In a speech on Tuesday at the National Automobile Dealers Association meeting in Washington, US Environmental Protection Agency (EPA) Administrator Andrew Wheeler outlined the Trump Administration’s thinking on national fuel economy standards and California.

Wheeler said that the Administration will begin taking steps in the very near future to establish one set of national fuel-economy standards. (On Wednesday, President Trump tweeted that his administration “is revoking California’s Federal Waiver on emissions”—a reference to the waiver of preemption under the federal Clean Air Act granted California by the US Environmental Protection Agency (EPA) in the Obama Administration in 2012 to enable California’s Advanced Clean Cars regulation, which address both criteria pollutants and GHG emissions. Earlier post.)

In August 2018, EPA and US Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) released a notice of proposed rulemaking (NPRM) to adjust the Congressionally-mandated Corporate Average Fuel Economy (CAFE) and Light-Duty Vehicle Greenhouse Gas Emissions Standards. (Earlier post.)

The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light Trucks (SAFE Vehicles Rule) initiated a process to establish a new 50-state fuel economy and tailpipe carbon dioxide emissions standard for passenger cars and light trucks covering MY 2021 through 2026. The SAFE rule would essentially freeze the current standards at the MY 2020 level (specifically, the “footprint” or “size-based” target curves for passenger cars and light trucks) through 2026.

It’s no secret that the approach behind the current standards focused almost exclusively on energy efficiency and carbon dioxide reductions. Our proposed SAFE rule reflects what we believe is the right approach—right for public safety and the environment.

—Andrew Wheeler

Wheeler adduced four reasons to support that argument: price, safety, environmental impact and incentivizing the purchase of new, cleaner, safer cars.

Price. Wheeler said that the average sticker price of a new vehicle reached $39,500 in the first half of 2019—out of reach for many American families. Kelly Blue Book earlier this month reported that the the estimated average transaction price for a light vehicle in the United States was $37,401 in August 2019, up 2% from August 2018.

Wheeler claimed that the current trajectory of the standards is one of the factors driving costs higher, especially with the electric vehicle issue factored in.

In order to comply with the Obama standards, auto makers need to sell many more electric vehicles. By some counts, they will need to produce lineups that are 50 percent electric or more over the next seven years. However, electric cars cost $12,000 more to make than the average vehicle, according to a McKinsey analysis. Those costs are passed on to consumers. Which is one reason why electric vehicles are still—despite billions of dollars in subsidies—less than 2 percent of new vehicle sales.

One way for auto makers to meet the standards is to lower the price of electric vehicles and raise the price of other, more popular vehicles, such as SUVs and trucks. In other words, American families are paying more for SUVs and trucks so automakers can sell EVs at a cheaper price.

It’s one thing for the American public to directly subsidize electric vehicles through tax incentives. It’s another thing to use the nation’s vehicle emissions standards to prop up a product that has minimal impacts on the environment and only the wealthy can afford.

Of the roughly 57,000 households that received the EV tax credit in 2016, nearly 80 percent had at least a six-figure income. If these people want to buy an EV, I think they can afford one, without asking low- and middle-income Americans to help pay for it.

—Andrew Wheeler

Wheeler said that compared to keeping the 2012 standards in place, the preferred option in the SAFE proposal would reduce the price of new vehicles by thousands of dollars.

Safety. Wheeler noted that research shows that passengers are more likely to be killed in older vehicles compared to newer ones. He and the Administration are proposing that by revising the standards—and as a result reducing the price of new vehicles—more Americans will purchase newer and safer cars and trucks.

Environmental impact. Wheeler observed that even the most stringent vehicle standards will have only a minimal impact on global temperatures. According to the Obama EPA’s 2012 analysis, even a much more stringent version of the rule than the one that eventually finalized would have lowered global temperatures by only two-one hundredths of a degree Celsius by 2100.

So it’s important to put things in context. We’re talking about changes in the hundredths of a degree Celsius, in 2100, under a more aggressive scenario than what the previous administration actually finalized.

