Current Status
In April 2022, the National Highway Traffic Safety Administration (NHTSA) published a final rule withdrawing the January 14, 2021, interim final rule and reverting to the December 2016 final rule, which would apply inflation adjustments beginning with Model Year 2019.
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 model that exceeds 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 to make them impactful.
Timeline
June 24, 2024 NHTSA promulgated a final rule establishing 2 percent annual increases in CAFE standards for MYs 2027-2031 passenger cars and MYs 2029-31 light duty trucks.
May 2, 2022 NHTSA promulgated a final rule revising fuel economy standards for passenger cars and light duty trucks, scheduling 8 percent annual increases for MYs 2024-25 and a 10 percent increase for MY 2026.
Apr. 1, 2022 NHTSA published a final rule withdrawing the January 14, 2021 interim final rule and reverting to the December 2016 final rule, which would apply the inflation adjustments beginning with MY 2019.
Aug. 20, 2021 NHTSA published a supplemental notice of proposed rulemaking to consider whether to withdraw the January 14, 2021, interim final rule and revert to the December 2016 final rule that would apply the inflation adjustment beginning with MY 2019, which NHTSA indicates would be consistent with the Second Circuit’s case law. (Nat. Res. Def. Council v. Nat’l Highway Traffic Safety Admin., 894 F.3d 95, 116 (2d Cir. 2018); New York v. Nat’l Highway Traffic Safety Admin., 974 F.3d 87, 101 (2d Cir. 2020).)
April 12, 2021 Seventeen Democratic lawmakers sent a letter to NHTSA Deputy Administrator Steven Cliff urging the agency to rescind the Trump-era interim final rule delaying higher penalties for automakers.
March 15, 2021 NHTSA submitted a proposed rule addressing CAFE Civil Penalties to the Office of Information and Regulatory Affairs (OIRA).
Feb. 16, 2021 Fifteen Democratic attorneys general sued NHTSA over the interim final rule. State of New York et al., v. NHTSA, [No. Pending] (2d Cir.). In their comments on the interim final rule, the coalition of states argued that the rule violates NHTSA’s statutory duty to raise the “long-stagnant CAFE penalty,” and that NHTSA violated the APA by making the repeal effective immediately without notice and comment.
Jan. 25, 2021 Environmental groups sued NHTSA alleging the interim final rule fails to comply with fuel emissions goals. Natural Resources Defense Council et al. v. NHTSA, [Docket No. Pending] (2d Cir.).
Jan. 14, 2021 NHTSA published an interim final rule declining to increase penalties until model year 2022. Comments are due by January 25, 2021.
Aug. 31, 2020 The Second Circuit vacated NHTSA’s final rule after finding that the CAFE penalty qualifies as a civil monetary penalty under the Improvements Act, meaning that it must be updated to account for inflation and the penalty can only be reconsidered within a short window of time, one that NHTSA improperly exceeded when it reconsidered the penalty from 2016 in 2019. New York v. NHTSA, No. 19-02395 (2d Cir.).
April 15, 2020 The Department of Justice suspended the collection of civil penalties through at least May 31, 2020, in an attempt to alleviate the financial impact of the coronavirus pandemic.
Aug. 12, 2019 NRDC and Sierra Club also filed suit against NHTSA for its final rule reducing penalties for noncompliance. NRDC v. NHTSA, No. 19-02508 (2d Cir.).
Aug. 2, 2019 California, New York, and 11 other states filed 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 (2d Cir.).
July 12, 2019 NHTSA released 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 was published in the Federal Register on July 26, 2019 and effective Sep. 24, 2019.
June 29, 2018 The U.S. Court of Appeals for the Second Circuit issued its opinion and confirmed 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 (2d Cir.).
April 23, 2018 The U.S. Court of Appeals for the Second Circuit granted petitions to review the attempt to infinitely delay the rulemaking and vacated NHTSA’s July 2017 delay rule. NRDC v. NHTSA, No. 17-2780 and New York v. NHTSA, No. 17‐2806 (2d Cir.).
April 2, 2018 NHTSA published 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.
Sep. 11, 2017 New York, California, Vermont, Pennsylvania, and Maryland sued NHSTA as well. New York v. NHTSA, No. 17‐2806 (2d Cir.).
Sep. 7, 2017 NRDC and other environmental groups sued NHSTA over the delay in implementing and enforcing the penalties while it reconsiders them. NRDC v. NHTSA, No. 17-2780 (2d Cir.).
July 12, 2017 NHTSA announced a plan to reconsider enhanced penalties, delayed the effective date for the Obama-era rule, and sought public comment through Oct. 10, 2017.
Dec. 28, 2016 NHTSA published 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 before July 2016. NHTSA reconsidered its plan in light of the information in the auto industry petition for reconsideration and decided 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.
Aug. 1, 2016 Two auto industry trade groups, the Alliance of Automobile Manufacturers and Association of Global Automakers, petitioned NHTSA for reconsideration.
July 5, 2016 NHTSA adopted 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.