On March 14, 2022, the Biden EPA issued a notice of decision to reinstate California’s Clean Air Act waiver for its Advanced Clean Car program, restoring the state’s authority to set and enforce more stringent standards than the federal government, including California’s greenhouse gas emission standards and zero emission vehicle mandate. Other states can legally follow and enforce California’s standards again, too.
The Clean Air Act (CAA) establishes federal regulation of motor vehicle emission standards and preempts state standards. However, under section 209, the CAA gives California—which had emission standards prior to the enactment of federal standards—the ability to seek special treatment through a waiver of federal preemption. Under section 177, other states can then adopt California’s standards, as seventeen states and the District of Columbia have done. For additional history of the waiver program, see my recent analysis.
California sought and was granted its first waiver in 1968, and the state has since received over 100 waivers for a range of programs including vehicle standards and heavy-duty and off-road equipment. However, in 2008, the Bush administration became the first to deny a waiver, a decision that the Obama administration subsequently reversed. The Obama administration then negotiated a unified set of standards for California and the federal government, but California was still legally permitted to develop more stringent standards.
The Trump administration upended the waiver system in 2019. EPA and the National Highway Traffic Safety Administration (NHTSA) issued a joint rulemaking that resulted in the withdrawal of California’s previously granted waiver for its GHG and zero emission vehicle (ZEV) programs (part of the Advanced Clean Car program), last approved in 2013. To withdraw the waiver, the agencies relied on novel legal interpretations of their respective statutory authorities, the CAA and the Energy Policy and Conservation Act (EPCA). This action was known as Part I of the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule, which set out “One National Program” (for fuel efficiency and GHG emission standards). Instead of a unified California and federal system with opportunities for more stringent California standards, there would just be a federal system. California was stripped of its ability to enforce its GHG standards and ZEV mandate, and other states were precluded from adopting California’s GHG standards.
Now, the Biden administration is taking steps to ensure California can continue to pursue its authority under the CAA and implement more stringent programs. Last year, EPA and NHTSA issued separate notices teeing up questions about the Trump administration’s legal reasoning to withdraw the waiver. In its April 2021 notice, EPA explained “there are significant issues” with the Trump administration’s Part I Rule, including the time elapsed since EPA’s 2013 waiver decision, the novel interpretations set forth in the Part I Rule, and the consideration of environmental conditions in California and consequences of the waiver’s withdrawal. In its proposal, NHTSA asserted that it does not, in fact, have authority to adopt legislative rules implementing express preemption under EPCA. I described both proposed actions more fully in a previous analysis.
Overview of EPA’s Notice of Decision
In the March 2022 notice of decision, EPA: (1) rescinded its 2019 waiver withdrawal, and (2) withdrew the agency’s legal interpretation from the Part I Rule that argued that states may not adopt California’s GHG standards under section 177 even if California has a valid waiver for such standards. The rescission of the waiver withdrawal brings back into force California’s 2013 waiver for its ZEV sales mandate and GHG emission standards. EPA set forth several arguments in support of these actions.
EPA Established a New Standard for Revisiting Waiver Determinations and Applied It
In the recent notice of decision, the agency found that its prior reconsideration of the waiver under the particular facts and circumstances of this case was improper and that EPA had not properly exercised its limited authority to reconsider a waiver. EPA agreed with the Part I Rule that the agency has “inherent reconsideration authority” for waiver determinations, despite no explicit statutory language to this effect. But to limit what might be considered broad, roving authority established in the Part I Rule, EPA established a new standard for when reconsideration is permissible. The agency noted that any waiver reconsideration should be grounded and constrained through the three statutory waiver criteria in section 209(b) that EPA must grant a waiver unless it finds that:
- California determined arbitrarily and capriciously that its standards are at least as protective as the federal standards,
- California “does not need such State standards to meet compelling and extraordinary conditions,” or
- California’s standards are not consistent with the CAA’s provisions regarding technological feasibility.
Without such a focus, EPA argued that it would be undermining congressional intent to give California the ability to “protect the health and welfare of its citizens . . . [and] allow California to serve as a pioneer and a laboratory for the nation in setting new motor vehicle emission standards and developing control technology.” EPA makes clear that reconsideration should only be used in two narrow cases—clerical or factual errors or significantly changed circumstances that would undermine the granting of the waiver:
“EPA believes it may only reconsider a previously granted waiver to address a clerical or factual error or mistake, or where information shows that factual circumstances or conditions related to the waiver criteria evaluated when the waiver was granted have changed so significantly that the propriety of the waiver grant is called into doubt.”
