While the details of the changes to efficiency standards have yet to be determined, whether or not they will provide any relief for the auto industry will depend largely on the fate of the California waiver, which allows the state to impose its own stricter fuel economy laws under the Clean Air Act. The Obama administration negotiated the 2012 rule with California to keep the targets uniform across the country so that car companies wouldn't need a separate production line to meet different standards in the Golden State, where more than a third of cars sold in the United States are purchased.
California's stricter fuel economy standards are critical if the state is to meet its climate goals of reducing emissions by 40 percent by 2030, but EPA Administrator Scott Pruitt has voiced his frustration with California, saying it shouldn't be able to dictate the tailpipe standard for the rest of the country. "California is not the arbiter of these issues," he told Bloomberg in March. On Monday, the EPA said the California waiver "is still being re-examined."
No other state can ask for a waiver, but they can all adopt California's stricter rule, and at least 15 states have done so, including Pennsylvania, Georgia, and the New York metropolitan area. In effect, the California standards now apply to more than 40 percent of the population in the U.S.
The EPA first set fuel efficiency standards in the 1970s to reduce the nation's reliance on foreign oil, after the Organization of the Petroleum Exporting Countries oil crisis sent the price per barrel skyrocketing. In 2012, the EPA bolstered the standards, requiring all new fleets of vehicles to get 54.5 miles per gallon, on average, by 2025—a threshold fewer than 4 percent of cars on the road today would meet. Experts estimated that the new rule would save between five and six billion tons of greenhouse gas emissions by 2025.
At the time, automakers agreed to the new standard. Oil prices were higher, consumers were favoring smaller cars, and the Obama administration had only recently overseen the $80 billion bailout of the U.S. auto industry. But by 2017, as Obama's EPA re-affirmed the standards in a mid-term review shortly before he left office, automakers were lobbying for looser standards.
In a February of 2017 letter to regulators, Mitch Bainwol, the president of the Alliance of Automobile Manufacturers, wrote that complying with the strict standards could cost the industry $200 billion and 1.1 million jobs. President Donald Trump has long called the Obama-era regulation an "assault on the American auto industry," and, in March, the EPA re-opened the review of the regulations, giving car companies another shot to lobby for changes.
Pruitt said Monday that the mid-term evaluation was rushed, and, "in light of recent data," the regulations should be revised. "The Obama Administration's determination was wrong," he said in a statement Monday. "Obama's EPA cut the Midterm Evaluation process short with politically charged expediency, made assumptions about the standards that didn't comport with reality, and set the standards too high."
But California will not back down from its stricter standards. Attorney General Xavier Becerra told the Los Angeles Times that the state is prepared to take any legal action necessary to protect its waiver and fuel economy targets. "We didn't make these moves lightly," Becerra said. "They came after years of study, scientific evidence, fact-gathering, comment periods, a lot of back and forth among experts and stakeholders. To unwind this and go backward would cost our industries and cost our people billions of dollars. There has to be a good reason to make any kind of move. We have seen nothing change that would make California change its position."
California has been receiving waivers to regulate car pollution from the federal government for nearly half a century, and no waiver has ever been revoked. "If Pruitt tries to revoke the California waiver, he'll have an uphill battle," says Jessica Scott, an environmental law professor at Vermont Law School. "This hasn't been done before and it's not clear that the Clean Air Act allows it."
Rolling back the standards now is a huge step backwards in U.S. efforts to reduce emissions. The transportation sector is responsible for more than a quarter of the nation's emissions, and research shows that domestic policies are more important for driving innovation in the auto industry than consumer demand.
"With increasing global temperatures and worsening extreme weather, this is not the time to pump the breaks," Scott says. "What the general public may not realize is that this is much more significant than withdrawing from the Paris Accord. It is through domestic regulation, such as the fuel economy standards, that those international commitments to reduce emissions and combat climate change are actually implemented."
Environmental groups are expected to challenge any changes to the standards in federal court.
"As a general matter, one administration can take a different approach than the previous one, but it has to give reasons for doing so that aren't arbitrary and capricious, and it has to go through the same rule-making process that the previous rule had to go through," Scott says. "If Trump's EPA doesn't comply with one or both of these requirements (and they haven't in their efforts to undue some other Obama rules), environmental groups will be ready and can win."