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Record $100 Million Fine Against Automakers in Greenhouse Gas Enforcement Case

Wednesday, November 12, 2014
Sandler, Travis & Rosenberg Trade Report

The Environmental Protection Agency and the Department of Justice announced recently a $100 million civil penalty and other enforcement actions against two Korean automakers charged with selling vehicles that emit more greenhouse gases than had been certified.

The EPA charged that the two automakers (a) sold close to 1.2 million vehicles whose design specifications did not conform to those certified to the EPA, (b) overstated the real-world fuel economy performance of many of these vehicles by one to six miles per gallon, and (c) understated the emissions of greenhouse gases by their fleets by approximately 4.75 million metric tons over the estimated lifetime of the vehicles. Testing protocols included numerous elements that led to inaccurately higher fuel economy ratings, the EPA adds, and the automakers allegedly chose favorable results rather than average results in processing data from a large number of tests.

In addition to paying the largest penalty ever assessed for violations of the Clean Air Act, the automakers will spend approximately $50 million on measures reduce the likelihood of future greenhouse gas emission miscalculations, including reorganizing their emissions certification group, revising test protocols, improving management of test data and enhancing employee training before emissions testing is conducted to certify model year 2017 vehicles. They will also be required to audit their fleets for model years 2015 and 2016 to ensure that vehicles sold to the public conform to the description and data provided to EPA. Further, the automakers will forfeit more than $200 million worth of greenhouse gas emission credits they previously claimed, which can be used to offset emissions from less fuel-efficient vehicle models or sold or traded to other automakers for the same purpose.

The proposed consent decree is subject to a 30-day public comment period and court review and approval.

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