Applying this test, EPA found that the prior reconsideration was inappropriate because there were no clerical or factual errors in the initial waiver and none of the circumstances related to the three waiver prongs had “changed so significantly” that the waiver should have been called into doubt.
EPA also noted that it should have considered reliance interests in revoking the waiver—that is, whether affected parties had seriously relied on the waiver, for example, in developing future vehicle designs. The notice of decision asserted that in the Part I Rule, EPA did not properly consider that by the time the Part I Rule was proposed, twelve states had already adopted at least one or both of California’s standards under section 177. The agency also failed to properly consider the considerable time between the waiver’s approval in 2013 and the revocation in 2019.
EPA Rejected Its Prior Interpretation of Section 209(b)(1)(B)
The notice of decision also explained EPA’s determination that the agency’s prior interpretation of section 209(b)(1)(B) was inappropriate and flawed. This section of the CAA directs EPA not to grant a waiver if California does not need its standards “to meet compelling and extraordinary circumstances.” In the Part I Rule, the Trump administration determined that under section 209(b)(1)(B), California did not need its GHG standards to meet “compelling and extraordinary circumstances” because GHGs are a globally mixed pollutant and there is no “particularized nexus” to California’s motor vehicle standards. Historically, EPA had considered GHG and criteria pollutant standards together when determining whether California needed its own motor vehicle standards, rather than the standard-by-standard approach taken in the Part I Rule. EPA withdrew the Part I Rule’s standard-by-standard approach and returned to the historic view based on several factors, including:
- Congress’s acquiescence of the historic interpretation through its failure to amend or otherwise reject EPA’s interpretation for nearly 40 years;
- Congress’s intention to allow California to have pioneering standards; and
- General implications of deference to California in the statute.
EPA Found That California Has the “Compelling and Extraordinary Circumstances” Needed for a Waiver
EPA argued that, regardless of the interpretation of section 209(b)(1)(B), California met the “compelling and extraordinary circumstances” requirements for a waiver for the GHG and ZEV standards. According to EPA, there is a “clear connection” between criteria pollutant emissions and the adoption of GHG emissions standards and ZEV standards. EPA noted that there are many co-benefits to GHG and ZEV standards, which include a reduction in criteria pollutants, so addressing GHG emissions also serves to address California’s need for criteria pollutant abatement. As home to one of the most polluted air basins in the country, the notice of decision explains that it is undisputed that California meets these requirements for criteria pollutants.
Looking at climate impacts specifically, EPA agreed with evidence submitted by commenters that California is “particularly impacted by climate change” due to fires, heat waves, sea-level rise, and more, justifying the need for GHG standards and a ZEV mandate. And, EPA rebutted the idea that a globally mixed pollutant cannot have local impacts, discussing the “unrefuted evidence” in the record showed that locally elevated carbon dioxide concentrations can result from nearby carbon dioxide emissions. EPA also quoted California’s evidence that temperature increases due to climate change exacerbate smog formation—the driving force behind Congress’s original reason for providing California with a waiver option.
EPA Untethered Its Interpretation from NHTSA’s
EPA found that it had previously erred when it considered NHTSA’s EPCA preemption determination as a reason to justify the waiver withdrawal. In this notice of decision, EPA asserted that the agency should be limited to the section 209(b) factors when considering whether to grant or reconsider a waiver. EPA argued that using non-statutory factors, like preemption, go against historical practice and legislative history. And even if EPA could have relied on NHTSA’s preemption determination, NHTSA has since reconsidered its position and withdrawn its prior action.
EPA Reversed Its Section 177 Determination
EPA determined that it was inappropriate and unnecessary to provide a new interpretation of section 177 in the waiver proceeding, because “EPA plays no statutory approval role in connection with states’ adoption of standards identical to those standards for which a waiver has been granted to California.” EPA further noted that there was no petition, request, or mandate that compelled EPA to issue an interpretive view in the Part I Rule and that it was not final agency action.
