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Clean Car Rules: Corporate Average Fuel Economy Standards and Greenhouse Gas Standards
By Sara Dewey
Litigation is underway challenging EPA greenhouse gas standards and California waiver reinstatement, which will raise constitutional preemption and other issues; Model Year 2027 is the next key rulemaking phase.
Transportation is the largest source of greenhouse gas emissions in the US. Improving the fuel economy of cars and trucks saves consumers money on gas and lowers emissions. Given the transportation sector’s share of US GHG emissions, clear and legally durable regulatory actions to lock in deep reductions are important for the Biden administration’s climate goals.
The Trump administration rolled back Obama-era rules aimed at cutting auto emissions: the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rules withdrew California’s waiver to set its own GHG standards and Zero Emissions Vehicle (ZEV) program, determined that other states were not allowed to use those standards (SAFE Vehicles Rule Part I), and set dramatically weakened federal fuel efficiency and GHG standards (SAFE Vehicle Rules Part II). Given the importance of regulatory predictability for automakers, many of whom supported more robust standards in the Obama administration and are on the path to electrification today, the rollbacks caused uncertainty and delay in the industry.
Under the Biden administration, EPA and the National Highway Traffic Safety Administration (NHTSA) have taken steps to reestablish the regulations and legal interpretations to strengthen the standards and create a regulatory framework for continued electrification. New standards from EPA and NHTSA complement both other efforts by the Biden administration to incentivize the transition to electric vehicles as well as automakers’ net-zero goals and/or shifting their inventory toward electric vehicles.
In January 2021, President Biden issued the Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis requiring NHTSA and EPA to consider publishing a proposed rule revising, suspending, or rescinding SAFE Part I and SAFE Part II. In August 2021, President Biden also signed an executive order on “Strengthening American Leadership in Clean Cars and Trucks” setting a goal that 50 percent of new cars and light-duty trucks sold in 2030 will be zero-emission vehicles.
You can read more and stay updated on our Clean Car Rules Regulatory Tracker Page.
 The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule Part One: One National Program, 84 Fed. Reg. 51,310 (Sept. 27, 2019).
 The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light Trucks, 85 Fed. Reg. 24,174 (Apr. 20, 2020).
EPA Greenhouse Gas Standards and the California Waiver
In December 2021, EPA finalized GHG vehicle standards for Model Year 2023 through 2026. These standards are an effort to make up for gains lost under the Trump administration and to set a more aggressive pathway to more electrification. They accelerate the rate of stringency increases from about 1.5 percent year-over-year SAFE standards for model years 2023 to 2026 to nearly 10 percent from model years 2022 to 2023, followed by a 5 percent stringency increase in model year 2024. In model year 2025, the rule increases the stringency by 6.6 percent and in model year 2026, the stringency increases another 10 percent.
Texas and 14 other states petitioned for judicial review of EPA’s vehicle GHG emission standards in the DC Circuit. Those states have argued that the rule exceeds EPA’s authority and violates the separation of powers under the Constitution. Other groups, including the Competitive Enterprise Institute and the soybean trade association, also challenged the rule. The DC Circuit consolidated those cases, and several industry groups, 20 states, and environmental and public health groups moved to intervene in support of EPA. Notably, the Alliance for Automotive Innovation—representing automakers including Ford, General Motors, Honda, Toyota—intervened in support of EPA.
EPA’s rule is designed to withstand court challenges. EPA’s emphasis on technical feasibility, compliance flexibility, consistency with prior rules’ underlying modeling and cost benefit analyses, and on returning to the core purpose of the Clean Air Act will provide strong support for the rule in court. Read EELP’s analysis of EPA’s GHG rule here.
EPA also issued a notice of decision in March 2022 rescinding the Trump administration’s 2019 California waiver withdrawal. In the notice of decision, EPA (1) rescinded its 2019 waiver withdrawal, and (2) withdrew the agency’s legal interpretation that argued that states may not adopt California’s GHG standards under section 177 of the Clean Air Act even if California has a valid waiver for such standards. The notice of decision explained EPA’s determination that the agency’s prior interpretation of section 209(b)(1)(B) of the Clean Air Act was inappropriate and flawed. EPA also found that it had previously erred when it considered NHTSA’s Energy Policy and Conservation Act preemption determination as a reason to justify the waiver withdrawal and asserted that the agency should be limited to the section 209(b) factors when considering whether to grant or reconsider a waiver. As a result, the 2013 waiver for California’s ZEV sales mandate for model years 2017 to 2025 and GHG emission standards are again effective, and states may adopt California’s GHG standards pursuant to section 177.
