On Monday, the Environmental Protection Agency and the Justice Department announced a major settlement involving automakers Hyundai and Kia over alleged violations of the Clean Air Act (CAA) when reporting greenhouse gas emissions. In the largest-ever penalty in the history of the CAA, the South Korean automakers agreed to pay a $100 million civil fine for selling around 1.2 million vehicles that collectively will emit approximately 4.75 million metric tons of GHGs in excess of what the automakers said they would release.
The companies also agreed to forfeit the GHG credits associated with those excess emissions, which could be valued at hundreds of millions of dollars according to Attorney General Eric Holder, who made the announcement along with Gina McCarthy, head of the Environmental Protection Agency. Holder said the companies cherry-picked data to calculate higher fuel efficiencies than the vehicles actually had.
“They used the best data, not the average data, tested at times when the temperature was best for fuel economy, used the wrong size tires, and tested in tailwinds, not headwinds,” said Holder. “That speaks to the kind of problems we saw.”
Holder said that on top of the fine and the credit forfeiture, the companies will also be required to put in rigorous new procedures to prevent this type of violation from ever happening again. These types of fuel efficiency standards were the first time the EPA attempted to regulate GHGs under the CAA.
Both Holder and McCarthy emphasized how this kind of systemic misrepresentation sets back important GHG emissions programs, which the EPA is tasked with developing, monitoring, and enforcing. Not only does it undercut the integrity of the program, it also creates unfairness in the marketplace. McCarthy said that the oversight and enforcement demonstrated in this case shows that the EPA can successfully reduce GHGs under the CAA.
“While we are very committed to writing smart rules that are reasonable and affordable, we are also equally diligent in implementing and enforcing them so we can protect and deliver,” she said. “Not just for vehicle fuel efficiency, we can also do this for the power sector too.
McCarthy was referring to the EPA’s Clean Power Plan that calls on states to reduce GHG emissions from existing power plants by 2030. The plan is currently in the comment period.
McCarthy said this settlement is about the EPA “having a robust auditing process” and that this is by far the most egregious misstatement of fuel economy standards they’ve identified, and the only ones that were systemic in nature. Kia and Hyundai misstated mileage by between one and six miles per gallon. The EPA discovered the violations in 2012 for car models from 2011 through 2013.
McCarthy also said that the EPA also looks at what consumers are saying about vehicles on top of their auditing in order to bolster oversight. In 2012, Hyundai and Kia announced they would reimburse owners of about 900,000 vehicles for misstated mileage ratings.
The foundation of the EPA’s fuel efficiency program relies on GHG credits as the currency for legal compliance. Each credit is worth one metric ton, and companies can both earn extra credits for outstanding performance and require more credits when they need to balance their ledger.
The problem involves four Hyundai models — the Accent, Elantra, Veloster and Santa Fe — and the Rio and Soul from Kia.
In a statement, David Zuchowski, president and CEO of Hyundai Motor America, said Hyundai had fully cooperated with the EPA throughout the course of its investigation and that the company is ready to move forward.
“Hyundai is committed to partnering with the government to innovate fuel economy testing procedures in order to achieve more accurate and reliable ‘real-world’ results for consumers,” said Zuchowski.