US NHTSA to reexamine CAFE civil penalty rates
12 July 2017
The US Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) announced that it is reexamining an Obama administration rule that increases civil penalties related to the Corporate Average Fuel Economy (CAFE) standards to adjust them for inflation.
The NHTSA published two notices in the Federal Register (docket number NHTSA-2016-0136 and NHTSA-2017-0059). The first notice indicates that NHTSA is reconsidering the December 28, 2016, final rule, and seeks comment on the appropriate inflationary adjustment. The second notice delays the effective date of this rule during NHTSA’s reconsideration period.
Seeking comment on the inflationary adjustment will allow stakeholders to provide input and provide NHTSA additional information to inform the agency’s decision regarding how the CAFE civil penalty should be adjusted for inflation, said the agency.
Under the US CAFE fuel economy regulations, manufacturers are allowed to pay fines in lieu of compliance with the fuel economy standards. The December final rule, issued by NHTSA under the Obama administration, almost tripled the CAFE fine for noncompliant vehicles from $5.50/0.1 mpg per vehicle to $14.00/0.1 mpg per vehicle, plus adjustments for inflation, effective from model year 2019.
Since the beginning of the CAFE program in 1975, car manufacturers have paid over $890 million in penalties. The highest CAFE penalties were historically paid by manufacturers of large luxury brands, including Jaguar, BMW and Porsche.
In addition to the increased penalty rates, carmakers feel threatened by an anticipated increase of CAFE noncompliance levels across the industry. Under the 2022-2025 GHG/CAFE regulations, manufacturers are faced with very challenging CAFE standards—the fuel consumption of cars and light trucks must be reduced by around 4% in each model year to meet the global average industry targets. Carmakers have projected that the model year 2016 would be the first to miss the industry-average CAFE goals since 2004, and that the shortfall would widen the following year, according to Bloomberg.
The reexamination of CAFE penalty rates follows a decision to re-open the Midterm Evaluation of the 2025 GHG emission standards—announced by the US EPA Administrator Pruitt in March—which may lead to a relaxation of the standards and/or to a delay in the implementation schedule. Both decisions have been praised by auto industry trade groups, and criticized by environmental groups.
Source: US NHTSA