Sec. 40006. Corporate average fuel economy civil penalties | Impact

One Big (not so) Beautiful Bill over the U.S. Capitol

Legislative and Policy Analysis

Section 40006: Corporate average fuel economy civil penalties

Executive Summary

Section 40006 changes the Corporate Average Fuel Economy, or CAFE, enforcement system by setting the statutory civil penalty for manufacturer fuel-economy shortfalls at $0.00. It does not repeal CAFE standards themselves, and it does not remove manufacturer reporting, EPA fuel-economy calculations, NHTSA compliance reviews, or CAFE credit accounting. Instead, it removes the monetary consequence for covered passenger-car and light-truck manufacturers that fall below applicable CAFE standards for model years where the Secretary of Transportation has not already issued a penalty notice.[1]

The section’s direct statutory dollar changes are narrow but significant: it replaces the base penalty amount of $5 per each 0.1 mile per gallon shortfall with $0.00, and replaces the higher permissible penalty ceiling of $10 per each 0.1 mile per gallon shortfall with $0.00.[1] In the current U.S. Code, the resulting penalty formula now uses $0.00 as the multiplier, meaning the formula can still be applied but produces no civil penalty for covered CAFE standard violations.[2]

The practical effect is to convert an enforcement regime that historically used fines, credits, and public compliance data into one where reporting and credit systems may continue, but the financial backstop is effectively removed. NHTSA’s CAFE Public Information Center still identifies compliance reports, credit balances, credit trades, and civil-penalty data as public information streams, but future section-specific penalty collections are likely to be zero or sharply reduced depending on pending model-year penalty-notice status.[3]

What Section 40006 Actually Does

Section 40006 amends 49 U.S.C. § 32912, the federal civil-penalty provision for automobile fuel-economy violations. It makes two textual changes:

Statutory item	Prior dollar amount in amended text	New amount under Section 40006	Practical effect
Base manufacturer penalty for violating a fuel-economy standard	$5 per 0.1 mile per gallon shortfall	$0.00	Eliminates the base monetary penalty calculation for covered CAFE noncompliance.
Maximum higher penalty amount the Secretary may prescribe	$10 per 0.1 mile per gallon shortfall	$0.00	Prevents the Secretary from raising the penalty above zero under that statutory authority.

The section contains no appropriation, grant, transfer, rescission, loan authority, tax credit, or direct spending program. Its budgetary relevance comes from federal receipts and compliance incentives, not from new spending authority. Historically, CAFE penalties could produce material federal collections. NHTSA has described its civil-penalty report as covering civil penalties collected since the beginning of the CAFE program, and older NHTSA budget materials stated that since model year 2000 the agency had collected an average of about $25 million each year in CAFE violation fines.[3][4]

The current amended statute now says that a manufacturer violating a standard prescribed for a model year under 49 U.S.C. § 32902 is liable for a civil penalty of $0.00 multiplied by each 0.1 mile per gallon shortfall, multiplied by the number of covered automobiles, and reduced by available credits.[2] Because the multiplier is zero, the calculation produces no penalty even if a manufacturer has a fuel-economy shortfall after credit use.

Section 40006 also contains an applicability rule. The zero-penalty amendments take effect on the date of enactment and apply to all manufacturer model years for which the Secretary of Transportation has not already provided a written notification specifying the penalty due under 49 U.S.C. § 32903(b)(2)(B).[1] That means the provision is not limited to future model years only; it also reaches unresolved prior model years where the penalty notice had not yet been issued.

Legislative Mechanism

The legislative mechanism is a direct amendment to an existing civil-penalty statute rather than a repeal of the CAFE program. CAFE standards remain located in 49 U.S.C. chapter 329. DOT and NHTSA still regulate fuel-economy standards, while EPA calculates manufacturer average fuel economy levels and related greenhouse-gas standards under its separate Clean Air Act authority.[5]

The mechanism has three important features.

First, it changes the penalty formula itself. The CAFE civil penalty is calculated by multiplying the statutory dollar rate by each 0.1 mile per gallon shortfall and by the number of affected automobiles, after accounting for credits.[2] Section 40006 changes the statutory dollar rate to zero, so the compliance formula remains in the law but no longer produces a monetary sanction.

