11/05/2018 - Legal Analysis

Beyond the Waiver: EPA’s Plan to End State GHG Vehicle Standards

by Michelle Melton, JD 2019

This blog is the third in a series on the legal landscape surrounding California’s Clean Air Act waiver to set vehicle greenhouse gas standards. The first post examined the potential for preemption by the Energy Policy and Conservation Act and the second post summarized the administration’s proposed rule and preemption plan.

The comment period recently closed for the Trump administration’s proposed Light Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards governing model years 2021-2026, known as the Safer Affordable Fuel Efficient (SAFE) Vehicles Rule. Barring a miraculous change of heart from either party, it looks like the administration and California are eventually headed for a battle royale, with enormous implications for the auto industry, consumers, American federalism, and the planet. The proposed rule would unwind the Obama administration’s rule1, which mandated year-to-year increases in fuel economy and tailpipe emissions stringency, by freezing fuel economy standards at 2020 levels and freezing vehicle CO2standards at 2021 levels.2 The rule would also take the unprecedented action of withdrawing California’s existing Clean Air Act (CAA) waiver, which entitles the state to set its own vehicle emission standards for greenhouse gases. These two proposals have rightly garnered a lot of attention; both have significant, real-world impacts on climate change and it is uncertain whether they are legal.

The intense focus on these two projects has allowed a third, hugely consequential aspect of the SAFE Rule to go virtually unnoticed. EPA has quietly proposed to reinterpret CAA § 177, stripping the states beyond California of their ability to adopt greenhouse gas standards for vehicles in their jurisdictions.3 This is the one-two punch of EPA’s plan: withdraw California’s waiver and reinterpret § 177 to ensure that even if the waiver survives, no state besides California can adopt California’s standards. This effort is yet another way in which the administration is trying to make it impossible for states to address climate change. Even if California ultimately retains its waiver and the administration retreats on its proposal to freeze fuel economy and emission standards, this third proposal, tucked deep in the proposed rule, has the potential to seriously set back the climate fight for years to come.

Section 177 allows states to “piggyback” on California’s waiver by allowing them to adopt California’s vehicle emission standards for new vehicles sold in their states. Specifically, § 177 allows “any State” that has submitted a state implementation plan for criteria pollutants under the CAA to adopt and enforce California’s standards, so long as two conditions are met: 1) the standards “are identical to the California standards for which a waiver has been granted” and 2) they are adopted “at least two years before the commencement of such model year.” Twelve states and the District of Columbia have opted to adopt California’s standards, amounting to about a third of the market for new motor vehicles, while others are considering adoption. EPA’s proposal would eliminate those states’ authority to adopt California’s greenhouse gas emission standards (states would still be free to adopt California’s standards for criteria pollutants).

EPA argues that the title of § 177, “New motor vehicle emission standards in nonattainment areas”, its location within the broader statute, and the fact that it is limited to states that have state implementation plans for achieving attainment for traditional, criteria pollutants under the CAA all suggest that Congress intended § 177 to be available only as a tool for to help states come into “attainment” (compliance with air quality standards for criteria pollutants). EPA places significant weight on the fact that § 177 is in Part D, rather than in Title II, where California’s waiver provision is located. EPA argues that if § 177 were a waiver “applicable to all subjects [read: GHGs]” it would have been placed in Title II, rather than Part D. To EPA, the placement, title, and language of § 177 suggest that states are only allowed to adopt California standards that are targeted at reducing criteria pollutants, not standards related to greenhouse gases. In short, EPA proposes to read § 177 as precluding states from adopting more stringent emission standards unless those standards are designed to control criteria air pollutants, which is ironic given that controlling greenhouse gas emissions from vehicles also reduces criteria pollutants.

EPA’s argument is flawed in multiple ways. First, it ignores the fact that EPA does not have direct authority under the CAA to authorize or deny states the ability to adopt California’s standards. In fact, EPA has no role in implementing § 177. While California has to go through a formal “waiver” process that requires the agency’s approval, there is no similar process for states adopting California standards pursuant to § 177. Second, EPA’s reading of the statute ignores the plain text, which does not, on its face, limit states to adopting only those standards that explicitly relate to criteria pollutants. A plain reading of the statute simply requires states to adopt standards that “are identical to the California standards for which a waiver has been granted.” Congress did not qualify this phrase by identifying the kinds of pollutants that states may address; in fact, the text includes no limitation on the types of pollutants for which states may adopt California’s standards. As one commenter pointed outEPA is reading “nonattainment pollutants” into a statute concerned with “nonattainment areas.”

Another reason to be skeptical of EPA’s interpretation: it creates the prospect of automakers having to produce one car that meets California’s criteria-pollutant and GHG tailpipe standards, another car that meets EPA’s less-stringent criteria-pollutant and GHG standards and a “third vehicle” for the § 177 states that meets the California criteria-pollutant standards along with EPA’s less-stringent GHG standards. Congress intended, however, to avoid this outcome as evidenced by the explicit language in § 177 and its legislative history. Section 177 states, nothing in this section should be construed as authorizing the creation “or have the effect of creating, a motor vehicle or motor vehicle engine different than a motor vehicle or engine certified in California under California standards (a ‘third vehicle’) or otherwise create such a ‘third vehicle’.” Finally, EPA’s argument is specious because greenhouse gas standards assist states in achieving their goals for reducing criteria pollutants. Several states could struggle to achieve not only their climate goals, but their broader air quality goals without the ability to piggyback on California’s standards.

EPA’s statutory reading is only plausible (and legally valid) in a world in which Massachusetts v. EPA came out the other way—that is, if the CAA had not been interpreted to regulate greenhouse gases. By reading the statute as if it intentionally differentiates between criteria pollutants and greenhouse gases, EPA is attempting to revive the argument it lost in Massachusetts. It is not hard to see that the agency is engaged in a bit of extra-legal lawmaking: EPA is attempting to restrict the applicability of the CAA to greenhouse gas regulation through its new interpretation of § 177 so that such regulation can only take place when EPA deems it appropriate.

The stakes of EPA’s reinterpretation of § 177 are potentially huge. First, because automakers earn credits in the § 177 states that they need to comply with California’s standards, the new interpretation could make it more difficult for automakers to comply with these standards (assuming California retains its waiver). Second, this interpretation could adversely impact the auto market, by creating the “third car” problem described above (again, assuming that California retains its waiver). Third, this interpretation could also be a significant barrier to NAAQS attainment for some states. Emission standards that limit greenhouse gases generally also reduce criteria pollutants, and some states have used their ability to enforce greenhouse gas emission standards for vehicles as a tool to help achieve NAAQS attainment. Finally, the new interpretation would undermine states’ abilities to fight climate change by tackling vehicle emissions—especially because transportation is the largest single source of greenhouse gas emissions in many states.

In sum, the air pollution and greenhouse gas implications of the proposed SAFE Rule hinge not only on California’s waiver and the ultimate level of the efficiency targets, but on whether EPA finalizes its proposed interpretation of CAA § 177.