What Happened?

Automakers that violate the federal fuel-economy standards under the Corporate Average Fuel Economy (CAFE) program now face no civil penalties. The fiscal year 2025 reconciliation law, Public Law 119-21, reduced to zero the civil fine manufacturers face for missing Corporate Average Fuel Economy (CAFE) standards.

The Congressional Research Service (CRS) published a report examining how recent statutory and regulatory changes affect the program. Separately, the Trump administration issued a final rule cutting the projected average fuel-economy target for model-year 2031 light-duty vehicles from 50.4 miles per gallon to 34.9 miles per gallon.

Why Does it Matter to Me?

The Corporate Average Fuel Economy (CAFE) program requires the National Highway Traffic Safety Administration to set separate fleet-average fuel-economy standards for domestic passenger cars, imported passenger cars and light trucks. The CRS report notes that eliminating the penalty may weaken incentives for manufacturers to improve fuel economy, though market forces and technological advances could still encourage efficiency.

The new rule eliminates trading of fuel-economy credits between manufacturers for credits earned beginning with model year 2028, while previously earned credits remain tradable under existing time limits.

Both Sides, Now

The National Highway Traffic Safety Administration (NHTSA) argues that separate passenger-car and light-truck standards encouraged unintended market changes, including manufacturers replacing station wagons with minivans and crossover vehicles.

Critics argue that removing penalties weakens the program's ability to hold automakers accountable. Reuters reported that NHTSA figures assigned $235.5 million in penalties to Stellantis for model years 2018 and 2019, and $128.2 million to General Motors for model years 2016 and 2017, for falling short of fuel-economy requirements. Those cases show the penalty was an active enforcement tool before it was eliminated.

The Congressional Research Service report says Congress controls the program's underlying legal framework, including penalties, credit provisions and standard-setting requirements, while the administration can revise regulations within its existing statutory authority. Neither congressional leaders nor the White House responded publicly to the CRS report's findings.

What Happens Next?

In February, the Environmental Protection Agency (EPA) rescinded its 2009 greenhouse-gas endangerment finding and repealed federal vehicle greenhouse-gas emissions standards. The CRS report notes that without EPA vehicle greenhouse-gas standards, NHTSA would have no corresponding standards to align with CAFE requirements, though EPA retains responsibilities for fuel-economy testing, verification and labeling.

The report outlines options Congress could pursue: restoring civil penalties, revising credit rules, changing fleet classifications, or reconsidering EPA's role. It does not recommend a specific course.Number

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