The divergence risk between U.S. and CARB standards was eased in 2009, when the federal government sought to harmonize compliance requirements in the One National Program by establishing new greenhouse gas emissions and fuel economy requirements for light-duty vehicles and later granting California a waiver to enforce its Advanced Clean Cars Program, which includes zero-emission obligations that push the industry closer and closer to complete electrification.
California's ZEV mandate requires that a certain percentage of cars and light-duty trucks do not produce carbon dioxide tailpipe emissions. Several states, including New York, rely on the California waiver and have adopted California's clean car standards. This ZEV program allows automakers to sell credits for overcompliance, which has been crucial to the profitability of Tesla and other companies.
The federal government changed course under the Trump administration. Last Sept. 27, it revoked California's ZEV waiver and, on April 30, revised federal greenhouse gas and fuel economy requirements based on its determination that the existing requirements were not appropriate or achievable. The new rules require annual improvements in greenhouse gas and fuel economy performance by only 1.5 percent each year, as compared with 5 percent under the prior rule. The federal government justified these actions by stating:
1. Under existing law, only the federal government has the authority to set rules for fuel economy and, by extension, greenhouse gas emissions.
2. California does not need to create its own state-specific rules to tackle climate change.
3. The prior federal standards were unnecessary and unachievable.
It is not surprising, then, that these actions were met with mixed reactions, even within the industry. Some applauded the federal government's efforts to streamline rules nationwide and reduce the cost of compliance; others disagreed, arguing that they were already on track to meet the prior rules and were willing to comply with California's standards.
The legal fight is taking place in the U.S. Court of Appeals for the District of Columbia Circuit. There, California — along with environmental groups, select industry coalitions and other Democratic states — argues that the federal government lacks the legal authority to withdraw the previously granted waiver. However, the court's ruling likely will not come until at least early 2021. And even then, the losing party will likely request that the Supreme Court review the case. What's more, if Biden wins, the federal government would likely try to put all the legal challenges on hold until the new administration can attempt to rescind the revocation of California's authority, a potentially lengthy process.