Scott Pruitt wants to roll back the EPA’s requirements for clean vehicles. It’s going to be a fight.
Buckle up for a bumpy legal battle about your next car's emissions.
EPA Administrator Scott Pruitt recently announced his intention to repeal Obama-era standards on vehicle emissions. While we don’t have specific details about the new requirements, we do know they would be less strict—or ambitious—than the current standards set to start with the 2022-2025 model year. This could mean more greenhouse gas emissions, less fuel-efficient vehicles, and the possibility of cheaper automobiles. It all depends on who you ask.
But it’s likely that the actions of the Trump-era EPA here won’t be the final say in this emissions-regulating saga, which draws heavy influence from the political powers in charge at a given moment. Instead, it’s going to set up an epic lawsuit with Pruitt and the EPA on one side, and California and a host of other states — all of which are blue and represent around a third of the country’s new car market according to Bloomberg — on the other. And that’s where the real showdown will take place.
How we got here
After President Trump’s surprise electoral victory in November 2016, the Obama-era EPA pushed through a “midterm evaluation” (MTE) of vehicle emissions regulations originally proposed in 2012. The MTE was scheduled for completion in April, 2018 and was meant to examine whether the proposed 2022-2025 standards were fair. The Obama EPA finalized its evaluation more than a year early, publishing its decision on January 17, 2017—three days before the Trump administration took over. Obama’s EPA found, perhaps unsurprisingly, that the 2022-2025 regulations were just fine, and could remain in place.
The impending requirements call for the fleetwide average fuel economy of cars and trucks to rise to 51.4 miles per gallon by 2025, up from 35.5 mpg in 2016. Similarly, tailpipe carbon dioxide emissions will fall 31 percent to 173 grams per mile. It’s the averages that matter — car companies that sell lots of efficient hybrids and electric cars will be able to offset fuel-hungry pickup trucks to meet goals. Companies that don’t achieve the standards are able to purchase credits from companies that overachieve — making a useful revenue stream for EV-only companies like Tesla (and this is happening already).
The downside here is that whenever you increase capability — horsepower, towing capacity, or fuel efficiency — things get more expensive, and the strict regulations could force companies to change their product mix to something less profitable (or less desired by consumers).
Companies like GM and Ford make a ton of money off heavy, fuel-inefficient pickup trucks. The top-three best-selling vehicles in the US last year were the Ford F-series (900,000), Chevy Silverado (600,000), and Ram Pickup (~500,000) — and the segment continues to grow. Everything else takes a distant second and showcases the difficulties with trying to regulate fleetwide emissions standards. For reference, the stock model 2018 Ford F-150 has a fuel efficiency of around 26 mpg—roughly half of the 51.4 number the fleet will need to average. Higher fuel economy standards could put significant pressure on those sales by forcing carmakers to sell more small, fuel-efficient cars that consumers are less interested in.
Big oil change
This week, when the midterm evaluation was originally supposed to take place — and perhaps also unsurprisingly — the Trump EPA thought differently.
“The Obama Administration’s determination was wrong,” said EPA Administrator Scott Pruitt in a statement. “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.”
Politics plays a big role in many things at the EPA, and that’s perhaps even more true with former Oklahoma Attorney General Scott Pruitt (who is a close ally of the fossil fuel industry and repeatedly sued the EPA as Oklahoma AG) at the helm. The Trump administration has been rolling back regulations all over the place, environmental and otherwise, including on so-called clean coal, financial institutions, and, of course, net neutrality.
This is just the latest volley in what they consider cutting red tape. Revising proposed regulations on how much greenhouse gases autos can emit into the atmosphere is par for the course — but what’s really interesting is what happens next.
“There’s going to be incredible litigation over this,” says Emil Frankel, senior fellow at the Eno Center for Transportation and a former Assistant Secretary for Transportation Policy under President George W. Bush. And that litigation is where Pruitt’s real fight is.
Under the Clean Air Act, the EPA is charged with setting national standards for vehicle tailpipe emissions of certain pollutants. But the EPA also has the authority to grant a waiver to the state of California, allowing that state (as well as the 13 states and Washington DC, which follow its requirements) to set their own, stricter standards. Those states, for example, mandate that 15 percent of all vehicles sold in 2025 to be zero-emission, a requirement that probably won’t exist in the rest of the country. But Pruitt’s statement suggests that he might not allow California to continue to determine its own emissions standards.
