Thursday, November 6, 2014

CO2 Emissions fine for Hyundai and Kia

The United States is serious about carbon dioxide; the U. S. Environmental Protection Agency (EPA) sued the Korean automobile manufacturers, Hyundai and Kia (both part of the same conglomerate) for lying about the gas millage on some of their cars. On Monday, the EPA and the U.S. Department of Justice announced a $100 million fine as part of the settlement with Hyundai and Kia that will resolve their alleged intentional Clean Air Act violations. Hyundai and Kia misrepresented the fuel economy and greenhouse gas emissions of several models under the National Program for greenhouse gas emissions (GHG) and fuel economy standards. This 2009 program was the first step taken by the EPA to meet President Obama’s pledge to reduce U.S greenhouse gas emissions, the second step was the reduction in greenhouse gas emission from power plants. Electrical generation and automobiles and trucks account for 74% of the carbon dioxide emissions in the United States.

In the summer of 2011 the EPA and the Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) finalized the new millage and emission standards for automobiles and light trucks for model year 2012 through 2016. The EPA GHG standards require these vehicles to meet an estimated combined average emissions level of 250 grams of carbon dioxide (CO2) per mile in model year 2016, equivalent to 35.5 miles per gallon (mpg). There were interim benchmarks that automobile manufacturers were required to meet and approved methods for measuring fuel economy and greenhouse gas emissions. In addition, credits were granted for exceeding targets.

EPA alleges that Hyundai and Kia inflated their millage and falsely reduced their greenhouse gas emissions on the Hyundai Accent, Elantra, Veloster and Santa Fe and the Kia Rio and Soul. A combined 1.2 million of these vehicles were sold from model years 2012 and 2013 based partially on the inflated millage figures. Complaints about millage prompted the EPA audit which uncovered that the design specifications for these cars did not conform to the specifications the companies certified to EPA in making their greenhouse gas emissions calculations. EPA discovered these violations in 2012. Subsequent investigation revealed that Hyundai’s and Kia’s testing protocol that they performed in Korea was incorrectly performed to produce higher fuel economy ratings. In processing test data, EPA accused Hyundai and Kia of cherry picking the best data rather than averaging all data as required by the EPA.

In information given to consumers, Hyundai and Kia overstated the fuel economy by one to six miles per gallon, depending on the vehicle and understated the emissions of greenhouse gases by their fleets by approximately 4.75 million metric tons over the estimated lifetime of the vehicles. The inflated fuel millage numbers were great enough for consumers to notice, despite the fact that all millage numbers at the time were for ideal conditions and unlikely to be obtained by the average driver.

Hyundai and Kia have agreed to pay a $100 million civil penalty and will forfeit 4.75 million greenhouse gas emission credits that the companies previously claimed. The greenhouse gas emission credits are estimated to be worth over $200 million. This fine is intended to demonstrate the seriousness with which the Administration will enforce climate related regulations.

In their press release Hyundai stated that they believe that their process for testing the fuel economy of its vehicles is consistent with government regulations and guidance, which grants broad latitude to vehicle manufacturers in determining test conditions. “Outside of a data processing error related to the coastdown testing method by which Hyundai calculated resistance or "road load," it was Hyundai’s regulatory interpretation within this broad latitude that was responsible for the ratings restatement.” Hyundai and Kia corrected the error, and in October 2012 the EPA approved Hyundai’s new fuel economy testing program. In addition, Hyundai provided a lifetime reimbursement program to cover the additional fuel costs associated with the rating change plus a 15% premium in acknowledgment of the inconvenience to all owners of the effected vehicles.

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