In the waning days of the Obama administration, the Environmental Protection Agency (EPA) surprised many observers by expediting the ongoing review of its landmark carbon dioxide (CO2) emission and fuel efficiency standards for light-duty vehicles. The standards, a centerpiece of the Obama Climate Action Plan, had been issued in 2012. At the time, the EPA committed to a mid-term evaluation (MTE) of the technological feasibility and costs of the emission limits for Model Years (MY) 2022-2025. Despite expectations that it would continue into 2018, the EPA announced on November 30, 2016 that it had completed the MTE and was proposing to keep the emission standards for these model years intact. After public comment, the agency affirmed this determination on January 13, 2017.
The EPA immediately faced sharp criticism for rushing to judgment on issues that some felt should be deferred to the incoming administration. Leading the charge was the auto industry, which angrily claimed that the EPA “has executed an accelerated and flawed assessment,” “has violated critical procedural safeguards at every turn,” and has relied on “a host of problematic assumptions and technical analyses.”
The industry’s indignation should be taken with a large grain of salt. Although agreeing to the MY 2022-2025 standards in 2012, the industry had recently questioned their achievability and undoubtedly hoped they would be weakened by the Trump administration. While the industry may be disappointed that the Obama EPA accelerated its MTE timetable, this was well within the EPA’s discretion. The only legitimate question is whether, by moving quickly, the EPA compromised the quality of its technical and economic analysis.
This is demonstrably not the case. Despite industry’s picture of a deeply flawed process, the EPA in fact developed a comprehensive technical record, conducted a thorough assessment of the issues, solicited public comment on multiple occasions, and responded at length to the industry critique of its draft analyses. Having made a considered judgment that the MY 2022-2025 emission and efficiency targets are technologically feasible and beneficial to consumers, the EPA had no reason to delay closing out the MTE on its own terms—recognizing that the next administration could take another bite at the apple if it disagreed with the agency’s analysis.
The Trump team has made no secret of its desire to dismantle President Obama’s climate initiatives. The light-duty emission and fuel efficiency standards are high on its hit list, with Trump advisors calling for them to undergo radical surgery, if not outright elimination. But Trump will find that this is easier said than done.
The Trump EPA will need to navigate a minefield of legal and technical obstacles if it tries to withdraw or weaken the standards, and missteps will bring near-certain defeat in the courts. Moreover, California can effectively counter a move to roll back the federal standards by retaining and even strengthening its own standards, creating dueling systems of emission control that would be unworkable for the industry.
The odds are that, after lengthy maneuvering, the standards will either remain intact or become more stringent. Hopefully, now that the Obama EPA has spoken, the industry will back off its strident rhetoric and concentrate on bringing to market the low-emitting technologies in which it is investing billions.
Boxed in by the Supreme Court
The EPA standards are rooted in the 2007 Supreme Court decision in Massachusetts v. EPA, which overturned the Bush administration’s denial of a petition seeking regulation of CO2 emissions from light-duty vehicles under the Clean Air Act (CAA). After determining that CO2 was a “pollutant” subject to the act, the court held that the EPA had an obligation to determine whether these emissions “endangered” public health and welfare—a decision based strictly on the science of climate change—and then to issue rules reducing vehicle emissions if it made this finding.
The Trump EPA will need to navigate a minefield of legal and technical obstacles if it tries to withdraw or weaken the standards, and missteps will bring near-certain defeat in the courts.
In response, the EPA collected the vast scientific literature and expert reports on climate change and exhaustively summarized their principal findings. After public comment and further peer review, it concluded in late 2009 that (1) “elevated concentrations of greenhouse gases (GHGs) in the atmosphere may reasonably be anticipated to endanger” public health and welfare and (2) “the emissions of the well-mixed gases from new motor vehicles contribute” to these dangerous atmospheric levels.
This endangerment finding was upheld on judicial review. Based on its findings, Massachusetts v. EPA obligated the EPA to regulate light-duty CO2 emissions and the agency met this responsibility through its 2010 and 2012 emission standards.
While some Trump advisors have mused about withdrawing the endangerment determination, this would be an impossibly heavy lift. The science underpinning the determination is well-documented and broadly accepted and developing a credible repudiation of that science would be a daunting task. Any attempt to do so could backfire and invite condemnation by the global scientific community, not to mention rejection in the courts.
If the endangerment finding remains in place, a move to withdraw the standards would breach the obligation to regulate vehicle CO2 emissions imposed by the Supreme Court and would likely be declared unlawful.
Weakening the standards through rulemaking
The Supreme Court’s decision would not necessarily block President Trump from attempting to reduce the stringency of the standards. However, it is an axiom of administrative law that rules in place cannot be changed without a full notice-and-comment rulemaking. In such a process, the Trump EPA would bear the burden of justifying higher emission limits and would need to address both the requirements of the CAA and the extensive record that was developed when the standards were first adopted in 2010 and 2012 and augmented through the MTE.
