On June 7th, the National Highway Traffic Safety Administration (NHTSA) announced finalized fuel economy standards that will govern the auto industry during model years 2027-2031. The NHTSA is an agency within the U.S. Department of Transportation tasked with administering the Corporate Average Fuel Economy (CAFE) standards, and the finalization of new regulations marks the end of a complex rulemaking process. The agency ultimately settled for moderate stringency increases that appear to be acceptable to auto manufacturers and are closely aligned with relaxed tailpipe emission standards finalized by the Environmental Protection Agency on March 20th.
The NHTSA has a statutory obligation to promote energy conservation by setting fuel economy standards at the maximum feasible level automakers can achieve in each model year. Under the finalized rules, light duty passenger cars will face fuel economy targets that increase annually by 2% from 2027 to 2031. Light duty trucks will have it a little easier, with annual 2% target increases commencing in 2029. The agency estimates that the new rules will increase the average fleetwide fuel economy requirement from 47.3 mpg in 2027 to 50.4 mpg in 2031. The fleetwide fuel economy requirement stood at 35.8 mpg in 2022. The agency considered five regulatory alternatives that varied significantly regarding stringency, along with a sixth “no action” alternative. Of the five alternatives requiring some level of fuel economy improvement, the one that was adopted was the least aggressive.
The finalized standards are sure to face a legal challenge initiated by the fossil fuel industry, but it is unlikely that the auto industry will support that litigation. The Alliance for Automotive Innovation (AAI) is a lobbying group representing the vast majority of full-line automakers that sell light duty vehicles in the United States, and the powerful trade organization has not joined the recent challenge against the EPA’s similar standards, which the AAI tepidly endorsed. On the day the NHTSA new standards were announced, the AAI’s president and CEO, John Bozzella, expressed satisfaction with the outcome of the rulemaking process in a blog post. Praising the alignment of the CAFE standards with the moderate tailpipe emission standards finalized recently by the EPA, Bozzella wrote, “It looks like the left hand knew what the right hand was doing. That’s the kind of coordination we recommended. So that’s good and appreciated.” Both the EPA and the NHTSA have crafted their regulations to withstand judicial review, and the fossil fuel industry’s legal challenges will be weakened by the absence of support from the auto industry.
Under the Biden Administration, the NHTSA and the EPA have finalized regulations that will shape the U.S. auto industry for years to come, and the two agencies have chosen to advance their statutory goals at a sensible pace. President Biden’s political opponents will attempt to portray the regulations as a heavy-handed mandate for electric vehicles that tramples on the rights of auto consumers, but that kind of argument will be a tough sell. The AAI’s endorsement of the EPA’s rules emphasized that they “are mindful of the importance of choice to drivers and preserve their ability to choose the vehicle that’s right for them.” The same is true of the NHTSA’s latest CAFE standards, which are far too moderate to constitute an electric vehicle mandate.