Trump administration stops increased fuel economy fees at automaker request

Riley Beggin
The Detroit News

Washington — The Trump administration agreed to delay a costly increase in civil penalties for automakers who fail to meet fuel economy standards, according to a rule released Tuesday by the National Highway Traffic Safety Administration. 

Under the new rule, increased fines will not be applied through model year 2022 and the agency is determining whether it will apply the changes to the 2023 model year.

The decision comes shortly before President-elect Joe Biden is set to be sworn in next week. Industry analysts expect he will make "green" auto industry policy a priority, including potential changes to Corporate Average Fuel Economy standards. 

In this file photo, morning traffic begins to swell on the 101 Freeway in the San Fernando Valley. California finalized its agreements with five major automakers aimed at upholding its stringent vehicle emissions standards. (Al Seib/Los Angeles Times/TNS)

In 2015, Congress and the Obama administration passed a law that required federal agencies to raise penalties to catch up with inflation.

The decision prompted a near-tripling of the non-compliance fine from $5.50 to $14 for each 0.1 mile per gallon consumed beyond the standards beginning with model year 2015. Automakers opposed the increased fines, arguing it would cost the industry around $1 billion more annually to comply with the regulations.

Four years later, the Trump administration issued a rule suspending the Obama-era regulation. Environmental groups sued them over the suspension and in August, an appeals court overturned the Trump administration's decision. 

The Alliance for Automotive Innovation — which represents major automakers selling vehicles in the U.S., including the major Detroit automakers — asked the Trump administration to delay implementing the changes, arguing that increased fines wouldn't incentivize adherence because it's too late to make changes to certain model years and would "effectively be punishing violators retroactively," according to NHTSA.

"Several individual vehicle manufacturers submitted supplemental information to NHTSA further articulating the negative economic position they are in due to COVID-19 and the potential and significant adverse economic consequences of the increased civil penalty rate, particularly during this time of stress on the industry," the agency wrote in the proposed rule

The industry has not met federal fuel economy standards since 2015, according to the Environmental Protection Agency. While Detroit automakers' fuel economy has been increasing and greenhouse gas emissions have been decreasing in recent years, the three lag behind other major manufacturers in the measurements, according to the agency's most recent Automotive Trends report. 

In late October, Fiat Chrysler Automobiles NV said in a quarterly filing that it may have to pay nearly $583 million in fines after the Court of Appeals decision. 

The Alliance for Automotive Innovation said in a statement that automakers appreciate NHTSA's decision, saying the vehicles that would have drawn higher fines "have already been sold or will soon be manufactured."

"As the interim final rule notes, and we agree," the statement continued, "‘NHTSA does not believe that it is appropriate to impose a higher civil penalty rate for model years when doing so would not have incentivized improvements to fuel economy — one of the core purposes of'" the Energy Policy and Conservation Act that began the federal fuel economy program. 

Environmental and safety advocates criticized the decision, with the Union of Concerned Scientists' Dave Cooke writing on Twitter that it resembles "industry handouts" and the Center for Auto Safety calling it a "ridiculous" last-minute regulation.

Twitter: @rbeggin