Part 3: Withdrawal of California Waiver and Preemption of ZEV by EPCA
On August 2, 2018, the US Environmental Protection Agency (EPA) and the National Highway Safety Administration (NHTSA) jointly published the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026. The Joint Notice of Proposed Rulemaking (NPRM) gave much-awaited guidance for future emissions and fuel economy regulation. The NPRM included a 60-day comment period from the date entered into Federal Register (August 23, 2018), and posted to the regulator’s docket on August 24, 2018. The comment period included three public hearings and closed on October 26, 2018 . EPA and NHTSA are to make a final ruling an “undetermined time” after the 60-day comment period ends. In this series, CAR presents a multi-part review of key elements of the proposal and puts the possible outcomes into context.
Although the emissions and fuel economy standards are an essential part of the SAFE Vehicle Rule and have garnered much public debate, the proposed Withdrawal of the California Waiver may create even greater disharmony, uncertainty, and lengthy legal disputes.
Under Section 177 of the Clean Air Act, individual states are given the right to adopt California’s vehicle emissions regulations, but may not develop their own. There are 12 Section 177 states (Connecticut, Delaware, Maine, Maryland, Massachusetts New Jersey, New York, Oregon Pennsylvania, Rhode Island, Vermont, and Washington. Colorado is in the process of becoming the 13th state to adopt the regulations. The District of Columbia also complies with California’s emissions regulations. Figure III-1 shows the states that have adopted California’s LEV III and/or ZEV regulations and those states that have adopted neither but have co-joined the lawsuit against the EPA that had been filed on May 1, 2018, hoping to stop the withdrawal of the waver (Illinois, Iowa, Minnesota, and Virginia).
Figure III-1: States that have adopted California Low Emissions Vehicle III and Zero Emissions Vehicle ZEV Regulation, or have co-joined the May 1, 2018 Lawsuit Against the United States EPA
Source: CAR Research
In an expected action, the Trump Administration proposed to withdraw the waiver of the Clean Air Act preemption for California’s Advanced Clean Car (ACC) program, Zero Emissions Vehicle (ZEV) mandate and Greenhouse Gas (GHG) standards that apply to MY’s 2021 through 2025 because:
- Those standards address environmental problems that are not particular or unique to California
- Are not caused by emissions or other factors particular or unique to California
- For which the standards will not provide any remedy particular or unique to California
This was a strong shot directly at the State of California, and the California Air Resource Board. Then Governor Jerry Brown and Mary Nichols, Chair, California Air Resources Board (CARB) both responded quickly and strongly to the Administrations action:
“(California) will fight this stupidity in every conceivable way possible.” Jerry Brown, former Governor, State of California” 
“Unfortunately, by putting out these proposals, the administration has effectively precluded our ability to engage in a conversation with them …We can’t possibly, other than in a formal legal proceeding, suggest alternatives they might like.” Mary Nichols, Chair CARB 
Although the negotiations between California and the U.S. regulators initially were characterized as in good faith, they had been mostly behind closed doors. and appear to have been cut-off as of late February 2019. It is notable that the manufacturers have been relatively quiet regarding the California-Trump Administration discussions. However, the manufacturers have made it clear that one national program is very important to them. To avoid a potential negative public reaction, it has been in the manufacturers’ best interest to let the negotiations play-out without commenting in the media, but the ability to sit by quietly California and the Trump administration appear to have ceased negotiations.
Adding complexity to the negotiations, Governor Jerry Brown left office in January 2019 and was replaced with incumbent Lieutenant Governor Gavin Newsome. While Newsome is a political veteran, he likely does not possess the influence of Brown. If California loses its exemption, it is possible, even likely they will enter into a protracted court battle. Such a battel would add greater uncertainty to an already challenging process. However, it is important to consider that given the recent appointment of conservative-leaning Justices Gorsuch and Kavanagh to the U.S. Supreme Court, California may face increased hurdles if they proceed with legal actions.
