Long Adversaries, Automakers Now Want to Work With California on Emissions

The Trump administration, though, doesn't appear willing to bring the state to the table when crafting new standards. That puts automakers in a tough spot.
by | May 17, 2018
Automakers want the federal government to ease emission standards, but they don't want a two-tiered system with one set of standards for California and another for everyone else. (AP/David Zalubowski)

When a group of auto industry executives met with President Trump last week, they had an unusual request: Work with California to institute new air quality regulations for new cars.

The request was striking because automakers and California pollution regulators are often fighting over tailpipe emission standards. California, which has special permission to set standards that are tougher than federal ones, has long pushed automakers to lower the types and amounts of air pollution caused by cars and trucks. A dozen other states follow California’s standards.

“The auto companies are worried that Trump will start a war with those states [that adopt California’s standards], and that Trump will let them pick up the pieces," says Dan Becker, director of the Safe Climate Campaign, an environmental advocacy group.

Automakers want to relax the federal fuel-economy standards and air pollution regulations enacted by the Obama administration, and the White House seems eager to do just that -- but without California's input.

“Federalism is not one state dictating to the rest of the country what should occur,” Scott Pruitt, head of the U.S. Environmental Protection Agency (EPA), told Bloomberg in March. “California is not the arbiter of these issues.”

That puts the auto manufacturers in a bind.

They clearly don’t like the rules California has set on vehicle emissions, which are in effect through 2025. But if California’s requirements aren’t incorporated into a national system, Gloria Bergquist, a vice president of the Alliance of Automobile Manufacturers, says, “we break off into two different countries" -- one where car companies in California and a dozen other states sell low-emission and zero-emission vehicles, and another where automakers could continue to sell SUVs and other higher-polluting vehicles under relaxed federal regulations.

"There’s going to be a lot of uncertainty if we have two standards,” Bergquist says. “We’re a capital-intensive industry so don’t like long-term uncertainty. We want to see if there’s a way to work with California."

So far, though, that doesn't seem to be happening.

Despite Trump reportedly backing the idea of bringing California into the negotiations during last week's White House meeting, The Wall Street Journal reported this week that the Environmental Protection Agency (EPA) does not plan on consulting California before proposing new standards. And the proposals the Trump administration has floated would scale back the Obama-era requirements well beyond what car manufacturers have even publicly asked for.

The Trump administration has had some conversations with California about new vehicle emission standards, but they weren't substantive, says Dave Clegern, a spokesman for the California Air Resources Board.

“We had three meetings with someone from the U.S. EPA” months ago, he says. “There were no proposals discussed. There was no sense of where it might go. It was essentially one meet-and-greet, followed by another meet-and-greet and then a third meet-and-greet.”

 

How California Came to Dominate

To get a sense of why California is so influential, and why automakers want to include its regulators in making new fuel-efficiency rules, it helps to understand how California got a seat at the table in the first place.

California has had a special place in federal air pollution laws ever since Congress passed the Clean Air Act in 1970. By then, California had already started regulating air pollution in its state because it had the most polluted skies in the country. (It still does.) Its regulations were stricter than the new ones Congress wanted to put in place, so federal lawmakers let California set its own rules as long as it got permission from the EPA. Since then, California has asked for the EPA’s permission to set stricter rules 110 times. The EPA approved 109 of them.

The Clean Air Act does not, however, address mileage standards for vehicles. Those rules came in 1975, as a response to the crisis caused by the 1973 oil embargo. Congress wanted cars and trucks to use less fuel so the United States wouldn’t be so vulnerable to another embargo. It tasked the U.S. Department of Transportation with coming up with minimum mileage standards that also took into account the impact that higher mileage requirements would have on safety, the affordability of vehicles and U.S. jobs. Those standards increased until the mid-1980s and then remained flat until 2012.

California had no role in setting those mileage standards and, technically, still doesn’t. But the state's influence on this matter has grown.

In 2004, the state's air regulators decided that they needed to limit carbon dioxide emissions from vehicles because of the harm the greenhouse gas has on the environment. The EPA under President George W. Bush, though, rejected the California rule -- the one time so far the EPA has rejected a waiver from California under the Clean Air Act. California and other states, including Massachusetts, sued the federal government, arguing that the EPA was required to regulate carbon dioxide pollution. The U.S. Supreme Court agreed in 2007, and, after Obama took office, the EPA granted California’s waiver.

The Obama administration, which had helped bail out U.S. automakers in the Great Recession, went a step further.