Second, it removes the Secretary’s ability to raise the CAFE civil penalty under the amended higher-penalty provision. The amended statute now says the higher amount may not be more than $0.00 for each 0.1 mile per gallon.[2]

Third, it uses an applicability cutoff tied to whether the Secretary has already provided a penalty notification. That makes agency timing important. If NHTSA had already issued a qualifying notification specifying the penalty due for a manufacturer and model year, Section 40006 does not appear to undo that notice. If no such notice had been provided, the zero-penalty rule applies.[1]

Expenditure Tracking and Reporting Protocol

Section 40006 affects federal financial flows through foregone or reduced civil-penalty receipts rather than through appropriated outlays. The relevant administering agency is the Department of Transportation’s National Highway Traffic Safety Administration. The relevant statutory and program area is the CAFE program under 49 U.S.C. chapter 329, especially 49 U.S.C. §§ 32902, 32903, 32904, and 32912.[2]

The likely tracking sources are:

Tracking source	What it is likely to show	Visibility limitation
NHTSA CAFE Public Information Center	Manufacturer performance, standards, production volumes, credit balances, credit trades, and civil-penalty data	Public data should remain useful for compliance status, but future penalty collections may show zero even when shortfalls exist.
EPA verified final fuel-economy data	Final manufacturer fuel-economy calculations used in CAFE compliance	EPA data supports the compliance calculation but does not by itself show a payable penalty after Section 40006.
Treasury receipt accounting	Civil-penalty collections deposited to the federal government	Section-specific effects may be hard to isolate if collections fall to zero or are aggregated in broader receipt accounts.
OMB and CBO budget materials	Estimated changes in federal deficits, receipts, and related budget effects	Public estimates may aggregate Section 40006 with other transportation, energy, tax, or vehicle-market provisions.
GAO, inspectors general, and congressional oversight	Compliance administration, enforcement practices, and policy effects	Oversight may lag implementation and may not provide model-year-level public data.

Manufacturers report CAFE compliance information before and during the model year to NHTSA. After the model year, manufacturers provide compliance reports to EPA, EPA verifies final fuel-economy data, and NHTSA evaluates compliance, credits, transfers, trades, and any remaining shortfalls.[3] Before Section 40006, unresolved shortfalls could lead to civil penalties. After Section 40006, the public reporting stream may still show performance gaps and credit use, but the penalty multiplier is zero unless a qualifying pre-enactment penalty notice had already been issued.

flowchart TD
A[Section 40006] --> B[NHTSA CAFE program]
B --> C[Manufacturer reports]
C --> D[EPA final data]
D --> E[NHTSA compliance review]
E --> F[Credit use and trades]
F --> G{Penalty notice sent}
G -->|Yes| H[Prior penalty pathway]
G -->|No| I[Zero penalty result]
H --> J[Treasury receipts]
I --> K[Public compliance data]
J --> L[Budget records]
K --> L
L --> M[Congress GAO IG oversight]

Public visibility is likely to be mixed. Compliance data may remain visible through NHTSA’s CAFE Public Information Center, which includes manufacturer performance, credit status, and civil-penalty reports.[3] But the budgetary effect of reduced collections may be difficult to isolate in public Treasury or OMB materials because Section 40006 changes receipts rather than creating a separately appropriated account.

Day-to-Day Government Process Changes

For NHTSA, Section 40006 changes the enforcement end point more than the data pipeline. The agency still needs manufacturer reports, EPA-verified fuel-economy data, credit accounting, and model-year compliance determinations. NHTSA’s public materials describe a compliance system in which manufacturers submit reports, EPA verifies final data, and manufacturers may use credits carried forward, carried back, transferred between fleets, or traded with other manufacturers.[3]

The operational change is that a manufacturer with an unresolved shortfall after credits no longer faces a positive-dollar CAFE civil penalty for model years covered by the section. NHTSA may still calculate shortfalls and maintain data, but the civil-penalty notice process becomes less consequential for covered cases because the statutory multiplier is zero.

For EPA, the section does not directly amend EPA’s greenhouse-gas authority or its role in calculating fuel-economy values. EPA still has a verification role in the CAFE compliance data stream described by NHTSA.[3]

For Treasury and budget offices, the change is a receipts issue. To the extent CAFE penalties would otherwise have been collected, fewer dollars flow to the federal government. The section does not create a new spending account, so the day-to-day budget execution issue is not obligation of funds but recognition, estimation, and reporting of lower civil-penalty receipts.

For Congress and oversight bodies, the policy question shifts from whether manufacturers paid enough penalties to whether the remaining CAFE framework still produces meaningful compliance incentives without a monetary sanction. NHTSA has separately been reconsidering parts of the CAFE program and has stated in Federal Register materials that it is reviewing fuel-economy standards and related statutory constraints.[6]

Effects on Consumers

The consumer effects are indirect and contested.