ABOVE: Listen to the Last Week in Tech podcast in which we discuss the EPA’s proposed roll-back. The fuel talk starts around the 12 minute mark.
“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.”
In our highly charged world of political gamesmanship, them’s fightin’ words. And this is consistent with the Trump administration’s aggressive posture towards California’s sovereignty, on everything from sanctuary cities to federal land transfers.
And California, naturally, is prepared to fight back. “We’re prepared to do everything we need to defend the process,” Xavier Becerra, California’s attorney general, said in an interview with The New York Times.
Environmental advocacy groups are readying for a fight, too. “The current standards have helped bring back, secure, and create jobs nationwide; they have reduced pollution; saved consumers billions at the pump; and have been integral to growing and sustaining America’s manufacturing sector over the past decade,” said a statement by the BlueGreen Alliance, a group of labor unions and environmental groups. “Weakening the rules — which is indicated to be the intent of today’s decision — could put American jobs at risk today and in coming years, and would threaten America’s competitiveness in manufacturing critical technology.”
The long road ahead
Expect the battle over this repeal to take a long time. The courts move slowly, and this is a complicated issue on which billions of dollars in car-industry R&D budgets are resting. Do automakers need to plan to meet the Obama-approved regulations in 2022, or are the forthcoming Trump/Pruitt-proposed regs going to be locked in?
It also has the potential, environmental advocates say, of perhaps putting the US on the back foot when it comes to international emissions regulations. If the EU and China end up with stronger emissions requirements, they could set the tone for car development in the rest of the world. If the US adopts weaker standards, the auto lobby could use that fact to encourage other countries to adopt weaker emissions and fuel economy standards as well. What automakers want, more than anything, is worldwide consistency so they don’t need to make different cars for different markets.
The Obama administration was trying to be the first mover on this and set the tone for everyone else, as Europe and China are just starting the standards-making process. By undoing the aggressive Obama EPA regulations, the Trump administration may lower worldwide standards at the same time. The regulations that Pruitt and the EPA want to overturn are still a few years away — but given lengthy development cycles, automakers are already well into the planning of cars that will be released in a few years. This means any uncertainty (especially around whether stronger regulations will go into effect or not) could be an expensive proposition.
In the end, many car companies are focusing on developing so-called “global cars” — vehicles that are equipped largely identically all around the world. This reduces costs through economies of scale, but also restricts cars to the lowest common denominator between all countries. If China or Europe has stricter requirements, companies (especially those who sell more cars in those markets) may choose to build to stricter requirements from those countries regardless of what the US does.
The automakers, at least publicly, are supportive of whatever the EPA decides. In reality, they’re walking a delicate line between the economic reality of tougher regulations (which would likely drive up costs) and environmental impacts. Carmakers also express a need for a single national emissions standard, not dual requirements for California and then the rest of the US.
GM and Ford both sent us boilerplate statements that don’t add much to the conversation. There isn’t, however, a single “automaker” position on the topic. Carmakers, like Ford, that have more advanced engine and manufacturing technology, are already on track to achieve the current Obama-era standards. In that case, the high standards are a competitive advantage. While others, like Fiat Chrysler, who declined to provide a standalone statement, may find meeting the Obama standards extraordinarily difficult — if not impossible.
The Auto Alliance, a trade group that represents most of the major automakers, is perfectly happy to take sides. It’s openly supportive of Pruitt’s move — and has been quietly lobbying for this sort weakening of the standards:
“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. 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.”
Arriving at a destination
To revise the Obama-era regulations, Pruitt’s EPA will need to go through a formal rulemaking process, which would include a public notice (which should be coming later this month) and an open comment period. This means a public and lengthy fight — and likely will include lawsuits from multiple players including environmental groups and states opposed to the EPA’s proposed changes. It could be years, even beyond the 2020 election, before this is all over.
With the potential implementation of these requirements more than three years away, nothing will need change immediately. But with both sides making hay out of the need for more (or fewer) regulations on the environment, expect the dueling press releases to continue indefinitely. And, soon enough, dueling lawsuits too.