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US may cut fines for fuel economy violations

12 Jul 2017 14:29 (+01:00 GMT)
US may cut fines for fuel economy violations

Washington, 12 July (Argus) — President Donald Trump's administration is considering reducing the penalties automakers will have to pay if they fail to meet increasingly aggressive fuel-economy standards in the US.

The US National Highway Transportation Safety Administration (NHTSA) today blocked a rule issued last year that increased the penalty by about 150pc. The rule was intended to account for more than four decades of inflation. The agency cited concerns that automakers incurring the penalty could pass its cost along to consumers and worries about negative effects on the economy and employment.

The administration's action could weaken automakers' financial incentives to achieve aggressive fuel-economy standards put in place under former president Barack Obama's administration. US automakers under those standards are required to increase the average fuel-economy of vehicles they manufacture to about 50 miles/USG by 2025, up from about 35 miles/USG today.

NHTSA, which jointly enforces those fuel-economy standards alongside the US Environmental Protection Agency (EPA), since 1975 has been penalizing automakers at a rate equivalent to $5.50 for every tenth of a mile per USG below the fuel economy standards they were meant to achieve, multiplied by the number of vehicles sold.

But that penalty was deemed too low after the US Congress in 2015 enacted a law ordering all federal agencies to revise their civil penalties to account for inflation. NHTSA, in response, issued a rule that adjusted the penalty to $14 per tenth of a mile and would have applied beginning with model year 2019 vehicles.

NHTSA now says the inflation adjustment was "more complicated" than it initially understood, in part because low fuel prices have caused consumers to become less concerned about the fuel economy of vehicles they are purchasing. The agency has blocked the higher penalty from taking effect and is seeking comment for the next 90 days on where it should be set.

Environmental group the Sierra Club's director for federal advocacy Andrew Linhardt accused the administration of trying to backpedal on climate regulations to "fatten the wallets of corporate polluters." EPA this year revived plans to conduct a "midterm" review that would allow the agency to weaken fuel-economy standards that apply starting in 2022.