Federal regulators offered the auto industry some relief today on two key areas of the U.S. government’s light-vehicle fuel economy program that had sparked new tensions between the administration and the industry.
In response to a petition from groups representing auto manufacturers, the National Highway Traffic Safety Administration is postponing a steep increase in penalties for noncompliance with corporate average fuel-economy standards. That increase, which was due to be applied to 2015 model-year vehicles, will now take effect beginning with 2019 models.
The agency said the delay reflects “the reality that manufacturers design their products far in advance.”
Separately, the agency granted automakers’ request for a formal rule-making process to clear up discrepancies between greenhouse-gas standards overseen by the EPA and the fuel-economy standards administered by NHTSA.
“These steps reflect our ongoing commitment to dialogue with stakeholders throughout implementation of this important program,” NHTSA said in a statement accompanying the ruling.
The decision also likely reflects the Obama administration’s intent, in its final weeks, to work out several tension points in the CAFE agreement that threatened to derail the program as it moves under a new presidential administration.
The increase in penalties was prompted by a law enacted last year directing all federal agencies to update their civil penalties to maintain their effect as a deterrent and keep up with inflation.
For NHTSA, that meant raising the rate used for calculating CAFE penalties to $14 from $5.50. The $8.50 difference amounts to a large amount because it's applied to each 0.1 mpg that an automaker falls short of its fuel economy target and then multiplied by the number of vehicles from that fleet sold in a given model year.
Environmental advocates had argued that the fee increase was needed to make noncompliance more costly to automakers.
Automakers that fall short of their fuel-economy targets can also purchase credits from other companies to stay in compliance. But the penalty increase, disclosed in a July 5 Federal Register notice, caught the industry off guard, especially as it applied to vehicles that had already been available for sale — and for which the fuel-economy standards hadn’t yet been determined.
At the time, the Alliance of Automobile Manufacturers called it a “draconian” move that would make it harder for automakers to make progress toward the Obama administration's call for a fleetwide average of 54.5 mpg by the 2025 model year.
Today’s NHTSA move came in response to a petition from the Alliance and the Association of Global Automakers seeking to block the increase. NHTSA concluded that because automakers had already completed compliance plans for vehicles through the 2018 model year, applying the higher penalty before that wouldn’t help enforce the standards or improve overall fuel economy.
The Alliance applauded the delay, saying it would give automakers time to adjust their development plans “as fuel economy requirements continue to increase dramatically.”
The other NHTSA move is in response to a request from the two trade groups for a final rule that would clear up discrepancies between the greenhouse-gas and fuel-economy components of the federal program, so that automakers aren’t penalized under one set of rules for trying to comply with the other set.
The agency said it would address the discrepancies in its upcoming proposal setting fuel-economy standards for the 2022 model year and beyond, or in a separate proposal.
“We urge NHTSA to act as quickly as possible to complete these steps,” the Alliance said in a statement. “Every year that automakers have to comply with two differing sets of rules, it creates unnecessary hurdles for manufacturers.”
In a separate statement, the Global Automakers group said, “We are still evaluating NHTSA’s response to our petition on CAFE civil penalties. We appreciate the agency’s recognition that the auto industry entails long lead time and compliance plans.”