—Andrew Wheeler

Wheeler also claimed that most automakers cannot comply with the trajectory of the current standards, based on data from noncompliance fines. For Model Year 2016 (the most recent data available), domestic passenger vehicle manufacturers paid more than $77 million dollars for noncompliance with DOT’s CAFE standards. In Model Year 2017, most large manufacturers used banked credits, along with technology improvements, to maintain compliance with EPA’s greenhouse gas standards.

While the compliance penalty data for 2017 and 2018 is not yet available, the most recent DOT data on surplus credits and the magnitude of the shortfall between the fleet and CAFE compliance suggest that this figure may rise dramatically due to the increasing stringency of the Obama standards. For example, the total shortfall in CAFE credits for model year 2018 is the equivalent of almost $1.3 BILLION dollars, more than 10 times higher than the equivalent shortfall for model year 2011 (just over $100 million).

This begs the question: Why keep standards that automakers can only comply with through credits and fees? We believe that changes are needed, and the SAFE proposal set forth our view of what changes are appropriate. And because our rule would remove certain credits and fees, our standards would have a negligible impact on the environment compared to the current standards.

—Andrew Wheeler

Purchasing. The average age of vehicles on the road today is at a record high 12 years. In 1990, the average age was eight years. Wheeler said that either consumers cannot afford the price of new vehicles or they are not interested in purchasing certain types of new vehicles. Either way, the lack of fleet turnover creates problems—the most important of which is passenger safety.

California. Wheeler said that from the beginning, the goal was a 50-state solution. He said he met with the California Air Resources Board (ARB) three times. The parties could not reach a solution and decided to end discussions.

We embrace federalism and the role of the states, but federalism does not mean that one state can dictate standards for the nation. To borrow from Louisiana Attorney General Jeff Landry, CAFE does not stand for California Assumes Federal Empowerment.

So we will be moving forward with one national standard very soon. We will be taking joint action with the Department of Transportation to bring clarity to the proper—and improper—scope and use of the Clean Air Act preemption waiver.

Our actions will not impact California’s health-based standards and programs. California will be able to keep in place and enforce programs to address smog and other forms of air pollution caused by motor vehicles. [I.e., criteria pollutants. -Ed.] This will allow the State to redouble its efforts to address its air quality problems and finally achieve compliance with EPA’s National Ambient Air Quality Standards.

—Andrew Wheeler

Legal. Thaddeus Lightfoot, a partner at the international law firm Dorsey & Whitney, spent almost three decades specializing in environmental law. Lightfoot was previously a trial attorney with the US Department of Justice. He notes that:

California has long led the nation in reducing mobile source emissions. Since President Trump’s election, California has essentially carved out its own climate change policy, focusing on reducing the state’s greenhouse gas emissions. But now the Trump administration is seeking to revoke the federal waiver allowing California to set more stringent tailpipe emissions for greenhouse gases, imperiling California’s go-it-alone strategy on climate change.

California’s power to obtain a waiver is expressly stated in the Clean Air Act. No other state may ask for a waiver. But other states may adopt California’s more stringent standards and 15 states have done so, meaning California’s rules are not limited to that state. Commentators estimate the California mobile source rules actual cover approximately 135 million people, or more than 40 percent of America’s population. The number may be even higher, because car dealerships bordering California may sell cars that comply with California’s emission regulations. And Canada recently signed an agreement to work with California on regulations to reduce greenhouse gas emissions from vehicles.

It is unclear whether the Trump administration has the authority to revoke the California waiver. The NYU School of Law’s Institute for Policy Integrity published a study last year concluding the plain text of the Clean Air Act does not allow EPA to revoke a waiver. The George W. Bush administration denied California’s waiver in 2008 and California challenged that decision, but the case was never decided. When Barack Obama became president, the litigation was put in abeyance and EPA in 2009 granted California’s waiver to set its own greenhouse gas emission standards for model years 2009 to 2016. The Trump administration’s authority to withdraw California’s waiver is an issue of first impression.