Trump Freezes Fines for Missing Obama-Era Fuel-Efficiency Standards

Published August 28, 2019

The Trump administration has decided to freeze the cost of fines automakers must pay for missing increased Corporate Average Fuel Economy (CAFE) standards imposed by the National Highway Traffic and Safety Administration (NHTSA) in 2016, then under the control of President Barack Obama.

In 2015, Congress passed legislation ordering federal agencies to adjust a wide range of civil penalties to account for inflation. The Obama administration responded by more than doubling the fines on automakers for violating CAFE fuel economy standards, raising them from $5.50 to $14 for every 0.1 mile per gallon each new car and truck exceeds national fuel-efficiency standards. Nearly simultaneously, the Obama administration imposed an accelerated timeline for steep fuel economy increases on automakers.

The Trump administration put the Obama-era fines on hold in 2017 and initiated in August 2018 a formal rulemaking to permanently suspend the increase in fines for missing federal CAFE standards.

After nearly a year of public input, NHTSA issued a final rule on July 12 freezing the fines at previous levels. NHTSA estimated the freeze would save automakers almost $1 billion per year.

‘Significant Economic Harm’

Combined with the increased fuel economy mandates, the fines would have cost car makers and consumers dearly, says Gloria Bergquist, vice president of public affairs for the Alliance of Automobile Manufacturers, whose membership includes Fiat Chrysler, General Motors, Toyota, Volkswagen, and other manufacturers.

“[The Obama administration] failed to take into account the significant economic harm that would result,” Bergquist said. “[NHTSA’s] own model clearly shows the significant economic harm that such a dramatic and unjustified increase in penalties would have on auto manufacturers, workers, and ultimately consumers.”

States Challenge Freeze

As has become common when environmental regulations are changed, the Trump administration’s freeze is now the subject of litigation.

A coalition of twelve states and the District of Columbia, led by the attorneys general (AG) of California and New York, filed suit in the Second Circuit Court of Appeals on August 5, challenging the administration’s freeze on CAFE fines.

The AGs claim, among other things, NHTSA violated the 2015 Federal Civil Penalties Adjustment Act by freezing the fines and inaccurately interpreting its “statutory obligations,” in the words of the complaint. The plaintiffs also allege NHTSA’s rule is “based on inaccurate assumptions of the economic impact of the inflation-adjusted penalties.”

No Separate Deal

Meanwhile, the Trump administration is finalizing its revisions to the 2012 Obama CAFE standard increases.

The Obama administration increased fleet-wide fuel-efficiency standards to an average of 46.7 miles per gallon by 2026. In 2018, the Trump administration proposed freezing the standards at 37 mpg and stripping California of its power to impose its own, stricter, statewide tailpipe emissions standards.

In 2009, the Obama administration authorized California to set its own standards, allowing other states to opt into the California program.

In addition, the White House has announced it will fight a new agreement between California and a handful of automakers seen as a compromise between stringent Obama-era CAFE standards and a more relaxed proposal favored by the Trump administration.

“The federal government, not a single state, should set this standard,” John Deere, special assistant to President Donald Trump, said in a statement. “We are moving forward to finalize a rule for the benefit of all Americans.”

Dangerous Standards, ‘Social Engineering’

CAFE standard increases were among the worst regulatory changes during Barack Obama’s years as president, says Jay Lehr, a senior policy analyst with the International Climate Science Coalition.

“Fewer Obama regulations were dumber than making CAFE standards tighter and imposing steeper fines,” said Lehr. “People do not want lightweight, unsafe cars, and CAFE standards make our cars less safe in the name of combating manmade climate change, which has been a fraud from the outset. Trump is righting another Obama wrong.”

The tightened CAFE standards weren’t about saving fuel; they were about government controlling how people travel, says Craig Rucker, president of the Committee for a Constructive Tomorrow (CFACT).

“The only purpose realistically served by tightening CAFE standards and raising fines was to distort the automobile market in favor of electric vehicles,” Rucker said. “Think of it as social engineering through mandated industrial policy.”

Bonner R. Cohen, Ph.D. ([email protected])¬†is a senior fellow at the National Center for Public Policy Research and a senior policy analyst with CFACT.