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Will Trump Auto Rule End California's Regulation of Fuel Economy?

The Trump administration is expected tomorrow to release its proposed revisions of the Obama administration’s Corporate Average Fuel Economy (CAFE) and motor vehicle greenhouse gas emission standards for model years 2021 and later. On Saturday, July 28, The New York Times posted a leaked draft that the National Highway Traffic Safety Administration (NHTSA) sent in May to the White House for review. The question of the hour is whether the final draft released tomorrow will retain or retreat from the May draft’s bold initiatives.

Bold Initiatives

The leaked draft is the perfect complement to the Environmental Protection Agency’s (EPA) proposal to repeal the Clean Power Plan and President Trump’s decision to withdraw from the Paris climate treaty. The proposal NHTSA sent to the White House in May would topple the third pillar of President Obama’s so-called climate policy legacy. It’s not just that CAFE standards for passenger cars would plateau in 2020 at 43 miles per gallon rather than rise to 54.5 mpg in 2025, as contemplated in the Obama administration’s 2012 rulemaking. More importantly, the leaked draft would permanently change the institutional framework and political dynamics of fuel economy policy. Specifically, it would eliminate California’s power to establish carbon dioxide tailpipe standards and mandate sales of zero-emission vehicles—policies that effectively regulate fuel economy.

In other words, the leaked draft is a plan for regime change. That is bold, but also conservative because the proposal would restore the statutory system Congress enacted. Congress never authorized California to regulate fuel economy. Indeed, when Congress created the CAFE program in 1975, it expressly prohibited states from adopting or enforcing laws or regulations “related to” fuel economy.

Case for Preemption

Laws made pursuant to the Constitution “shall be the supreme law of the land . . . anything in the laws or constitution of any state to the contrary notwithstanding” (Article VI). Congress in 1975 enacted the Environmental Policy and Conservation Act (EPCA), which created the national fuel economy program. EPCA’s express preemption of state laws or regulations relating to fuel economy is, as the leaked draft says, “broad and clear”:

When an average fuel economy standard prescribed under this chapter is in effect, a State or a political subdivision of a State may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards for automobiles covered by an average fuel economy standard under this chapter [49 U.S.C. 32919].

The draft goes on to point out that unlike section 209(b) of the Clean Air Act, which allows EPA to waive federal preemption of state automobile emission standards, “EPCA does not allow for a waiver of preemption.” It continues:

Nor does EPCA allow for states to establish or enforce an identical or equivalent regulation. In a further indication of Congress’ intent to ensure that state regulatory schemes do not impinge upon EPCA’s goals, the statute preempts state laws merely related to fuel economy standards or average fuel economy standards.

The leaked draft cites three Supreme Court cases establishing that the phrase “related to” in preemption statutes is broad. As in common speech, it signifies that one thing stands in some relation to another thing, has some bearing on it, refers or pertains to it, etc.

As it happens, the functional relationship between greenhouse gas tailpipe standards and fuel economy standards is so close that “greenhouse gas emissions, and particularly carbon dioxide emissions, are mathematically linked to fuel economy and therefore regulations limiting tailpipe carbon dioxide emissions are directly related to fuel economy.”

Although Obama administration officials would later deny under oath that fuel economy standards and greenhouse gas tailpipe standards are “related,” the Obama EPA and NHTSA’s first joint motor vehicle standards rulemaking in 2010 described the relationship as “very direct and close.” That’s because carbon dioxide constitutes 94 percent of all motor vehicle greenhouse gas emissions, and “there is a single pool of technologies . . . that reduce fuel consumption and thereby reduce CO2 emissions as well” (75 FR 25326-25327).

The leaked draft concludes:

Since there is but one pool of technologies for reducing tailpipe CO2 emissions and increasing fuel economy available now and for the foreseeable future, regulation of CO2 emissions and fuel consumption are inextricably linked. Such state regulations [as California’s greenhouse gas motor vehicle standards] are therefore unquestionably “related” and expressly preempted under 49 U.S.C. 32919.

Nor is that all. Other state standards that “have the effect of regulating CO2 emissions or fuel economy are likewise related to fuel economy standards, and likewise preempted.” That means EPCA also preempts California’s Zero Emission Vehicle (ZEV) mandates:

Likewise, a state law prohibiting all tailpipe emissions, carbon or otherwise, from some or all vehicles sold in the state, would relate to fuel economy standards and be preempted by EPCA, since the majority of tailpipe emissions consist of CO2. We recognize that this preempts state programs, such as California’s ZEV mandate, that establish requirements that a portion of a vehicle’s fleet sold or purchased consist of vehicles that produce no tailpipe emissions.

Breaking New Ground

Most of the foregoing points have been made before, but the leaked draft also breaks new ground. It rebuts in detail Green Mountain Chrysler v. Crombie (2007) and Central Valley Chrysler-Jeep, Inc. v. Goldstene (2008)—cases in which district courts in Vermont and California ruled that EPCA does not preempt state motor vehicle greenhouse gas standards. Citing Green Mountain, the Obama EPA subsequently granted a waiver authorizing California to implement AB 1493, the state’s motor vehicle greenhouse gas emissions law.

For brevity’s sake, I will summarize (and modestly embellish) a few key points in the leaked draft’s rebuttal, focusing on the Central Valley decision, which purports to be the more definitive ruling.

In Central Valley, the California district court argued that because Congress wants to respect states’ “historic police powers,” express preemption statutory provisions “should be given a narrow interpretation.” It then concluded that the “narrowest interpretation consistent with the plain language of EPCA’s preemptive provision is that it encompasses only those state regulations that are explicitly aimed at the establishment of fuel economy standards, or that are the de facto equivalent of mileage regulation . . .” Since AB 1493 explicitly aims at controlling greenhouse gases, not fuel economy, and also regulates motor vehicle refrigerants, which are not related to fuel economy, EPCA does not preempt AB 1493, the court reasoned.

