08/05/2019 - Regulatory Rollback

Corporate Average Fuel Economy Penalties

by EELP Staff

The Environmental & Energy Law Program is tracking the environmental regulatory rollbacks of the Trump administration. Click here for the list of rules we are following. If you’re a reporter and would like to speak with an expert on this rule, please email us.

Why it Matters

Penalties provide automakers with greater incentive to make their cars and trucks more fuel-efficient, saving consumers money on fuel and reducing greenhouse gas emissions. The penalty rate applies to every 0.1 mile per gallon car models exceed the Corporate Average Fuel Economy (CAFE) standards. The penalty rate is important because some automakers have opted to pay fines, even when they reach billions of dollars, instead of producing more fuel-efficient vehicles. The ample profit margins on less fuel efficient vehicles allow automakers to absorb these penalties, which is why the National Highway Traffic Safety Administration (NHTSA) under the Obama administration moved to increase the penalties in order make them impactful.

Current Status

July 12, 2019 NHTSA releases a final rule that does not raise penalties for noncompliance, keeping the preexisting penalty rate of $5.50 per every 0.1 mpg over the standard. The final rule is published in the Federal Register on July 26, 2019 and effective Sep. 24, 2019.

Aug. 2, 2019 California, New York, and 11 other states file suit in the Second Circuit Court of Appeals challenging NHTSA’s reduction of penalties for automakers that fail to meet the CAFE standards. The states make a number of arguments, including that the penalty rollback violates the Inflation Adjustment Act, which mandates that public agencies update their civil penalties to account for inflation over time. New York v. NHTSA, No. 19-02395 (2nd Cir.). NRDC and Sierra Club also file suit against NHTSA on Aug. 12, 2019 for its final rule reducing penalties for noncompliance. NRDC v. NHTSA, No. 19-02508 (2nd Cir.). 

April 15, 2020 The U.S. Department of Justice suspends the collection of civil penalties through at least May 31, 2020 in an attempt to alleviate the financial impact of the coronavirus pandemic.

History

July 5, 2016 NHTSA adopts an interim final rule, enhancing penalties for noncompliance with fuel efficiency standards up to $14 for every 0.1 mile per gallon over the standards.

Aug. 1, 2016 Two auto industry trade groups, the Alliance of Automobile Manufacturers and Association of Global Automakers, petition NHTSA for reconsideration.

Dec. 28, 2016 NHTSA publishes a final rule, granting the industry petition in part. NHTSA had intended to apply the $14 rate to any penalties assessed on and after August 4, 2016, beginning with penalties applicable to violations for model year 2015, and violations from prior model years that resulted from recalculation of a manufacturer’s previous CAFE levels. The industry asserted that manufacturers had already set their product and compliance plans for model years 2017 and 2018 based on the CAFE penalty provisions in place prior to July 2016. NHTSA reconsidered its plan in light of the information in the auto industry petition for reconsideration and decides to only apply the $14 penalty rate to model year 2019 and after. NHTSA, however, leaves the door open to adjust the $14 rate for inflation between now and then. The rule is effective January 27, 2017.

Trump Era

July 12, 2017 NHTSA announces a plan to reconsider enhanced penalties, delays the effective date for the Obama-era rule, and seeks public comment through Oct. 10, 2017.

Sep. 7, 2017 NRDC and other environmental groups sue NHSTA over the delay in implementing and enforcing the penalties while it reconsiders them. NRDC v. NHTSA, No. 17-2780 (2nd Cir.).

Sep. 11, 2017 New York, California, Vermont, Pennsylvania, and Maryland sue NHSTA as well. New York v. NHTSA, No. 17‐2806 (2nd Cir.).

April 2, 2018 NHTSA publishes a Notice of Proposed Rulemaking that rejects the Obama administration’s final rule increasing penalties for noncompliance. This proposal is open for comment until May 2, 2018.

April 23, 2018 The U.S. Court of Appeals for the Second Circuit grants a petitions to review the attempt to infinitely delay the rulemaking and vacates NHTSA’s July 2017 delay rule. NRDC v. NHTSA, No. 17-2780 and New York v. NHTSA, No. 17‐2806 (2nd Cir.).

June 29, 2018 The U.S. Court of Appeals for the Second Circuit issues its opinion and confirms that NHTSA does not have the authority to indefinitely delay the effective date of the increased penalties. NRDC v. NHTSA, No. 17-2780 and New York v. NHTSA, No. 17‐2806 (2nd Cir.).

July 12, 2019 NHTSA releases a final rule that does not raise penalties for noncompliance, keeping the preexisting penalty rate of $5.50 per every 0.1 mpg over the standard. The final rule is published in the Federal Register on July 26, 2019 and effective Sep. 24, 2019.

Aug. 2, 2019 California, New York, and 11 other states file suit in the Second Circuit Court of Appeals challenging NHTSA’s reduction of penalties for automakers that fail to meet the CAFE standards. The states make a number of arguments, including that the penalty rollback violates the Inflation Adjustment Act, which mandates that public agencies update their civil penalties to account for inflation over time. New York v. NHTSA, No. 19-02395 (2nd Cir.). 

Aug. 12, 2019 NRDC and Sierra Club also file suit against NHTSA for its final rule reducing penalties for noncompliance. NRDC v. NHTSA, No. 19-02508 (2nd Cir.). 

April 15, 2020 The U.S. Department of Justice suspends the collection of civil penalties through at least May 31, 2020 in an attempt to alleviate the financial impact of the coronavirus pandemic.