Jul 25, 2019 8:30 PM

California's Auto-Emissions Deal Could Trump the Feds' Plans

Ford, Honda, Volkswagen, and BMW agree to tougher California mileage standards, potentially disrupting Trump’s proposal to relax US rules.

For two years, California and the federal government have been on the edge of an all-out throwdown over vehicle emissions. As an industry, transportation is the largest single source of US greenhouse gas emissions, and researchers say reducing tailpipe emissions is key to minimizing human-driven climate change. To address the challenge, the Obama administration adopted rules that require carmakers’ fleets to average 54.5 miles per gallon by 2025, up from about 37 today.

The Trump administration questions the science around climate change, and wants to ditch the Obama-era rules. But California gets a vote. That’s because since the 1960s, the state has had a special waiver allowing it to set its own emissions standards. And California regulators want to stick with the Obama-era rules, raising the specter that automakers would have to make two different sets of cars.

Automakers hate this idea, even more than they hate tough rules. Seventeen of them wrote the administration last month asking for a detente with California. That changed little—until this week.

Thursday, California regulators and four global automakers—Ford, Honda, Volkswagen, and BMW—reached a compromise. Under the deal, the four automakers agreed to produce fleets averaging around 51 miles per gallon by 2026, one year after the Obama-era target.

From one perspective, the deal is an end run around the federal government, and a fiery display of the California market’s—and California regulators’—might. From another, it’s a sign that compromise between the Golden State and its antagonists in Washington may still be possible. Mary Nichols, chair of the California Air Resources Board—often called the country’s most powerful car regulator—told The Washington Post that she saw the agreement as an “olive branch.”

“This is very much a compromise,” says Nic Lutsey, who oversees electric vehicles and fuels work at the International Council on Clean Transportation, a nonprofit research organization.

Either way, analysts say the deal is a victory for electric vehicles, which don’t emit any greenhouse gases directly, even if the deal isn’t specifically about them. “This is a clear acknowledgement that electric vehicles will be part of the larger policy development in the US,” says Lutsey. “These companies see electric vehicles as a market.”

Luke Tonachel, who directs the clean vehicles and fuels group at the Natural Resources Defense Council, an environmental advocacy group, says the deal could be a step toward national program “that could get us back on track” toward reducing emissions.

One reason EV fans have to be excited: The four automakers explicitly agreed to recognize California’s authority, including the state’s ambitious zero-emissions vehicle program. The almost 30-year-old program, which has been adopted by 14 other states, requires anyone selling vehicles in California to sell a specified number of electric vehicles, including plug-in hybrids, battery-electric cars, and hydrogen fuel cell vehicles. Automakers can also purchase “ZEV credits” from another manufacturer that exceeds their quota, and meet their requirements that way. The program has been hailed as a main driver of new EV technologies.

“The automakers that agreed to the voluntary plan basically agreed not to sue California over their standards, so from that perspective, it’s preventing lawsuits,” says Don Anair, who oversees clean vehicle research at the Union of Concerned Scientists, an environmental advocacy group. (California, on the other hand, has sued the EPA over its reversed stance on emissions.)

Anair and others point out, however, that major automakers have had their future electric vehicle model plans in the works for years already, and that last-minute changes to regulations likely won’t affect their product lineups. Indeed, experts have predicted that the auto industry will invest $300 billion in electric vehicle technology over the next five to 10 years, thanks, in part, to ambitious regulations out of China and Europe. The California agreement shows that some manufacturers, at least, see the writing on the wall. “The automakers are acknowledging that they can make significant improvements [to fuel economy], far more than what the Trump administration has proposed,” says Anair.

Two big questions remain. The first is how the federal government will react. After much delay, the Trump administration reportedly will officially propose to roll back the Obama standards in September.

The second is how other automakers react. The Automobile Alliance, the nation’s largest manufacturers’ lobbying group which counts both deal signatories and non-signatories as members, wrote in a statement that the agreement “acknowledges that the ... standards developed by the Obama administration are not attainable and need to be adjusted.” But the group also signaled that it wants this fight over with. “Uncertainty from protracted litigation is a major concern for an industry with long production cycles,” it wrote.