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Brief Challenging Suspension of NHTSA Rule on Fuel Economy Penalties

March 12, 2018

In 2017, the National Highway Traffic Safety Administration (NHTSA) suspended its 2016 Civil Penalties Rule, which adjusted the penalties for automobile manufacturer non-compliance with fuel economy standards for the first time in decades to reflect inflation. In issuing its suspension, NHTSA claimed that it was causing no harm. Our brief in the case challenging this suspension shows that NHTSA’s claim of no harm was inaccurate.

The 2016 Civil Penalties Rule would have increased the penalty for non-compliance with fuel economy standards from $5.50 to $14 per tenth of a mile-per-gallon. Thus, manufacturers that faced marginal compliance costs of more than $5.50 and less than $14 would be expected to increase their fuel efficiency in reaction to the updated penalties. By suspending the Civil Penalties Rule, NHTSA removed these incentives for increasing fuel efficiency.

As NHTSA’s own fuel-economy compliance model predicts, this would have changed average fuel economy in a significant way. Our economic fellow, Dr. Sylwia Bialek, ran the model and found that in 2022, for example, assuming the suspension is ongoing, the suspension would cause a decrease in fuel economy of more than two miles per gallon on average for passenger vehicles for that one year alone. And even a shorter two- or three-year delay would lead to a cumulative and ongoing impact. By reducing those fuel savings and associated emissions reductions, NHTSA has caused the public harm.

NHTSA’s argument that any harms would not be “immediate” because the 2016 Civil Penalties Rule did not apply to model years before 2019 is also based on inaccurate premises. Because the suspension was issued just as manufacturers were making their compliance decisions for the 2019 Model Year and beyond, it could be expected to have caused manufacturers that would have otherwise increased compliance to not do so. And, in any event, because manufacturers can obtain compliance credits for early compliance, removing the future penalty increase also caused harm by removing incentives for early compliance and depressing the value of compliance credits.

The law requires NHTSA to provide a reasoned explanation for the suspension, including a rational assessment of the impact of the action. Our brief argues that NHTSA’s inaccurate assessment of the harm of the suspension was arbitrary and capricious. In addition, by failing to comply with the law, NHTSA has contributed to an environment of harmful regulatory uncertainty. Our brief argues that the Suspension Rule should be vacated.

Filed under Climate Change and Energy Policy, Court Filings, Transparency