The U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) recently issued a notice of proposed rulemaking in the Federal Register which would retain the penalty rate for automobile manufacturers that fail to meet Corporate Average Fuel Economy (CAFE) standards.
Under the Inflation Adjustment Act, federal agencies must adjust their civil penalties annually for inflation. This resulted in CAFE penalties increasing from $5.50 per tenth of a mile per gallon to $14 beginning with model year 2019 vehicles.
It is estimated that the increase would cost the industry an additional $1 billion annually.
“The agency is proposing this based on a legal determination that the CAFE penalty is not a ‘civil monetary penalty’ as contemplated by the 2015 Act and that, therefore, the 2015 Act should not be applied to the NHTSA CAFE civil penalty formula,” the notice said.
CAFE was enacted in 1975 to reduce energy consumption by increasing the fuel economy of cars and light trucks. Fleet-wide averages must be achieved by each automaker annually.
In 2016, the Environmental Protection Agency raised fuel economy to 54.5 miles per gallon by 2025. President Donald Trump has said he will reverse this regulation.
Public comment is requested on the penalty rate.