Deep Dive Episode 184 – Federalism or a Federal Standard? Fuel Economy and Greenhouse Gas Emissions Standards
Federal and state government authority to mandate automobile manufacturers and consumers switch to electric cars is one of the most contentious legal and policy debates of the last two decades.
The Biden Administration has proposed to rescind two actions of the Trump Administration — EPA’s withdrawal of a Clean Air Act waiver of preemption, and a Department of Transportation preemption regulation — that together attempt to establish one preemptive, national standard for automobile fuel economy and greenhouse gas emissions by the NHTSA and EPA and, as a consequence, prohibit California from adopting or enforcing motor vehicle greenhouse gas emissions or zero-emitting vehicle requirements for motor vehicles under state law.
In this live podcast, a panel of lawyers involved in the litigation discuss the legal and policy issues presented by these proposals.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
[Music and Narration]
Introduction: Welcome to the Regulatory Transparency Project’s Fourth Branch podcast series. All expressions of opinion are those of the speaker.
Colton Graub: Good afternoon and welcome The Federalist Society’s Fourth Branch podcast for the Regulatory Transparency Project. My name is Colton Graub. I’m the Deputy Director of RTP. As always, please note that all expressions of opinion are those of the guest speakers on today’s call. If you would like to learn more about each of our speakers and their work, you can visit regproject.org where we have their full bios.
After opening remarks and discussion between our panelists, we will go to audience Q & A, so please be thinking of the questions you would like to ask our speakers.
This afternoon we’re pleased to host a conversation discussing the Biden administration’s proposal to rescind two actions of the Trump administration, EPA’s withdrawal of the Clean Act Waiver of preemption and the Department of Transportation’s preemption regulation that together tend to establish one preemptive national standard for automobiles, fuel economy, and greenhouse gas emissions by the NHTSA and EPA.
We’re pleased to welcome an expert panel of distinguished speakers to discuss this topic. James Coleman will be moderating the discussion. He is a Professor of Law at Southern Methodist University’s Dedman School of Law.
James, I’ll hand it off to you.
James Coleman: Well, thank you so much, Colton. I’m looking forward to today’s discussion. We’re going to be talking about the Clean Air Act rules for greenhouse gas emissions and cars that the Environmental Protection Agency developed along with fuel efficiency regulations by NHTSA, the National Highway Traffic Safety Administration.
The Clean Air Act sets emission standards for all sorts of pollution sources, as we know. But usually it allows states to adopt their own stricter emission standards if they like. Cars are treated differently, though. Because of their mobility and the national market for car sales, Clean Air Act emission standards preempt state standards with one big exception which is that California can set it’s own standard, which other states may adopt, if the Environmental Protection agency gives it a waiver, and EPA can only give California a waiver if it meets certain standards, including that California needs its own standards to meet compelling and extraordinary conditions. So that’s the big question for our expert panelists today. Does California needs its own greenhouse gas standards for cars to meet compelling and extraordinary conditions? And should California get to set its own standards?
In terms of the history leading up to this panel, President Obama gave California a waiver to set its own greenhouse gas standards in 2009, but he avoided any conflict between the federal and California standards by aligning the new federal standards with California’s. Ten years later, in 2019, the Trump administration issued the review, a rule known as SAFE I, that withdrew California’s waiver for greenhouse gas regulation of cars. Then in 2020 just a few months later, the Trump administration issued a new rule SAFE II, that sets national greenhouse gas standards for cars through 2026.
Today we’re really lucky to have three experts to discuss this topic. Each of them has been involved in the ongoing litigation that challenges the Trump administration’s SAFE I and SAFE II rules. I’m just going to give a brief introduction to them in the order they’ll speak.
Starting with Jonathan Brightbell, he’s a trial and appellate lawyer at Winston & Strawn, but during the Trump administration, he served at DOJ’s Environmental and Natural Resources Division, and he was ultimately acting Assistant Attorney General. He led the defense of EPA’s rule makings, permits and policies, including the SAFE I and SAFE II rule makings in the litigation in the D.C. Circuit.
Our second speaker will be Sean Donahue who represents the Environmental Defense Fund in the D.C. Circuit litigation concerning the SAFE I rule. He went to the University of Chicago for Law School, and after that he clerked for Judge Ruth Bader Ginsburg and Justice Stevens. He was an associate at Jenner & Block and an attorney in the appellate section of DOJ’s Environmental and Natural Resources Division, and he’s taught environmental law and related topics at several law schools. Since 2007, he’s been a partner at a small public interest oriented litigation firm.
Finally, we have Benjamin Flowers, who’s the Solicitor General of Ohio. After graduating from University of Chicago, he clerked for Judge Ikuta on the Ninth Circuit and Justice Scalia on the Supreme Court. He spent some time in private practice at Jones Day in Columbus before becoming SG in Ohio. In the litigation that we’re talking about, he represented Ohio, which led a group of states that supported EPA’s decision to withdraw a waiver that allowed California to regulate emissions more stringently. He supported EPA’s decision to withdraw the waiver. He filed a brief arguing that the waiver provision, which is only for California, violates the equal sovereignty of states doctrine.
