The U.S. National Highway Traffic Safety Administration (NHTSA) is seeking to erase an Obama-era regulation that would drastically increase penalties imposed on car makers for falling short of fuel economy standards.
Last summer, the department put the regulation's planned rollout on hold as it researched the matter. Automakers said the rule could cost the industry as much as $1 billion.
This week, the NHTSA proposed to spike the new regulation altogether because it would have a "negative economic impact."
The rule would impact cars made in model year 2019 and beyond and would increase the fine on lawmakers from $5.50 per tenth of a mile per gallon to $14 for each car that failed to hit a gas mileage minimum.
New York, California, and three other U.S. states in September sued the federal government for delaying the rollout of the higher penalties, as did several environmental groups.
A federal appeals court has set an April 12 hearing on the lawsuit. On Tuesday, two major auto trade associations intervened on behalf of the government in the suit.
In March 2017, President Donald Trump ordered a review of U.S. vehicle fuel efficiency standards for 2022-25 put in place by the Obama administration, saying they were too tough.
The Environmental Protection Agency is expected to determine by Friday that the standards are "not appropriate" and propose revisions to the rules in the coming months.
NHTSA said previously the increases would potentially result in an additional $30 million in annual civil penalties. Automakers say the increases would dramatically raise costs, since they would also boost the value of fuel economy credits used to meet requirements.
Some automakers, including some luxury car makers, historically have opted to pay fines instead of meeting fuel efficiency requirements. Jaguar Land Rover, owned by India's Tata Motors, and Daimler AG, which makes Mercedes-Benz vehicles, paid the most in fines in recent years.
NHTSA said last July many automakers were falling behind current fuel standards and face "the possibility of paying larger CAFE penalties over the next several years."
The Alliance of Automobile Manufacturers, a trade group representing major companies, said it was pleased that NHTSA had issued the proposed rule, but will need time to review the "notice that's just been released before we're able to offer more."
Reuters contributed to this report.
© 2022 Newsmax. All rights reserved.