Continuing our series on Corporate Average Fuel Economy (CAFE) and Greenhouse Gas (GHG) standards, President Trump recently placed the topic back at the forefront by ramping up an attack on California’s Clean Air Act waiver. The waiver gives California special authority under the Federal Clean Air Act to set its own emissions and air pollution laws. Readers may recall that California is outsize in terms of its influence on the auto industry because it harbors a disproportionately high number of registered vehicles and its emissions standards are followed by over a dozen other states. As such, California plays a unique and critical role in shaping emissions standards and the automobile industry as a whole. Although California’s emissions standards have historically been in lockstep with the national standards, California’s lawmakers have been steadfast that they will decline to follow the national standards if they are weakened. California is at odds with the Trump administration’s new program, the Safer Affordable Fuel-Efficient Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light Trucks (SAFE rule), which would freeze the current emissions standards. The Trump administration, by and through the Environmental Protection Agency (EPA), has indicated that the emission freeze created by the SAFE rule will facilitate a drop in the price of automobiles because automakers won’t have to pass the cost of keeping up with overly ambitious CAFE and GHG standards to the consumer. The President further opines that increased vehicle production will facilitate job growth and that fewer old cars on the road will increase overall highway safety. The first blow in the Trump administration’s bout with California over emissions standards came in the form of the “One National Program” rule (September, 2019), which revoked the 2013 Clean Air Act waiver. In enacting the rule, the EPA said that it is rescinding the waiver because the Department of Transportation (DOT) determined that California’s standards interfere with DOT’s sole authority under the Energy Policy and Conservation Act and because California hasn’t met the standard to qualify for the waiver. The first legal basis for rescinding the waiver is grounded in the doctrine of preemption. When state law and federal law conflict, federal law displaces, or preempts, state law, due to the Supremacy Clause of the Constitution. Preemption applies regardless of whether the conflicting laws come from legislatures, courts, administrative agencies, or constitutions and is intended to avoid a patchwork of state service-determining laws, rules, and regulations. While there are several forms of preemption, here the Trump administration relies on “field preemption,” which essentially asserts that Congress may foreclose any state regulation in a certain area, irrespective of whether state law is consistent or inconsistent with federal standards. The EPA will face staunch opposition to its bid to rescind California’s waiver and it is far from certain that its preemption argument will withstand judicial scrutiny. Indeed, California, together with 22 other states, Washington, D.C. and the cities of Los Angeles and New York immediately fired back against the One National Program rule, challenging the rule in federal court and citing existing case law that may undercut the preemption argument. The opposition may have merit. Similar attempts to regulate emissions have been decided in favor of the states. In 2007, the United States Supreme Court decided the case of Massachusetts v. EPA, wherein the Court rejected the EPA’s argument that it couldn’t regulate CO₂ emissions from motor vehicles because it would interfere with the National Highway Traffic Safety Administration’s fuel economy regulatory authority. In that case, the court indicated that the even if the DOT sets mileage standards, those standards do not license the EPA to “shrink its environmental responsibilities.” Further, in the wake of the Massachusetts case, judges have upheld state programs aimed at setting automotive emissions standards in two subsequent federal court cases coming out of California and Vermont. Because the Trump administration’s preemption argument may be somewhat tenuous, it has further bolstered its position by stating that withdrawal of the waiver is appropriate because California hasn’t met the Clean Air Act’s standard to qualify for the waiver. Under the Act, California must affirmatively establish that “compelling and extraordinary conditions” exist that warrant an exemption from the federal standards. California has previously justified the waiver by claiming that its standards address smog and climate change problems in the state. However, the Trump administration is now saying that California can’t meet the standard because climate change is a universal problem and California doesn’t face any unique problems that would justify a waiver. At the end of the day, whether California is attempting to protect its citizens through the enforcement of ambitious emission standards or is leveraging its authority under the Clean Air Act waiver to commandeer federal authority and compel national fuel economy standards is for the reader to determine. However, it is noteworthy that Ford, Honda, Volkswagen and BMW of North America have all agreed to comply with California’s emissions standards. Consequently, it has been reported that those four automakers are now the focus of a federal antitrust investigation. We’ll continue to keep an eye on the changes to emissions standards and report them accordingly. If you have any questions, please feel free to contact Ben Dill at 804-377-1272 (bdill@setlifflaw.com) or Steve Setliff at 804-377-1261 (ssetliff@setlifflaw.com).