The Cars the Agency May Not Count

On 30 September the National Highway Traffic Safety Administration published a 304-page rule rewriting the fuel economy standards for every new passenger car and light truck from model year 2022 to model year 2031. The agency estimates that the new standards correspond to a fleetwide average of “roughly 34.9 mpg in MY 2031,” against about 49.3 mpg under the standards it issued in 2024. The rule takes effect on 30 November. Two days after publication, three sets of challengers asked three different federal appeals courts to set it aside.

The largest group, led by California’s attorney general, Rob Bonta, filed in the First Circuit in Boston: 21 states, the District of Columbia and five cities, including Chicago, Denver and New York. (Bonta’s office counted 26 petitioners; the petition itself also names the City of Los Angeles.) Five environmental and consumer groups, among them the Sierra Club and the Environmental Defense Fund, filed in the D.C. Circuit. The Natural Resources Defense Council filed alone in the Second Circuit in New York. All three rely on the same provision, 49 U.S.C. 32909(a)(1), which lets anyone adversely affected by a fuel economy regulation seek review either in the D.C. Circuit or in the circuit where it resides or has its principal place of business.

What the agency may not consider

The governing statute is short on this point. Section 32902(a) requires each standard to be “the maximum feasible average fuel economy level that the Secretary decides the manufacturers can achieve in that model year,” and subsection (f) lists four things to weigh: technological feasibility, economic practicability, the effect of other federal vehicle standards, and “the need of the United States to conserve energy.” Subsection (h) then sets limits. In carrying out subsections (c), (f) and (g), the Secretary “may not consider the fuel economy of dedicated automobiles,” meaning vehicles that run only on an alternative fuel, which the statute defines to include electricity; must treat dual-fuelled vehicles, such as plug-in hybrids, as running only on gasoline or diesel; and may not consider credit trading.

Nearly everything in the new rule turns on how far that sentence reaches. NHTSA first set out its answer in an interpretive rule in June 2025 and applies it here: “In establishing or amending maximum feasible fuel economy standards and determining the baseline by which those standards are established, NHTSA is, by definition, carrying out subsections (c), (f), and (g).” So the agency removed electric vehicles from the fleet its analysis starts from and from its sales forecast. On that reading, it concluded, the standards set in 2020, 2022 and 2024 “were set above the maximum feasible level because they considered factors prohibited by 49 U.S.C. 32902(h).” By its own figures, the model year 2024 gasoline and diesel fleet achieves a combined 35.4 mpg; counting electric vehicles and the electric operation of plug-in hybrids, 36.2 mpg.

The states argued in their comments, as the rule summarises them, that subsection (h) governs the setting of standards and the weighing of the four factors “but not the baseline calculation,” and that the agency was erasing more than 4 million actual electric vehicles from its model. Bonta’s office repeated the point on Friday: the rule “improperly forces the agency to ignore the presence of millions of electric vehicles in the nation’s existing fleet,” and its standards “for the next five years require less efficiency than what the U.S. fleet actually achieved in 2021.”

Back to 2022, at no charge

The rule does not only set future standards. It amends those for model years 2022 to 2026, vehicles already built and sold or now on sale. NHTSA had long read the statute to allow a standard to be loosened only “up until the beginning of the model year in question.” It now reasons that the only statutory time limit on an amendment, the 18 months’ lead time in section 32902(g)(2), applies to amendments that make a standard more stringent, and that “EPCA contains no lead time requirement if the amendment makes an average fuel economy standard less stringent.” The rule acknowledges that this is “a change in its previous interpretation of the statute.”

Whatever the standards are, Congress has already removed the price of missing them. Section 40006 of the budget law known as the One Big Beautiful Bill Act (Public Law 119-21), signed on 4 July 2025, struck “$5” from the penalty in section 32912(b) and inserted “$0.00,” capped any higher rate the Secretary might set at the same figure, and applied the change to every model year for which a penalty notice had not yet been sent. The final rule conforms NHTSA’s own regulation for model year 2022 onward without notice and comment, on the ground that the agency exercises no discretion. “Under current law there are no fines for manufacturer shortfalls,” it says. A manufacturer that falls short still commits a violation; it simply owes nothing for it.

That changes the economics of the credit market too. The rule ends trading in credits generated after model year 2027, and observes that even for older credits that remain tradable, with the zero penalty rate “there is little to no benefit to manufacturers who may purchase those credits.” Such sales have been a significant source of income for Tesla and Rivian, Reuters reported. NHTSA estimates the rule will cut the average up-front cost of new vehicles attributable to the standards by about $1,290, and acknowledges a 4.6 per cent increase in gasoline consumption through 2050 compared with leaving the 2024 standards in place.

Which court decides

Filing in three circuits on the same day is likely to set off a procedure in 28 U.S.C. 2112(a). If an agency receives petitions for review of the same order from at least two courts of appeals within ten days of its issuance, it must notify the Judicial Panel on Multidistrict Litigation, which designates one of those courts “by means of random selection.” The other courts transfer their cases to it, though that court may itself send the whole proceeding elsewhere for the parties’ convenience.

The last round went the same way. When California sued over the June 2025 interpretive rule in the First Circuit and the Center for Biological Diversity sued in the D.C. Circuit, the panel held a random selection on 3 July 2025 and designated the First Circuit. Those cases were later put on hold to await this rule. The states’ new petition tells the First Circuit that it is related to them, since the interpretive rule is “the foundation” for the new one. A random draw need not honour that. If one is held, the case could go to Boston, New York or Washington, and the court that comes out of the drum would decide whether “may not consider” reaches the fleet the agency starts from or only the weighing it does at the end.

Others may still file. Section 32909(b) gives challengers 59 days after a regulation is prescribed. Even a complete victory for the states would restore stricter standards with a statutory penalty of $0.00 attached, unless Congress changes the number again.

Sources

The final rule (91 Fed. Reg. 61,988) was read in the Federal Register’s full-text edition, including its summary, its discussion of subsection 32902(h), lead time and amendment authority, credit trading and the civil penalty amendment; the figures for 2031, 2024 fleet performance, vehicle costs and gasoline consumption are the agency’s own estimates as stated there, and the states’ comments are as the rule summarises them. The June 2025 interpretive rule was read in its Federal Register summary. The statutory text of 49 U.S.C. 32901, 32902, 32909 and 32912 and 28 U.S.C. 2112 is from Cornell’s Legal Information Institute; section 40006 of Public Law 119-21 is from Congress.gov. The states’ petition and Bonta’s release of 2 October were read on the California attorney general’s site; the D.C. Circuit and Second Circuit petitions were read as filed, via CourtListener. The 2025 random selection is from the panel’s docket entry in MCP No. 197, and the abeyance from the states’ petition. The point about Tesla and Rivian is Reuters’s, as published by CNBC. The technical support document, the regulatory impact analysis and the comment letters themselves were not read.