NHTSA proposes revised MY2022-2031 corporate average fuel economy standards

In explaining its reach back to MY 2022, NHTSA indicated that this was consistent with the directive set forth in the January 28, 2025, “Fixing the CAFE Program” memorandum and is also the earliest model year for which NTHSA has not yet concluded CAFE compliance proceedings. NHTSA emphasizes that its proposed new standards do not rely on the imputed fuel-economy performance of EVs or the electric operation of PHEVs, and thus “brings the CAFE program into compliance with statutory restrictions” by avoiding “consideration of impermissible factors” used to set the current standards. 90 Fed. Reg. 56,438, 56,444, 56,447. Among other things, NHTSA states that the proposal is intended to enhance consumer choice and reduce regulatory burdens on automakers. According to NHTSA, the proposal will make vehicles more affordable and easier to manufacture, reducing estimated up-front vehicle costs by $900.

Proposed Standards and Vehicle Classification

NHTSA proposes to reclassify the light-duty fleet, focusing on vehicles that are “primarily designed to move people” for the passenger car fleet, and vehicles “primarily designed to operate off road or move cargo” for the light truck fleet. In practice, this means that a number of vehicle models that are currently considered to be lower fuel economy light trucks would be moved to the passenger fleet. NHTSA also proposes to update the classification criteria from technology-based to performance-based standards, where applicable.

Estimated Required Average and Estimated Achieved Average of CAFE Levels (in mpg) for the Preferred Alternative

The NPRM also proposes the minimum domestic passenger car targets as follows:

CAFE Program Proposals

Unlike prior recent rulemakings, as proposed, the NPRM includes some significant changes to the structure of the CAFE program and inter-manufacturer credit trading, and carry-back/forward provisions. Proposed changes to the CAFE program include, but are not limited to:

• Credit Trading Program. The NPRM proposes to eliminate the inter-manufacturer credit trading program beginning MY 2028, meaning, MY 2027 will be the last year in which manufacturers may apply traded credits to satisfy a shortfall. NHTSA stated that the inter-manufacturer credit trading is “authorized, but not required” by 49 U.S.C. 32903(f) and indicated that its proposed elimination of the credit trading program in MY 2028 is “in recognition of any particular reliance interests in the trading program to achieve compliance” and in order to allow sufficient “transition time” for manufacturers that already invested in credits as a compliance pathway. The change, however, does not impact the ability of manufacturers to transfer credits between different vehicle categories within their own fleets or to carry forward or backwards credits across model years.
• AC Efficiency and Off-Cycle Menu Fuel Consumption Improvement Values (FCIV). The proposal would eliminate air conditioning (AC) efficiency and off-cycle menu FCIVs for light-duty battery electric vehicles (BEVs) starting in MY 2027, and removes references to the Environmental Protection Agency (EPA) regulations governing FCIVs. Consistent with the prior final CAFE rule, the off-cycle FCIV program would be phased out between MYs 2031-2033, such that manufacturers are not able to generate OC FCIVs for MY2033 and beyond.
• Reporting Requirements. In connection with the proposed vehicle classification changes, NHTSA is also proposing to modify the reporting requirements, including requiring manufacturers to include the gross combined weight rating (GCWR, which is the loaded weight of a combination vehicle) for all non-passenger automobiles in the pre-model year and mid-model year reports beginning in MY 2028.
• Technical amendments to remove references to fuel efficiency standards for trailers, remove civil penalties for non-compliance with fuel economy standards, remove provisions applicable to model years prior to MY 2022, among other minor amendments.

Although acknowledging that prior rulemakings considered standards set by the California Air Resources Board (CARB) and prominence of BEVs in the market, the NPRM explicitly rejects consideration of CARB standards as preempted by the Energy Policy and Conservation Act (EPCA) and also references the three resolutions under the Congressional Review Act (CRA) which disapproved of the preemption waivers granted by CARB to enforce the Advanced Clean Cars (ACC) II program, among others. NHTSA also states that the proposal did not incorporate EPA’s non-criteria emission standards, due to the proposed rescission of EPA’ Endangerment Finding and greenhouse gas (GHG) standards for light-, medium-, and heavy-duty vehicles.

NHTSA considered a range of regulatory alternatives for each fleet, including two regulatory alternatives for passenger cars and light trucks as well as a No-Action Alternative, as follows:

Regulatory Alternatives Under Consideration

In addition to feedback on the technical basis for the proposal and modelling, NHTSA requests comment on, among other things:

• Whether environmental effects should remain relevant under “the need of the United States to conserve energy” or other factors;
• Whether Congress has given NHTSA authority under EPCA to consider environmental effects when setting fuel economy standards and consideration of potential upstream activity (e.g., domestic extraction and petroleum refining);
• Whether NHTSA must prepare and environmental impact statement (EIS) for similar CAFE standard-setting action, in light of the Seven County Supreme Court decision, National Environmental Policy Act (NEPA) amendments, and rescission of Council on Environmental Quality (CEQ) regulations implementing NEPA;
• Affordability as a factor in NHTSA’s assessment of maximum feasible standards;

Notably, NHTSA also requested comment on the extent to which credits change manufacturers compliance behavior and value of credits in light of the updated civil penalty rate ($0). While it remains to be seen how NHTSA will finalize these proposals, pursuant to Congressional action, we note that Congress amended EPCA as part of the One Big Beautiful Bill Act to set the CAFE penalty rate to $0 for MY 2022 and beyond. See Public Law 119–21 (OB3), 139 Stat. 72 (July 4, 2025). This proposal is therefore intended to remove references to civil penalties in 49 C.F.R. Part 536, consistent with the statutory amendment. See 49 C.F.R. §§ 536.5(d)(2), (6); 536.9(e); 536.10(b); 536.7(b)-(d).

NHTSA will hold a public hearing on the proposed SAFE III rule on a date yet to be announced and requests written comments by January 20, 2026.

Authored by Joanne Rotondi, Hannah Graae, and Allisa Newman.