NHTSA fuel rule ends credit trading that benefited Tesla

New fleet standard of 34.5 mpg replaces Biden’s 50.4

The fuel-economy rule the Trump administration finalized Monday eliminates a credit-trading system that had been a financial boon for electric-vehicle maker Tesla, The Wall Street Journal reported.

The new rule sets a fleet-wide average target of 34.5 miles per gallon by model year 2031, down from the 50.4 mpg standard set under the Biden administration. It applies to all model-year passenger cars and light trucks from 2022 through 2031.

“Sensible standards allow automakers more freedom to design and produce vehicles consumers actually want,” National Highway Traffic Safety Administration (NHTSA) Administrator Jonathan Morrison said in announcing the move.

The changes come as American drivers are squeezed by high gasoline costs and new-car prices that now top $50,000 on average. Administration officials said the lower target will reduce the average cost of a new vehicle by easing costly engineering requirements on automakers.

The Trump administration, backed by General Motors, Ford Motor and Toyota Motor, said the previous rules amounted to a de facto mandate to build expensive electric vehicles that consumers ultimately do not want.

The auto industry’s main trade group, the Alliance for Automotive Innovation, called the move an “appropriate course correction” and said it is reviewing the finalized rule.

“What the industry needs is long-term regulatory stability that includes balanced, durable and achievable fuel economy standards that continue to reduce emissions and improve fuel economy,” the Alliance for Automotive Innovation said.

The credit-trading system the rule eliminated had allowed automakers to buy credits from competitors to offset fines, the Journal reported. The workaround was a boon for electric-vehicle maker Tesla, which generates more zero-emission credits than it needs. The rule also reclassifies small SUVs and crossover vehicles — SUVs built on carlike chassis — as passenger cars instead of light trucks, a shift that changes how individual models count toward an automaker’s fleet average.

The fuel-economy standards, known as Corporate Average Fuel Economy (CAFE), apply to the average miles-per-gallon measure for all the cars produced by an automaker in a model year. Congress and the Trump administration last year essentially defanged the mandates by eliminating fines for violating them, the Journal reported.

Lowering the standards now enshrines into federal law more lenient miles-per-gallon targets for automakers. Returning to tougher standards would require more than simply reinstating penalties, the Journal reported.

Critics — including environmental groups and state attorneys general who opposed the rule — said the projected savings are overblown and will be quickly eclipsed by higher fuel costs, according to the Journal.

Since the 1970s, federal fuel-economy rules have pushed automakers to build cleaner cars — the Toyota Prius being a prominent example — and accelerated the electric-vehicle transition. Environmental groups credit the rules with saving trillions of gallons of gasoline, the Journal reported.

The fuel-economy rollback is the latest in a series of Trump administration moves to undo vehicle and emissions regulations, the Journal reported. Last year the administration ended a federal EV subsidy and repealed the Obama-era scientific finding that serves as the legal basis for federal greenhouse-gas regulation.

The new rule applies to all model-year passenger cars and light trucks from 2022 through 2031, with the 34.5 mpg fleet-wide average taking effect by the 2031 model year.