EPA’s notice of decision allows for the enforcement of California’s ambitious clean cars standards, which will reduce greenhouse gas and other vehicle emissions. Allowing states to again follow California’s GHG emission standards under section 177 will have the effect of reducing emissions as states are able to enforce more stringent standards. The decision may also encourage more states to adopt California’s standards. In August 2022, California Air Resources Board adopted a new rule, Advanced Clean Cars II, which will start in MY 2026 and phase out new gas-powered vehicle sales by 2035. California will apply to EPA for a new waiver to implement this rule.
Following these actions by EPA, a case regarding the 2019 Trump administration’s revocation of the California waiver is being held in abeyance.
In May 2022, 17 states filed suit against EPA over the notice of decision for the California waiver. The Ohio attorney general has opposed the decision arguing that states are equal under the Constitution, and Clean Air Act section 109 violates this “equal sovereignty” by allowing California to exercise its own power in setting vehicle standards. However, the agency’s reconsideration of the waiver was grounded in and constrained by statute. Specifically, Clean Air Act section 209(b) requires that EPA must grant a waiver to California unless it finds three specific conditions, none of which were met when the Trump administration pulled back the waiver. Read EELP’s analysis of the revived California waiver here.
In addition, in March 2022 EPA proposed more stringent NOx standards for heavy-duty vehicles and engines starting in model year 2027 and updates to the existing Heavy Duty Greenhouse Gas Emissions Phase 2 Program.
NHTSA Fuel Economy Standards
NHTSA has taken steps to strengthen fuel economy standards. In December 2021, NHTSA finalized its May 2021 proposal repealing the regulatory text in SAFE Part I and concluded that it lacked the authority to dictate the scope of Energy Policy and Conservation Act preemption. NHTSA explained that the statute is self-executing and is sufficient to control the preemption analysis.
In April 2022, NHTSA released new fuel economy standards under the Energy Independence and Security Act for light duty vehicles model years 2024 and 2025, setting them to increase 8 percent per year. NHTSA also finalized the standard for model year 2026 with an increase of 10 percent per year. NHTSA projects that the revised standards will require an industry fleet-wide average of approximately 49 mpg in model year 2026.
NHTSA’s rule is consistent with the past structure of the program, which strengthens it against a legal challenge. Some automakers, including Ford, supported the rulemaking in public statements, reinforcing that the rule reflects a shift toward electrification that is already underway in the industry. Texas and 10 other states filed a challenge to the fuel economy rules in the DC Circuit, arguing that the rule will harm the auto industry and implicate state sovereignty issues. However, NHSTA’s approach is consistent with the program’s past approach and reflects existing trends in the industry, which establishes a strong defense for the rule.
Legislative Investments in Electric Vehicles
In the recently passed Inflation Reduction Act, Congress intended to provide a boost to electric vehicles, and that investment along with other recent legislation may strengthen future clean car rulemakings. The law extends and expands the electric vehicle tax credit, which has the potential to lower cost and bolster demand for electric vehicles over time. If there is uptake (and if the domestic sourcing and production requirements in the law do not create an impediment), the law will help to create a new baseline as EPA evaluates its regulatory options for future standards. Similarly, the Infrastructure Investment and Jobs Act and CHIPS and Science Act, both passed this session, invest in electric vehicle charging infrastructure and chip production respectively, which could help lower the cost and improve accessibility of electric vehicles, enabling more ambitious future rules.
Looking Ahead at vehicles
Looking ahead for the EPA and NHSTA rules, it is possible that portions of the clean cars legal questions will come before the Supreme Court. A key factor for any of the cases is that these rules reflect and are consistent with the transition in the auto industry toward electrification that is already occurring. Keep up with the Biden administration’s future work on car emission and fuel standards at our tracker page.
Regulating Greenhouse Gas Emissions from Aviation
By Hannah Perls
The Biden administration is implementing, and now defending in court, the Trump-era rulemaking.
