Texas v. EPA could save the day for cars that go vroom

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The Competitive Enterprise Institute this week filed its reply brief for private petitioners in State of Texas et al. v. Environmental Protection Agency. If successful, the litigation will do for the automotive sector what West Virginia v. EPA (2022) did for the electric power sector—thwart the EPA’s ambition to restructure a major portion of the U.S. economy without a clear authorization from Congress.

A win by petitioners would also have two immense consumer benefits. It would preserve Americans’ freedom to buy internal combustion engine vehicles and prevent the EPA from pricing middle-income households out of the market for new motor vehicles.

Texas this week also filed its reply brief on behalf of state petitioners. Both briefs respond to the EPA’s brief of February 24, 2023. All the briefs, including CEI’s initial brief of November 3, 2022, and a concise overview of the issues are available here.

Petitioners are challenging the EPA’s greenhouse gas (GHG) emission standards for model years (MYs) 2023-2026 motor vehicles, finalized on December 20, 2021. The agency heralded the rule’s aggressive new GHG emission standards as a “giant step forward” in “paving the way toward an all-electric, zero-emissions transportation future.” Citing West Virginia v. EPA (2022), CEI emphasized that “Congress nowhere provided clear authorization for EPA to effectively mandate electrification of the Nation’s vehicles.” Hence, “the rule cannot stand.”

In reply, the EPA claimed the MY 2023-2026 standards are “technologically neutral” and increase electric vehicle (EV) sales only as an “incidental effect.” In reality, the rule is a de-facto EV mandate. As the 2021 EPA rule stated, “[c]ompliance with the final standards will necessitate…further deployment” of electric vehicles (86 FR 74493).

Moreover, only eight days ago, the EPA proposed GHG standards for MYs 2027-2032 with the express aim of boosting EV market share in 2032 to 67 percent—well beyond the 39 percent projected under the current policy baseline.   

Predictably, the EPA denies that the MY 2023-2026 standards raise any “major questions” requiring a clear statement from Congress authorizing such requirements. However, the parallels with the EPA’s behavior in the West Virginia case could not be closer. CEI’s brief explains:

Just as in West Virginia, EPA is claiming the power to shift the Nation’s energy policy by reverse-engineering its preferred balance of technologies through emission standards. In West Virginia, it attempted to force a shift from coal-fired plants to wind- and solar-powered plants; here, it attempts to force a shift from liquid-fuel vehicles to electric vehicles.

The EPA also claims the 2021 rule raises no major questions requiring clear direction from Congress because it “broke no new legal ground.” Rather, the rule merely “tighten[ed] existing emission standards under its longstanding and oft-invoked authority.” Not so. CEI’s brief explains:

Before the rule, EPA set greenhouse gas vehicle emission standards for vehicles, and some automakers chose to comply in part by producing electric vehicles. Now, EPA has set standards that—by design— “[d]rive” electric-vehicle production and promote a market penetration rate double what it would be without the rule…. Petitioners do not argue that EPA can require some, but lower, electric-vehicle penetration; they challenge EPA’s authority to set standards that, for the first time, require the substitution of electric vehicles for liquid-fuel vehicles—a difference in kind, not degree.

The EPA denies there is any such qualitative difference. Mandating electric vehicles is just another way to prescribe pollution-emission controls, whether “designed as complete systems” or “devices to prevent or control such pollution,” the agency argues. But that is tantamount to saying that an EV is a pollution control device for internal combustion engine (ICE) vehicles, which is nonsensical. As CEI’s brief explains:

The component parts of an electric vehicle, such as their batteries, are not add-in devices that block the emission of pollution or minimize pollution that would otherwise occur. They are integral to the basic functioning of the vehicle, which does not emit the relevant pollutant in the first place.

The EPA tried to pull a similar stunt in 2012 when it proposed to determine that natural gas combined cycle (NGCC) power plants are the “best system of emission reduction” for coal power plants, and on that basis proposed carbon dioxide (CO2) emission standards that no commercially-viable coal power plant could meet. The EPA had to drop that proposal because it was an obvious attempt to prohibit investment in new coal generation—a policy Congress has never approved and one that would have been dead on arrival if proposed in legislation. Classifying EVs as pollution control devices for ICE vehicles is every bit as loopy as classifying natural gas power plants as emission reduction systems for coal power plants. But I digress.

