Carmakers face higher mpg fines

Keith Laing
Detroit News Washington Bureau

Washington — Automakers face higher fines for violating stringent federal fuel-efficiency standards requiring them to produce produce car fleets that average over 50 miles per gallon by 2025 after a court overturned a Trump administration decision to postpone a hike in the penalties.

In a move that stoked ire among environmentalists, the National Highway Traffic Safety Administration announced in January that it was postponing a scheduled increase that would have raised the penalty for auto companies that fail to meet the higher emission standards. The fine was scheduled to increase to $14 from $5.50 for each one-tenth of a mile-per-gallon their average fuel economy falls short.

That penalty would be multiplied by the total number of cars in automakers’ fleets sold in that model year. The delay was overturned by the U.S. 2nd Circuit Court of Appeals on Monday. The petition to review NHTSA’s order was filed by California, Maryland, New York, Pennsylvania and Vermont.

Environmentalists are cheering the court ruling, but it may prove to be a hollow victory if the Trump administration proceeds with an anticipated rollback of the mileage rules. The administration already has announced a decision to put the brakes on rules crafted by the Obama administration that would have required automakers to produce car fleets that averaged over 50 miles per gallon by 2025. The Environmental Protection Agency and NHTSA intend to craft new rules for the models years between 2022 and 2025.

California, which sets its own environmental standards under a waiver included in the 1970 Clean Air Act, has threatened to sue to preserve the Obama administration’s emission rules. A dozen other states have adopted California rules, accounting for a third of the nation’s auto market.

With the possibility of future lawsuits over gas mileage hovering, environmental groups in Washington say it bodes well that a federal court has sided with them in the case about the fines for emission violations.

“Once again, the Trump administration has failed in court,” Sierra Club Senior Attorney Alejandra Nunez said in a statement. “Neither the American people nor the judicial system will allow Donald Trump and his administration to haphazardly weaken the civil penalties for companies violating the life-saving clean air standards just to help the auto industry pad its pockets. ... These updated fines must remain in place to ensure that automakers do not cheat the system.”

NTHSA said Tuesday that it is planning to review the court ruling once it becomes available. The agency has said it decided to postpone the fine increase for emission violators “in accordance with the memorandum of January 20, 2017, from the Assistant to the President and Chief of Staff, entitled ‘Regulatory Freeze Pending Review.” NHTSA had previously agreed to delay implementation of fine increases pertaining to 2015 model year cars until the 2019 model year.

Rebecca Lindland, senior analyst at Kelley Blue Book, said the possibility of having to pay increased fines for falling short of the emission standards will be a headache for automakers. They already are having trouble convincing car buyers to opt for fuel-efficient cars instead of popular SUVs and pickup trucks.

But Lindland said the court ruling is unlikely to dissuade the Trump administration from rolling back the Obama-era gas mileage rules.

“This is a significant jump for those manufacturers that are paying fines, such as JLR and Daimler, from $5.50 to $14.00 per 0.1 MPG off the fuel economy target,” she said. “As these fines were first floated several years ago, and this ruling basically just says no, we won’t provide relief, this won’t change much about the debate on fuel economy standards.

“The real issue continues to simply be the lack of interest consumers show in hybrids, electrics, and other high-fuel efficiency vehicles. The OEMs wouldn’t be pushing back on these regulations and fines if more than 3 percent of consumers were buying alternative propulsion vehicles every year.”

The new emission standards, known as Corporate Average Fuel Economy (CAFE), began to take effect with the 2017 model year, after an initial increase in requirements that ran from 2012-16. They call for ramping up from the current fleet-wide average of about 34 miles per gallon for cars and trucks in 2016 to an eventual goal of 54.5 miles per gallon by 2025.

The increase, which some automakers have said is too ambitious, starts with a rise to an average of over 35 miles per gallon for the 2017 models already rolling out. The mileage rules call for automakers to achieve a fleetwide average mileage rate of more than 36 miles per gallon for cars and trucks in 2018.

The standard then increases to more than 37 miles per gallon in 2019 and nearly 39 miles per gallon in 2020, which is before automakers will have a chance to weigh in on the need for any course corrections. By 2021, automakers will be required to hit a combined average of 41 miles per gallon for their cars and trucks.

The rules for the model years between 2022 and 2025 were subject to a congressionally mandated review that was canceled initially by the Obama administration, but later reinstated by the Trump administration.

Automakers have pushed Trump to roll back the requirements in the later years or address inconsistencies between the Department of Transportation rules and concurrent greenhouse gas emission rules being enacted by the EPA. They argue that car buyers have demonstrated less interest in fuel efficient vehicles than common wisdom expected when the rules were put in place at a time when gas prices were topping $4 per gallon.

The Alliance of Automobile Manufacturers, which lobbies for major carmakers in Washington, declined to comment on the recent court ruling.

The national average price for a gallon of gas on Tuesday was $2.76, according to AAA.

Sylwia Bialek, economic fellow at the Institute for Policy Integrity at New York University School of Law, which filed a brief as an impartial adviser to the court on the case, said the court ruling overturning NHTSA’s decision to delay the fine increase for emission violators is significant, despite the fact that Trump administration is now weighing rolling back the rules completely.

“There is no question that the public would be worse off as a result of this suspension,” she said. “NHSTA should be aware of the enormous impact of the suspension, since it is predicted by the agency’s own models.”

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Twitter: @Keith_Laing