Regulators raise CAFE penalty, but plan to lower mpg target

The 54.5 mpg benchmark will not be reached, as low gasoline prices continue to bolster demand for SUVs and crossovers.

US regulators are preparing to significantly increase penalties automakers face for failing to reach corporate average fuel economy (CAFE) standards.

Companies are currently required to pay $5.50 per 0.1 mpg below the mandatory threshold, multiplied by the number of vehicles sold for the given year. A report issued by the Environmental Protection Agency (PDF) indicates the civil penalty will jump to a "considerably higher level" of $14 per 0.1 mpg.

The report attempts to estimate the costs associated with compliance. Explaining the rationale behind the penalty increase, some automakers may have decided it was cheaper to simply pay the government rather than investing in technology to improve fuel efficiency.

One chart outlining theoretical improvements places a special notation beside BMW, Daimler, Jaguar Land Rover and Volvo. The projections assume the four automakers are "willing to pay civil penalties ... if doing so would be more financially attractive than further increasing average fuel economy."

Despite the increased fines to encourage efficiency improvements, an Automotive News report suggests regulators are backing away from the 54.5 mpg target for 2025. Persistent low gasoline prices have encouraged more buyers to opt for a truck or SUV instead of cars. When the 54.5 mpg goal was set, regulators assumed a mix of 67 percent cars and 33 percent larger vehicles.

The government now expects CAFE numbers to reach between 50 mpg and 52.6 mpg by 2025, reflecting an expected even mix between cars and trucks.