EPA Repeals Vehicle Greenhouse Gas Standards and NHTSA Cuts Fuel Economy to 34.9 MPG, With No Fines Left for Missing Them

On 30 September NHTSA published a final rule cutting US fuel economy standards to an industry average of about 34.9 miles per gallon by model year 2031. It completes a federal retreat from vehicle climate rules that began with EPA’s repeal of the 2009 endangerment finding in February.

Under the 2024 standards NHTSA is replacing, the 2031 average would have been about 49.3 mpg. The new rule, which NHTSA calls SAFE Vehicles Rule III, takes effect on 30 November and resets standards back to model year 2022. Passenger cars would average about 40.2 mpg in 2031 and light trucks about 26.4 mpg.

Three levers, all pulled

Washington had three ways to push carmakers toward electric vehicles: EPA’s greenhouse gas standards, NHTSA’s fuel economy standards and the purchase tax credits. All three have now been switched off or blunted, along with California’s own rules.

EPA went first and furthest. Administrator Lee Zeldin signed the rescission on 12 February. It was published on 18 February and took effect on 20 April. It withdraws the 2009 finding that greenhouse gases from new vehicles endanger public health and welfare, and with it every federal greenhouse gas standard for cars, trucks and engines from model year 2012 on. Standards for smog-forming pollutants and air toxics stay.

EPA’s main legal argument is that section 202(a)(1) of the Clean Air Act doesn’t let it set standards to address global climate change. It also leaned on the major questions doctrine and argued that cutting US vehicle emissions would have only trivial effects on global temperature. It chose not to finalize a new scientific finding, which narrows the case to a question of statutory reading. EPA says the repeal will save Americans more than $1.3 trillion in vehicle costs.

Congress handled the other two levers. In June 2025 it used the Congressional Review Act to void EPA’s waiver for California’s Advanced Clean Cars II rule, which would have phased out sales of new petrol cars in the state by 2035. A month later the reconciliation law ended the $7,500 EV credit for vehicles bought after 30 September 2025. It also set the civil penalty for missing fuel economy standards at zero.

Standards without a penalty

That last change matters more than the new numbers. NHTSA’s rule says it plainly: “Under current law there are no fines for manufacturer shortfalls.” A carmaker that misses the 34.9 mpg target faces no financial consequence from the federal government.

The rule also ends trading of fuel economy credits between manufacturers, starting with credits earned in model year 2028. Credits earned through 2027 can still be sold and used for five years. That trade was a steady income stream for EV makers, who sold surplus credits to companies that fell short. With no fines, the credits were already losing value.

NHTSA left electric vehicles out of its analysis. The fuel economy statute tells it to set standards without counting on vehicles that run on alternative fuels, and NHTSA now reads that strictly. It estimates the new standards cut the up-front cost of a new vehicle by about $1,290 in 2031 compared with the 2024 rules.

The court test

The endangerment repeal is the piece most likely to be decided in court. Seventeen health and environmental groups, led by the American Public Health Association, petitioned the D.C. Circuit on the day it was published. A coalition of more than two dozen states, led by New York, Massachusetts, California and Connecticut and joined by cities and counties, filed on 19 March. Petitioners also asked EPA to reconsider and then asked the court to pause the case while it does. By mid-August the court hadn’t set a schedule for merits briefing.

EPA is extending the same reasoning to power plants. On 14 September it finalized a repeal of most of the 2024 carbon standards for fossil fuel plants, due to take effect on 16 November. The same day it proposed rescinding all remaining greenhouse gas standards for power plants, citing the vehicle repeal as support. Comments are due on 2 November.

What the market is doing

EV sales have fallen without the federal push. The EV share of new car sales peaked at 11.4% in September 2025, the month the credit ended, and has held at about 5 to 6% through 2026, according to Edmunds. Hybrid sales are up almost 27% over the past year, with petrol near $4.50 a gallon.

Carmakers still build EVs for Europe and China, where sales keep growing. What’s gone is any federal rule that would cost them money for selling too few. If the D.C. Circuit upholds EPA’s reading of the statute, that reading binds the next administration too. Only Congress could then bring vehicle greenhouse gas rules back.