Why This Matters
EPA’s notice of decision allows for the enforcement of California’s ambitious clean cars standards, which will encourage innovation as automakers improve vehicle technology and emission controls to meet California’s standards and will reduce greenhouse gas and other vehicle emissions. Allowing states to again follow California’s GHG emission standards under section 177 will also have the effect of reducing emissions as states are able to enforce more stringent standards. The decision may also encourage new states to adopt California’s current standards or future ones.
Two states are uniquely affected. Minnesota announced its intent to follow California’s standard and tied the “effective date” of its regulations to the reinstatement of California’s waiver. Now that California’s waiver is in place, Minnesota can officially bring its standards into effect. Virginia’s General Assembly passed HB1965 in 2021, which directed the state’s Department of Environmental Quality to develop and the State Air Pollution Control Board to adopt a low-emission and zero-emission vehicle program beginning with MY 2025. The State Air Pollution Control Board adopted the program in December of 2021, meeting the section 177 requirement that states adopting California’s standards provide vehicle manufacturers with at least two model years’ lead time before the standards may be enforced. Restoring the state’s ability to enforce California’s standards will remove uncertainty and will likely allow the state to have standards in place for MY 2025, though the new Youngkin administration and Republicans in the state legislature may attempt to slow progress.
This action is also an integral component of the Biden administration’s broad, multi-pronged strategy for reducing emissions from the transportation sector. EPA and NHTSA have both worked to improve vehicle emission and fuel economy standards, respectively, and pave the way for California’s standards to be reinstated. In December 2021, EPA issued a final rule strengthening emission standards for light-duty trucks and cars for model years (MY) 2023 to 2026, selecting a more stringent option than the agency initially proposed. NHTSA recently finalized a new fuel economy rule that covers MY 2024 to 2026, requiring require 8 percent improvements in fuel economy in MY 2024 and 2025, and a 10 percent improvement in 2026, reaching an estimated industry-wide fleet average of 49 miles per gallon in MY 2026. EPA also recently proposed new nitrogen oxide standards for heavy-duty trucks for MY 2027 to 2031 that will also reduce GHG emissions. It has been more than 20 years since EPA revised the NOx standards for these on-highway heavy-duty trucks and engines. Both agencies are also working on light- and heavy-duty rules that cover later model years. You can learn more about the new car standards on our recent podcast, and see all our clean car work on this page.
California’s authority is a complement to these federal standards. Unlike the Obama administration’s harmonized California-federal standards, California’s revived standards are distinct from the federal standards. And re-establishing California’s legal authority to set more stringent standards provides a pathway for California regardless of a federal decision in the future.
 California State Motor Vehicle Pollution Control Standards; Advanced Clean Car Program; Reconsideration of a Previous Withdrawal of a Waiver of Preemption; Notice of Decision, 87 Fed. Reg. 14,332 (Mar. 14, 2022), https://www.federalregister.gov/documents/2022/03/14/2022-05227/california-state-motor-vehicle-pollution-control-standards-advanced-clean-car-program.
 See 42 U.S.C. § 7543.
 See id. § 7507.
 States That Have Adopted California’s Vehicle Standards Under Section 177 of the Federal Clean Air Act, Cal. Air Res. Bd. (Dec. 6, 2021), https://ww2.arb.ca.gov/sites/default/files/2022-01/177_states_12062021_nada_sales.pdf.
 Jennifer A. Dlouhy, Biden Moving to End Trump’s Fight with California over Emissions, Bloomberg L. (Feb. 16, 2022, 12:35 PM), https://news.bloomberglaw.com/environment-and-energy/biden-moving-to-end-trumps-fight-with-california-over-emissions.
 Emily Wimberger & Hannah Pitt, Come and Take It: Revoking the California Waiver, Rhodium Grp. (Oct. 28,
2019), https://rhg.com/research/come-and-take-it-revoking-the-california-waiver/; Pollution Standards Authorized by the California Waiver, Cal. Air Res. Bd. (Sept. 17, 2019),
 The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule Part One: One National Program, 84 Fed. Reg. 51,310 (Sept. 27, 2019).
 California State Motor Vehicle Pollution Control Standards; Advanced Clean Car Program; Reconsideration of a Previous Withdrawal of a Waiver of Preemption; Opportunity for Public Comment, 86 Fed. Reg. 22,421 (notice issued Apr. 28, 2021).