With that, I’ll turn it over to Jonathon.
Jonathan Brightbell: Well, great, thank you very much, James. Thank you for The Federalist Society’s hosting of this discussion and inviting me to participate. The question of California’s authority to regulate pollution from automobiles in a manner related to fuel economy and thereby mandate adoption of electric cars and vehicles is one that actually stretches back two decades. It really kicked off in 2002 when local dealers in Fresno County challenged California’s zero emission vehicle mandate of 2001 which was functionally a mandate to built hybrid electric vehicles. They were the first to argue that such a regulation would be preempted by the Energy Policy and Conservation Act of 1975, which provides that “when an average fuel economy standard prescribed under this rule is in effect, a state or a political subdivision of a state may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards for automobiles covered by an average fuel economy standard under this chapter.” It is a preemption provision that is subject to no exceptions or waivers.
District court in the Eastern District of California concluded that California’s zero emissions vehicle mandate at the time was so related and granted a preliminary injunction against California’s program. Thereafter, California amended its zero emission vehicle mandate to mitigate the concerns of the dealers. But at the same time, in 2002, California enacted new legislation mandating that car implement controls of greenhouse gas emissions to the maximum extent feasible on automobiles.
Now, on the question of whether this is or was appropriate exercise of federalism or whether a federal standard should control, as James pointed out, it’s important to understand distinctions in the Clean Air Act. Title 1 of the Clean Air Act and Title 2 are fundamentally different. Title 1 deals with stationary sources, and with stationary sources Congress pursued a scheme of cooperative federalism. EPA sets national health or technology based standards, and then primarily delegates to states the implementation of that. Congress’s plan of federalism then grants states the right and ability to be more stringent. And in the era of the passage of the bulk of those provisions, stationary source pollution was primarily local and regional in both its sources and effects.
Whereas in Title 2, which relates to mobile sources, the presumption is different. It is not a title of federalism. It is one of national standards, which as James noted, recognizes that vehicles cross state lines. They are constructed in certain states for sale across the nation. And so there is a preemption provision 7543(a) stating “no state shall adopt or attempt to enforce,” so not just implement or put on the books in the first place, but at any point thereafter, “attempt to enforce any standard relating to the control of emissions for new motor vehicles or new motor vehicle engines subject to this part.”
Now believing the California was subject to extraordinary conditions that made smog and other pollution control more difficult because of California’s unique topography and climate, the Air Quality Act of 1967 granted California and California alone special authority. This is where the dispute stems from. It empowered California to seek and the federal government to waive a grant, a waiver of this otherwise all-encompassing federal preemption provision where a California standard was required to meet compelling and extraordinary conditions. That is now reflected in 42 U.S.C. § 7543(b).
Now when California began implementing its new greenhouse gas emissions program of automobiles a decade and a half ago now plus, California had not yet obtained such a waiver and this, again then, touched off additional law suits, further preliminary injunctions granted, further preliminary injunctions denied, an EPA Clean Air Act Waiver, eventually, denial by the Bush administration, and then immediately thereafter, once the Obama administration took office, the first of a number of reversals by EPA and later on NHTSA relating to the issue of California ‘s authority to regulate in the area of automobile greenhouse gas emissions.
This then caused the litigation to continue to swirl back and forth across numerous courts until a cease fire was reached in 2013. This reflected, as James described, the EPA and NHTSA would set a common standard with planned five percent increases annually, subject to an EPA midterm evaluation for feasibility in 2018 for model years 2022 and beyond, and California would deem compliance with the federal standard to be compliance with California. This led to the parties shelving the legal disputes without resolution regarding California ‘s waiver and EPCA preemption.
Now, when 2018 arrived, disputes arose regarding the feasibility of continued fuel economy, requirement increases, and emissions control increases for greenhouse gas standards because technological innovation in battery technology had flattened, concerns about safety, concerns about consumer acceptance of electric vehicles and their willingness to pay, and the concerns of this raising the overall cost of new cars for consumers, and thereby actually having a rebound effect that could actually have a negative impact on total air quality improvement.
So in 2019 and 2020, NHTSA and EPA took action to revise the standards. NHTSA also issued an interpretive regulation stating that EPCA preempts state greenhouse gas emission regulations relating to tailpipe emissions of cars. And EPA also, then, went back to the position that it has started at in the Bush administration of denying the waiver to California to set its own greenhouse gas emission standards.
As people are aware and you’ve heard, this touched off yet another round of litigation, without dealing with all the twists and turns, leading up to the D.C. Circuit case being fully briefed and ready for argument. At the end of 2020, we had another change of administrations. So once again, we have proposals by the federal government to reconsider and flip positions back again. We started saying EPCA preempts, no waiver. We moved to not really addressing whether EPCA preempts and granting a waiver. We moved back to EPCA preempts, denying the waiver. And now there are proposals on the table to flip flop back and forth again.