Once the EPA makes a finding of endangerment, the CAA requires the EPA to set standards that “ reflect the greatest degree of emission reduction achievable through the application of technology which the administrator determines will be available for the model year to which such standards apply,” considering related cost, safety, and energy factors. The EPA applied these criteria in developing standards in 2010 for MY 2012-2016 and then extending these standards to MY 2017-2025 in 2012.
Together with parallel rulemakings by the National Highway Safety Administration (NHTSA), the two sets of standards called for progressively lowering tailpipe emissions of CO2 and improving the fuel efficiency of passenger vehicles and light trucks, culminating in a projected fleet-wide average fuel economy of 54.5 miles per gallon (mpg) by MY 2025. The EPA has estimated that the standards will avoid 6 billion metric tons of CO2 emissions over the lifetimes of the vehicles sold in MY 2012-2025; save more than $1.7 trillion in fuel costs; and reduce America’s dependence on oil by more than 2 million barrels per day in 2025.
After years of inaction, pressure to improve fuel efficiency and reduce CO2 emissions began to build in the George W. Bush years. The Obama standards were the product of a groundbreaking 2009 agreement between the Obama administration, the auto industry, and the state of California to create a uniform national framework for CO2 emission reduction. Under this agreement, the auto manufacturers agreed not to challenge the standards and California agreed to accept them in lieu of its own requirements.
Supporting the feasibility of the standards was a comprehensive engineering and economic analysis developed by the EPA and the NHTSA to demonstrate the technology pathways for meeting the new requirements. The industry accepted this analysis but secured a commitment by the administration to update it through an MTE as MY 2022-2025 approached. It was agreed that the MTE would inform a determination whether the targets for these four model years should be weakened, strengthened or retained. The EPA committed to make this determination by no later than April 2018 but retained the ability to complete the process earlier.
The EPA and the NHTSA, working in tandem with the California Air Resources Board, launched the MTE in July 2016 with a voluminous draft Technical Assessment Report (TAR). The TAR concluded that the technologies to meet the standards were developing on pace, the costs would be lower than anticipated in 2012, and the standards could be met with internal combustion technologies and minimum electrification. Even with lower gas prices, the TAR found that savings in fuel costs would greatly exceed increases in vehicle prices after a short payback period. And the TAR determined that, because of changes in the fleet mix of passenger cars and SUVs, the standards overall would achieve lower CO2 reductions than originally projected.
There were many comments on the draft TAR. NGOs argued that there was a strong case that the standards should be strengthened based on the TAR’s findings and the shortfall in greenhouse gas reductions resulting from changes in the fleet mix. By contrast, the auto industry took issue with the TAR’s analysis, arguing that the technology path was both more difficult and more expensive than it projected and that a significant increase in electric vehicles and hybrids would be needed for compliance with the standards, resulting in significantly greater costs and lack of consumer acceptance.
Despite industry’s claims that the EPA gave short shrift to its comments in its rush to complete the MTE, the agency in fact conducted extensive additional modeling using the latest data on market conditions, fuel costs, and technology performance. This new analysis along with a full response to the industry comments was summarized in the 268 page proposed determination and presented more fully in a 719 page Technical Support Document. The EPA’s conclusion was that the industry arguments did not hold water and that the current standards are in fact feasible and cost-effective.
For example, the EPA observed that industry’s modeling assumed that the only technologies available in MY 2025 will be those in use in MY 2014 and they will not improve in efficiency. According to the agency, “[i]t is not plausible that the best powertrain efficiencies of today represent the limit of achievable efficiencies in the future.”
In addition, based on further modeling of possible technology pathways using a central case and eight sensitivity cases, the EPA reaffirmed its conclusion that “the standards can be met largely through utilization of a suite of advanced gasoline technologies,” with limited penetration of hybrids and electric vehicles. (This is the same conclusion that the National Academy of Sciences reached in a 2015 report.) On the premise that “consumer acceptance issues hinge primarily on the acceptability of the technologies for advanced conventional gasoline vehicles,” the EPA emphasized that “the data to date confirm that consumers do not have concerns with these technologies”; that they “provide ancillary benefits that may enhance consumers’ acceptance of the vehicles”; and that consumers will continue to benefit from fuel savings that over time exceed the modest increases in vehicle prices (about $875 per vehicle across the fleet).
It will be difficult for political appointees of the new administration to reverse these findings, which represent not policy judgments but the product of complex economic and engineering analyses by career agency experts and their contractors. If the agency’s technical work stands unrebutted, then a decision to weaken the standards would rest on shaky ground and could easily be set aside as arbitrary and capricious by a reviewing court. And even if some changes are made in the EPA’s technical analyses on Trump’s watch, they would likely only justify modest increases in the MY 2022-2025 emission limits—a paltry accomplishment for the time, resources, and political capital that the Trump team would need to invest.
The California factor
Whatever President Trump does, California will likely have the last word on the MY 2022-2025 emission limits and fuel economy targets.
Based on its early leadership in curtailing pollution from vehicles, California enjoys a privileged status under the CAA and can set emission standards that are more stringent than those adopted by the EPA if the agency issues a waiver of preemption. Other states can adopt the California standards and then can implement them in lieu of the federal limits.
