EPA orders revised CAFE targets, may revoke California's waiver

Editor's note: A previous version of this report incorrectly identified the Natural Resources Defense Council. It has been corrected.

WASHINGTON -- EPA Administrator Scott Pruitt on Monday announced that aggressive light-vehicle fuel efficiency and emissions limits set under the Obama administration for model years 2022-25 are “not appropriate,” triggering a controversial new rulemaking process to adjust the standards and a possible showdown with California.

The EPA and NHTSA, the nation’s auto safety regulator, will work to produce a joint proposal in the coming months that either lowers the emission targets, extends the deadlines, or offers companies more flexibility to gain and apply credits for past performance toward future goals.

“The Obama Administration's determination was wrong,” EPA Administrator Scott Pruitt said, who has undertaken to unwind dozens of health and environmental rules promulgated by the previous administration. “Obama’s EPA cut the Midterm Evaluation process short with politically charged expediency, made assumptions about the standards that didn’t comport with reality, and set the standards too high.”

Pruitt put California on notice that it would not allow the state to impose its stricter standard on the federal government. The EPA said the administrator is evaluating whether to revoke California’s waiver to set its own emissions rules if it doesn’t cooperate.

“Cooperative federalism doesn’t mean that one state can dictate standards for the rest of the country,” Pruitt said. “EPA will set a national standard for greenhouse gas emissions that allows auto manufacturers to make cars that people both want and can afford -- while still expanding environmental and safety benefits of newer cars. It is in America's best interest to have a national standard, and we look forward to partnering with all states, including California, as we work to finalize that standard.”

Automakers welcomed Monday’s decision and said it’s premature to assume the mileage rules will be rolled back in any meaningful way.

“This was the right decision, and we support the Administration for pursuing a data-driven effort and a single national program as it works to finalize future standards,” the Alliance of Automobile Manufacturers, said in a statement. “We appreciate that the Administration is working to find a way to both increase fuel economy standards and keep new vehicles affordable to more Americans.”

Republican congressmen Fred Upton of Michigan, Bob Latta of Ohio and John Shimkus of Illinois, who chair subcommittees in the House Energy and Commerce subcommittees, applauded the EPA’s new final determination on fuel economy standards, saying it “reflects current realities and better mirrors what the car-buying public wants.

“If automakers cannot produce the cars people want to buy at prices they can afford, that will quickly have an adverse impact on the auto industry, its workers, and even the environment as older, less-efficient cars will remain on our roadways. That is why we need reasonable and achievable improvements in fuel economy, and this determination is a step in the right direction,” they said in a statement.

Industry officials have called for modest changes to the targets or the way compliance is measured. A significant rollback of the standards would undermine the harmonized fuel economy program with California and 13 allied states that automakers say they want to preserve so new light vehicles don’t have to be built to different standards.

“NADA has long supported a data-driven and informed process for determining future greenhouse gas and fuel economy standards, and we applaud EPA for putting us back on this path," said Peter Welch, CEO of the National Automobile Dealers Association.

Single national program

Maintaining a single national program is critical to ensuring that cars remain affordable,” the Auto Alliance said. “We look forward to working with key stakeholders and the State of California once EPA and NHTSA begin a rulemaking. As in the past, we will review their proposed rule through the lens of its impact on jobs and meeting our customers’ needs for affordable, safe, clean and fuel-efficient transportation.”

The latest targets, which the auto industry helped set seven years ago, call for light duty vehicles to average 51.4 mpg, or about 36 mpg under real-world conditions. Industry officials say the weighted sales mix towards light duty trucks in the past 18 months, now puts the official target below 50 mpg.

A 2016 EPA technical analysis said the 2025 fuel standards are projected to save about 540 million metric tons of GHG emissions and reduce oil use by 1.2 billion barrels.

Public interest groups, many states and localities and Democratic members of Congress are lined up in opposition to fuel economy changes, saying the decision undercuts progress on reducing harmful smog and greenhouse gas emissions blamed for global warming. They insist that years of rigorous and comprehensive analysis have repeatedly demonstrated the feasibility of the standards.

