What Happened?
The federal rules that set minimum fuel efficiency targets for cars and trucks sold in the U.S. have lost their main enforcement tool. A fiscal year 2025 budget law reduced the civil penalty automakers pay for missing those targets to $0.00, meaning carmakers face no financial consequence for falling short.
A Congressional Research Service (CRS) report published Sept. 24 states directly that "manufacturers are no longer incentivized to comply with these standards" as a result. The penalty that automakers previously paid for missing fuel economy targets reached $335 million in 2024 before falling to $190 million in 2025, and is now eliminated entirely.
Why Does it Matter to Me?
When automakers face no penalty for building less fuel-efficient vehicles, the market for high-mileage cars can shrink, and drivers may find fewer options that save money at the pump.
The Trump administration's proposed SAFE Vehicles Rule III would reduce the required average fuel economy for new light-duty vehicles from 49 miles per gallon by model year 2026, set under the prior administration, to approximately 30.4 miles per gallon for that same model year. That gap, nearly 19 miles per gallon, translates directly into how far a new car can travel on a single tank of gas.
The proposal would also eliminate a system that allowed automakers to buy and sell fuel economy credits, a market the CRS report describes as multibillion dollars in scale. The report cites a Wall Street Journal account noting that electric vehicle maker Rivian Automotive faced a $100 million revenue gap as a result of relaxed fuel economy rules.
Both Sides, Now
The Trump administration cited technological feasibility and economic practicability as justifications for setting less stringent standards. Some automotive industry stakeholders have expressed concern about frequent regulatory changes, given that companies typically develop five-year to 10-year product plans, the CRS report notes.
In February, the Environmental Protection Agency also rescinded a 2009 finding that had required it to issue greenhouse gas emission standards for vehicles, removing a regulatory requirement that had historically aligned Corporate Average Fuel Economy (CAFE) rules. Together, the zeroed-out penalty and the rescinded emissions finding represent two separate pillars of the fuel economy framework being removed in the same period.
What Happens Next?
The CRS report outlines several options Congress could take, including resetting the civil penalty, capping credit banking or trading, redefining vehicle fleet classifications, or adjusting what the Transportation Secretary must weigh when setting fuel economy targets. Congress could also choose to take no action and allow federal agencies to manage what remains of the program, including monitoring fleet fuel efficiency and maintaining vehicle fuel economy labels.
The proposed SAFE Vehicles Rule III was published in the Federal Register on Dec. 5, 2025, and is still working through the regulatory process. No congressional vote on the penalty or program structure is currently scheduled, and no hearing date has been announced.
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