Ledyard King, Todd Spangler and Nathan Bomey
Published 1:14 PM EDT Sep 18, 2019
WASHINGTON – The Trump administration is revoking California’s waiver on auto emissions, a move that would undercut the state’s decades-long ability to set stringent standards on tailpipe discharges from cars and light trucks.
President Donald Trump announced the move on Twitter, saying it would save consumers costs “while at the same time making the cars substantially SAFER,” because it will encourage drivers to buy newer cars at a lower price.
Officials with the Environmental Protection Agency (EPA) and the Department of Transportation have scheduled a joint news conference Thursday morning to announce details of their decision.
EPA officials sent the state a letter last week warning that the tougher emission rules violate federal law. Several other states had considered adopting California’s standard and four automakers signed an agreement this summer embracing the lower emission requirements, drawing a sharp rebuke from Trump.
Revoking the waiver also would affect 13 other states who have signed on: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont and Washington. Of those, only Pennsylvania voted for Trump in 2016.
California officials, who used the waiver earlier this summer to reach a deal with Ford, Volkswagen, BMW and Honda, have previously threatened to sue the administration if they blocked the state’s efforts to toughen emissions standards.
“We’re ready for a fight for a future that you seem unable to comprehend,” California Attorney General Xavier Becerra said in a statement Tuesday. “We’ll see you in court is you stand in our way.”
With nearly 15 million registered automobiles, California is by far the largest customer base for automakers who would rather not undertake the costly effort to design cars that meet two separate emissions standards.
California has long been able to help shape national emission standards because of its size and its ability to draw in other states. Altogether, about one-third of U.S. auto sales occur in states under California’s standards, according to Morgan Stanley.
Emissions rules: Trump administration to block California’s stringent auto emission rules
Earlier this month, the administration warned California on Friday that its deal with Ford and three other automakers to increase mile-per-gallon standards for cars violates federal law.
In a letter to the California Air Resources Board (CARB), officials for the EPA and Department of Transportation said the deal struck with the four automakers “appears to be inconsistent with federal law” that gives the administration “and not California or any other state” authority to set fuel standards.
In July, the automakers reached an agreement with CARB to increase average fuel standards for new vehicles to nearly 50 mpg by model year 2026. They also notably recognized what they considered California’s authority to set standards for it and a handful of other states that have adopted them.
The deal, however, was sharply criticized by Trump and his administration, which has proposed freezing existing fuel economy standards put in place in 2011 as well as overturning the long-standing waiver, which allows California to set its own standards.
The auto emissions is the latest administration effort to undo Obama-era regulations that were implemented to reduce pollution.
Carmakers’ deal: 4 automakers reach emissions deal with California, bucking rollback
In rolling back other anti-pollution rules, administration officials have touted the importance of giving states the authority to set their own rules. In this case, the administration is protesting California’s ability to set a de facto national standard.
Last month, Trump slammed Ford for joining the deal, saying it would force up prices on autos and that “Henry Ford would be very disappointed if he saw his modern-day descendants wanting to build a much more expensive car, that is far less safe and doesn’t work as well.”
There has been little or no evidence, however, to back up Trump’s claims about the safety. And even by the administration’s own past statements, the average price of new, more fuel efficient vehicles could go up by $2,100, not $3,000.
General Motors and Toyota deferred comment to the Alliance of Automobile Manufacturers, the Washington, D.C.-based trade association that represents most major automakers on policy issues. Ford had no immediate comment, while Fiat Chrysler, Volkswagen and Honda did not immediately respond to requests seeking comment.
The Auto Alliance will review the Trump administration’s action and the EPA’s pending emissions standards decision “to get the full picture of how this impacts automakers, our workers and our customers,” said Dave Schwietert, interim CEO of the group, in a statement.
The group is attempting a careful balancing act because its members are taking different approaches to dealing with emissions standards.
“Automakers support year-over-year increases in fuel economy standards that align with marketplace realities, and we support one national program as the best path to preserve good auto jobs, keep new vehicles affordable for more Americans and avoid a marketplace with different standards,” Schwietert said.
The dispute between the Trump administration and California injects “uncertainty and risk to U.S. auto industry competitiveness and sustainability” at a “critical time” for the industry, Morgan Stanley analyst Adam Jonas said last week in a research note.
If California’s standards are wiped out, automakers would presumably face less stringent federal regulations. That means they wouldn’t be on the hook to produce as many advanced energy vehicles, which are often made solely for the Californian market to meet the rules there. For example, the Hyundai Nexo and Toyota Mirai hydrogen fuel cell vehicles are available only in California, according to car-buying advice site Edmunds.
With California’s standards off the books, automakers likely could invest more heavily in larger vehicles that emit more carbon, which contributes to climate change.
But they would not be able to abandon fuel-efficient cars altogether. Most automakers sell vehicles in foreign markets. For example, GM sells more vehicles in China than it sells in the U.S. And in regions like China and Europe, regulators are raising emissions standards to require investments in zero-emission electric vehicles.
Michelle Krebs, executive analyst at car-buying site Autotrader, said she doesn’t anticipate any “drastic change” in strategies among the car companies.
“The automakers know where the world is going in terms of low-emissions, high-fuel-economy vehicles, and this is a long-lead business,” Krebs said. “They’re working on cars today that will come out in 2023 or so. So they’re not going to just suddenly change their approach.”
GM, Volkswagen, Toyota and Ford are among the auto companies that have recently announced plans to invest heavily in electric vehicles. Those investments are likely to continue regardless of the U.S. plans, Krebs said.
What’s more, automakers need to plan for the possibility of a shift in the political winds.
“They know this administration won’t be in power forever,” Krebs said. “Things could change and they can’t be caught flat-footed if it does shift back.”
Customer preferences could change, too.
“Ultimately, we believe consumers, local/city governments and tech-sponsored megafleets will be the deciding factor that drives an inflection in EV adoption and CO2 reduction,” Morgan Stanley’s Jonas wrote.
Contributing: John Fritze