The National Highway Traffic Safety Administration is considering increasing penalties for automakers that fail to meet fuel-efficiency requirements. Though this could be considered a restoration of older standards, depending upon your perspective.
Shortly before leaving office, President Donald Trump postponed a regulation from the last days of the Obama administration that would have effectively doubled fines for vehicle manufacturers failing to meet Corporate Average Fuel Economy (CAFE) requirements. Automakers had been complaining that the rule would have dramatically increased operating costs, suggesting that would trickle down to vehicle pricing and give manufacturers selling carbon credits an unfair advantage.
Though there are plenty of people who already believe the idea of paying a rival business to “offset emissions” in order to pollute more is kind of a silly premise.
A U.S. appeals court in overturned the former administration’s decision to suspend the 2016 regulation in the summer of 2020. While Obama originally wanted the increased penalties to take effect for the 2019 model year, Trump managed to get them delayed until 2022. But the original plan was to suspend the increased fines indefinitely, since the previous administration was focused on deregulation as its main method of spurring the domestic economy. This seems to be counter to the Biden administration’s strategy and the NHTSA has been fairly aggressive in pursuing new regulatory actions since the change in leadership.
According to Reuters, Congress ordered federal agencies to adjust CAFE-related civil penalties in 2015 to account for inflation. This led the NHTSA to raising fines to $14.00 (from $5.50) for every 0.1 mile per gallon new cars and trucks consume in excess of required standards. Since then, the interested parties have been throwing in their two cents.
In March, Tesla urged a U.S. appeals court to reinstate the higher fuel economy penalties and said the Biden administration ignored the ongoing impact of the Trump rule on the credit-trading market.
Tesla, whose electric cars produce zero emissions, sells credits to other automakers to reduce their burden of complying with regulations and argued the Trump rule change makes those credits less valuable.
FCA paid a total of nearly $150 million for failing to meet 2016 and 2017 requirements.
NHTSA said its analysis showed reinstating the earlier hike could boost penalties for the 2019 model year alone by $178.5 million, a figure that does not include the impact on credit trading.
Stellantis said earlier this month in a securities filing costs related to potential higher CAFE penalties could be about 521 million euros ($609 million).
Meanwhile, the NHTSA proposed increasing CAFE requirements by 8 percent annually for 2024 through 2026, reversing a Trump-era policy that rolled back higher requirements to ensure consumer vehicle choices remained robust and pricing remained low (at least that’s how it was framed). While the above is fine with just about any manufacturer that prioritizes EVs, legacy brands that still need to sell hundreds of thousands of gas-burning vehicles have less to celebrate. Automotive lobbies generally oppose the hike and have been begging regulators not to retroactively apply penalties to vehicles already produced all summer.
The Department of Transportation and NHTSA will be giving the public 30 days to comment on whether the government should reinstate the 2016 rules imposing higher penalties — which would include vehicles from the 2019 model year.
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