Why It Matters
The federal Corporate Average Fuel Economy (CAFE) program, which sets minimum fuel efficiency targets for vehicles sold in the United States, is facing its most significant structural changes in decades, a Congressional Research Service (CRS) report published Sept. 24 finds. The report, authored by Naseeb A. Souweidane, an analyst in transportation policy, arrives as Congress and the Trump administration have each taken actions that together have substantially weakened the program's enforcement architecture.
The most consequential development is the reduction of the CAFE civil penalty to $0.00, enacted through the fiscal year 2025 reconciliation law (P.L. 119-21). The report states directly: "Due to this reduction to $0.00, many aspects of these CAFE standards may no longer be as applicable as before since manufacturers are no longer incentivized to comply with these standards."
Civil penalties collected by the National Highway Traffic Safety Administration (NHTSA) reached $335 million in 2024 before falling to $190 million in 2025. With the penalty now eliminated, Congress faces a choice: reset the penalty, restructure the program, or step back from active oversight.
The Big Picture
The Trump administration's proposed SAFE Vehicles Rule III, published in the Federal Register on Dec. 5, 2025, would reduce the projected required average fuel economy for light-duty vehicles from 49 miles per gallon (mpg) by model year 2026, as set under the Biden administration, to approximately 30.4 mpg for the same model year. The proposal also would eliminate inter-manufacturer credit trading, a flexibility under which electric vehicle-focused manufacturers have been major sellers of credits.
The credit trading market is described in the report as multibillion dollars in scale. The report cites a Wall Street Journal account noting that Rivian Automotive faced a $100 million revenue hole as a result of relaxed fuel economy rules.
In February, EPA rescinded the 2009 greenhouse gas endangerment finding, which had required the agency to issue greenhouse gas emission standards for vehicles, making the historical regulatory alignment between NHTSA CAFE standards and EPA greenhouse gas standards "inapplicable," the report notes.
The Trump administration cited technological feasibility and economic practicability as justifications for less stringent standards, and the report notes that some automotive industry stakeholders have expressed concern about frequent regulatory changes, given that companies typically develop five-year to 10-year product plans.
The Bottom Line
The CRS report notes that Congress may consider actions such as resetting the civil penalty, placing statutory limits on credit banking or trading, redefining vehicle fleet classifications, or adjusting what the Secretary of Transportation must weigh when determining maximum feasible fuel economy. The report also notes that Congress could choose to make no changes and allow relevant agencies to determine various aspects of the program, including monitoring fleet fuel efficiency and maintaining vehicle fuel economy labeling requirements. With the penalty at zero and a sweeping rulemaking still working through the regulatory process, the practical scope of congressional oversight over fuel economy enforcement remains an open question heading into the next model year cycle.
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