So regarding these positions—I’m just going to take another minute or two here to provide some comments before I hand it off to my colleagues—on the EPA side, it’s really striking how little the notice actually says about what EPA thinks it has done incorrectly that is now warranting reconsideration yet again. The statements are things like “whether it properly evaluated and exercised its authority,” “whether it appropriately interpreted and applied § 209(b)(1)(b)” in terms of the comments their calling for. But EPA doesn’t actually state its bases for reconsideration and provides reasons why with any particularity and identify those arguments that it made in the D.C. Circuit and in the final rule preambles and in the proposed preambles during the prior administration that it now sees differently and why it sees differently. It also does not even acknowledge the constitutional issue raised by Ohio and a number of other states and the effect that that has as a matter of interpretive canons on constitutional avoidance. Presumably that’s because for purposes of the waiver grant, the withdrawal of the withdrawal, they are proceeding by adjudication and therefore calculating that they don’t need to put their cards on the table at this point regarding the final legal theories and justifications that it may adopt and therefore don’t need to worry about logical outgrowth limits that exist when you are dealing with a legislative rule and putting forth a rule making proposal.
Now on the NHTSA side, it’s interesting that they are proposing to repeal the regulation because NHTSA asserts that they’re concerned about confusing people about whether they have the authority to issue such regulations. So NHTSA says it wants to withdraw the regulations, mitigate confusion about what the proper interpretive scope of the EPCA preemption provision is. But notably, NHTSA doesn’t actually say that EPCA does not and should not preempt California’s greenhouse gas emission standards in their proposal. It merely states that it’s withdrawing the regulation that says the statue does. And in fact, there’s a footnote where NHSTA specifically disclaims that interpreting the proper scope of EPCA’s preemption provision would be within the scope of this rule making.
Now, one of the reasons why that’s important is that NHTSA has long taken the view, and with complete consistency taken the view even without the One National Program Rule, that EPCA does preempt state greenhouse gas regulation of tailpipe emissions of automobiles. There was a 2002 amicus brief filed on this on NHTSA’s behalf by the Department of Justice. In a 2006 final rule that established the reformed CAFE program as it now exists, NHTSA interpreted EPCA in the context of that final rule as preempting state regulation of tailpipe CO2 emissions. So regardless of whether the One National Program Rule is rescinded, NHTSA’s consistent long standing interpretation of EPCA expressed in the context of finalizing legislative rules using the same statutory authority it drew from to promulgate the interpretation of the preemption provision of the One National Program Rule, its consistent, long standing, never violated interpretation has been that EPCA preempts such standards.
Apologies in advance for being a bit cute here, but this would seemingly make NHTSA’s rationale for repealing the o One National Program Rule, i.e. to avoid confusion about how to interpret EPCA itself a bit confusing. So, with those observations, I will pass the baton to my colleague Mr. Donahue.
Sean Donahue: Thanks, Jonathan, and thanks, Colton, for inviting me to join you today. So first just a couple sort of, if you will, atmospheric points. The transportation sector is the number one source of greenhouse gas emissions in the United States. We have to reduce emissions steeply and soon to have any chance of avoiding the worst consequences of climate change. And that is even more true in California where the transport sector dwarfs others in its share of emissions. California of course also faces very serious criteria pollution problems, including in the Central Valley and the Los Angeles area.
We have the means to attack these problems. The United States, often relying on California innovation, has led the world in vehicle emission control technology, and we can do that here. It’s a public health imperative, but there’s also massive economic upside. The SAFE I proposal was a move backwards at exactly the wrong time, and indeed it divided the auto industry, which had a sense — or at least some of which had a sense that that was so. And now, even the parts of the industry that supported SAFE I are very much on board with a clean vehicles agenda in the near term. General Motors intends to eliminate tailpipe emissions from all its new light duty vehicles by 2035, for example, and other major car companies are onboard with similar commitments.
We think both of these actions of the Trump administration, the EPA, and the NHTSA were pretty egregiously flawed and in ways that legal conservatives should find troubling in many respects. First of all, on the waiver, EPA had never in the more than 50 years of § 209(b) withdrawn a waiver that it had previously granted. There is not statutory authority to withdraw a waiver. And the state regulations that go into effect once EPA grants a waiver engender a reliance not only in California but in the other states that may adopt them under the Clean Air Act and incorporate them in state planning because of their benefits not only for greenhouse gas emissions but for criteria pollutants. So it’s highly disruptive to do what EPA did here with no warrant. We think on that ground alone, the EPA action has to be overturned.
