On July 12, 2019, the National Highway Traffic Safety Administration (NHTSA) issued a final rule reversing an increase in the penalties that automakers face for failing to meet corporate average fuel efficiency (CAFE) standards, reducing their financial incentive to upgrade their fleets. This policy represents another move in an extended effort by the Trump Administration to roll back Obama Administration restrictions on greenhouse gas (GHG) emissions from the transportation sector.
Since 2009, passenger vehicle fuel efficiency standards have been jointly set by NHTSA, under the Energy Policy and Conservation Act (EPCA) of 1975, and the Environmental Protection Agency (EPA), which determines GHG emission limits under the Clean Air Act (CAA). CAFE standards were initiated in response to the Organization of Petroleum Exporting Countries (OPEC) oil embargo of 1973, to reduce US dependence on foreign oil. In 2009, as the purpose of fuel economy standards grew to include limiting GHG emissions, the Obama Administration involved EPA in the process of setting CAFE standards for the first time. From that point, EPA worked jointly with NHTSA, using its authority to regulate GHG emissions from automobiles under the CAA. This culminated in an ambitious CAFE standard of 54.5 mpg, issued in 2012 for model years 2020 on.
During the final months of the Obama Administration, giving teeth to these higher CAFE standards, NHTSA issued a rule increasing the penalty rate for automakers who failed to meet fuel efficiency targets from $5.50 (per 0.1 mpg over the standard) to $14. Because the fine is based on the total number of vehicles not meeting the standard in any given model year, these costs could easily surpass hundreds of millions of dollars per year per manufacturer. The Obama Administration, petitioned by industry leaders, delayed enactment of the rule until the 2019 model year.
On January 25, March 28, June 27, and July 12, 2017, the Trump administration released rules extending those delays, before ultimately issuing this reversal of the civil penalties rule. This goes hand in hand with the Trump Administration’s attempt to roll back the Obama CAFE standards themselves, through the Safer Affordable Fuel Efficient (SAFE) Vehicle rule, which it proposed in 2018 and has yet to finalize.On August 2, 2019, 12 states and the District of Columbia sued to overturn the final NHTSA civil penalties rule in the U.S. Court of Appeals for the Second Circuit. A group of environmental petitioners also filedsuit challenging the rule, and the two cases have been consolidated. Briefing is now pending in the case.