Halloween brought a surprise resolution in the conflict between the Trump administration and states over the regulation of fuel efficiency and emission standards. The Trump administration announced it is quitting its plan to freeze tailpipe-emissions targets for new vehicles through the year 2025. It now plans to require an annual increase of 1.5 percent in fuel efficiency instead of the 5 percent gains required by the Obama administration.
Regulation of Motor Vehicles
The 1.5 percent increase is the Trump administration’s reaction to pushback from the automotive industry and the Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration’s (NHTSA) struggle to provide sound cost-benefit analysis justifying its proposed freeze in 2018.
Section 202(a) of the Clean Air Act (CAA) directs the EPA to set standards for the emission of pollutants from motor vehicles. The CAA prohibits states from setting their own vehicle emission standards. The exception to this CAA rule is the waiver Congress allows the EPA to provide to states that adopted standards prior to 1966. Because California is the only state that qualifies for the waiver, other states area allowed to “adopt and enforce” standards identical to California.
The Energy Policy and Conservation Act enacted in 1975 requires the Secretary of Transportation set the corporate average fuel economy (CAFE) standards for new vehicles. The standard is set between one and five years at a time. The Secretary delegates its authority to set CAFE standards to NHTSA. In 2009, the EPA and NHTSA agreed to begin making a joint final rule because of the close relationship between CO2 emissions and fuel consumption. In 2012, the EPA and NHTSA published Green House Gas (GHG) emission and fuel economy standards for vehicles for 2017 to 2025 model years. However, because it was limited to setting standards of a maximum five years, standards were set for vehicles between 2017 and 2021 with “augural” standards for model years 2022 to 2025. The agencies estimate the standards set from 2017 to 2025 would save four billion barrels of oil, reduce GHG emissions by two billion metric tons, and save $3,400 to $5,000 in lifetime fuel savings per vehicle sold. California showed its approval of the federal standards by agreeing to comply if the proposed reductions be maintained.
President Trump Attempts Auto Standards Rollback
Last year the Trump Administration took steps to roll back greenhouse gas emission and fuel efficiency standards to automobiles. The original standards would have required a fleet average of 54.5 miles per gallon by 2025. The EPA announced last year that it would reconsider a rulemaking to alter the greenhouse gas emission standards adopted in 2012 for vehicles made between 2022 and 2025. The EPA published its Revised Determination stating the previous standards were “not appropriate.” It argued that many of the key assumptions the EPA previously relied upon “were optimistic or have significantly changed.”
Lawsuit for Relaxing GHG Standards
The Trump Administration’s attempt to relax GHG standards led to a lawsuit by seventeen states including California and Colorado. The lawsuit argued the EPA violated requirements imposed by 40 C.F.R. Section 12(h) and that the Revised Determination was arbitrary and capricious. Section 12(h) requires the EPA consider the following factors when assessing GHG emissions standards: availability and effectiveness of technology, cost complying with the standards on the producers or purchasers of new vehicles, feasibility of the standards, impact of the standards on emissions and oil conservation, and its impact on the auto industry and vehicle safety. The EPA responded by moving to dismiss the petition for lack of jurisdiction on the ground the Revised Determination was not “final action.” Only final actions under the CAA can be reviewed. The U.S. Court of Appeals noted Sierra Club v. Envtl. Prot. Agency, 873 F.3d 946, 951 (D.C. Cir. 2017) demonstrated cases with actions that are not final lack jurisdiction to hear administrative challenges. It also indicated the EPA announced its intention to create standards it found appropriate by reviewing information it previously collected as well as considering new information it gathered.
The Petitioners argued the Revised Determination was a final action because it created legal consequences for the agency and for states. It also argued it was a final action because it withdrew the 2017 Original Determination, which was a final action. The Court of Appeals stated the Revised Determination does not creates legal consequences for the EPA because although it deemed the current emission standards as “not appropriate,” it did not change the standards. The Revised Determination did not create legal consequences for states either because it “did not compel the Petitioner States to act in order to meet their commitments.” According to the Court of Appeals, the Petitioners provided no support that the Revised Determination is final action because the Determination withdrawn is a final action. It noted though the Original Determination was withdrawn, the evidence supporting it still stands. The EPA must provide an explanation that includes evidence and prior factual findings if it changes the 2012 standards. On October 25, 2019, the United States Court of Appeals held the EPA’s decision is not a judicially reviewable final action and the petition for review must be dismissed.
Reaction to President Trump’s Fuel-Efficiency Policy
The auto industry has had mixed reactions to President Trump’s attempt to roll back fuel economy standards. General Motors, Toyota, and Fiat Chrysler Automobiles surprised states by siding with President Trump to prevent California from setting its own vehicle emissions rules for vehicles. They have argued for a “unified fuel economy and GHG program.” Ford Motor Co, Honda Motor Co, and Volkswagen AG however made an agreement with the California Air Resources Board to increase fuel mileage standards and reduce greenhouse emissions. The agreement made this July includes stricter greenhouse standards beginning in 2022, promotion of zero-emission technology, and increased innovation. President Trump described the agreement as “having very little impact on the environment” while the EPA called it “nothing more than a press release.”
The new 1.5 percent target recently announced by President Trump may still see challenges from states that favor stricter regulations. As noted by David Clegern, spokesperson for the California Air Resources Board, criticized the 1.5 percent target as not doing enough to meet California’s air and climate goals. It is too early to tell what will happen next. There are a lot of stakeholders that will be impacted in what the final standard becomes. We will monitor what happens closely and communicate how this may affect you in the future.