Supporters of reducing or eliminating CAFE penalties argue that penalties raise manufacturer compliance costs and can push automakers toward more expensive vehicle mixes. The White House has argued that resetting CAFE policy would reduce vehicle costs and avoid pressure toward electric vehicles that some consumers may not want.[7] Under that view, Section 40006 may help reduce compliance-driven costs embedded in vehicle prices, especially for larger vehicles, trucks, and conventional gasoline models.

Critics argue that eliminating penalties weakens the incentive to improve fuel economy, which can increase consumer fuel costs over a vehicle’s life. DOT’s own general CAFE description says higher fuel-economy standards can save consumers money at the pump while reducing energy consumption and greenhouse-gas emissions.[5] Consumer Reports criticized the Senate version of the change as making the CAFE program an accounting requirement without meaningful enforcement, arguing that weaker enforcement could leave cost-effective fuel-saving technologies undeployed.[8]

The real-world consumer impact will depend on manufacturer behavior. If automakers respond by producing less fuel-efficient fleets, some consumers may face lower upfront prices for certain vehicles but higher gasoline costs over time. If market demand, state rules, EPA emissions standards, fuel prices, or global platform decisions continue to push efficiency improvements, consumer fuel-cost effects may be smaller.

Effects on Businesses

The most direct business beneficiaries are automobile manufacturers that otherwise would have owed CAFE penalties or purchased credits to avoid them. Section 40006 lowers the downside cost of noncompliance by changing the penalty multiplier to zero. This may reduce compliance risk, reduce reserve needs for unresolved model years, and weaken the business case for buying credits from competitors.

The section may also affect the CAFE credit market. NHTSA’s CAFE system allows manufacturers to carry credits forward, apply credits to prior years, transfer credits among fleets, and trade credits with other manufacturers.[3] If the alternative to buying credits is a zero-dollar penalty, demand for credits may fall. That could reduce the value of credits held by manufacturers that overcomply, including manufacturers whose business models benefit from selling regulatory credits.

Traditional automakers with larger truck and SUV portfolios may gain flexibility in product planning. They may be able to prioritize vehicle size, performance, towing capacity, or lower production cost without the same CAFE penalty exposure. However, this flexibility may be limited by other constraints, including EPA greenhouse-gas standards, state vehicle-emissions rules, fuel prices, consumer demand, global regulatory requirements, and investor expectations.

Businesses outside auto manufacturing may see smaller indirect effects. Dealers may benefit if automakers offer more vehicles aligned with current consumer demand. Fuel suppliers may benefit if average fleet fuel consumption rises. Suppliers of efficiency technologies could face reduced demand if manufacturers defer fuel-saving upgrades that were previously justified by avoided penalties.

Environmental and Climate Impact

Section 40006 is likely to weaken one federal incentive for improving fleet fuel economy. CAFE standards were created to reduce energy consumption by increasing the fuel economy of cars and light trucks, and DOT states that higher standards can improve energy security, save consumers money at the pump, and reduce greenhouse-gas emissions.[5]

The section does not itself authorize more emissions, repeal EPA greenhouse-gas standards, or eliminate CAFE reporting. But by removing monetary penalties for covered CAFE shortfalls, it reduces the cost of producing fleets that fall below CAFE requirements. If manufacturers respond by reducing efficiency investments or relying less on high-efficiency models, petroleum consumption and carbon dioxide emissions could be higher than under a system with meaningful penalties.

The climate effect is therefore incentive-based rather than automatic. The magnitude depends on fleet mix, gasoline prices, EPA standards, technology costs, consumer preferences, state policy, and whether NHTSA later changes CAFE standards themselves. NHTSA’s 2025 Federal Register materials show that the agency was already reconsidering CAFE standards for model years 2022 forward and addressing the role of credits, electric vehicles, and statutory constraints in standard-setting.[6] Section 40006 works alongside that broader policy reset by removing the CAFE civil-penalty backstop.

Impact Summary

Section 40006 is a compact statutory amendment with outsized enforcement consequences. It keeps the CAFE architecture in place but changes the penalty rate to $0.00, effectively removing the monetary sanction for covered manufacturer fuel-economy shortfalls. The most immediate effect is on automakers, CAFE credit markets, NHTSA enforcement leverage, and federal penalty receipts.