But the specific legal grounds EPA offered, we think also are deeply flawed and flimsy. EPA concluded that California does not need its greenhouse gas and zero emission vehicle standards to be compelling and extraordinary conditions, but in doing so, it departed from the interpretation of the statute that it has consistently applied for 50 years, which, consistent with the statutory language, looks to whether California needs a separate program of emission standards as a whole rather than specific sets of standards in making that need determination. And the EPA acknowledged that it was departing from that interpretation, but it said it would revert to it in the future. We think that sort of one time only approach to statutory construction is not sound, but it’s also just inconsistent with the statutory text which is referring to the program as a whole and to five decades of consistent agency interpretation.
But even if it were permissible to make this change, the grounds that EPA offered were not persuasive. The record that California faces compelling and extraordinary circumstances with respect to climate change is overwhelming, as anyone who has spent any time in the summer of fire in California that is now a regular thing and not just summer also fall and stretching larger every year knows. And the choking smoke that those fires put over major urban areas for weeks at a time or anyone who is at all familiar with the water situation that is caused by a climate change driven severe drought.
In addition, the standards that EPA took away from the state standards that EPA took away here are, as the state pointed out, really important for reducing criteria pollutions like smog as well, both because they served to reduce the pollutants that cause smog and also because climate change itself, warming makes smog worse and exacerbates its effects. So we think the conclusion that California doesn’t need the standards is just not supportable on the record.
EPA’s other ground for withdrawing the waiver, which was reliance on the NHTSA rule, also violated decades of consistent interpretation of the statute and the waiver statute itself, which enumerates three exclusive grounds for EPA to consider in deciding whether to grant a waiver. It does not include whether the state regulations might be invalid under some other provision not administered by EPA. And EPA again acknowledged we normally consider only the three factors, but here we’re going to go outside that. We’ll come back to our usual approach in the future. Not solid decision making.
And as I’ll get to in a minute, we also think that the NHTSA rule is invalid on multiple grounds, including just being substantively wrong about preemption. I just note, on the zero emitting vehicle standards in particular, these standards have been around since 1990 in California. They’re critically important for reducing criteria pollution. EPA has regularly granted waivers for them, so we think that that’s a particularly egregious aspect of this. On the NHTSA side, Congress hasn’t delegated to NHTSA the authority to adopt legislative rules expressing its views on the preemptive effect of EPCA and giving them independent force. There’s just nothing there, and it’s on that basis that we think NHTSA must repeal the rule.
We also think that NHTSA’s conclusion about preemption is clearly wrong on the merits. EPCA has always required, EPCA that being the fuel economy statute, has always required NHTSA to take into account other motor vehicle standards of the government and some prior formulations and early versions of the statute, the effects of those other standards on fuel economy, and that has always been understood to include both EPA emission standards and California standards that are subject to a waiver. So it’s just not plausible to say that the same Congress that thought that California’s standards had to be taken into account in setting fuel economy concluded that California standards that affect fuel economy are necessarily preempted.
There are various provisions in the U.S. Code that make quite clear that zero emitting vehicle standards and greenhouse gas emitting standards are not preempted. Various fairly narrow provisions that instruct, for example, EPA to consider California’s standards in setting federal standards. The only two courts that have reached final decisions on the preemption question, one in California, one in Vermont, concluded that there was not preemption. After those decisions, there was a furious effort by the Bush administration to get them overturned and legislation, and that effort was unsuccessful and to the contrary resulted in a savings clause that we believe strongly supports the non-preemption view.
I think to the extent NHTSA relied on the idea that there’s a necessary relationship between fuel economy and greenhouse gas emissions and that that process preempts, for reasons already mentioned that, so we don’t think that that’s right that the idea that there is an effect on fuel economy leads to preemption. But it’s also inconsistent with some of the record facts like with zero emitting vehicles, which are increasingly the most important category of vehicles for reducing greenhouse gas emissions, there isn’t a relationship to fuel economy which is defined in terms of distance per gallon of fuel. As this point, I think I’m going to turn things over to Benjamin, and he’s going to discuss the equal sovereignty arguments that Ohio’s advanced in these proceedings.
Benjamin Flowers: Yeah, thank you for having me and thanks, everybody, for joining the call. My co-panelists did a great job of setting up the dispute in this case, so I think I can be pretty brief here, partly because Ohio’s interest in this matter was fairly discrete. So I just want to return to something that was said at the outset, which is that § 209 of the Clean Air Act, in particular § 209(b), contains a provision that allows the EPA to grant a waiver to California that lets California and no other state regulate the emissions from new cars. So the golden state as we put it in one filing was something of a golden child in that respect.
Now, Ohio objects to this for some practical reasons. It’s not simply pride that — a bruised ego from having California get special treatment. There are real tangible effects. So one of them is that given the size of California, California is a very significant market, of course. So when California sets these new emissions standards, that puts tremendous pressure on automakers to comply with those standards. So when they’re higher than the federal standards, California ‘s standards end up becoming something of de facto national standards or at least can become de facto national standards.