“The Trump administration’s decision will take America backward by jeopardizing successful safeguards that are working to clean our air, save drivers money at the pump, and drive technological innovation that creates jobs,” Luke Tonachel, director of the Natural Resources Defense Council's Clean Vehicles and Fuels Project, said in a statement.

The Union of Concerned Scientists estimates U.S. drivers have saved $57 billion since the first phase of standards went into effect in 2012.

Ford under fire

Greenpeace USA on Monday released a video lampooning Ford Motor Co., and urging it to distance itself from the Auto Alliance, the trade group that has been most vocal in pushing the administration to revisit the standards. The satirical ad shows children donning gas masks as they disembark from a Ford SUV into the polluted air.

Environmental groups and other proponents of the Obama administration’s fuel-economy program had looked to Ford in particular to defend the current standards, given Executive Chairman Bill Ford’s support for the original program and his years advocacy on environmental issues.

“Instead of trying to rewrite the rules in their own favor, companies like Ford, that have promised to fight climate change and build smart cities, need to make good on their promises,” Greenpeace said in a statement last week.

California officials have threatened a legal battle if the Trump administration tries to make significant changes to the fuel efficiency plan without their consent. The state has authority under the Clean Air Act to set more stringent vehicle standards and agreed eight years ago to harmonize its standards with federal ones. Thirteen states and the District of Columbia have adopted the California standards.

California Governor Jerry Brown blasted the EPA's decision. "This cynical and meretricious abuse of power will poison our air and jeopardize the health of all Americans," Brown said.

Mary Nichols, the head of the California Air Resources Board, said the state "will vigorously defend the existing clean vehicle standards."

The prospect of implementation delays from lawsuits could create operational uncertainty for automakers and suppliers.

Automakers also could lose money if they scale back sales of inefficient vehicles or pay compliance penalties in California and allied states, which represent more than 40 percent of the market.

President Donald Trump reopened the review of Corporate Average Fuel Economy and greenhouse standards at the request of automakers, saying the regulations were too burdensome. A review of the greenhouse standards, due this month, was built into the program to assess whether the standards at the midway point were still realistic for the next phase, since they were based on assumptions about future technology, costs, consumer buying habits, and testing capabilities.

Car companies argue the Trump administration’s final determination on the 2025 standards isn’t rolling back progress on emissions. Standards will still be higher than they are for the 2021 model year, but the lower trajectory will allow automakers to meet the targets without substantial financial hardship, they say.

Private-sector reaction

The decision puts automakers out of step with others in the business community that are increasingly sensitive to public perception of corporate sustainability practices and a desire to protect their brand image. Consumers, with easier access to digital information, often look to spend money with companies that share their values and try to minimize impact to the environment.

New York City Comptroller Scott Stringer called the EPA’s decision “short-sighted and backwards.”

Stringer is the custodian of the $190 billion city pension fund, which has invested almost $200 million in Ford and General Motors, and owns shares in other auto companies.

“Rolling back strong national fuel economy and emissions standards will undermine the global competitiveness of the U.S. auto industry,” he said in a statement. “In the absence of federal leadership, states need to continue to lead on clean car standards.”

The American Council for an Energy-Efficient Economy, a non-profit advocacy organization dedicated to energy efficiency, also reacted negatively to Pruitt’s rejection of the fuel economy standards. Its donors include automotive suppliers Johnson Controls, Robert Bosch LLC, and Dow Chemical (parent of Dow Automotive).

“Putting the brakes on these standards would be a costly mistake with long-lasting economic and environmental impacts. In giving their tacit support to the move, domestic automakers could ultimately undermine their own competitiveness globally, as they are facing similar or more stringent standards in major markets around the world,” Therese Langer, ACEEE’s transportation program director, said. “If U.S. manufacturers lag in developing the fuel-saving technologies that global markets demand, it could adversely affect our exports, as well as provide an opening for additional imports of more fuel-efficient vehicles the next time fuel prices spike.”