The Trump administration’s efforts to reverse fuel efficiency mandates put in place by his predecessor took another hit courtesy of a court ruling that invalidated the suspension of financial penalties against automakers.
The U.S. Court of Appeals for the Second Circuit overturned the Trump administration’s July 2019 rule suspending an Obama-era regulation more than doubling penalties for automakers failing to meet fuel efficiency requirements.
The 3-0 ruling asserts that the National Highway Transportation Safety Administration, or NHTSA, didn’t make a “timely” decision to suspend the penalties, which automakers claim will add $1 billion in compliance costs, according to Reuters.
In 2015, as part of a sweeping order from Congress, NHTSA issued a new mandate to hike fines to $14 from $5.50 for every 0.1 mile per gallon of fuel that new cars and trucks consume in excess of the required standards.
The current administration has attempted to roll back many of the Obama administration’s efforts to toughen fuel efficiency and emission requirements during the former president’s final days in office. Shortly after the Trump administration suspended the increase in fines, a group of states – supported by several environmental groups – challenged the move.
Some automakers argued the increases would dramatically raise costs, since they would also boost the value of fuel economy credits used to meet requirements, Reuters reported.
It’s problematic for some companies as they have simply accepted paying the fines are part of doing business rather than trying to meet the requirements. Some of the automakers that have paid the penalties, include Jaguar Land Rover and Daimler AG.
In October, Fiat Chrysler Automobiles said it faced a $79 million U.S. civil penalty for failing to meet 2017 fuel economy requirements after paying a $77.3 million penalty for 2016 requirements.
Environmental groups urged the administration to retain the increase, noting U.S. fuel economy fines have lost nearly 75% of their original value because fines had only been increased once – from $5 to $5.50 in 1997 – during the past four decades.
Trump, two groups of automakers and nearly two dozen states have been in an ongoing battle about fuel efficiency and emissions mandates for much of the last two years.
Most recently, those states filed suit against the administration, after they enacted reduced mandates in March requiring 1.5% annual improvements in vehicle fuel efficiency through 2026, which are lower than the 5% put in place by former President Barack Obama. The Trump administration had pondered simply freezing the current requirements, keeping the requirements through 2026.
The suit was filed by 23 states, led by California as well as the District of Columbia and New York City, Denver, San Francisco and Los Angeles. Prior to this, a collection of 12 environmental groups, including Environmental Defense Fund, Sierra Club and Union of Concerned Scientists also sued over the rules.
Prior to that, California and the California Air Resources Board have been squabbling with Trump and the Environmental Protection Agency for nearly two years about fuel economy and emissions requirements. California has a special exemption allowing it to set its own standards due to pollution problems in the state. Trump pulled the exemption and the state sued.
During that time, a group of automakers including Ford, Volkswagen, BMW and others inked a deal with California to meet a standard somewhere between the Obama and Trump requirements. The new rules require the U.S. vehicle fleet to average 40.4 miles per gallon rather than 46.7 under the Obama rules finalized in 2012.