And that leads to a few consequences. For one thing, the State of California can use their power to regulate new emissions to extract concessions from the regulated entities. And we have some evidence, public reports, of California meeting with auto executives and doing precisely that. But more importantly, the California standards may not be good for other states, including Ohio. For one thing, income levels vary pretty significantly across the country, and so any particular requirement that increases the cost of cars may not be a big deal in California, but it may be a significant problem in parts of Ohio, rural Appalachia, or certain cities in Ohio where income is lower.
That can have a couple of effects. First, by increasing the cost of cars, if those folks actually do want to buy a new car, they’ll have to spend more to do it. But also, it can actually be bad for the environment because if the cost of the car goes up, then the incentive to purchase it goes down, and so people may hang on to gas guzzlers for longer than they otherwise would have without the new emission standards. Of course those are policy issues, not legal issues. And I’m here, at least, to talk about one legal issue in particular, which is the one that we briefed.
So many of you are probably familiar with the concept of equal sovereignty of the states. This concept’s been much derided, I think, since the Supreme Court’s decision in Shelby County which was about the Voting Rights Act. Part of the criticism of Shelby County was there wasn’t much attempt to ground the equal sovereignty of states in the original meaning of the Constitution or in other background legal principles. So let me start out by explaining why we think it can be grounded in the Constitution and a background legal principle. And then I’ll bring it back to this case.
We did a deep dive, and we concluded—as I alluded to there—that the doctrine was very real. The first indication of this is just a clue from the text, and it’s something we’re all really familiar with. The Constitution refers to the states as states. We didn’t join the union as territories or provinces or something like that. We’re states, and the word state was bound up with the concept of with sovereignty. And indeed it’s not even contested that the states are themselves sovereign. You’re familiar with the famous phrase that the founders split the atom of sovereignty, meaning they left some sovereignty — they gave some sovereignty to the federal government and left the rest with the states.
Well, what we argued is that the concept of sovereign or the concept of the state at the time of the founding implied equal sovereignty. It would have been unimaginable to have some sovereigns with more sovereign authority than others, England having more sovereign authority than France or France than America, American than Brazil, and so on. So that’s the first point is just the nature of a sovereign is that the sovereignty is equal with other sovereigns, except at the Constitution itself in our case limits it. So in some sense, the federal government does have sovereignty that the states do not, for example.
This carries over to the admission of new states, and this is where you find some supporting case law. There’s quite a bit of case law that’s saying that when a new state enter the union, it enters the union on equal terms with the other states, on equal footing, again, consistent with the idea that you cannot have unequal sovereignty except to the extent the Constitution specifically allows for it.
Now it’s important to state two limits on this equal sovereignty doctrine that I think are often overlooked and are part of what leads to a misunderstanding and a criticism of the doctrine. The first is that equal sovereignty does not mean equal treatment. Congress does not have to give the same benefits to every state nor must it impose equal costs on every state. So for example, Congress, in deciding where to place certain government facility, like a military base, does not have to distribute them equally throughout the country. If they decide to put a military base, a navy base, for example, in Connecticut, they don’t have to put a navy base or a similar base in Ohio or in Nebraska or anywhere else. So with the equal sovereignty doctrine is getting at is not equal treatment of the states, but rather, the requirement that the states must retain equal sovereign power. So when Congress takes away some sovereign authority from the states, it must do that equally even though it does not have to give them benefits on equal terms.
The second point is that some provisions in our Constitution actually do allow for unequal treatment, unequal sovereignty, in particular, the Fourteenth and Fifteenth Amendments, the Civil War amendments. Those do permit Congress to impose appropriate regulations implementing the rights set out in the Fourteenth and in Fifteenth Amendments, and appropriate legislation may include restricting sovereignty and in particular the ability to operate elections, for example, on unequal terms. But Shelby County actually showed how strong the equal sovereignty doctrine is because even in that context when you’re dealing with the Fifteenth Amendment, where Congress can impose — it can regulate sovereignty differently between the states, even in that context, the background principle of equal sovereignty is strong enough that, unless Congress has a really good reason and really good evidence to support the equal treatment, it will not be deemed appropriate legislation as it must be under the Fifteenth Amendment.
So with all that, let me return to this case, and let’s really return to § 209. Section 209 says, states, you cannot regulate new car emissions, but there’s one exception: California can get a waiver. So our position was that that is failing to accord equal sovereignty to the states because California and only California can get permission to exercise its sovereignty with respect to this one issue. Every other state is denied the opportunity to exercise its sovereignty to that issue. Because the provision leads to an equal sovereignty problem when California gets a waiver what we are viewed was that the agency not only can take back the waiver, but it actually has no choice. Issuing the waiver’s unconstitutional, and so far as the government’s acting unconstitutionally, it has a duty to stop doing so. So we’ve filed comment — we’ve not only filed a brief in the case making that point, but we have filed and will file comments in the agencies reconsidering the waiver under the Biden administration.
With that, I think I’ve closed out the first round, so I’ll had the microphone back to the moderator.