Few, if any, elements of the NPRM warranted more comments than the proposed revocation of California’s waiver. The Global Automakers noted the need for maintaining One National Program (ONP) was paramount to future planning, and litigation would lead to great uncertainty:
“This important goal can be achieved without resorting to a costly and uncertain litigation to either assert preemption under EPCA or to revoke California’s waiver under the CAA. Therefore, the Global Automakers emphasizes that maintaining ONP will require CARB’s participation…”
And they further stated;
“Action that maintains ONP obviates the need to address California’s authority under EPCA preemption or the CAA Waiver, but achieves the same goal of providing regulatory certainty and reducing regulatory overlap.” 
Honda emphasized the need to avoid a long legal battle:
“Should California and the federal government be unable to agree on a single national program, it is reasonable to expect protracted litigation from multiple parties, on numerous fronts. As these cases work their way through the courts, automakers will have uncertainty about future regulatory direction, hampering our ability to strategically plan and efficiently invest resources.” 
Nissan also supported a compromise adding:
“Nissan urges NHTSA and EPA to continue to align their rulemaking process within the federal programs and with CARB so that the national and state programs are harmonized and equivalent to the fullest extent possible, consistent with the goals of ONP while avoiding potential uncertainty and protracted legal challenges.” 
Many suppliers also indicated the preference for consistent ONP. For example, BorgWarner stated:
“Decisions regarding long-term investment in R&D, capital and tooling are challenging for suppliers like BorgWarner, who support all major automakers, and therefore need to invest in multiple technology solutions to meet our customers’ needs. One National Program and harmonization of the CO2 and CAFE standards are necessary to provide the industry with certainty for investments and efficiencies in product development and manufacturing” 
While favoring a compromise, FCA did submit comments in support of preemption stating:
“…it remains our hope that conflicts over preemption will be avoided by an agreement to modify ONP to address evolving market realities; however, in the absence of such an agreement, FCA agrees that the law gives the federal government the authority to preempt state standards that are directly related to fuel economy.”
“The mathematical relationship between the two is undeniable, and our understanding of that relationship has only grown as the program matures. In addition, any state GHG standards that limit tailpipe CO2 emissions would impact how manufacturers comply with federal fuel economy standards. As such, there is a strong argument that EPCA expressly and impliedly preempts state GHG standards that limit CO2 tailpipe emissions. For similar reasons, ZEV mandates could reasonably be found to be preempted by EPCA as well.”
A revocation of the California waiver, and the legal battle that would likely follow could lead to hardship for vehicle manufacturers and suppliers. The effort to create a true One National Program is important for all stakeholders, but so too is a consistent and stable regulatory environment. A fast, reasonable, and lasting resolution of the proposed revocation, or conversely, the continued ZEV mandate, is critical for the viability of the automotive industry.
Director, Propulsion Technologies & Energy Infrastructure
 Federal Register/ Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules, pp 42817 and Federal Register/ Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules (https://www.transportation.gov/briefing-room/dot4818)
 The Notice of Decision to grant a waiver for California Advanced Clean Car Program, was entered into the Federal Register on January 9, 2013. For a review of that waiver, please see here: (https://www.gpo.gov/fdsys/pkg/FR-2013-01-09/pdf/2013-00181.pdf)
 Comment submitted by the Association of the Global Automakers; Attachment A: Details of the Comments from the Association of the Global Automakers on the Proposed SAFE Vehicles Rule, page 5
 Ibid, page 5
 Comments submitted by American Honda Motor Co., Inc. in response to Docket No. EPA-HQ-OAR-2018-0283 and NHTSA-2018-0067, dated October 25, 2018, page 5
 Comment submitted by Nissan Group of North America, October 26, 2018, page 3
 Comment submitted by BorgWarner, October 26, 2018, page 2
 Comments submitted by Fiat Chrysler Automobiles, October 26, 2018, page 9
 Ibid, page 9