Revoking California’s waiver is contrary to existing law

In a letter to the California Air Resources Control Board (CARB) on Sept. 6, the U.S. EPA and U.S. Department of Transportation "put California on notice" that the agreement California struck with four automakers to reduce greenhouse gas (GHG) emissions through fuel economy standards "appears to be inconsistent with Federal law." EPA and DOT argue that they have sole authority to establish nationwide fuel economy and GHG emissions standards, and that both Section 209 of the Clean Air Act and the 1975 Energy Policy and Conservation Act (EPCA) prohibit California from adopting or attempting to enforce its own emissions or fuel economy standards.

Contrary to EPA and DOT's position, Section 209 permits California to set stricter air emissions standards than the federal baseline. Since California was already regulating air emissions when the Clean Air Act was passed in 1970, Congress created a California-only exemption to the act's preemption authority, which otherwise prohibits states from adopting or attempting to enforce different emissions standards than those set by EPA. California may set stricter requirements, so long as California determines that its emissions standards are at least as protective of public health and welfare as applicable federal standards. California exercises its exemption by seeking "waivers" from EPA each time California seeks to set a more stringent standard than EPA. EPA "shall" grant the waiver unless the EPA Administrator finds that California's determination was arbitrary and capricious, California does not need such standards to meet "compelling and extraordinary conditions," or the proposed standards are otherwise inconsistent with the Clean Air Act.

The question is whether California's stricter fuel economy standards fit within the statutory exemption and the prior waivers granted by EPA. It is clear that regulation of fuel economy standards is critical to addressing climate change, as the transportation industry accounts for nearly 30% of total GHG emissions in the U.S. Although the George W. Bush EPA initially denied a California waiver request relating to regulation of GHG emissions in 2008, EPA eventually issued the waiver in 2009. California's position was strengthened by the Supreme Court's 2007 ruling in Massachusetts v. EPA, which held that GHG emissions are appropriately regulated under the Clean Air Act. In 2013, EPA again granted California's waiver request, allowing California to set GHG emissions regulations and fuel economy standards via its Low and Zero Emissions Vehicle programs. Thus, both Supreme Court precedent and past EPA practice permit California to set fuel economy standards to control GHG emissions.

To now change course and prevent California from enforcing these standards, EPA must revoke California's existing waivers. Yet, scholars who have researched the issue have found no legal basis for EPA to revoke California's prior waivers. Nothing in the Clean Air Act permits EPA to revoke a waiver. If EPA were to attempt to revoke California's current waiver, it would need to support its changed position with scientific, technical, and legal justifications, which the Trump administration has reportedly been unable to do.

EPA and DOT's other argument that EPCA preempts California from issuing its own fuel economy standards has already been shot down by at least two federal courts considering the issue -- both courts found that EPCA does not preempt California from regulating GHG emissions through fuel economy standards. Central Valley Chrysler-Jeep, Inc. v. Goldstene, 529 F. Supp. 2d 1151 (E.D. Cal. 2007); Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie, 508 F. Supp. 2d 295 (D. Vt. 2007). Each court relied, at least in part, on the Supreme Court's decision in Massachusetts v. EPA, which considered and dismissed EPA's nearly identical argument that EPCA prevented EPA from regulating GHG emissions via fuel economy standards because EPCA assigns the responsibility for setting fuel economy standards to DOT. Instead, the court found the two statutes can operate independently, regardless of some potential overlap. The same holds true for California, because Congress granted it essentially the same authority as EPA under the Clean Air Act.

In sum, the Trump EPA's apparent intent to revoke California's prior waivers is contrary to existing law. Despite this, the Trump administration shows no signs of backing down, even prompting the Justice Department to open an investigation into the automakers' agreement with California. The dispute is likely to spur years of litigation, and the final outcome will likely depend on whether Trump is reelected, and the courts' willingness to overturn clear precedent. 