The Biden administration is addressing GHG emissions from aviation largely through federal investments and international diplomacy, while retaining an obsolete Trump-era rule that regulated aviation GHG emissions for the first time. To date, the administration’s efforts include the US Aviation Climate Action Plan introduced at COP26, which promises significant federal investment to incentivize the development and deployment of sustainable fuels and promote new efficiency measures. Also, on Oct. 7, 2022, the US and other members states of the International Civil Aviation Organization (ICAO) committed to achieve net-zero carbon emissions by 2050 through emissions reduction measures, including the use of “sustainable aviation fuels”. ICAO aircraft standards are considered in three-year cycles, with the next cycle running from February 2022 to February 2025. (Notably, the aviation sector was omitted from both the Kyoto protocol and the Paris Agreement, making the ICAO standards the primary international agreement governing GHG emissions from aviation).
EPA projected that the Trump administration’s standards, which adopted the 2017 ICAO standards, were already obsolete and would not result in any emission reductions. However, the Biden administration retained the rules as they were the first-ever greenhouse gas emissions standards for aviation under the Clean Air Act, and having the standards in place helps civil manufacturers avoid having to seek certification from a foreign aviation authority. However, petitioners in litigation challenging the standards — environmental groups and a coalition of states led by California — argue that EPA violated the CAA by failing to consider the necessary statutory factors when choosing to retain the Trump standard.
Courts reviewing EPA’s rule will likely balance the costs associated with stricter standards against EPA’s public health mandate under the CAA. Specifically, when setting aviation emissions standards under the CAA, EPA must “giv[e] appropriate consideration to the cost of compliance” in setting the effective date, potentially limiting EPA’s ability to impose meaningful emissions standards affecting airplane engines in the short term. Also, the aviation sector is distinct from other sources of GHG emissions because it is dominated by two companies – Boeing in the US, and Airbus in the Netherlands – which together make up 91 percent of the global airplane manufacturing market. As a result, the domestic benefits of the regulation may be limited in that they do not apply to Airbus. The Biden administration must therefore balance the relative impacts and consider the proper sequencing of seeking to strengthen the international ICAO standards and issuing updated aviation GHG emissions regulations under the CAA.
For more, see our analysis on EPA’s New Aviation Emissions Standard: Why It’s Already Obsolete.
 Aviation Climate Action Plan, FAA (Nov. 9, 2021), https://www.faa.gov/sustainability/aviation-climate-action-plan [https://perma.cc/R66R-Q9ER].
 The ICAO is a specialized agency of the United Nations and meets every three years.
 During COP26, the member states of the International Aviation Climate Ambition Coalition, including the US, also committed to “tak[e] steps domestically to implement Annex 16 Volume IV of the Chicago Convention as fully as possible and in a timely manner.” Annex 16 Volume IV refers to the Carbon Offsetting Reduction Scheme for International Aviation (CORSIA), which was adopted by the ICAO Council in June, 2018. CORSIA seeks to achieve carbon-neutral growth in the international aviation market after 2020. For more details on CORSIA, see Sungjoo Ahn, EPA’s New Aviation Emissions Standard: Why It’s Already Obsolete, Harv. Env’t & Energy L. Program (Feb. 25, 2021), https://eelp.law.harvard.edu/2021/02/epas-aviation-emissions-standard/.
 Control of Air Pollution from Airplanes and Airplane Engines: GHG Emission Standards and Test Procedures, 86 Fed. Reg. 2,136 (Jan. 11, 2021) (codified at 40 C.F.R. pts. 87, 1030).
 In 2016, EPA made a finding under Section 231 of the CAA that GHG emissions from certain classes of aircraft engines endanger public health and welfare by contributing to climate-changing air pollution. This finding triggered Section 231(a)(2)(A) of the act, obligating the agency to set GHG standards for the covered aircraft engines. Finding that Greenhouse Gas Emissions From Aircraft Cause or Contribute to Air Pollution That May Reasonably Be Anticipated to Endanger Public Health and Welfare, 81 Fed. Reg. 54,421 (Aug. 15, 2016) (codified at 40 C.F.R. pts. 87, 1068).
 California v. EPA, No. 21-1018 (D.C. Cir); Ctr. for Biological Diversity, v. EPA, No. 21-1021 (D.C. Cir.).
 42 U.S.C. § 7571(b).
 How Airbus Has Grown Over the Years to Dethrone Boeing as the Largest Commercial Aircraft Maker, Forbes, Jan. 6, 2020, https://www.forbes.com/sites/greatspeculations/2020/01/06/how-airbus-has-grown-over-the-years-to-dethrone-boeing-as-the-largest-commercial-aircraft-maker/?sh=76ad44363a59.