Auto Industry Sees Path For California, EPA Fuel Economy Deal

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By Abby Smith

Auto suppliers and manufacturers see an opening for California regulators to compromise with the Trump administration on “slight adjustments” to fuel economy standards for passenger cars—but the EPA must provide data to back up any changes.

California regulators have said they’re “open to listening” to any proposed change Environmental Protection Agency and National Highway Traffic Safety Administration officials offer “as long as it’s data-driven,” Laurie Holmes, senior director of environmental policy for the Motor & Equipment Manufacturers Association, said at a March 20 event hosted by the group.

The industry’s remarks appear to be part of an attempt to tamp down rising public tensions between the Trump administration and California, which the industry fears could lead to uncertainty.

California has the special ability under the Clean Air Act to set its own standards. The Golden State has already adopted the Obama-era standards for fuel economy and greenhouse gas emissions through 2025—even as the EPA and NHTSA eye options to potentially soften the stringency of limits for model year 2022-2025 vehicles.

The EPA must make a decision by next month on the future of its standards. The auto industry is looking to avoid a battle between the administration and California over the standards. They want to keep the one national program they signed onto in 2010 and avoid the uncertainty and complexity of complying with separate programs.

‘Enough Data’

Holmes said California regulators are “open to making slight adjustments, it sounds like. But we’ll have to see whether EPA and NHTSA provide enough data to convince California to stay at the table.”

Robbie Diamond, president and CEO of Securing America’s Energy Future, a group that aims to reduce U.S. dependence on foreign oil, also suggested California regulators “are showing some flexibility.” The Golden State and the Trump administration “can meet halfway,” Diamond said at the March 20 event.

And Diamond suggested California could even be enticed to negotiate if the EPA also offers some changes to program that would help encourage technology innovation.

The California Air Resources Board is “prepared to look at any additional evidence or data if presented to us,” but its analysis demonstrates the current standards are “appropriate and feasible,” Stanley Young, a spokesman for the board, told Bloomberg Environment.

“We’ve seen no evidence to suggest these important standards that reduce pollution and greenhouse gases and protect public health should be weakened,” Young added.

April 1 Deadline

The EPA intends to meet an April 1 deadline to complete an evaluation of greenhouse gas standards for model year 2022-2025 passenger cars, an agency spokesperson told Bloomberg Environment.

Trump EPA officials last year re-opened the agency’s review of those standards, reversing an Obama-era finding that the agency should maintain the standards’ stringency for those model years. The Obama administration’s program—crafted in 2010 through an agreement between the EPA, NHTSA, and the California Air Resources Board—would require an average fleetwide fuel efficiency of 54.3 miles per gallon in model year 2025.

The EPA by April 1 is expected to release only a determination indicating whether it finds the standards need to be changed. Any proposal detailing at what level Trump officials would aim to set the standards will be developed in the months after.

The EPA spokesperson didn’t respond to questions from Bloomberg Environment about whether the agency would be including new data in its forthcoming determination.

Tensions Rising

In recent weeks, tensions between the EPA and California officials over the vehicle greenhouse gas standards have escalated.

EPA Administrator Scott Pruitt recently suggested the agency could target California’s special waiver under the Clean Air Act, which allows it to set standards stricter than federal levels.

“California is not the arbiter of these issues,” Pruitt told Bloomberg News March 13, adding the state’s regulations “shouldn’t and can’t dictate to the rest of the country what these levels are going to be.”

Mary Nichols, California’s top air regulator, said in February “there would be war with many states lining up with California” if the Trump administration goes after the state’s waiver. A dozen states, including New York, Pennsylvania, and Massachusetts, have adopted California’s standards, totaling more than a third of the U.S. auto market.

Pruitt also said March 13 the EPA isn’t “presently” looking at setting standards beyond model year 2025, an approach that initially was thought could bring California to the negotiating table. Golden State air regulators have already adopted standards for model years 2022-2025 at Obama-era levels, and they’re beginning conversations about the next round of state limits through 2030.

Litigation Adds to Uncertainty

Automakers and auto suppliers, however, are cautioning against any attack on California’s waiver.

“Anything that leads to more than one program is not efficient for the industry. It’s not efficient for the customer either,” Julia Rege, environment and energy director for Global Automakers, said at the March 20 event. Her group represents foreign-based car manufacturers, including Honda, Hyundai, Nissan, Toyota, and Subaru.

“Anything that takes away from one national program results in a lot of uncertainty,” Rege said. She added that any litigation over California’s waiver would be costly, time-consuming, “and it only adds to the uncertainty for industry, too.”

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