By: Annette Rolain
The Department of Justice and Environmental Protection Agency (“EPA”) negotiated the largest settlement in Clean Air Act history — $100 million dollars — against motor companies Hyundai Motor Company (“Hyundai”) and Kia Motors Corporation (“Kia”) on November 3, 2014. The Clean Air Act was passed by Congress in 1970 to regulate air emissions, which include greenhouse gases, from stationary and mobile sources in an effort to protect public health and welfare from hazardous air pollutants.[1] Vehicle tailpipe emissions are regulated as mobile sources under the Clean Air Act, meaning car companies must comply with the Clean Air Act when introducing new vehicles into the stream of commerce.
The United States and the California Resources Board filed a civil action against Hyundai and Kia[2] to assess and recover civil penalties under the CAA for failing to accurately disclose their vehicles’ road load force, which is fundamental to the testing and analysis that manufacturers use to derive fuel economy rates and to demonstrate that vehicles meet air pollution emission standards. Hyundai and Kia certified false road load forces to the Environmental Protection Agency (“EPA”) for over 1.2 million 2011, 2012 and 2013 light-duty vehicle models. In essence, Attorney General Eric Holder stated, “Hyundai and Kia calculated higher fuel economy and lower greenhouse gas emissions than th[e] vehicles actually have” and collected more greenhouse gas emission credits, earned by building cars with lower emissions than required by law and used to offset emissions from less fuel-efficient vehicle models, than they were entitled to claim.[3] In addition to its $100 million civil penalty, Hyundai and Kia will also forfeit 4.75 million greenhouse gas emission credits.[4] Lastly, Hyundai and Kia will be required to implement new testing and analysis procedures, including internal auditing, to prevent future violations.[5] The value of these new procedures is estimated at over $50 million.[6]
The financial implications of the settlement terms are significant for Hyundai and Kia, and not just because of the $100 million civil penalty or $50 million to implement auditing procedures. Greenhouse gas emission credits can either be used or sold, and Hyundai and Kia have forfeited credits equaling the emissions released from powering more than 433,000 homes for a year.[7] It is likely that Hyundai and Kia had already prepared uses for those credits, and now must turn to alternatives. In order to manufacture less fuel-efficient vehicle models, the companies may choose to manufacture fewer of those models or discontinue certain models, potentially affecting profits. The other likely scenario is that they purchase excess emission credits from other car companies, requiring Hyundai and Kia to dip into coffers that had been previously allocated. While also costly, Hyundai and Kia may even choose to invest money in upgrading its less fuel-efficient models to greener technologies; a concept called technology-forcing, which the Clean Air Act was created to foster.
Car companies should expect EPA and the Department of Justice to continue their hard line stance for all current greenhouse gas laws, bringing civil action wherever EPA finds violations. It has also arguably added strength to EPA’s pending greenhouse gas rule, The Clean Power Plan, created to cut carbon dioxide emissions from existing (and outdated) power plants. In either situation, the settlement should be a warning sign to greenhouse gas-emitting industries to tow the line, or face the steep consequences of EPA’s increased interest in preventing the effects of climate change.
The settlement, although agreed to between the parties, is still “proposed” pending a 30-day public comment period, which should bring in a large number of comments from motor vehicle and power plant industry proponents. After the 30-day comment period, the settlement must be reviewed
[1] Summary of the Clean Air Act, Environmental Protection Agency, https://www2.epa.gov/laws-regulations/summary-clean-air-act (accessed Nov. 8, 2014).
[2] United States v. Hyundai Motor Co., Case No. 1:14-cv-1837 (D.C. Cir. 2014).
[3] Eric H. Holder, U.S. Attorney General, Dep’t of Justice, Remarks at the Press Conference Announcing Settlement with Hyundai and Kia (Nov. 3, 2014) (transcript available at .
[4] Id.
[5] Id.
[6] Hyundai, Kia To Pay $100M To Settle Suit Over Emissions, 28-2 Mealey’s Poll. Liab. Rep. 11 (November 2014).
[7] Press Release, Department of Justice, United States Reaches Settlement with Hyundai And Kia in a Historic Greenhouse Gas Enforcement Case (Nov. 3, 2014) (available at .
