sold in a year. If a manufacturer sells a less efficient, higher-emission model, it must balance that with more efficient ones to meet the set target. Failure to do so can result in hefty penalties, making accurate emissions accounting critical.

Here’s where biogenic CO2 enters the debate. When petrol burns, it releases fossil CO2 — carbon that has been locked underground for millions of years and is now permanently added to the atmosphere. Ethanol, however, comes from plants like sugarcane and maize that absorbed CO2 during their recent growth. When ethanol burns, that carbon returns to the air, but it is part of a short-term cycle between plants and the atmosphere, not a net new addition — provided crops are grown sustainably.

Think of fossil CO2 as money withdrawn from an ancient savings account — once gone, it’s gone for good. Biogenic CO2, on the other hand, is like spending from your monthly salary — it flows out but also comes back in through the next harvest. Globally, this distinction is widely recognised in carbon accounting.

In India, the Ministry of Petroleum and Natural Gas (MoPNG) tasked Indian Oil Corporation Limited (IOCL) with measuring the biogenic carbon content in ethanol-petrol blends. IOCL’s tests analysed two carbon isotopes: C14 (bio-based) and C12 (fossil-based). The results confirmed what automakers have long argued — higher ethanol blends contain a measurable share of biogenic CO2. E20 fuel showed 15 per cent bio-based carbon, E25 had 19 per cent, and E30 contained 25 per cent. Following these findings, MoPNG asked the Ministry of Power (MoP) — which oversees the Bureau of Energy Efficiency (BEE) — to account for biogenic CO2 in CAFE calculations. Yet, despite the scientific evidence and industry appeals dating back to 2022, the matter remains unresolved. This delay could have serious consequences. With CAFE 3 norms (effective 2027-2033) set to impose even stricter emission limits, ignoring the biogenic share in ethanol blends would make automakers’ fleets appear more polluting than they truly are. That, in turn, could trigger steep fines — Rs 25,000 per car for the first km/l shortfall in fuel efficiency, Rs 50,000 for each additional km/l, plus a base penalty of Rs 10 lakh. Ironically, companies that have invested in ethanol-compatible or flex-fuel vehicles could be penalised as if they were selling only petrol-powered cars. Such a misalignment would be a major disincentive at a time when India’s policy direction clearly supports higher ethanol adoption. For the country’s biofuel transition to stay on track, the solution is clear: update CAFE norms to reflect the scientific reality of biogenic CO2. Doing so will ensure that emissions reporting is accurate, industry incentives remain intact, and India’s ambitious ethanol roadmap continues without regulatory friction.

If India wants to lead in sustainable transport, it must match its bold biofuel policies with equally forward-thinking carbon accounting. Anything less risks stalling the momentum of one of its most promising green energy success stories.

The writer is Joint Director, Trade Promotion Council of India and Editor, India Business & Trade

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