James Coleman: Well, thank you so much, all of you. That was wonderful. I’m just going to pass it around for another round of reactions to each other’s comments. You know each other well, but I’m sure everybody would benefit from those. One question I’m curious about is Sean talked a little bit about some of the policy questions involved, but I’d be curious to hear a little bit more from Jonathan and Benjamin about that. And also sometimes there’s a notion — certainly this was mentioned in the SAFE I rule — the suggestion that, well, for criteria pollutants it might make sense for California to have its own regulation, both because it has not just unique impacts, but really particularly bad impacts, very severe impacts that aren’t experienced by other states, first.
And the secondly, that it has — cleaning up criteria pollutant emissions from cars in California really does a lot to address that problem. So sometimes you’ll hear people say, well, by contrast with greenhouse gas emissions, yes, California faces unique harms from climate change, but every state faces some unique harms. If you look at any of them, there are states that experience those. And also, whatever regulations California adopts to reduce greenhouse gas emissions, if they are just in California, maybe won’t have as big an impact on addressing that as a comparably as a reduction in criteria pollutants were. Sean mentioned some objections to that in reasoning both in statutory terms and the way EPA has interpreted things in the past. But I’m curious what you all think about that sort of policy argument as well as the broader policy arguments, in general. I take it, Benjamin, you might disagree with that kind of theory from the other side, so I’d be curious what all of you think of those policy arguments.
Let’s go same order, so Jonathan, Sean, Benjamin.
Jonathan Brightbell: Okay. Sure. As for the policy arguments and the environmental benefits, actually the agencies initially in the phase one rule recognized that there were no material environmental benefits that should be logically anticipated from California having its own greenhouse gas emission standards as compared to a unified federal program. I can explain that a little bit, and it kind of goes to this issue of why a fuel economy standard is related to a greenhouse gas emission standard. It comes back to the idea — it’s just science 101, right. A gasoline powered engine operates by burning fuel. The ignition of the fuel creates the force, the spark that drives the engine pistons that make the engine go. And this does also throw off carbon dioxide. And NHTSA has long regulated, ostensibly as a matter of setting distance per gallon of fuel, miles per gallon, but it actually has always in reality, as a practical matter, regulated by measuring the emissions of carbon dioxide that are thrown off per mile that cars are tested on test beds in lab conditions in labs that are actually run by EPA. This goes all the way back to the 70s.
So while NHTSA regulates on the basis of miles per gallon in the law, the reality is as a practical matter, because there is this mathematical relationship, this direct scientific relationship between the amount of CO2 that gets thrown off when you burn a gallon of gas, if that’s a static knowable number, and then whether you measure the gas that’s going out or you measure the gas that going in as a function, then, of the distance traveled on the vehicle, it’s two sides of the same coin, right? That’s the scientific reason which is not materially in suit about why the greenhouse gas emission standards are related to fuel economy.
Then, as to the policy question that you raised and recognized is that the NHTSA standard and then the EPA standard, when unified and synthesized with any national program, is set on a national basis. And so simple example, let’s call it 30, okay. And if California has independent authority to set a higher different fuel economy standard or CO2 grams per mile standard, and it says for California and those other states of the union that are going to adopt the California greenhouse gas emission standard under 177, it’s going to be 35, the automobile companies are still compliant on the basis of — they obviously would then have to comply in California, if California has its own disparate standard. But in terms of compliance with the national-wide standard, they can still comply with the nation-wide standard on a national basis and then sell — we’ll just call rough math and just for simplicity it’s 50/50 California the 177 states versus the cars in the rest of the country, then they can sell cars in the rest of the states at 25, and it still only averages out to be on a nation-wide basis the national 30 miles per gallon standard.
So all giving California this power does as a policy matter is create a situation, and this is the finding that was made in connection with the rule making, that is and pointed out and explained in the D.C. Circuit, it has created a situation that is disruptive of a national program and creates administrative and bureaucratic conditions. Many of the automakers have committed to moving to electric vehicles, lowering their carbon footprints, and believe that it is in their business interest and in a policy interest for themselves and their consumers and their customers, their planet to do that. And that is their prerogative.
The question, of course, though is what did Congress mandate, and what authority has Congress given various agencies to mandate, including the State of California in the context of the Clean Air Act and EPCA?
Sean Donahue: This is Sean. I’ll jump in. I think we don’t agree that the record supports that California having set greenhouse gas standards that are more stringent is meaningless as against a world with rolled back, weak, federal standards. We think that that’s exactly when they’re important. And I don’t think that — you’ve got to remember the ZEV mandate part, too, that EPA removes the waiver as to those zero emitting vehicle standards, which of course have very significant benefits for criteria pollution as well. And EPA really has no record basis for denying that. That’s a, as I mentioned, particularly egregious part of this.
