On April 2, 2018, after months of suggesting the Trump administration would roll back the Obama-era greenhouse gas (GHG) emissions standards applicable to light-duty vehicles, the U.S. Environmental Protection Agency (EPA) Administrator, Scott Pruitt, authorized publication in the Federal Registerof a notice reconsidering the emissions standards for model years 2022-2025. (See, https://www.gpo.gov/fdsys/pkg/FR-2018-04-13/pdf/2018-07364.pdf)

Declaring that the Obama administration standards were “based on outdated information, and that more recent information suggests that the current standards may be too stringent,” EPA withdrew its January 12, 2017 Final Determination, which found the standards appropriate, and announced its intent to initiate a notice and comment rulemaking to revise the standards.

While some automakers celebrated the notice, major car companies, including Ford, have recently urged EPA to maintain the Obama-era standards but provide additional flexibility for automobile manufacturers. The move also elicited pointed criticism from former EPA Administrator Gina McCarthy, who said the standards set by the Obama administration were “based on real information” and that the current administration would “use any excuse” to undo Obama administration regulations. Pruitt has defended the notice, saying the previously-approved standards were infeasible.

Background

The 1970 federal Clean Air Act amendments set the first comprehensive federal emissions standards for new automobiles for pollutants that could adversely impact human health. The amendments specifically provided that any state that had adopted automobile emissions standards before March 30, 1966—in other words, California, which had earlier adopted its own standards through the Mulford-Carrell Act—could submit a waiver request to EPA to allow it to continue to set its own standards as long as they are equally as protective as the federal standards. California has routinely utilized this waiver exemption to set fuel standards since the amendments’ passage. Separately, Corporate Average Fuel Economy (CAFE) standards were first established by Congress in 1975, partially in response to the 1973 oil embargo. They set the average new vehicle fuel economy that an automobile manufacturer’s fleet must achieve, and have periodically increased over time.

The CAFE standards for light-duty vehicles were increased again in 2007; that same year, the U.S. Supreme Court, in Massachusetts v. U.S. EPA, determined that GHG emissions from vehicles are subject to regulation under the Clean Air Act. Following that decision, in 2009, a deal between the federal government, state regulators, and automobile manufacturers was reached to create a national program that would harmonize federal Clean Air Act, CAFE, and California standards. EPA and the National Highway Traffic Safety Administration (NHTSA) jointly developed a National Program for GHG emissions and fuel economy standards in two phases, Phase I (for model years 2012-2016) and Phase II (for model years 2017-2025). All major manufacturers, representing 99 percent of model year 2016 sales in the United States, were able to meet the Phase I standards.

A 2012 rulemaking established the Phase II standards, and required EPA to conduct a Mid-term Evaluation (MTE) of the GHG standards established for model years 2022-2025. The MTE was undertaken by the EPA during President Obama’s tenure in office, with a final determination on the standards issued in January 2017. At that time, EPA determined that the model year 2022-2025 standards remained appropriate and that no rulemaking to modify the regulations was required. Notably, California had sought a waiver in 2012 for its Advanced Clean Cars regulation, which was approved in 2013; those standards were also reviewed for model years 2022-2025 on a mid-term basis (by the California Air Resources Board) and found appropriate in January 2017.

EPA’s Notice of Reevaluation

In contrast to the January 2017 finding, Administrator Pruitt determined that:

• . . .the [model year 2022-2025] standards are not appropriate in light of the record before EPA, and therefore should be revised as appropriate.

Citing to a “significant record” that had been developed since the January 2017 determination, including with respect to consumer acceptance of advanced technology vehicles and fuel price projections, the notice concluded that new information needed to be assessed in setting more feasible GHG emissions standards. The notice suggested that various economic inputs, including with respect to the social cost of carbon and energy security valuation, needed to be updated to arrive at an appropriate rule.

In reaching its determination, EPA solicited comments from stakeholders, and the notice contains a significant number of citations to automaker comments on the review. The notice also consistently raised a few perceived issues with the prior standards:

• The reach and success of the National Program is limited by consumer inability to afford new cars. The notice referenced potential higher vehicle costs as having an unaccounted-for negative effect on achieving emissions reductions, claiming that consumers would use older, less fuel efficient vehicles for longer if automobile costs rise as a result of stringent standards.

• Changing trends impact compliance with the standards. While data at the time of the January 2017 rulemaking showed that automobile manufacturers were “over-complying” with the standards and building up credits, the notice says new EPA data shows that automakers have begun relying on credits to comply with the National Program as of model year 2016, a trend EPA now anticipates to continue. The notice also noted “flagging demand” for fuel-efficient vehicles and uncertainty in future efficiency improvements.

• Fuel cost projections for the 2017 rulemaking were overly optimistic. The notice contends that fuel costs estimated at the time of the 2017 determination were significantly higher than current projections, and the lower projected fuel prices mean that energy-efficient vehicles will be less attractive to consumers, thereby presenting new challenges to automakers.

EPA clarified that while the notice represents a final determination on the appropriateness of the model year 2022-2025 standards, it is not a final agency action subject to review because a joint notice and comment rulemaking process, coordinated with NHTSA, will be necessary before any changes to the current standards will take effect. As that process moves forward, the current standards will remain effective.

Conclusion and Implications

EPA will now begin the process of reassessing the GHG emissions standards, guided by the principles set forth in the April 2 notice. While Administrator Pruitt has repeatedly referenced disapproval of California’s waiver, saying in January of this year that, “California doesn’t have the authority to set the standards for the rest of the country,” no formal steps have been taken to revoke the existing waiver approved in 2013. The notice itself reiterates EPA’s commitment to a national harmonized program, but only references harmonization of the federal GHG and CAFE standards. Reversal of the waiver could have serious implications as California seeks to meet its GHG reduction goals for 2030. For more information online, see:https://www.epa.gov/newsreleases/epa-administrator-pruitt-ghg-emissions-standards-cars-and-light-trucks-should-be; and https://www.epa.gov/regulations-emissions-vehicles-and-engines/midterm-evaluation-light-duty-vehicle-greenhouse-gas

(Julia Stein)