Why Trump and California Faced Off Over Auto Rules

(Bloomberg) -- U.S. President Donald Trump’s administration has completed a three-year quest to dismantle his predecessor’s most concrete environmental achievement: historic fuel-efficiency regulations for cars and light trucks. In 2011, under President Barack Obama, the auto industry agreed to meet stricter targets for fuel economy and carbon dioxide emissions from 2017 to 2025. The Trump administration has now replaced those standards with far weaker requirements through 2026, months after it stripped California of its authority to set tailpipe CO2 limits of its own. Yet while the regulatory attack has been completed, the legal battles will continue for some time, with California leading the fight.

1. What standards are at issue?

The targets agreed to in 2011 call for the Corporate Average Fuel Economy (CAFE) of cars and trucks to rise from 35.5 miles per gallon in 2016 to a projected 51.4 by 2025 (down from an original projection of 54.5 mpg). Tailpipe CO2 emissions are to fall 31% to 173 grams per mile, a level similar to targets set in the European Union, China and Japan. Automakers are assigned corporate averages to meet, under a complex system that accounts for production volumes and the sizes of cars and trucks. If automakers fall short of corporate mpg targets, they face fines. If they miss CO2 standards, they could be barred from selling vehicles entirely.

2. Didn’t the new standards already take effect in 2016?

Technically they did. But a key concession by Obama was to agree to backload many of the increases. That means the manufacturers had to make only gradual improvements for the first decade but face steeply increasing requirements from 2021 to 2025. Automakers have endorsed the need for cleaner cars but say meeting ever-higher standards is proving a tricky task. GM’s redesigned Malibu sedan weighed 300 pounds less and had an engine 40% smaller but got just two more miles per gallon. At the same time, cheaper gas has tilted sales away from fuel-efficient cars. That’s increasing the burden of compliance on big pickups, which accounts for a significant portion of Ford Motor Co.’s profit in North America. In 2014, the company spent more than $1 billion to retool factories to build aluminum bodies for its F-150 pickup and introduced turbo-charged V-6 engines.

3. What do automakers want?

They say they’re spending more money than the government predicted to comply with the rules. They also want more credits granted for eco-friendly technology like aerodynamic design that can help them meet their targets. In negotiations that led to the rules, Obama agreed to an industry request for a midterm evaluation in 2017, in which regulators would examine whether the costs and benefits of the clean car rules were meeting expectations. In his last days in office, the Obama administration said it had completed the midterm evaluation and no changes were need -- to the chagrin of automakers.

4. How is California involved?

Under an agreement that dates to the creation of the EPA almost 50 years ago, the federal government has repeatedly affirmed that California, which struggles with smog, has a right to craft its own clean-air rules. The state is so big that carmakers try first to comply in California and then use the same designs everywhere else. During the Obama administration, the state agreed to let automakers that hit the new, tougher federal targets automatically comply with the state’s tailpipe carbon dioxide rules. In addition, more than a dozen other states, including New York and Massachusetts, have exercised their option under federal law to adopt clean-air rules that mirror California’s.

5. How much does this matter?

For California, a lot. The auto rules are key to achieving the state’s climate goals. In 2016, California Governor Jerry Brown signed a law to cut California’s greenhouse gas emissions by 40% below 1990 levels by 2030. To do that, some 40% of the state’s auto sales would have to be zero-emission vehicles -- ZEVs -- or gas-electric plug-ins by 2030, up from 3% now, according to staff projections from the state’s Air Resources Board.

6. What was Trump’s plan?

Former Environmental Protection Administration chief Scott Pruitt declared in April 2018 that the fuel-efficiency regulations for cars and light trucks were too stringent and must be revised. The following August, the EPA and Transportation Department’s National Highway Traffic Safety Administration then proposed scrapping steady increases in mileage rules and instead recommended capping them at a roughly 37-mile-per-gallon fleet average after the 2020 model year. That proposal argued that easing mileage standards would reduce vehicle prices and make it easier for consumers to replace older, less-efficient cars with newer, safer vehicles, avoiding thousands of traffic fatalities in the process. It also proposed stripping California’s authority to regulate automobile greenhouse gas emissions, an unprecedented move challenging the state’s longstanding environmental power. It followed through on that piece of the plan in September 2019.

7. What did Trump do?

In March 2020, amid the global coronavirus pandemic, Trump’s agencies finalized replacement standards requiring 1.5% annual mileage improvements through 2026. Those figures were less aggressive than the original proposal but a major relaxation compared to the roughly 5% annual gains required under the Obama-era rules.

8. What was the reaction?

Conservative activists cheered the Trump administration’s effort while supporters of the previous rules were -- and still are -- outraged. Environmental advocates have argued the plan will result in cars that spew more carbon pollution. Consumer advocates say any up-front savings on new car prices will be eclipsed by higher fuel costs. Even some automakers have been cool to the approach and some have pushed back more forcefully. Ford, BMW, Volkswagen, Honda and Volvo’s U.S. cars unit bucked the Trump administration and agreed to meet voluntary emissions targets set by California that are more stringent than the relaxed federal rules. California along with several other states and environmental organizations have sued the Trump administration to block its attack on the state’s authority.

The Reference Shelf

• What state-by-state pollution rules might mean for automakers.
• A Bloomberg View editorial chooses California over Trump.
• Why the car after your next car might be electric.
• California Air Resource Board blueprint for limiting emissions, May 2016.
• The awkwardbi position carmakers found themselves in after seeking Trump’s help

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