Audit, Compliance and Risk Blog

Motor Vehicle Greenhouse Gas Standards–California and Four Manufacturers Finesse the Turf War With the Federal Government

Posted by Jon Elliott on Tue, Aug 20, 2019

Exhaust pipe 2-1Since the Trump Administration reversed the federal government’s agreement with California for joint motor vehicle greenhouse gas (GHG) standards, federal and state agencies have moved steadily to assert their respective authorities and to sue their counterparts. However, on July 25, 2019 California and 4 major vehicle manufacturers announced a voluntary agreement that eases the state requirements somewhat while making the looser federal standards irrelevant for those companies – and for any additional manufacturers that might join later.

What’s the Present Federal-California Conflict?

The Clean Air Act (CAA) addresses emissions of pollutants, but not vehicle efficiency as such. Instead, the National Highway Traffic Safety Administration (NHTSA) sets national vehicle fuel economy standards for vehicle makers' fleets, under authority of the Energy Conservation Act of 1975. These include the Corporate Average Fuel Economy (CAFÉ) standards. The Environmental Protection Agency (EPA) and NHTSA coordinate their rulemaking activities. They also generally cooperate with the California Air Resources Board (ARB); because California began setting state standards before EPA gained national authority in 1977, it has CAA authority to set new standards if EPA allows (formally: California sets a standard, and applies to EPA for a waiver from nationwide preemption by claiming special conditions that typically relate to vehicular air pollution in the Los Angeles).

In 2010, EPA and NHTSA set national standards for GHG emissions from light duty vehicles for 2012-2016, in cooperation with ARB. In 2012, they adopted standards for subsequent years in two phases, 2017-2020 (Phase 1) and 2022-2025 (Phase 2), promising a mid-term review of the Phase 2 standards. However, after President Trump replaced President Obama, this cooperation quickly broke down. EPA reviewed the joint standards, formally rescinded the federal version of the Phase 2 standards, and proposed to extend Phase 1 levels instead of imposing tighter controls. California and other states have sued.

What Deal Has Been Announced?

On July 25, ARB announced a deal with Ford, Honda, BMW of North America and Volkswagen Group of America. The deal provides a “framework” for voluntary fleet efficiency goals that exceed the federal 2022-2025 standards, and provide for some easing of California’s adopted Phase 2 standards. As summarized by ARB, the terms are as follows:

  • Revised Greenhouse Gas Standards: GHG standards, beginning in the 2022 model year (MY) and extending through the 2026 MY, with increasing stringency at a nationwide average annual rate of 3.7% (year-over-year). [note: was 4.7%] Of the 3.7% annual stringency, 1% can be achieved using the advanced technology multiplier credits, below.

  • Appropriate Flexibilities to Promote Zero Emission Technology: Continue current advanced technology multipliers that now expire after MY 2021, extending them through MY 2024 at the current 2.0x for Battery Electric and Fuel Cell Electric Vehicles (BEV/FCEV), and 1.6x for Plug-in Hybrid Electric Vehicles (PHEV), tapering off at the current MY 2020 and MY 2021 levels in MY 2025 and MY 2026, respectively.

  • Simplify Accounting: Remove the requirement to account for upstream emissions of fuels, as these can be addressed by other programs.

  • Increase Innovation: Raise the current cap on off-cycle menu credits, which account for actions taken outside the formal test cycle framework, from 10 grams per mile to 15 grams per mile starting in MY 2020.

  • Streamlining and Process Improvements: Improve the off-cycle credit program to facilitate timely review and decision-making regarding the approval of new off-cycle technologies.

  • Recognize California’s Authority: Participating companies are choosing to pursue a voluntary agreement in which California accepts these terms as compliance with its program, given its authority, rather than challenge California’s GHG and ZEV programs.

Based on this summary from ARB, and on reading of initial press reports, it appears that this deal benefits the participating vehicle manufacturers by adding another year to meet the Phase 2 CAFÉ numbers, easing some administrative requirements, and extending some supports for non-traditional vehicles. It also offers certainty about regulatory requirements: before this deal, manufacturers could not know whether California or the federal legal position would prevail in ongoing litigation that might not be resolved for several years. On the other side, California receives partial vindication for its aggressive stance.

What Now?

The four signatory manufacturers represent about 30 percent of US auto sales, and initial press reports suggest that additional manufacturers may join. In any case, since the deal involves voluntary commitments to exceed the reduced federal standards, the Trump Administration appears to have no way to prevent these extra efforts.

Meanwhile, EPA and NHTSA are moving forward to finalize the reduced Phase 2 standards. And the various federal-state lawsuits continue. It seems all but impossible that litigation will end before President Trump’s present term ends in January 2021.

Self-Assessment Checklist

Does the organization manufacture or import light duty vehicles?

 - If so, is it participating in the ARB-manufacturers framework deal, or evaluating whether to do so?

Does the organization use light duty vehicles in its activities, and plan to buy or lease new vehicles during the next 6 years?

Where do I go for more information?

Specialty Technical Publishers (STP) provides a variety of single-law and multi-law services, intended to facilitate clients’ understanding of and compliance with requirements. 

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About the Author

Jon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 25 years. 

Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).

Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).

You may contact Mr. Elliott directly at:

photo credit: wuestenigel Car exhaust pipe via photopin (license)

Tags: Business & Legal, California Legislation, Environmental risks, Environmental, Greenhouse Gas, ghg