For consumers, the provision may reduce compliance pressure that supporters associate with higher vehicle prices, but it may also reduce incentives for fuel-saving technology that lowers lifetime gasoline costs. For businesses, it lowers civil-penalty exposure for manufacturers with CAFE shortfalls and may reduce the value of compliance credits. For climate and energy policy, it weakens one of the federal tools designed to push the new-vehicle fleet toward lower fuel consumption and lower greenhouse-gas emissions.

The section’s public tracking will not look like a grant or appropriation. The key records will be NHTSA CAFE compliance data, credit reports, civil-penalty reports, Treasury receipt records where collections exist, and CBO or OMB budget estimates. Section-specific effects may be difficult to isolate because the visible result may be the absence of penalty collections rather than a new federal spending line.

Key References and Sourcing

Source	Relevance
GovInfo, enrolled H.R. 1 text	Primary statutory text for Section 40006, including the changes from $5 and $10 to $0.00 and the applicability rule.
U.S. Code, 49 U.S.C. § 32912	Current codified civil-penalty language after amendment, showing the $0.00 penalty multiplier and higher-penalty ceiling.
NHTSA CAFE Public Information Center	Official source for CAFE reporting workflow, manufacturer compliance data, credit reports, and civil-penalty reporting.
U.S. Department of Transportation, CAFE Standards	Official DOT overview of CAFE purpose, NHTSA and EPA roles, consumer fuel-savings rationale, and greenhouse-gas implications.
NHTSA FY 2015 Budget Justification	Historical NHTSA discussion of CAFE enforcement, civil-penalty collections, credit tracking, and average annual fines.
Congressional Budget Office, Public Law 119-21 estimate	Official enacted-law budget context for Public Law 119-21, including deficit, direct spending, and revenue effects.
Federal Register, Resetting the Corporate Average Fuel Economy Program	Agency context for NHTSA reconsideration of CAFE standards, statutory constraints, credit treatment, and enforcement authority.
White House CAFE reset fact sheet	Administration policy rationale supporting CAFE reset and zero civil penalties.
Consumer Reports advocacy statement	Consumer-advocacy critique of eliminating CAFE enforcement penalties.

[1] GovInfo, “H.R. 1 Enrolled Bill, Section 40006, Corporate average fuel economy civil penalties,” primary statutory text, https://www.govinfo.gov/content/pkg/BILLS-119hr1enr/html/BILLS-119hr1enr.htm.

[2] Office of the Law Revision Counsel, “49 U.S.C. § 32912: Civil penalties,” current codified statutory text, https://uscode.house.gov/view.xhtml?edition=prelim&req=granuleid%3AUSC-prelim-title49-section32912.

[3] National Highway Traffic Safety Administration, “CAFE Public Information Center,” compliance reporting, credit, and civil-penalty data portal description, https://www.nhtsa.gov/corporate-average-fuel-economy/cafe-public-information-center.

[4] National Highway Traffic Safety Administration, “FY 2015 Budget Justification,” CAFE enforcement discussion and historical average annual fine collections, https://www.nhtsa.gov/sites/nhtsa.gov/files/fy2015_nhtsa_budget_justification.pdf.

[5] U.S. Department of Transportation, “Corporate Average Fuel Economy (CAFE) Standards,” official overview of CAFE purpose and NHTSA and EPA roles, https://www.transportation.gov/mission/sustainability/corporate-average-fuel-economy-cafe-standards.

[6] National Highway Traffic Safety Administration, “Resetting the Corporate Average Fuel Economy Program,” Federal Register, June 11, 2025, https://www.federalregister.gov/documents/2025/06/11/2025-10586/resetting-the-corporate-average-fuel-economy-program.

[7] White House, “Fact Sheet: President Donald J. Trump Announces the Reset of Corporate Average Fuel Economy (CAFE) Standards,” December 3, 2025, https://www.whitehouse.gov/fact-sheets/2025/12/fact-sheet-president-donald-j-trump-announces-the-reset-of-corporate-average-fuel-economy-cafe-standards/.

[8] Consumer Reports, “Senate tries to quietly gut popular fuel economy program without consumers noticing,” June 6, 2025, https://advocacy.consumerreports.org/press_release/senate-tries-to-quietly-gut-popular-fuel-economy-program-without-consumers-noticing/.

[9] Congressional Budget Office, “Estimated Budgetary Effects of Public Law 119-21, to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14, Relative to CBO’s January 2025 Baseline,” July 21, 2025, https://www.cbo.gov/publication/61570.