The most groundbreaking part of CEI’s brief is its argument that the Clean Air Act does not authorize the EPA to establish fleet-average emission standards. That argument has the potential to unwind a decade and more of EPA climate policy regulations.

Unlike other vehicle standards, which apply to individual vehicles, the EPA’s GHG standards are fleet-average standards. That has been the case since 2010, when the EPA first promulgated GHG motor vehicle standards. The EPA’s reliance on fleet-average standards was inevitable for two main reasons.

First, CO2 emissions from motor fuel consumption constitutes more than 95 percent of all tailpipe GHG emissions (75 FR 25326), and no practical on-board CO2 filtration or capture technology has ever been invented. That means the only practical method of reducing tailpipe CO2 emissions per mile is to reduce fuel consumption per mile. Moreover, this can only be accomplished on a fleet-average basis, because a vehicle’s fuel consumption per mile is a function of engine characteristics, body design, and weight, not of the vehicle’s pollution control technologies.

Second, the Supreme Court in Massachusetts v. EPA (2007) directed the EPA and the National Highway Traffic Safety Administration (NHTSA) to “avoid inconsistency” between any future corporate average fuel economy (CAFE) standards and GHG motor vehicle standards. Accordingly, in 2010, 2012, 2016, and 2020, the EPA and NHTSA engaged in joint rulemakings, simultaneously promulgating coordinated fleet-average GHG and fuel economy standards. Functionally, tailpipe GHG standards are fleet-average fuel economy standards by another name.

In fact, under President Biden, the EPA and NHTSA no longer engage in joint rulemakings, perhaps because no one would even pretend that the Energy Policy and Conservation Act (EPCA) authorizes NHTSA to regulate ICE vehicles out of the U.S. auto market. But there is a deeper inconsistency that the Massachusetts court somehow missed. Fleet-average emission standards are inconsistent with Title II of the Clean Air Act—the EPA’s putative statutory authority.

The CEI brief’s argument on this pivotal point spans eight pages. Here is the summary statement:

Fleetwide averaging also clashes with “the design and structure of [Title II] as a whole.” Utility Air, 573 U.S. at 321 (citation omitted). Title II sets forth a comprehensive, interlocking scheme for enforcing emission standards through testing, certification, warranties, remediation, and penalties. Fleetwide-average standards are incompatible with these provisions, which are “designed to apply to” individual vehicles and “cannot rationally be extended” to fleets. Id. at 322.

A related fatal flaw is that the EPA’s GHG standards flout Congress’s clear intent that fuel economy standards not be set so stringently that automakers must sell alternative fuel vehicles (including EVs) to comply. CEI’s brief explains:

In the Energy Policy Act of 1992, Congress directed NHTSA to set fuel-economy standards based on averages, but prohibited NHTSA from setting fuel-economy standards that average in the fuel economy of electric vehicles. See Pub. L. No. 102-486 §§ 302,403, 106 Stat. 2776, 2870-2871, 2876 (later codified at 49 U.S.C. § 32902(h)). This prohibition bars NHTSA from doing exactly what EPA is doing here: misusing its regulatory authority to force a transition from conventional vehicles to electric vehicles by artificially tightening the “average” standard a fleet must meet. Of course, when Congress finalized the language of Section 202(a)(l) in 1977, it had no need to explicitly block EPA from considering electric vehicles, because it did not contemplate that EPA would set emission standards using averaging in the first place (or that EPA would be setting standards for greenhouse gases). The prohibition on NHTSA nevertheless underscores just how far EPA is reaching here: it is straining statutory language to seize a power that Congress expressly denied to a sister agency that actually has authority to promulgate fleetwide-average standards.

I make no predictions about how the D.C. Circuit Court of Appeals will decide the case. What I can say is that if petitioners win, Texas v. EPA could be a landmark decision on a par with West Virginia v. EPA and, perhaps, even Massachusetts v. EPA.