California has historically used its leverage to push the EPA to adopt more stringent national standards and its influence was an important factor in the framework for addressing CO2 emissions that developed early in the Obama administration. In 2004, California adopted its own CO2 emission limits for the light-duty fleet. Thirteen states plus the District of Columbia opted into the California standards, extending them to 40 percent of the national light-duty market. With the Obama administration seeking to integrate the California standards into a national framework, the EPA’s 2010 and 2012 standards incorporated many elements of the California approach. In return, California supported the federal standards but insisted that the EPA issue a waiver of preemption so that the California rules remained on the books and could be enforced if the federal standards were weakened. The EPA granted these waivers.
In addition to participating in the MTE and supporting the recent EPA determination, California just completed a review of its own MY 2022-2025 standards. This review occurred against the backdrop of both Trump’s rollback threats and California’s recent decision to reduce economy-wide GHG emissions by 40 percent below 1990 levels by 2030. The review recommends that California retain its MY 2022-2025 standards but warns that more stringent standards might be necessary if the national standards are weakened. (The EPA has said that the MTE record would justify strengthening the national standards although it chose not to do so). The waivers granted by the Obama EPA should clear the path to keep the current California standards in place, notwithstanding speculation that the president’s nominee for EPA administrator, Scott Pruitt, might take the unprecedented and legally dubious step of revoking these waivers.
The Trump administration will likely be an outlier in a world that remains concerned about climate change and committed to continued decarbonization of the transportation sector.
The industry’s oft-repeated desire for national consistency would be thwarted if California and the federal government move toward divergent CO2 emission standards. Because the industry cannot operate efficiently if it is subject to conflicting systems of emission control, it would probably have little choice but to build all U.S. vehicles in compliance with the California requirements—marginalizing any weaker federal standards that the Trump EPA managed to put in place.
Leading from the rear
Although the industry may be unhappy with the EPA’s decision to truncate the MTE and cut off further debate, does it really want to mount a 3-4 year rear-guard battle to weaken the federal standards that will likely be unsuccessful? Is this the best posture for a prosperous and successful industry that is preparing for a radically different future brought about by fast-moving technological change?
In a November 10 memo to the Trump transition team, the Alliance of Automobile Manufacturers touted the industry’s recent success, noting that “new vehicle sales are strong [and] employment is growing.” (In fact, 2016 vehicle sales were the highest on record). The alliance observed that “Americans view automobiles manufactured today as significantly improved relative to a decade ago.” And it emphasized that “cars are far more efficient” than in the recent past and that gains in efficiency have occurred “even as the combination of lower gas prices and higher conventional engine efficiency has resulted in … growing market share of light trucks versus cars.”
The alliance also called attention to the dynamic changes transforming the industry and underscored that “research is ambitious and consequential and technological innovations are redefining mobility as we know it.” Self-driving vehicles are one area where progress has been rapid and Silicon Valley giants like Apple and Google, ride-share companies like Uber, and auto manufacturers have been pouring billions into R&D.
The same is true of electric vehicles. Significant reductions in battery costs and increases in driving range, coupled with the build-out of charging networks, are making electric vehicles more competitive. Experts predict that we are nearing a tipping point where the price differential between electric and conventional vehicles disappears and a mass market rapidly emerges. Auto companies are clearly positioning themselves for this eventuality by introducing a host of new models across a spectrum of market segments. Toyota, for example, announced in 2015 a goal of reducing global average new-vehicle CO2 emissions by 90 percent by 2050 through progressive market penetration of zero emission vehicles. And Mark Shields, Ford’s CEO, recently predicted that sales of electric vehicles will exceed those of gas powered vehicles in 15 years.
The movement to electric vehicles is a global trend and other important economies (Canada, the EU, and China) have emission and fuel economy standards equal to if not more stringent than the U.S. requirements. In the wake of Trump’s election, these nations have affirmed that they intend to stay the course on their climate commitments.
Against this backdrop, it’s jarring to see the industry arguing that further improvements in gasoline engine technologies will be difficult to achieve and that cost and performance shortcomings will block consumer acceptance of zero emission vehicles. This deeply defensive message is at odds with the industry’s impressive recent record of improved vehicle performance and fuel economy gains, its financial strength and massive technical capabilities, and rapid changes in technology and the marketplace that it professes to welcome.
The Trump administration will likely be an outlier in a world that remains concerned about climate change and committed to continued decarbonization of the transportation sector. U.S. auto manufacturers, who are leaders of a great global industry, should think twice about being on the wrong side of progress.
Bob Sussman served in the Obama administration during 2009-2013 as co-chair of the Transition Team for the EPA and then as senior policy counsel to the EPA administrator. He was a senior fellow at the Center for American Progress in 2008, writing and speaking about climate change and energy. In 2007 he retired as a partner at Latham & Watkins. He previously served in the Clinton administration as the EPA deputy administrator. He is now on the adjunct faculty at Georgetown Law Center and Yale Law School and is a consultant on energy and environmental policy.