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Highway agency tosses Obama proposal to raise fuel economy fines

Steve Geimann and Ryan Beene, Bloomberg News on

Published in Business News

WASHINGTON -- The Trump administration threw out steeper fines proposed by Obama-era regulators for automakers that fail to meet tougher fuel economy standards, a boost for luxury brands like Jaguar, BMW and Porsche that have paid the highest penalties in the past.

The National Highway Traffic Safety Administration, in a filing late Friday, said fines for breaching Corporate Average Fuel Economy, or CAFE, standards would remain at the current rate. A 2015 proposal by the Obama administration, to take effect for the 2019 model year, would have more than doubled the civil penalties on manufacturers.

The agency, which administers the CAFE program, said the final rule would cut future financial burdens on industry and consumers by as much as $1 billion a year.

Since the mid-1970s, automakers have been fined $55 for each mile-per-gallon shortfall of the standard, multiplied by the number of vehicles sold in that model year. Congress in 2015 instructed all federal agencies to update their civil penalty formulas to reflect inflation, and NHTSA at the time proposed to increase the fine to $140 per mpg shortfall, per vehicle sold.

But after a two-year review, NHTSA concluded that CAFE fines aren't a "civil monetary penalty" to be adjusted for inflation. Instead, the fines are part of a "complicated market-based enforcement mechanism" and are set at the end of "a complex formula, credit-earning arrangement, and credit transfer and trading program," according to the filing.

The fuel economy program took effect in 1975, and companies paid more than $890 million in penalties through the 2014 model year, according to NHTSA. Separately, carmakers in 2017 projected that cars and light trucks from the 2016 model year would be the first to fall short of industry-average fuel economy goals since 2004, and that the shortfall would widen the following year.

Facing a double-whammy -- higher per-vehicle fines coupled with rising fuel-economy standards -- they asked NHTSA to reconsider. Under President Donald Trump, NHTSA in July 2017 sought public comments on revising the proposal.

Hardest hit by higher fines would likely be luxury brands including Jaguar-Land Rover, BMW and Porsche, which may have been exposed to millions of dollars in additional penalties. Tata Motors Ltd.'s Jaguar-Land Rover brand paid more than $14 million in penalties stemming from its 2013 model year light trucks, for example.

NHTSA's decision comes as Trump seeks to slash regulations viewed as costly or burdensome to businesses.

(c)2019 Bloomberg News

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