In 2010, it formulated an agreement that brought together California’s regulations, the U.S. DOT’s mileage requirements and the EPA’s Clean Air Act rules into one package. The new rules called for increasing the mileage requirements of new car and truck fleets to 35.5 miles per gallon by 2016.

The most controversial part of the agreement is that the federal government also laid out targets for 2017 through 2025, covering vehicles more than a decade after the pact was reached. The agreement called for increasing the mileage requirements to nearly 55 mpg by 2025. (The real-world mileage would be much lower than that target, possibly as low as 36 mpg, because the figures don’t account for high-speed driving, air conditioning and cold temperatures. Large vehicles, like trucks and SUVs, also have lower targets, purportedly to promote safety.)

Indeed, the terms of the deal extended so far into the future that the Obama administration agreed that the EPA should take another look at its terms by early 2018 to make sure the targets still made sense. The Obama administration sped up the process, releasing its findings in July 2016 and finalizing them just days before Trump’s inauguration in January 2017.

 

Trump Steps In

The Trump administration, with automakers' encouragement, took issue with those conclusions and started to do its own review. This April, Pruitt concluded that the original mileage goals should be revised because they were “based on outdated information” and “may be too stringent.”

Pruitt said the Obama administration had relied on unrealistic assumptions about gas prices and customers’ willingness to pay for advanced technologies. He pointed to information from automakers that customers were increasingly turning away from fuel-efficient vehicles and toward SUVs and trucks.

Meanwhile, new technology that makes vehicles more fuel efficient -- such as hybrid or electric power, reconfigured gas-powered engines or lighter building materials -- would drive up the price of new vehicles. Higher prices could discourage customers from buying new vehicles, which would leave less fuel-efficient cars and trucks on the road, Pruitt said.

California and 16 other states, plus the District of Columbia, sued almost immediately to block Pruitt’s decision.

“The states joining today’s lawsuit represent 140 million people who simply want cleaner and more efficient cars,” said California Gov. Jerry Brown. “This phalanx of states will defend the nation’s clean car standards to boost gas mileage and curb toxic air pollution.”

Clegern, the spokesman for the California Air Resources Board, says California’s review of the regulations, along with the Obama administration’s, was “exhaustive,” with more than 1,000 pages of documentation, and took several years to conduct.

“It was the most complete look at the auto market that’s ever been done. We concluded that standards would still be appropriate," he says.

They also concluded that, despite changes in the market, technology to improve fuel efficiency had advanced more quickly and cost less than the regulators originally anticipated.

But if the Trump administration successfully rolls back the federal standards, there’s a question of what happens with the California rules. As California sees it, the waiver it got from the Obama administration is still in effect, meaning automakers are still on the hook there for hitting the 54.5 mpg target by 2025.

“We’ve had more than 100 waivers, and we’ve never had one rolled back,” says Clegern. “The waivers don’t technically expire, but they are replaced with [new] ones that embrace new regulations.”

The Trump administration could try to invalidate the California standards in court, but judges have historically sided with California against similar challenges.

Becker, of the Safe Climate Campaign, blames the automakers for the predicament they’re in.

“The auto companies got greedy. They figured with Trump they could knock the standards down and no one would know what they were doing,” he says. “They want the rollbacks; they don’t want the blame for the rollbacks.”

Plus, Becker says coping with two different markets in the United States would be a “logistical nightmare” for auto companies, especially because the California-aligned states are on the East and West coasts, while auto plants are in the center of the country.

Like many environmentalists, Becker also faults the auto industry for heavily advertising trucks and SUVs, rather than fuel-efficient vehicles, because those vehicles have the highest profit margin. Several auto companies, particularly Ford, are shifting away from making cars altogether in favor of SUVs.

“They turn around and say, ‘We’re just doing what the markets want,’” Becker says of the automakers, “but they’re also shaping that market.”

But Bergquist, from the automakers group, says relatively low gas prices are the biggest reason customers choose larger vehicles over more fuel-efficient ones.

In Japan and Europe, where gas prices are considerably higher because of high fuel taxes, the top-selling models are small, fuel-efficient vehicles. In the United States, automakers sell 50 different types of electric vehicles, and together they account for less than 1 percent of vehicle sales. Ford’s F-150 pickup truck, the best-selling vehicle in the country, outsells all of them combined.

Bergquist says California regulators will have to come back to the table because of those market trends.

“They see the same sales figures as we do,” she says. “They know they’re going to have to revisit the mandates again.”