New GOP Budget Bill Guts Decades-Old Fuel Economy Rules for Cars and Trucks

A new provision in the Senate reconciliation bill would neuter the country’s fuel efficiency standards for automakers, gutting one of the federal government’s longest-running programs to manage gasoline prices and air pollution.

The new provision — which was released on Thursday by the Senate Commerce Committee — would essentially strip the government of its ability to enforce the Corporate Average Fuel Economy standards, or CAFE standards.

The CAFE rules are the government’s main program to improve the fuel economy of new cars and light-duty trucks sold in the United States. Over the past 20 years, the rules have helped push the fuel efficiency of new vehicles to record highs even as consumers have adopted crossovers and SUVs en masse.

But the Republican reconciliation bill would essentially end the program as a practical concern for automakers. It would set all fines issued under the program to zero, stripping the government of its ability to punish automakers that sell too many polluting vehicles.

“It would essentially eviscerate the standard without actually doing so directly,” Ann Carlson, a UCLA law professor who led the National Highway Traffic Safety Administration from 2022 to 2023, told me.

“It says that, ‘We have standards here, but we don’t care if you comply or not. If you don’t comply, we’re not going to hold you responsible,’” she said.

Representatives for the Senate Commerce Committee did not respond to an immediate request for comment. A talking points memo released by the committee on Thursday said that the new bill would “[bring] down automobile prices modestly by eliminating CAFE penalties on automakers that design cars to conform to the wishes of D.C. bureaucrats rather than consumers.”

Since 1975, Congress has required the National Highway Traffic Safety Administration (pronounced NIT-suh) to set annual fuel efficiency standards for new cars and light trucks sold in the United States. The rules generally require new vehicles sold nationwide to get a little more fuel efficient, on average, every year.

The rules have remained in effect — with varying levels of stringency — for 50 years, although they have generally encouraged automakers to get more efficient since Congress strengthened the law on a bipartisan basis in 2007.

In model-year 2023, the most recent period for which data is available, new cars and light trucks achieved a real-world fuel economy of 27.1 miles per gallon, an all-time high. The vehicle fleet was set to hit another record high in 2024, according to last year’s report.

Opponents of the fuel economy rules argue that the regulations increase the sticker price of new cars and trucks and push automakers to build less profitable vehicles. The Heritage Foundation, the conservative think tank that published Project 2025, has called the rules a “backdoor EV mandate.”

The rules’ supporters say that the standards are necessary because consumers don’t take fuel costs — or the environmental or public health costs of air pollution — into account when buying a vehicle. They say the rules keep gasoline prices low for all Americans by encouraging fuel efficiency across the board.

The strict Biden-era rules were projected to save consumers $23 billion in gasoline costs, according to an agency analysis. The American Lung Association said that the rules would prevent more than 2 million pediatric asthma attacks and save hundreds of infant lives by 2050.

Secretary of Transportation Sean Duffy has targeted the fuel economy rules as part of a wide-ranging effort to roll back Biden-era energy policy. On January 28, as his first official act, Duffy ordered NHTSA to retroactively weaken the rules for all cars and light trucks sold after model-year 2022.

On Friday, Duffy separately issued a legal opinion that would restrict NHTSA’s ability to include electric vehicles in its real-world estimates of the country’s fuel economy rules. The opinion sets up the next round of CAFE rules to be considerably weaker than existing law.

But the new Republican reconciliation bill, if adopted, would render those rules moot.

Under current law, automakers must pay a fine when the average fuel economy of the vehicles they sell exceeds the fuel economy standard set for that year. Automakers can avoid paying that penalty by buying “credits” from other car companies that have done better than the rules require.

The fine’s size is set by a formula written into the law. That calculation includes the number of cars sold above the fuel-economy threshold, how much those cars exceeded it, and a $5 multiplier. The GOP tax bill rewrites the law to set the multiplier to zero dollars.

In essence, no matter how much an automaker exceeds the fuel economy rules, the GOP reconciliation bill will now multiply their fine by zero.

The original CAFE law contains a second formula allowing the government to set even higher penalties if doing so would achieve “substantial energy conservation.” The new reconciliation bill sets the multiplier in this formula, too, to zero dollars.

The CAFE law’s penalties can be significant. The automaker Stellantis, which owns Fiat and Chrysler, recently paid more than $426 million in penalties for cars sold from model year 2018 to 2020. Last year, General Motors paid a $38 million fine for light trucks sold in model year 2020.

The CAFE provision in the GOP mega-bill seems designed to skirt past the Byrd rule, a Senate rule that policies in reconciliation bills must affect revenue, spending, or generally have more than a “merely incidental” effect on the federal budget.

But Carlson, the former NHTSA acting administrator, doubted whether the provision should really survive a Byrd bath.

Zeroing out the fines is “not really about revenue,” she said, but about compliance with the law. “This is a way to try to couch repeal of CAFE in revenue terms instead of doing it outright.”