NRDC et al. v. National Highway Traffic Safety Administration et al.

Fuel economy standards ensure that automakers develop and produce more efficient vehicles, which benefits consumers, public health, and the planet. But decades of inflation eroded the penalty for violations, undermining these Corporate Average Fuel Economy (CAFE) standards. In 1975, Congress set the original penalty at $5 for each 0.1 mile per gallon that an automaker’s fleet fell short of the applicable standard, multiplied by the vehicles in the fleet. The penalty remained largely unchanged for more than 40 years, rising slightly to $5.50 in 1997.

In 2015, however, Congress required federal agencies to update penalties to account—at least in part—for inflation. In 2016, the National Highway Traffic Safety Administration (NHTSA) updated the CAFE penalty to $14 for model years 2019 and beyond. The Trump administration repeatedly tried to undo this important rule, essentially offering manufacturers a cheap license to violate the standards. Each time, NRDC went to court to stop them.

First, in July 2017, NHTSA indefinitely suspended the $14 adjustment. NRDC, the Center for Biological Diversity, the Sierra Club, and several states sued—and in April 2018, the U.S. Court of Appeals for the Second Circuit overturned the Trump administration’s unlawful delay and restored the $14 adjustment.

Second, in July 2019, NHTSA issued a new rule reversing the penalty to $5.50, claiming that the CAFE penalty was exempt from any adjustment. When NRDC and our partners sued in response, the Second Circuit confirmed that the inflation adjustment statute applied and ruled that NHTSA lacked authority to undo the increase. Once again, the court reinstated the $14 penalty.

Finally, in January 2021, during the Trump administration’s final days, NHTSA tried one last giveaway, reducing the penalty to $5.50 for model years 2019–2021. NRDC and our partners sued a third time. Our lawsuit was paused while the Biden administration reconsidered the January 2021 rule. NHTSA ultimately agreed to restore the $14 penalty for model years 2019–2021, and the new rule took effect on May 31, 2022. With the proper penalty back in place, we voluntarily dismissed our lawsuit.

The inflation-adjusted penalty will strengthen all CAFE standards going forward, including the Biden administration’s newly finalized standards, which are projected to reduce fuel use by more than 200 billion gallons through 2050, saving drivers hundreds of dollars per year. Additional benefits include less vulnerability to oil prices and reducing carbon emissions by 2.5 billion metric tons. A penalty that accounts for inflation will help ensure that these fuel economy standards continue to deliver on their promise.