 Corporate Average Fuel Economy (CAFE) Preemption, 86 Fed. Reg. 25,980 (proposed May 12, 2021).
 California State Motor Vehicle Pollution Control Standards; Advanced Clean Car Program; Reconsideration of a Previous Withdrawal of a Waiver of Preemption; Opportunity for Public Comment, 86 Fed. Reg. at 22,422.
 California State Motor Vehicle Pollution Control Standards; Advanced Clean Car Program; Reconsideration of a Previous Withdrawal of a Waiver of Preemption; Notice of Decision, 87 Fed. Reg. 14,332, 14,344 (Mar. 14, 2022).
 Id. at 14,344.
 42 U.S.C. § 7543(b)(1).
 California State Motor Vehicle Pollution Control Standards; Advanced Clean Car Program; Reconsideration of a Previous Withdrawal of a Waiver of Preemption; Notice of Decision, 87 Fed. Reg. at 14,344.
 Id. (emphasis added).
 When an agency changes position, it is required to consider these reliance interests. See FCC v. Fox Television Stations, 556 U.S. 502, 515–16 (2009); Dep’t of Homeland Sec. v. Regents of the Univ. of Cal., 140 S. Ct. 1891, 1913 (2020).
 California State Motor Vehicle Pollution Control Standards; Advanced Clean Car Program; Reconsideration of a Previous Withdrawal of a Waiver of Preemption; Notice of Decision, 87 Fed. Reg. at 14,351.
 42 U.S.C. § 7543(b)(1)(B).
 See California State Motor Vehicle Pollution Control Standards; Advanced Clean Car Program; Reconsideration of a Previous Withdrawal of a Waiver of Preemption; Notice of Decision, 87 Fed. Reg. at 14,355.
 Id. at 14,353.
 See id. at 14,353–54.
 Id. at 14,363.
 See, e.g., Current Nonattainment Counties for All Criteria Pollutants, EPA (Feb. 28, 2022), https://www3.epa.gov/airquality/greenbook/ancl.html.
 Id. at 14,366.
 Id. at 14,364 n.297; see also 14,337 n.31.
 Id. at 14,368.
 Id. at 14,368–70.
 I.e., that states may not adopt California’s GHG standards under section 177 because “‘the text (including both the title and main text), structural location, and purpose of the provision confirm that [section 177] does not apply to GHG standards.’” Id. at 14,374.
 Id. at 14,375.
 See Report of the Administrative Law Judge, OAH 71-9003-36416 (2021), https://mn.gov/oah/assets/9003-36416-mpca-clean-cars-minnesota-rules-report_tcm19-480433.pdf.
 H.B. 1965, 2021 Special Sess. (Va. 2021).
 42 U.S.C. § 7507(2).
 See Elizabeth McGowan, As Virginia GOP Targets Clean Energy, Advocates Hope Senate Wall Holds, Energy News Network (Fed. 2, 2022), https://energynews.us/2022/02/02/as-virginia-gop-targets-clean-energy-advocates-hope-senate-wall-holds/.
 See Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions Standards, 86 Fed. Reg. 74,434 (Dec. 30, 2021) (to be codified at 40 C.F.R. pt. 86, 600). Note that this rule has been challenged. See, e.g., Arizona v. EPA, No. 22-1035 (D.C. Cir. filed Feb. 28, 2022), https://policyintegrity.org/documents/AZ_Petition.pdf.
 Corporate Average Fuel Economy Standards for Model Years 2024–2026 Passenger Cars and Light Trucks (forthcoming in the Federal Register), https://www.nhtsa.gov/sites/nhtsa.gov/files/2022-04/Final-Rule-Preamble_CAFE-MY-2024-2026.pdf.
 Proposed Rule and Related Materials for Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards, EPA (Mar. 28, 2022), https://www.epa.gov/regulations-emissions-vehicles-and-engines/proposed-rule-and-related-materials-control-air-1.
 EPA, Heavy-Duty 2027 and Beyond: Clean Trucks Proposed Rulemaking 1 (2022), https://www.epa.gov/system/files/documents/2022-03/420f22007.pdf.
 Id. at 2.