US NHTSA reinstates billions in fines on gas-guzzling automakers

The National Highway Traffic Safety Administration ruled that heightened fines on automakers that fail to meet Corporate Average Fuel Economy requirements on 2019 and later vehicles would be reinstated. The decision is a big hit to high-polluting automakers and the lobby group that supports them, and a win for EV makers.

The decision comes after years of fighting over a policy adopted in 2016 under President Obama that would apply to 2019 and later model year cars. The policy increased the fines for missing average fuel economy targets from $5.50 to $14 per .1 mpg per vehicle, in response to a 2015 law meant to catch old government penalties up to inflation. This is the first significant increase in this penalty since CAFE rules were first established in 1975 (the penalty was originally $5, then $5.50 since 1997).

Automakers who manage to stay within the limits gain credits that can be sold to other automakers who would otherwise be penalized. Automakers’ compliance or lack thereof can be found in DOT’s CAFE dashboard, where it can be seen that FCA missed the 40.9 mile-per-gallon target by nearly 11 mpg in 2020 (CAFE mpg is not calculated the same way as normal mpg and is more generous, thus the high numbers).

While automakers have long made the argument that compliance with such high CAFE targets is technologically impossible, the dashboard shows that Tesla exceeded the same 40.9 mpg target by 685 mpg. Surely other automakers with a century of experience can do better than 1/20th of Tesla’s efforts?

The 2016 policy was challenged by the Alliance of Automobile Manufacturers and the Association of Global Automakers, auto industry lobby groups representing virtually all automakers except for EV startups. The groups have since merged into the Alliance for Automotive Innovation – though both consistently lobby against innovation.

They estimated that the rule would cost the industry $1 billion annually – but it should be noted that they are known for lying and that fossil fuel pollution costs the US $650 billion annually according to the IMF, quite a bit more than their $1 billion number. The NHTSA estimates that these fines are “likely to exceed $100 million in at least one of the years affected,” and they estimate an increase of approximately $178.5 million in fines for model year 2019 alone.

Over the next few years, the rule resisted several challenges, including attempts to shelve it indefinitely. Despite already being in effect for three model years (’19-’21), the policy was eventually rolled back in an interim decision issued without opportunity for public comment on January 14, 2021, in the waning days that Donald Trump occupied the White House after losing his second election.

That interim decision was then challenged quickly as a result of President Biden’s January 20th executive order to re-evaluate federal agency actions of the previous four years which had not properly accounted for the environment. It was also formally challenged by the Natural Resources Defense Council, the Sierra Club, several other environmental groups, attorneys general from 16 states, and Tesla.

While the Alliance for Automotive Innovation and the National Auto Dealers Association supported the interim decision, Tesla suggested an immediate withdrawal of this last-minute leniency for polluters.

The NHTSA’s final rule took these comments into account, along with public comment solicited over the course of a month last August and September. In their final reasoning, they take the past administration’s arbitrary and capricious rule-making and the automakers’ legal reasoning to task. They point out the blatant attempt to delay compliance and then claim that it’s “unfair” to expect them to comply with rules that they themselves forced delays in compliance for.

Automakers complained that applying these penalties retroactively would be unfair – but NHTSA notes that the penalties were instated in 2016 for the 2019 model year, when they were still prospective, not retroactive. NHTSA also points out that “automakers that made their plans for Model Years 2019 through 2021 thinking that penalties would not increase did so at their own risk” and in defiance of court decisions upholding the rule.

That risk seems to have turned out poorly for the automakers, as they’ll be writing some big checks for their noncompliance soon. The final rule takes effect 60 days after its publication in the federal register, and automakers who didn’t plan properly to increase their efficiency and incorporate more EVs into their fleet will continue paying these penalties for years to come – much of which is likely to end up in their EV competitors’ pockets via the trading of credits.