Just at the intuitively attractive argument that well, what can a single state do against this global problem, it’s of course the perennial argument against doing anything on climate change because even at the national level you can’t completely fix the problem through individual action. But the only way you actually can attack the problem is incrementally, and California as I mentioned at the beginning has historically played a key role in spurring innovation. That how we’re going to get there. We’re going to reduce emissions here, and then we’re going to disperse our technology to the rest of the world and reduce emissions everywhere. And I think that idea is a good debaters’ point, but it’s quite inconsistent with how this would actually work. I think that’s why California from the beginning has recognized the importance of moving forward on controlling vehicle emissions.
Benjamin Flowers: Thanks. This is Ben. I can be pretty brief there I think. First of all, this is not the issue we briefed most obviously. One thing I would point out, more specifically, I should say, is that to the extent that California standards have an effect, it would seem to be because California is able to leverage its market power to force these changes even outside the California market, which is one of the policy problems that led us to get involved in the first place. That is not in and of itself the equal sovereignty problem. The equal sovereignty problem contributes to that issue.
The other thing, I think, on incrementalism is I take the point that you can always raise that argument to doing nothing. But at the same time, it’s difficult to tell people, particularly people struggling financially or who might be hurt by these regulations that they need to bite the bullet and spend $500 to $1000 more on a new car or hang on to a more inefficient car, potentially lose jobs, all to not even put any meaningful dent in the emission of greenhouse gases or contributing to climate change in the event that China or other countries don’t come along as well.
I don’t think it’s merely a debaters’ point to say unless you can show that it will actually accomplish something in the near-term, it shouldn’t be done. I think that it’s a very valid consideration to say that if we’re going to impose costs on American citizens and particularly those most financially vulnerable, we should make sure that, at the very least, we’re actually accomplishing something by doing so.
James Coleman: All right. Well, at this point let me — you all are free to respond to each other a little bit more, but maybe we should open it up, Colton, to Q & A.
Colton Graub: That sounds great. Thanks, everyone. We’ll now open the floor to audience questions. James, I’m going to hand it back to you. We have two questions.
James Coleman: I’ll start with the one that you all probably can see in the chat which is that — oh, that’s not it. So one question is that if you live in a rural area or a sparsely populated area, you have to drive further in general. So aren’t those really different circumstances than those faced by California, and does it make sense for California to be the only alternate to the federal standards, especially if it is more unique? Maybe, Sean, I’ll give you a chance to answer that and respond to anything else you want to from Benjamin and Jonathan briefly.
Sean Donahue: Yeah. Sure. So aside from the fact that California, too, has lots of rural areas, I think the assumption — Benjamin suggested this as well — that the California standards on net cost people money tends to be wrong, that actually more efficient vehicles, cleaner vehicles cost much less to operate. They tend to cost more up front, but they tend to pay themselves back pretty quickly. And that’s going to accelerate over time that impact, as the technologies become more diffuse and perfected. So I reject the idea, though it was a big part of the Trump administration’s effort to justify this roll back, that in fact there’s this large disparity and cost of driving as a result of these rules.
James Coleman: Benjamin or Jonathan, would either of you like to respond?
Benjamin Flowers: Well, this is Ben. I’ll just quickly add if they are cost justified then we don’t need the regulations. People will seek them out on their own. I think that’s ultimately the way this — by this I mean in terms of encouraging people to purchase vehicles that reduce emissions, I think the way to do it is to make them desirable, to make consumers seek them out. And if they truly are saving people money, then I think people would do that without needing regulations to force their hand.
Jonathan Brightbell: Right. There’s a lot of literature on that. Of course part of the problem here is there’s this huge externality that it’s choking the planet and causing all kinds of local and regional air pollution problems, which is a reason for stepping in. But there’s also some suggestion that regulation can help even if, with perfect information, people might choose zero emitting vehicles, the regulation can play a role in nudging that process along.
James Coleman: We can probably have a whole conference on some of these questions. They’re very rich. But let’s try and see if we can pull in that live Q & A question, Colton.
Colton Graub: Sure. That question states — I’m just going to read it verbatim. “There are lots of regulatory subsidies for electric vehicles. So for example, when calculating fleet average fuel economy, you can get double count electric cars. Also fuel efficiency calculations for electric cars just assumes that they are not responsible for carbon emissions, but in fact they are though it’s less than most internal combustion engines. As experts like Professor John Graham have noted, this subsidy regime hurts the environment, at least in the short-term because it lets traditional automakers buy credits that artificially depress their fleet averages rather than developing engines that are actually more fuel efficient. Because California’s ZEV mandate drives up the number of electric cars that have to be sold, this is likely to increase this harm. It seems to me that this is bad policy, and that it undermines California ‘s claim for special needs since the point of origin of CO2 is irrelevant.”
I’ll hand it back to you guys.
Benjamin Flowers: Was that a question?
James Coleman: I think the question is something like how do the other incentives for EVs, whether it’s federal tax credits or credit that they’re given for compliance with this, do they in one way or another undercut the stringency of the standards? And I there have been related concerns about efficiency standards over the years that either they’re using vehicle footprints or in number of ways they’re constructed in ways that don’t maximize reduction of a fuel use. I’m curious what you all think about those critiques of the fuel economy standards.
