In a Friday news dump last week, the Trump administration announced that they will be finalizing a reduction in fines for missing fuel economy targets. Not only is the administration working to roll back the strong standards set in place by the previous administration currently driving efficiency improvements across new vehicles, but now they are letting automakers off the hook if they miss targets between now and when that rollback goes into effect.
This action is par for the course for this administration, which is doing whatever it can to increase pollution and oil use.
Thwarting a Congressional mandate
Since 1975, manufacturers have been required to meet Corporate Average Fuel Economy (CAFE) targets which govern the average efficiency of new vehicles sold. If a manufacturer missed its annual target, they had to pay a penalty, which was initially set at $50 per miles-per-gallon, per vehicle. This penalty was adjusted slightly in the 1990s to $55/mpg/vehicle, but obviously this is nowhere close to the level of inflation that has occurred since 1975, which is why in 2015 Congress required Federal agencies to adjust all of their penalties with respect to inflation in order to ensure that they remained as strong a deterrent as they were when initially finalized (Title VII, HR 1314). The resulting penalty of $140/mpg/vehicle put in place under the Obama administration did not fully account for inflation since 1975, but it was the maximum allowable increase under the law set by Congress.
Fines this low are not a deterrent
Historically, while luxury manufacturers often treated the fines as part of their business model of selling nothing but overpowered vehicles to high-income buyers, large full-line automakers have managed to comply with the standards (or get the federal government to weaken CAFE standards, as in the 1980s) in order to avoid millions of dollars in fines for noncompliance. However, last year saw Fiat-Chrysler (FCA) fined for failing to ensure that the FCA cars produced in North America are approximately as efficient as the average car sold in the United States. The penalty rate is the same as it is for the CAFE standard, and with FCA falling nearly 3 mpg short of the rest of the industry, the decision not to improve the efficiency of its domestically-manufactured vehicles cost the company $77 million in fines last year, a fine which would have been nearly three times higher if NHTSA had not delayed implementation of the CAFE fine increase.
FCA knew years in advance that it would miss its efficiency targets and would therefore have to pay fines, and it did not adjust its behavior. And according to the Auto Alliance, the largest automaker trade group, its members are willing to pay billions of dollars in fines instead of complying with the regulations.
Clearly, the fine is not acting as a deterrent and should be increased—however, to no one’s surprise this administration is instead moving in the wrong direction.
This action gives manufacturers a free pass to sell more gas guzzlers
Under dubious legal arguments that the CAFE fine is not, in fact, a “penalty”, the Trump administration is rolling back the penalty from $140 back down to $55/mpg/vehicle, an argument at odds with previous increases under the Clinton and Obama administrations. Automakers themselves are even saying the fine is not high enough to push them to comply with the regulations, since the fine may be lower than the cost of putting more efficient technology in new vehicles. Since automakers assume their customers don’t care much about saving money at the pump, regulations are a key driver in getting technology to market, even technologies which pay for themselves. Lower fines simply reduce that push to actually comply with the rules, limiting the availability of consumers’ choices of more efficient vehicle options.
The Trump administration is already standing in the way of improvements beyond 2020 by rolling back fuel economy regulations. This action serves only to mute progress between now and then.
This administration gives polluters a green light
This action is like far too many others under this administration—Trump’s EPA has seen substantial reductions in penalties assessed to polluters and the number of inspections and actions taken towards those who put profit over public welfare. The agency has also ignored the health impacts of air quality worsening under their watch.
Unsurprisingly, automakers lauded the decision to lower the penalty, even while working to roll back the standards to fuel economy levels which are so meager that nearly one-third of vehicles sold today already meet them.
The administration’s actions to make enforcement of strong fuel economy standards as toothless as possible are consistent with the rest of their environmental and energy policies—give industry what it wants, and to hell with the rest of us. But that’s not a justifiable policy in the courts, and it is up to NGOs like UCS, as well as the states bearing the adverse impacts of these policies, to give ‘em hell right back, holding the administration and, thus, industry accountable for its actions.