## Facts

- NHTSA issued a Final Rule setting corporate average fuel economy (CAFE) standards for “light trucks” for model years 2008–2011, covering many SUVs, pickups, and minivans.
- The rule regulated some vehicles up to 10,000 pounds gross vehicle weight rating (GVWR) but left portions of the 8,500–10,000 lb GVWR class without fuel economy standards.
- NHTSA supported the rule with an Environmental Assessment (EA) and a Finding of No Significant Impact (FONSI), rather than preparing an Environmental Impact Statement (EIS).
- Environmental organizations and multiple state and local governments petitioned for direct appellate review, alleging violations of EPCA’s “maximum feasible” requirement and NEPA’s procedural duties.
- Petitioners argued that NHTSA’s cost–benefit analysis improperly treated reductions in carbon dioxide (CO₂) emissions as having no value and that the EA failed to meaningfully evaluate climate impacts and alternatives.

## Issues

1. Whether the light-truck CAFE standards were arbitrary and capricious under EPCA because NHTSA’s “maximum feasible” analysis improperly failed to account for the benefits of reducing CO₂ emissions.
2. Whether EPCA required NHTSA to set fuel economy standards for all vehicles in the 8,500–10,000 lb GVWR class addressed by the rulemaking.
3. Whether NHTSA violated NEPA by relying on an EA and FONSI that did not adequately analyze climate-change impacts and reasonable alternatives, thereby requiring a sufficient EA or an EIS.

## Decision

- The court granted the petitions in substantial part and remanded to NHTSA.
- The court held that the rule violated EPCA because NHTSA’s cost–benefit analysis assigned zero value to CO₂ reductions while monetizing compliance costs, distorting the “maximum feasible” determination.
- The court held that EPCA required NHTSA to set fuel economy standards for all vehicles in the 8,500–10,000 lb GVWR category covered by the statutory scheme, and that leaving part of the class unregulated was unlawful.
- The court held that the EA was inadequate under NEPA for failing to take a hard look at climate impacts and for insufficient analysis of more stringent alternatives.
- The court vacated the challenged portions of the rule and directed NHTSA on remand to prepare either an adequate EA or an EIS and to reset standards consistent with EPCA.

## Legal Principles

- Under EPCA, NHTSA must set CAFE standards at the “maximum feasible” level and may use cost–benefit reasoning only if the analysis fairly considers both costs and benefits.
- An agency acts arbitrarily and capriciously when it monetizes compliance costs but assigns no quantitative or qualitative value to an important category of benefits supported by the administrative record, including CO₂-emissions reductions.
- EPCA’s directive to consider the nation’s need to conserve energy requires reasoned consideration of the relationship between fuel consumption and resulting CO₂ emissions when setting fuel economy standards.
- Under NEPA, an agency must take a hard look at environmental consequences, including climate-related effects, before relying on a FONSI.
- When an EA does not adequately evaluate potentially significant environmental effects or reasonable alternatives, the agency must revise the EA or prepare an EIS.

## Conclusion

The Ninth Circuit set aside key aspects of NHTSA’s light-truck CAFE standards because the agency unlawfully discounted the benefits of CO₂ reductions under EPCA and failed to provide adequate NEPA analysis of climate impacts and alternatives, requiring a renewed rulemaking supported by a sufficient EA or an EIS.


Ctr. for Biological Diversity v. Nat'l Highway Traffic Safety Admin., 538 F.3d 1172 (9th Cir. 2008)