08/05/2019 - Regulatory Rollback

Corporate Average Fuel Economy Penalties

by Caitlin McCoy, Robin Just

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 Obama administration moved to increase the penalties in order make them meaningful.

Current Status

April 2, 2018 The National Highway Traffic Safety Administration (NHTSA) publishes a Notice of Proposed Rulemaking that rejects the Obama administration’s final rule to increase penalties for noncompliance with CAFE standards.

July 12, 2018 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.

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.

History

July 5, 2016 NHTSA finalizes 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 The Auto Alliance and Global Automaker petition NHTSA for reconsideration.

Dec. 28, 2016 NHTSA publishes a final rule, granting part of the industry petition, with an effective date of Jan. 27, 2018.

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.

Sep. 11, 2017 New York, California, Vermont, Pennsylvania, and Maryland sue NHSTA as well. Both petitions for review are filed in the U.S. Court of Appeals for the Second Circuit.  

Oct. 24, 2017 NRDC and the five states listed above ask the U.S. Court of Appeals for the Second Circuit to immediately reinstate the higher penalties.

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

April 23, 2018 The U.S. Court of Appeals for the Second Circuit grants a petition to review the attempt to infinitely delay the rulemaking and vacates NHTSA’s July 2017 delay rule.

June 29, 2018 The U.S. Court of Appeals for the Second Circuit issues its opinion in the case filed by NRDC and confirms that NHTSA does not have the authority to indefinitely delay the effective date of the increased penalties.

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.