Trump Ups the Ante in Feud With California Over Car Emissions
A smog check probe sits in a tailpipe of a vehicle at a station in California, U.S.. (Photographer: David Paul Morris/Bloomberg)

Trump Ups the Ante in Feud With California Over Car Emissions

(Bloomberg) -- The Trump administration has launched a multipronged legal assault on an agreement California struck with four carmakers in defiance of the president’s plan to ease national standards on tailpipe emissions.

Lawyers from the Transportation Department and Environmental Protection Agency on Friday sent a letter to California’s top air-pollution regulator, urging the state to abandon its pact with the automakers and warning that actions to carry out the agreement “appear to be unlawful and invalid.”

Separately, the Justice Department has opened an antitrust probe into the deal, in which four automakers agreed on compromise tailpipe emissions requirements with California. The administration is also preparing to formally strip California’s authority to set auto efficiency regulations that are tougher than the federal government’s, according to people familiar with the matter.

The actions amount to a significant escalation of the conflict between the Trump administration and Sacramento over environmental protections. It comes as automakers have urged the administration to moderate its rollback of emissions levels, arguing that a battle with California over the state’s regulatory powers would leave the industry with uncertainty over the critical standards for years.

Automakers want to avoid splitting the market with two different standards -- a federal mileage requirement in most states versus more stringent rules in more than a dozen states that adhere to California’s standards and account for more than a third of U.S. auto sales.

After talks with California and the Trump administration faltered, the California Air Resources Board announced in July an accord with the Ford Motor Co., Honda Motor Co., BMW AG and Volkswagen AG on tailpipe greenhouse gas emissions regulations.

The carmakers had agreed with California’s clean-air regulator to boost the fuel efficiency of autos sold in the U.S through 2026, defying a Trump administration proposal to ease mileage requirements enacted during the Obama administration.

Carmaker Response

Ford and Honda said they would cooperate with the Justice Department, while VW said it was “in regular contact with U.S. authorities on a number of matters.” BMW of North America said it looked forward “to responding to the Department of Justice to explain the planned CARB framework agreement and its benefits to consumers and the environment.”

In one of the letters seen by Bloomberg News, the Justice Department wrote it was concerned that the California agreement may violate federal antitrust laws, noting that the department hadn’t reached any conclusions on the matter. The department proposed a meeting to gather additional information about the emissions agreement and communications between the companies about the pact.

In the letter sent to CARB on Friday, lawyers for the EPA and DOT said that California’s plans overstep the state’s authority by intruding on the federal government’s power to set fuel economy and tailpipe emission standards.

“We recognize California’s disagreements with the federal government’s policy proposals in this area, but those policy disagreements cannot justify CARB’s pursuit of a regulatory approach that would violate federal law,” they said.

California officials insisted they wouldn’t be cowed. “California stands up to bullies and will keep fighting for stronger clean car protections that protect the health and safety of our children and families,” Governor Gavin Newsom said in an emailed statement.

Mary Nichols, chairman of the California Air Resources Board, said the Justice Department was bringing “its weight to bear against auto companies in an attempt to frighten them out of voluntarily making cleaner, more efficient cars and trucks than EPA wants.“

Russ Vought, acting director of the White House’s Office of Management and Budget, defended the Trump administration’s proposed fuel economy standards, saying they would make cars safer and more affordable.

“Unfortunately, California is trying to impose its failed policies on the rest of the country,” Vought said in a statement. “Even worse for Americans on the road, a handful of irresponsible auto makers are aiding California’s radical agenda that will hurt every one of us.”

The antitrust probe has echoes of a 1969 case brought by the Justice Department against a U.S. automakers’ trade association over claims the companies conspired to eliminate competition in the development of anti-pollution devices on cars.

Yet that case was about restraining innovation whereas the current conflict with California is about increasing innovation by improving fuel efficiency, said Harry First, who teaches antitrust law at New York University.

“Is there anything anticompetitive here or is it procompetitive?” said First. “The timing makes me concerned that it’s the Justice Department responding to political pressures rather than a real antitrust problem.”

Barbara McQuade, a law professor at the University of Michigan and former U.S. attorney in Detroit, also questioned the Justice Department move.

“It raises a red flag as to whether this is a valid exercise of antitrust laws or an effort advance the Trump administration’s policies to roll back environmental protections, and if so that would be an abuse of DOJ‘s power,” McQuade said.

Representative Doris Matsui, a Democrat from California, said the Trump administration’s move to “weaponize the DOJ” would itself be probed -- by Congress.

“This investigation is a political witch hunt that proves California’s efforts to reach an air quality deal with automakers is working, and President Trump can’t stand it,” Matsui said in an emailed statement.

The California deal requires annual reductions in tailpipe greenhouse gas emissions from model years 2022 through 2026. The Trump administration has proposed freezing national standards at 2020 levels. Both would be less stringent than requirements put in place during Obama’s term.

In a joint statement in July, the automakers said the pact with California “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.”

California said the agreement is open to all automakers. The Wall Street Journal previously reported the antitrust probe.

“We have done what the carmakers originally asked us to do, which is to lower the miles per gallon standards,” White House economic adviser Larry Kudlow said Friday morning on CNBC. The administration’s final plan will be released “probably in the next few weeks,” he said.

©2019 Bloomberg L.P.

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