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Will Trump EPA Reconsider California Greenhouse Gas Waiver?

The Trump administration “might attack our authority” to establish greenhouse gas motor vehicle standards, California Air Resources Board (CARB) Chairman Mary Nichols told E&E news ($) last Thursday.

If that’s true, it’s a very big deal. Section 209 of the Clean Air Act authorizes the Environmental Protection Agency to grant California a waiver to establish its own motor vehicle emission standards, and section 177 authorizes other states to opt into the California vehicle emissions program. Currently, 13 states have California vehicle emission standards, which are typically more stringent than federal standards.

The obligation to meet two sets of motor vehicle emission standards—federal and California—has always been an inconvenience to automakers. In sharp contrast, however, California’s separate greenhouse gas standards potentially pose an existential threat to the auto industry. 

Greenhouse gas emission standards implicitly and substantially regulate fuel economy. As EPA and the National Highway Traffic Safety Administration (NHTSA) explained in their first joint motor vehicle rule, carbon dioxide constitutes “94.9 percent” of vehicular greenhouse gas emissions, and “there is a single pool of technologies...that reduce fuel consumption and thereby carbon dioxide emissions as well.”

Unlike other motor vehicle emission standards—but exactly like the fuel economy standards they mimic—motor vehicle greenhouse gas standards apply not to each vehicle but to entire fleets or segments of fleets on average. And there’s the rub. Automakers sell a different mix of vehicles in each state because consumer preferences differ from state to state. If all 50 states were to opt into the California program, automakers would have to reshuffle the mix of vehicles delivered for sale in each state to achieve the same average grams carbon dioxide per mile—the same de facto fuel economy—as required in California. Thus, California’s greenhouse gas motor vehicle standards potentially set the stage for market chaos and the death of the U.S. auto industry.

The Obama administration purported to banish this threat by brokering a deal whereby states opting into the California program would agree to accept compliance with EPA’s greenhouse gas standards as compliance with their own. Under the deal, automakers would be subject to three sets of overt or de facto fuel economy standards administered by three agencies under three statutes. Obama officials misleadingly labeled this Rube Goldberg scheme the “One National Vehicle Program.” However, whenever CARB deems the federal standards insufficiently ambitious, it threatens to walk away from the alleged “harmonized” national program, which would leave the auto industry vulnerable once again to a patchwork of fuel economy regimes.

Will the Trump administration propose to repeal the California greenhouse gas waiver? That’s what CARB Chair Nichols professes to fear, but she offers no positive evidence, stating: “We're not hearing anybody coming in and saying, ‘You can’t do it.’” Note that EPA’s proposed Reconsideration of the Obama/CARB greenhouse gas/fuel economy standards does not even mention the word “waiver.”

What’s going on here? Two possibilities come to mind.

Maybe eight years of Obama have conditioned Nichols to expect continual pledges of presidential fealty to the “One National Program,” and the silence from Trump officials has her spooked.

The E&E article points to another possibility. Nichols complains that the Trump Justice Department will no longer use Clean Air Act enforcement penalties to provide multibillion-dollar subsidies for electric vehicle infrastructure. The Trump administration partly based its decision on separation of powers arguments developed by free market groups, notably by my CEI colleague, William Yeatman.

In the current Reconsideration proceeding, CEI is urging EPA administrator Scott Pruitt to rescind the California waiver based on the nation’s original fuel economy statute, the Energy Policy and Conservation Act (EPCA), which preempts state laws or regulations “related to” fuel economy. So maybe Nichols fears free marketers might persuade the Trump administration to dust off the EPCA preemption and apply it to California’s greenhouse gas motor vehicle program.