There are several problems here. Labels do not determine the nature of things. The direct functional relationship between fuel economy and greenhouse gas motor vehicle standards is not affected by the “explicit” language used to describe their purposes.

As it happens, because the functional relationship between the two types of standards is close and inherent, proponents routinely tout greenhouse gas standards as a means to boost fuel economy and CAFE standards as a means to reduce greenhouse gas emissions. Moreover, “the explicit purpose of the ZEV program is to affect fuel economy.”

While California’s motor vehicle greenhouse gas standards also apply to air conditioner refrigerants based on their global warming potential, such refrigerant emissions represent a small fraction of total motor vehicle greenhouse gas emissions—5.1 percent according to EPA and NHTSA’s 2010 joint rule (75 FR 25424). Nearly all the rest, as noted above, is carbon dioxide from motor fuel combustion, and regulating carbon dioxide emissions inextricably regulates fuel economy. Thus AB 1493 cannot escape preemption by commingling refrigerant standards with tailpipe carbon dioxide standards.

By the same token, because greenhouse gas emissions from air conditioner refrigerants “have no relation to fuel economy,” they are “outside the scope of EPCA preemption.” Accordingly, the leaked draft concludes that “states can pass laws specifically regulating or even prohibiting such vehicular refrigerant leakage” and “EPCA would not preempt such laws, if narrowly drafted so as not to include tailpipe CO2 emissions.”

The Central Valley court’s argument that EPCA’s preemption language must be interpreted narrowly ignores the plain fact that the EPCA preemption, covering anything “related to” fuel economy standards, is very broad. It is not possible to interpret a broad preemption narrowly without interpreting it loosely.

The court’s key argument is that once EPA grants California a Clean Air Act waiver to adopt its own motor vehicle emission standards, those standards become “other standards of the [federal] government,” hence are not subject to EPCA preemption, which applies only to state and local laws or regulations. But if that opinion were correct, it wouldn’t matter if AB 1493 explicitly establishes fuel economy standards or is just mileage regulation by another name. EPA could still make the California standards “federal” and immune to EPCA preemption just by pronouncing the magic words: “Waiver granted!” In short, the court's legal theory would give states free rein to ​openly and unequivocally regulate fuel economy—the exact opposite of what Congress intended.

The foregoing reductio ad absurdum refutation is not in the leaked draft but it complements the document’s case law argument, which may be summarized as follows.  Before California could request a waiver for AB 1493, it first had to enact the statute, and the California Air Resources Board (CARB) had to develop the implementing regulations. EPA can grant a waiver only for lawful statutes and regulations. However, AB 1493 and the associated rules were invalid under federal law from the get-go. As the leaked draft puts it, “When a state establishes a standard related to fuel economy, it does so in violation of EPCA’s preemption statute and the standard is therefore void ab initio [from the beginning].”

The draft continues:

Federal preemption is rooted in the Supremacy Clause of the U.S. Constitution. Courts have long recognized that the Supremacy Clause of the Constitution gives Congress the power to specifically preempt State law. Broadly speaking, the United States Supreme Court has long held that “an act done in violation of a statutory prohibition is void,” and has specifically noted that such acts are not merely “voidable at the instance of the government,” but void from the outset. The Ninth Circuit stated it more plainly: “Under federal law, an act occurring in violation of a statutory mandate is void ab initio.”  Discussing the Supremacy Clause, the Supreme Court explicitly explained that, “[i]t is basic to this constitutional command that all conflicting state provisions be without effect.” And at least one Federal Court of Appeals explicitly stated that the Supremacy Clause means “state laws that ‘interfere with, or are contrary to the laws of Congress’ are void ab initio.”

Here I would also note that the Central Valley court repeatedly acknowledges that the “touchstone” in preemption cases is “what Congress intended.” Congress clearly intended to preempt state regulation of fuel economy. When the Obama EPA granted California a waiver to implement AB 1493, it did not merely authorize California to participate in fuel economy regulation. It set the stage for CARB to be the lead agency in determining fuel economy standards.

How so? Again, California’s motor vehicle greenhouse gas standards primarily regulate fuel economy. That positions California to propose de facto fuel economy standards more aggressive than the explicit fuel economy standards NHTSA proposes. The auto industry desperately wants to avoid being subject to conflicting fuel economy requirements, but AB 1493 imposes no obligation on CARB to “harmonize” its standards with NHTSA’s. Moreover, California has no incentive to adjust its standards to match NHTSA’s because most auto companies and auto workers reside outside the state. Consequently, California’s political elites face no blowback at the polls from indulging in fuel economy zealotry.

Accordingly, in negotiations over the so-called One National Vehicle Program, California always has the whip hand. CARB can imperil businesses and jobs beyond its borders just by hinting that it will “de-couple” from the federal agencies should any future administration dare to relax the Obama administration standards. That is exactly the situation we have today.

CARB filed a preemptive lawsuit months before EPA and NHTSA proposed any specific revisions to the Obama rules, and months before that threatened to enforce its own separate standards. CARB has thus exposed for all to see that the “one national program” was never more than an uneasy truce wired to fall apart whenever California does not get its way. “Harmony” exists only as long as the feds dance to CARB’s tune.

The enormity of California’s intrusion into fuel economy regulation has become painfully obvious. A California-led fuel economy regime upends Congress’s clear and manifest purpose.