The National Highway Traffic Safety Administration (NHTSA) has reinstated strict fines for automakers that violate corporate average fuel economy (CAFE) standards.
The Trump Administration in January 2021 delayed a 2016 NHTSA ruling that would double fines for automakers who did not meet certain CAFE standards, beginning with the 2019 vehicle model year. As the decision was under review for the past year, NHSTA was not able to collect fines for automakers that were in violation of these standards between 2019 and 2021.
Now that NHTSA has signed this new final ruling, the federal watchdog will be able to apply much stiffer penalties for CAFE violations and will soon be able to collect stiffer fines from automakers that run afoul of the rules. According to Reuters, the fine is $14 for every 0.1 mile per gallon a 2019 to 2021 model year vehicle falls short of required fuel economy standards, multiplied by the number of non-compliant vehicles sold. The fine will rise to $15 per 0.1 mpg for the 2022 model year. The previous penalty for CAFE violations was $5.50 for every 0.1 mpg.
Automakers that sell vehicles with higher fuel economy ratings than CAFE standards permit are rewarded with credits that they can sell to other automakers. This ruling is viewed as a win for Tesla, which generates a significant portion of its profits from carbon credit sales, as carbon credits will now be worth more than they were previously.
Automakers objected to the higher CAFE penalties when they were first outlined by the Obama Administration in 2016. The Alliance for Automotive Innovation, an industry trade group representing virtually every major automaker, said the revised fines would cost the industry upwards of $1 billion each year. Stellantis alone is thought to be on the hook for roughly $570 million in fines from the 2019 to 2021 model years.