Jonathan Brightbell: Well, there is some truth in the observations that were made in terms of double counting and how all that plays through. In fact, that’s one of the ironies of the dispute at is developed between the last administration and the State of California and those folks who were opposed to a revisiting of the standards is that, as it played out, ultimately the Trump administration settled on a 1.5 percent increase in what the fuel economy standard should be and the increase in stringency for the greenhouse gas emission standards.
But what developed in California, which was interesting, was that it reached a side deal with a number of manufacturers in exchange for their agreement not to challenge California’s authority to essentially, on an ad hoc basis, lower the greenhouse gas emission/fuel economy obligations of those companies to three and a half percent. Which, with all the double counting of points referenced, really took the standard down to two and half percent increases for those select companies, which is interesting because it implied and recognized that the five percent standards that were on the books for model year 2022 and beyond were implicitly recognized that those were not actually feasible and sustainable.
And that the actual difference that that implied that existed between where the Trump administration ended up and where some of the opponents were, at least the state level, was much smaller, once the rules were actually implemented, than the gap that was perceived to exist at least at the proposal stage when the Trump administration initially went out with a zero percent increase and there was a claimed need to maintain a five percent increase in the standards.
James Coleman: Okay. So this has been a wonderful discussion. At this point, we are almost at the top of the hour, so thank you all so much. This has been wonderful, both for the questions, I thank you, especially to the panelists. Let’s continue in that order, and Sean and Benjamin, if you want to say anything in response to that last question as well, but so we’ll go Sean, then Benjamin, then back to Jonathan. If could just give us your final concluding thoughts, whether it’s about where you expect this to go or what the next challenge for the fuel efficiency standards are or in response to something that we’ve talked about today. If you wouldn’t mind, Sean, then Benjamin, then Jonathan.
Sean Donahue: Sure. So just a quick — I haven’t said anything about equal sovereignty. I just think that this is so not Shelby County. This is the claim that California’s ability to protect its own citizens under authority that it was exercising, before the federal government got into the field at all in the ’50s and ’60s, should be taken away because other states don’t have it too. It seems to me the objection might be we want that power too. Maybe that’s the problem. But it’s quite unlike any equal sovereignty claim that’s ever been recognized. I think we’d have sweeping implications for all kinds of ways in which particular states are treated differently under the U.S. Code. So we don’t think — and we think that’s an example of constitutionalizing everything in a way that’s not salutary.
So obviously my view is that both of these — both prongs of this rollback were legally flawed. They are also just the wrong thing in a time where what California’s trying to do is address a crisis for public health and welfare of its citizens. We think that the particular legal grounds given on both were just demonstrably wrong and filled with crosscutting administrative law offenses that none of us should be comfortable with. So we’re very supportive of the new administration’s effort to roll them back, to undo both of these actions and restore California’s waiver.
I want to reiterate my thanks for inviting me here today.
Benjamin Flowers: Yeah, this is Ben. I want to echo the thanks and for the interesting discussion from my co-panelists.
I agree with that we shouldn’t be constitutionalizing everything, but we also should be respecting the limits of the Constitution imposes. Frankly, I think the founding generation, the folks in North Carolina would have been stunned if Congress could pass a bill forbidding the regulation of the growth of tobacco except that a waiver can be given to Virginia if they ask. I don’t think that’s the system our Constitution sets up. And it’s true, one way to resolve the equal sovereignty problem would be to leave every state sovereignty to address this issue themselves intact. The problem is that’s not the one Congress has chosen because the Clean Air Act does generally preempt state regulation in that field. So with that law in place, the only thing the agency can do to avoid running afoul of the equal sovereignty problems is to deny or in this case withdraw the waiver. I think I’ll leave it at that.
And once again, thank you for having me and thanks to my co-panelists for a great discussion.
Jonathan Brightbell: I think the only addition thing I’ll add is an observation harking back to what both of my colleagues said about what’s actually happening in the marketplace. And once again, there are many companies out there that have made certain pledges to reduce their emissions, to build more fuel efficient vehicles. And once again, it’s interesting that the market, and in the United States with companies servicing their customers and meeting their needs, is finding its way to delivering a cost effective goods and automobiles to customers in the way that they want. Notwithstanding the fact that the government has had these mandates in effect, one wonders, once the epithet is written on everything that’s happened in the last many years and will continue to happen as legal challenges continue to flip flop back and forth, whether all of the regulatory efforts here amounted to much of anything, and ultimately what ended up succeeding was the American economy and free markets meeting the demands of their customers.
James Coleman: All right. So with that, thank you so much to all the panelists. What a rich discussion. We’re really grateful for your expertise and for you taking the time to explain all these complicated issues for our audience. Colton, with that would you like to wrap it up?
Colton Graub: Sure. I’d echo everything that James just said. Thank you to everyone for joining us today. We welcome listener feedback by email at email@example.com. Thank you for joining us. This concludes today’s call.
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