Trump, White House Edge Closer to Clash as Emission Talks Fail

(Bloomberg) -- California officials responded with defiance to the Trump administration’s decision to cut off talks over future fuel economy standards for cars, the latest turn in an escalating series of policy clashes between Washington and Sacramento.

The White House on Thursday said the Environmental Protection Agency and the Department of Transportation would proceed with or without California’s blessing to finalize new fuel economy and carbon emissions standards that the Trump administration has said should be weakened. The move sets up a likely court battle that some automakers warned could roil business plans heavily reliant on predictability.

In a tweet, Gavin Newsom, California’s Democratic governor, called the Trump administration’s decision “another targeted attack ” on the state and a “reckless political stunt” that would jeopardize the health of families and children. Senator Kamala Harris, one of the state’s two Democratic senators and a candidate for president, said it “follows a troubling pattern of targeting the state of California for political purposes.”

State Attorney General Xavier Becerra said “the facts and science are behind us. We hope they return to the table. We certainly don’t intend to abandon ship.”

Mary Nichols, chairman the California Air Resources Board, called the decision “a signal to us to stand our ground and resolutely defend” the standards, which were agreed upon by California, nearly every major automaker, and the Obama administration in 2011.

Too Stringent

President Donald Trump’s EPA in April deemed the rules too stringent. The agency and DOT auto regulators jointly proposed new, softer mileage requirements last August.

General Motor Co. and Ford Motor Co., the two largest U.S. automakers, said in separate statements they were disappointed the talks broke down without an agreement on nationwide fuel economy standards.

“A coordinated program with every stakeholder is in the best interest of Ford’s customers, and is the best path forward to achieve reductions in carbon dioxide emissions and support critical investments in new technologies,” Joe Hinrichs, president of global operations at Ford, said in a statement. “The auto industry needs regulatory certainty, not protracted litigation.”

GM said it hoped the Trump administration and California officials can still find a way to maintain the so-called national program of fuel economy and greenhouse gas emissions standards that apply across the country. “Regardless of the standards, we are committed to a future of zero crashes, zero emissions, and zero congestion,” GM said.

California v. Washington

The Trump administration on Thursday said it had decided to abandon discussions with the California Air Resources Board because of insufficient progress after months of talks.

“Despite the administration’s best efforts to reach a common-sense solution, it is time to acknowledge that CARB has failed to put forward a productive alternative,” the White House said in a statement on Thursday.

Critics of the mileage rules praised the decision.

“Consumers, not unelected bureaucrats in Sacramento, should decide what cars they want to buy,”said Tom Pyle, president of the American Energy Alliance, a free-market advocacy group. “The Trump administration is right to stop the negotiations and reject California’s power grab.”

Sacramento and Washington clash regularly on policy matters and along ideological lines. The Republican White House on Wednesday announced it would cancel more than $900 million in federal grants for a high-speed rail project, championed by Newsom’s predecessor, Jerry Brown. On Monday, California’s Democratic leadership led a group of more than a dozen states in a lawsuit to block Trump from diverting funds from the federal budget to pay for his promised wall on the U.S.-Mexico border.

The federal agencies released a proposal in August that recommended capping mileage requirements at a 37-mile-per-gallon fleet average after 2020, instead of raising them to about 47 mpg under rules adopted by the Obama administration. It also recommended revoking California’s authority to set tailpipe greenhouse gas emissions standards for new autos.

Automakers have urged the Trump administration to broker a compromise with California to maintain nationwide uniformity in fuel economy requirements. Roughly a dozen other U.S. states adhere to California’s vehicle emissions standards, a bloc that represents more than a third of U.S. auto sales.

Earlier this week, CARB spokesman Stanley Young said in an email that the administration had broken off communications before Christmas, “and never responded to our suggested areas of compromise -- or offered any compromise proposal at all.”

‘Never Serious’

“We concluded at that point that they were never serious about negotiating,” he said.

Fuel economy standards have significant influence over the mix of vehicles and engines that automakers sell, several years before new models arrive in showrooms. A court battle over mileage rules could upend technology development and investment plans for the U.S. while the other major auto markets of Europe and China press on with tougher requirements, according to Brett Smith, director of propulsion technology at the nonprofit Center for Automotive Research.

“I hear companies say, ‘Well we’re going to go down this path regardless.’ And they will, but they’ll do it elsewhere, and they’ll implement it elsewhere,” said Smith.

Impact on Suppliers

Auto parts suppliers, which develop much of the fuel-sipping technology that automakers use in their cars, will feel even more impact, said Alan Baum, an independent auto analyst in West Bloomfield, Michigan. “If you’re the supplier, you make an investment and if all of a sudden your customer says, ‘never mind,’ you’ve got an issue,” he said.

Environmental and consumer advocates said the breakdown signals that the administration intends to move ahead with plans to significantly weaken the standards that they said have already saved drivers $70 billion or more in fuel costs.

“They would rather blow things up than negotiate in good faith,” said Simon Mui, a senior scientist at Natural Resources Defense Council who works on vehicles and fuels, said of the Trump administration. “Gutting national clean car standards would be bad for jobs, bad for drivers who would pay more at the pump, and bad for the climate we will leave our children. The irony is that nobody likes this outcome, not even the auto industry.”

‘Superficial and Scant’  

Senator Tom Carper, a Delaware Democrat, also questioned the sincerity of the administration’s effort to seek a deal with California, saying in a statement that the talks “have been superficial and scant at best, or duplicitous and designed to fail at worst.”

Most carmakers have expressed support for higher fuel economy requirements over time, but also have lobbied the Trump administration to ease current requirements amid surging SUV sales, sustained low gasoline prices and limited demand for electrified vehicles.

Representatives for Toyota Motor Corp. and Fiat Chrysler Automobiles NV deferred comment to the Alliance of Automobile Manufacturers, an industry trade association, which said “automakers support year-over-year improvements in fuel economy that align with the marketplace.”

Honda Motor Co. also expressed disappointment at the outcome of the California talks, and said federal and state policies to support lower emissions should be coordinated.

“The industry requires certainty about future regulatory obligations to avoid unnecessary cost and complexity,” Honda said in a statement that urged “all parties to keep trying.”

©2019 Bloomberg L.P.