Tesla is pushing for stricter CAFE penalties in the US
CAFE fines – the costs associated with automakers failing to meet the company’s average fuel economy standards – are currently under scrutiny. The Biden administration and a U.S. appeals court are under pressure to quickly raise civil penalties for automakers who fail to meet fuel economy requirements. Up to $ 1 billion could be at stake annually Reuters, both for non-compliance with the rules and for higher prices for credits used to meet the rules.
Electric vehicle maker Tesla is selling loans to other automakers to help them meet government emissions regulations for vehicles. Tesla argues that the value of these loans will be diminished due to changes in the rules of the administration of former President Donald Trump.
Traffic is the single largest emitter of U.S. greenhouse gas emissions, outperforming the power industry for the first time in 2016. As of 2019, traffic accounted for approximately 29% of the United States’ total greenhouse gas emissions.
CAFE standards regulate how far vehicles have to travel on a gallon of fuel and are associated with regulatory credits. In order to reduce CO2 emissions, governments around the world have created incentives for automakers to develop electric vehicles or cars with very low CO2 emissions. Loans are given to automobile manufacturers who build and sell environmentally friendly vehicles.
Federal CAFE standards, combined with greenhouse gas (GHG) standards, are the primary mechanisms by which the US federal government regulates greenhouse gas emissions from the transportation sector. In addition to the goals of reducing emissions, the standards are also intended to improve the country’s energy security and consumer welfare.
The chronology of the CAFE considerations
In 1975, the Energy Policy and Conservation Act introduced standards for average business fuel economy to reduce energy consumption by increasing the fuel consumption of cars and light trucks.
The standards were raised from a need of 24.1 miles per gallon in 2011 to a projected target of 84.5 miles per gallon by 2025 during Barack Obama’s presidency.
In 2012, the federal government issued regulations that obliged car manufacturers to comply with increasingly stringent fuel savings and greenhouse gases for the period 2017â2025. Separately, the state of California and nine other states required automakers to sell increasing percentages of zero-emission vehicles over the same period.
Fiat Chrysler Automobiles paid nearly $ 150 million for failing to meet the 2016 and 2017 requirements.
Research from 2020 shows that stricter fuel consumption standards are increasing the pace of technological improvements in new passenger cars.
In January 2021, the Trump administration delayed a 2016 ordinance that more than doubled penalties for automakers who fail to meet CAFE requirements. The move was seen as an opportunity to save the industry hundreds of millions of dollars or more. Instead, the Trump administration set the Effective Date to be the 2022 model year. The announcement came just 8 days before President-elect Joe Biden took office.
The U.S. Second District Court of Appeals denied Tesla’s motion for immediate action pending review by the NHTSA in April.
President Biden hired the Environmental Protection Agency (EPA) and the Department of Transportation to propose new rules for advancing fuel efficiency standards in the auto industry. This is an attempt to change what one senior administration official called “harmful rollbacks” of the CAFE standards introduced by the Trump administration. âCorporate Average Fuel Economy Standards for Model Years 2024â2026 Passenger Cars and Light Trucksâ was signed on August 5th.
On August 10, the NHTSA proposed to change the CAFE standards set in 2020 for passenger cars and light trucks of model years 2024â2026. The standards would be tightened at a rate of 8% per year, instead of the previously established 1.5% per year. This proposal also responded to President Biden’s directive in Executive Order 13990 to reconsider the CAFE standards completed in 2020.
Stellantis said in August that the cost related to possible higher CAFE fines could be around $ 609 million.
On Aug. 18, the NHTSA issued a notice that it could impose higher penalties for earlier model years on automakers who fail to meet fuel efficiency requirements but will consider public comments first.
On August 27, Tesla filed a renewed motion for the U.S. Second District Court of Appeals to quickly reinstate higher sentences.
Tesla virtually met with officials from the National Highway Traffic Safety Administration (NHTSA) on Aug. 30.
The NHTSA proposal will be posted in the Federal Register on September 3rd.
The state of the CAFE standards today
“The uncertainty sustained by the slow pace of rulemaking by the NHTSA is therefore compounded by the likelihood of another round of litigation,” Tesla wrote, adding that the uncertainty “can last for several years.”
Now the NHTSA is considering reinstating Obama rule. The government memo said Tesla proposed to NHTSA to withdraw Trump’s lawsuit immediately, saying it “creates persistent uncertainty in investments and transactions across the industry, and any delays will continue to adversely affect the credit market until that.” Problem is solved “. Tesla believes that “any delays will continue to have an adverse impact on the credit market.”
A group representing major automakers such as General Motors, Toyota Motor, Ford Motors and Volkswagen called on the court to deny Tesla’s motion. âThe fact that Tesla could benefit from more certainty about the value of the accumulated CAFE credit is hardly a reason to break off an ongoing administrative procedure,â the group wrote in a court file.
The NHTSA announced a virtual public hearing on October 13, 2021 on its proposal for the âCorporate Average Fuel Economy Standards for Model Years 2024â2026 Passenger Cars and Light Trucksâ. This hearing will also allow the public to provide oral comments on the draft supplementary environmental impact statement accompanying the proposal. If necessary, an additional meeting will be held on October 14th to accommodate the number of people signing up for oral comments. Each commentator has 3 minutes to give oral evidence.
Final thoughts on Tesla’s days in court
Research has shown that a fuel consumption standard is at least 6 to 14 times less cost-effective than a pricing instrument (fuel tax) when an identical reduction in cumulative gasoline consumption is sought. The premise is backed by the U.S. government, which suggests that it is also possible to assume that, even if consumers respond to changes in gasoline prices, they are still short-sighted about choosing vehicles with technological advances . Progressive CAFE standards can serve as symbols that reflect consumers and encourage cost and environmental savings.
Selected image courtesy of Tesla
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