Ford, Volkswagen, BMW and Honda have reached a deal with California to increase gas mileage standards and reduce greenhouse gas (GHG) emissions, setting a national standard, a longtime auto industry goal.
The deal between the four automakers and the California Air Resources Board appears to offer a way around the thorny standoff between the Trump Administration and California over the administration’s push to roll back the standards laid out during the Obama Administration. The fight, however, is expected to continue in the courts despite the deal as the administration works to rewrite the rules. A White House spokesman did not immediately respond to a request for comment.
Notably, the deal “recognizes California’s authority” and would increase the average fuel economy of the automakers’ new vehicle fleets to almost 50 mpg by model year 2026. During a conference call Thursday with California Gov. Gavin Newsom and CARB Chair Mary Nichols, officials noted that the Trump Administration’s plan would bring that only to an average of 37 mpg by that time.
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The deal would stretch out the timeline for the improvement on the standards by a year from the Obama-era rules and would only apply if the administration follows through on its rewrite, which Newsom indicated has no justification since automakers themselves are willing to abide by more stringent rules.
Newsom called the deal a game changer and said California is asserting itself while reserving its rights to litigate.
“Regardless about what the Trump Administration determines in the next few weeks, this is the direction we’re headed in,” he said.
Newsom praised the four companies’ “significant leadership” and said they deserve “enormous credit.” He said he anticipates additional companies signing on, and the release noted that the deal is available to others.
The four automakers issued a statement Thursday touting the deal’s benefits.
“Ensuring that America’s vehicles are efficient, safe and affordable is a priority for us all,” the statement said. “A 50-state solution has always been our preferred path forward and we understand that any deal involves compromise. These terms will provide our companies much-needed regulatory certainty by allowing us to meet both federal and state requirements with a single national fleet, avoiding a patchwork of regulations while continuing to ensure meaningful greenhouse gas emissions reductions.”
Honda issued its own statement as well.
“The framework provides regulatory stability, greater environmental benefits and reduced compliance costs. As a leader in producing efficient, low and zero-emission vehicles, Honda believes this is a win for our customers and for the environment.”
The deal follows recent action by automakers to push the administration to reach a deal with broad support from California and other states. Seventeen automakers, including Ford and General Motors, had sent a letter directly to President Donald Trump urging one national standard in hopes of avoiding an extended period of litigation and regulatory uncertainty.
A Fiat Chrysler Automobiles spokesman, however, said the automaker was not invited to participate in the current discussion.
In a statement, FCA said it is committed to improving the fuel economy of its fleet but noted a need to adjust the rules.
“We have been clear throughout the federal rulemaking process that the current standards need to be adjusted to reflect changing conditions in the marketplace, and today’s announcement acknowledges that is true. We look forward to reviewing the details of this agreement, as well as the federal rule later this year,” the FCA statement said.
Those changing conditions involve the relatively low price of gas and the apparent consumer shift away from small cars to SUVs and trucks.
Interestingly, the Alliance of Automobile Manufacturers, which represents three of the automakers in the California deal (Ford, BMW and VW), focused in its reaction on the difficulty of reaching the Obama-era standards.
“Today’s announcement of the framework of an agreement by California and certain automakers acknowledges that the MY2022-2025 standards developed by the Obama Administration are not attainable and need to be adjusted. … Individual companies may have different perspectives on how best to achieve greater certainty. A final federal rule regarding future CAFE/GHG standards has yet to be released and automakers continue to seek an optimal pathway forward that meets the diverse needs of our customers while providing environmental improvements, preserving safety and auto jobs and keeping new vehicles affordable for more Americans,” according to the statement.
U.S. Rep. Debbie Dingell, D-Dearborn, weighed in on the news, calling it positive and saying the industry needs certainty.
“This industry is more fragile than many realize. If the United States is to be competitive, we have to stay at the forefront of innovation and technology, which will help us transition to the next generation of more fuel-efficient vehicles,” Dingell said. “This agreement is a step forward in that direction. I would urge this framework to be a catalyst for all stakeholders to go back to the table. It would be win-win for everyone.”
The anti-pollution advocacy group Moms Clean Air Force praised the deal but questioned why other automakers, Toyota in particular, had not already signed on.
“Moms are delighted that car companies are moving out of the rollback lane and getting America up to speed on mileage and fuel economy. We have one question though: where is Toyota USA? They should be part of this deal, showing leadership — as they know how to make fuel efficient cars — instead of hanging back,” said Dominique Browning, co-founder and senior director of the organization.
The entire process might be a case of “be careful what you wish for.”
Industry analyst Jeremy Acevedo of Edmunds told the Free Press last month that automakers may have “bit off more than they could chew” when they asked Trump to reconsider Obama-era CAFE standards.
“While automakers may not want to meet these aggressive targets, at least it’s something they can plan for, as opposed to years of uncertainty waiting out a lengthy court battle,” he said.
Here are the terms of the deal, according to the release:
- Revised greenhouse gas standards: GHG standards, beginning in the 2022 model year (MY) and extending through the 2026 MY, with increasing stringency at a nationwide average annual rate of 3.7% (year-over-year). Of the 3.7% annual stringency, 1% can be achieved using the advanced technology multiplier credits, below.
- Appropriate flexibilities to promote zero emission technology: Continue current advanced technology multipliers that now expire after MY 2021, extending them through MY 2024 at the current 2.0x for Battery Electric and Fuel Cell Electric Vehicles (BEV/FCEV), and 1.6x for Plug-in Hybrid Electric Vehicles (PHEV), tapering off at the current MY 2020 and MY 2021 levels in MY 2025 and MY 2026, respectively.
- Simplify accounting: Remove the requirement to account for upstream emissions of fuels, as these can be addressed by other programs.
- Increase innovation: Raise the current cap on off-cycle menu credits, which account for actions taken outside the formal test cycle framework, from 10 grams per mile to 15 grams per mile starting in MY 2020.
- Streamlining and process improvements: Improve the off-cycle credit program to facilitate timely review and decision-making regarding the approval of new off-cycle technologies.
- Recognize California’s authority: Participating companies are choosing to pursue a voluntary agreement in which California accepts these terms as compliance with its program, given its authority, rather than challenge California’s GHG and ZEV programs.
Contact Eric D. Lawrence: firstname.lastname@example.org. Follow him on Twitter: @_ericdlawrence.