Since the 1970 Clean Air Act, the federal government has let California set stricter emission standards and to be joined by other states that wish to follow the same regulations.



California's waiver has never been permanently revoked by any administration, but the law allows the federal government to do so. President Trump claims automakers would be "out of business" without such an intervention.



Automakers are less bullish. Less than two months ago, Ford, Honda, Volkswagen, and BMW struck a deal with California to achieve a 50-mpg standard by the 2026 model year in spite of federal rollbacks. Now they'll have to decide whether to push ahead with that pledge.

In the year since the Environmental Protection Agency said it would lower fuel-economy requirements on 2021 through 2026 model year vehicles, California has been in the crosshairs. Now, the Golden State's nearly 50-year run of setting tougher requirements—along with its iron mandate for electric cars enforced by 10 other states—could be over.

On Wednesday, President Trump tweeted that the EPA would soon revoke California's waiver under the 1970 Clean Air Act "in order to produce far less expensive cars for the consumer." At issue is the legality of California, under the California Air Resources Board (CARB), to force automakers to comply with a separate standard that supersedes the federal standard.

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The Trump Administration is revoking California’s Federal Waiver on emissions in order to produce far less expensive cars for the consumer, while at the same time making the cars substantially SAFER. This will lead to more production because of this pricing and safety...... — Donald J. Trump (@realDonaldTrump) September 18, 2019

"Many more cars will be produced under the new and uniform standard, meaning significantly more JOBS, JOBS, JOBS!" he tweeted Wednesday. "Automakers should seize this opportunity because without this alternative to California, you will be out of business."

Trump also stated, without providing any basis for the claim, that this would make cars less expensive and “substantially SAFER.”

A month earlier, Trump tweeted that "when this Administration's alternative is no longer available, California will squeeze them to a point of business ruin."

How California Developed Its Mandate

Until President Obama in 2011 set the most aggressive fuel-economy targets in the industry's history, automakers for decades had to sell cars with different emissions equipment in California. The waiver was intended to let California battle its smog crisis within Los Angeles. However, under the Clean Air Act, this mandate could be challenged and revoked by the EPA at any time.

As the state's influence grew and its attention pivoted from smog-forming gases such as nitrogen oxide (the kind produced by diesel engines) to greenhouse gases like carbon dioxide, in the 1990s California began requiring automakers to sell what became known as "compliance cars." Even today, limited series of electric, hydrogen, and other alternative-fuel vehicles sell in the state—and sometimes, only a handful of others—at low volumes, and often at big losses.

To enforce compliance, California created a private cap-and-trade market, under its zero-emission-vehicle (ZEV) mandate, to fine automakers that couldn't meet the requirements and to allow them to buy credits from automakers that could. Ten other states follow the ZEV mandate, plus Washington, D.C. Even more follow California's stricter low-emission vehicle (LEV, ULEV, SULEV) rules on tailpipe emissions, of which many automakers comply by building separate versions of the same models. Trump would do away with the ZEV mandate, its banking credit system, and all LEV standards in favor of a single national policy. California has been fighting the administration since 2017 when Trump reopened the EPA's midterm review on fuel-economy standards.

More opponents, including four automakers (BMW, Ford, Honda, and Volkswagen) that struck a private deal with California, decry the EPA's own admission that the plan would increase vehicle carbon-dioxide emissions by 9 percent through 2035 as compared to the current targets. They also counter that automakers can afford the tougher standards and that more efficient vehicles, by their nature, would decrease the nation's oil dependence.

But most automakers, with the obvious exception being Tesla, haven't been able to consistently meet California requirements—or even federal requirements—without trading ZEV credits or factoring in the EPA's own credit system that discounts fines when automakers sell a certain amount of emission-reducing technology in their fleets.

In a speech to the National Automobile Dealers Association on Tuesday, EPA administrator Andrew Wheeler said that automakers still aren't meeting Corporate Average Fuel Economy (CAFE) requirements and only comply through penalties.

"For example, the total shortfall in CAFE credits for model year 2018 is the equivalent of almost $1.3 billion, more than 10 times higher than the equivalent shortfall for model year 2011 (just over $100 million)," Wheeler said.

Cheaper Cars? EPA Thinks So

Trump's remarks echo the EPA's August 2018 proposal titled "Safer Affordable Fuel-Efficient Vehicles Rule," in which the agency claims that automakers would sell new cars at lower prices if they weren't forced to comply with rapidly increasing emission targets under the original rule set by President Obama in 2011. With lower prices, the agency says buyers would be able to upgrade older cars to newer, cleaner, and safer cars more often—not that distant a theory from Obama's 2009 Cash for Clunkers program, during which Americans took $3 billion in federal rebates to trade in 700,000 older cars. But Trump—in what remains a bizarre fight between himself and automakers that have locked in business plans to build more efficient cars under the Obama rules—wants a permanent solution that will leave the federal government in charge of vehicle emissions.

For now, nothing has changed; the only official statement so far comes from the president's Tweets. Even when it does, California and others are sure to file lawsuits that likely will delay the EPA's ruling, leaving automakers—and the rules themselves—completely up in the air.

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