The National Highway Traffic Safety Administration is facing a legal challenge from 15 states for delaying the implementation of heavier penalties to automakers that fail to meet fuel economy requirements.
The delay was announced by the NHTSA last month under the Trump administration. A response to inflation, the increase was ordered by Congress in 2015. The penalty was supposed to rise from the current price of $5.50 to $14 per 0.1 miles per gallon new vehicles consume over required standards.
According to the NHTSA, the decision could cost the American government up to $1 billion per year in underpaid penalties. According to Reuters, the 15 states, including New York and California, aren’t the only ones to go after the government agency, as the Sierra Club and the National Resources Defense Council have also sued the NHTSA for delaying penalties.
Indeed, the delay followed another attempt by the Trump administration to offer automakers that fail to meet fuel economy regulations impunity. In August, an appeals court overturned the administration’s attempt to suspend the regulation to increase penalties for automakers that violate fuel economy standards.
Although the increase may sound steep, the current $5.50 per 0.1 mpg was set in 1997 and that was the first and only time it has been increased since it was established at $5.00 in 1975.
Strictly speaking, the US inflation calculator estimates $5.00 45 years ago is the equivalent of $24.00 today. At $14, automakers are getting a 42% break compared to what they were paying in the ’70s.
This delay is particularly useful for companies like Stellantis. Before it partnered with Peugeot, Fiat Chrysler Automobiles’ fleet contravened fuel economy regulations enough to incur $79 million in penalties in 2017. If it had been forced to pay the incoming penalty rate of $14, that total would rise to nearly $200 million.
The Biden administration has already ordered a review of the NHTSA’s decision to push back penalty increases to 2026.