Trump administration freezes penalties for energy efficiency

WASHINGTON (Reuters) – The Trump administration announced Friday that it was issuing the latest rules to suspend the Obama administration's enforcement in 2016, which more than doubled the penalties imposed on car manufacturers who do not meet the requirements for fuel economy.

The 2015 Congress ordered federal agencies to adjust civil penalties for non-compliance with the average fuel economy requirements imposed by companies to account for inflation.

In response, the NHTSA issued rules to increase fines ranging from $ 5.50 to $ 14 for every mile and a half of fuel consumed by new cars and trucks beyond standards required.

Car manufacturers have protested the rise, saying it could increase industry compliance costs by $ 1 billion a year.

After a group of states and environmental groups initiated legal action, the Trump administration began in 2018 the process of officially canceling the Obama regulations.

In a late statement on Friday, NHTSA said it was faithfully following Congress's intent to have the penalty rate set at the level required by law.

She hoped that this final rule would significantly reduce the future burden on industry and consumers by $ 1 billion a year, he added.

The Alliance of Automobile Manufacturers, a trade group representing General Motors Co (GM.N), Volkswagen AG (VOWG_p.DE), Toyota Motor Corp. (7203.T), Fiat Chrysler Automobiles NV (FCHA.MIand others, said it could increase industry compliance costs by $ 1 billion a year.

Friday night, Gloria Bergquist, a spokeswoman for the group, welcomed the decision, saying that "the model of NHTSA clearly shows the considerable economic harm that could result in such a dramatic and unjustified increase in penalties for car manufacturers, workers and, ultimately, consumers ".

The previous administration "did not take into account the significant economic damage that would result," she added.

Automakers have argued that the increases would significantly increase costs, since they would also increase the value of the fuel economy credits used to meet the requirements.

In September 2017, three environmental groups and some US states, including New York and California, sued NHTSA for suspending Obama's rules.

Last year, states said: "If the penalty is not severe enough, automakers do not have a vital incentive to make fuel efficient vehicles."

Historically, some manufacturers have paid fines instead of meeting fuel efficiency requirements, including luxury automakers such as Jaguar Land Rover, owned by Tata Motors (TAMO.NS) and Daimler AG (DAIGn.DE).

In February, Fiat Chrysler told Reuters that it had paid $ 77 million in civil fines in 2018 in the event of non-compliance with the fuel economy requirements of the 2016 model year.

Fiat Chrysler is pleased with the decision.

This "allows us to continue our important investment plans in our manufacturing footprint in the United States and in the new technologies needed to maintain our improved fuel economy trajectory," said the automaker in a statement Friday night.

This decision comes as NHTSA and the Environmental Protection Agency are working to finalize a rewriting of the Obama administration's fuel economy requirements until 2026 in the coming months.

In August 2018, the administration proposed requirements for fuel economy and removal of California's right to set its own rules on vehicle emissions.

The final settlement faces a multi – year legal battle that could leave automakers in stalemate over future emissions and fuel economy requirements.

The rules of the Obama era provided fuel economy savings of 46.7 miles per gallon by 2026, against 37 miles per gallon according to the preferred option of the Trump administration.

Last month, 17 major automakers advocated a compromise "halfway" between the Obama era standards, which require an annual emissions reduction of about 5%, and the Trump administration's proposal.

Reuters reported in April that the authorities expect the final rule to include a slight increase in annual fuel consumption requirements.