Industry Analysis



Environmental regulations such as the Clean Air Act (CAA) and the Energy Policy and Conservation Act (EPCA) on auto emission standards brought about innovations such as electric vehicles in the U.S. automotive industry. The State of California had enjoyed a federal waiver from the U.S. Environmental Protection Agency (EPA) which allowed the state to set its vehicle emission standards which are stricter than federal standards. However, in 2019, President Trump’s Environmental Protection Agency (EPA) rescinded the waiver. This led government agencies and civil groups to file a lawsuit against the decision to rescind this waiver on California.

The Role of the State of California on the U.S. Auto Emissions Standards

  • With areas of Los Angeles covered with awful smogs, Governor Ronald Reagan endorsed an act that instituted the California Air Resources Board (CARB) to enact environmental regulations towards cleaning the air in the city in 1967.
  • The environmental regulation in the state of California was strict. Therefore, Governor Reagan moved to lock this regulation into law in the U.S. This brought about the Clean Air Act (CAA). However, section 209 of the Clean Air Act stipulated that “the federal emissions standards that were about to kick in would serve as a baseline; states would not be permitted to go below that baseline, but through a series of waivers California would be allowed to maintain its higher standards if it could present a good scientific and technological case for them.”
  • In 1990, a revised version of the Clean Air Act offered states in the U.S. the option to adopt California’s stricter environmental standards over the federal ones.
  • In 2009, the U.S. Environmental Protection Agency (EPA) granted a waiver of “Clean Air Act (CAA) preemption to California for its greenhouse gas emission standards for motor vehicles beginning with the 2009 model year.”
  • In 2019, Four large auto companies — Ford, Honda, Volkswagen, and BMW of North America — signed an agreement with California to roll out fleets averaging about 50 mpg by model year 2026.

The Nullification of the Waiver Granted to the State of California

  • In a joint statement released by the U.S. Department of Transport (DOT) and the U.S. Environmental Protection Agency (EPA) in 2018, EPA proposed the withdrawal of the “the January 9, 2013, waiver of CAA preemption for California’s Advanced Clean Car (ACC) program, Zero Emissions Vehicle (ZEV) mandate, and Greenhouse Gas (GHG) standards that are applicable to model years 2021 through 2025.”
  • Given that the President Trump thinks that claims about climate change is a “hoax” and an unnecessary barrier to economic growth, and over a dozen states in the U.S., that is roughly one-third of the American population, are adopting the California environmental standards, President Trump announced in September 2019 that the waiver which granted the state of California the liberty to set stricter standards for vehicle emissions has being rescinded.
  • Multiple reports hinted that a major factor to why this waiver was nullified is because President Trump views “California’s emissions standards as a back door to setting higher miles-per-gallon requirements for vehicles—and under the Energy Policy and Conservation Act of 1975, states aren’t allowed to set their own fuel efficiency standards”.
  • Large auto companies such as General Motors, Toyota, and Fiat Chrysler expressed support for the decision of the Trump administration to revoke the waiver on California. These companies opined that though they are in support of an increased fuel efficiency, the federal government should have the “sole purview” for setting national standards.

Moves to Rescind the Nullification of the Waiver on Auto Emissions Standards

  • The announcement by President Trump to nullify the waiver granted to the state of California to set its own auto emission standards led the “California Attorney General — Xavier Becerra — and 22 other state AGs, along with the District of Columbia, CARB, and the cities of New York and Los Angeles” to file a suit against the National Highway Traffic Safety Administration (NHTSA) challenging this decision at the U.S. Court of Appeals for the District of Columbia Circuit in November 2019.
  • The Nation reported that civil groups such as the “NRDC [Natural Resources Defense Council], the Environmental Defense Fund, the Union of Concerned Scientists, and the Sierra Club” were also part of the groups challenging the nullification of the waiver.

How Environmental Regulations Impacted the U.S. Automotive Industry

  • The environmental regulations in the U.S. led to the inception of new technologies in the automotive industry. First was the inception of new exhaust-capturing and emission-modifying devices, as well as commercially viable scrubbers which eliminate sulfur from flue gases with an efficiency of about 90% in the 1980s.
  • Environmental regulations on auto emission standards brought about the introduction of electric vehicles. While electric vehicle was innovated in the 1800s, progress on this innovation was slow and was almost halted. However, the amendment of the CAA in 1990 and the 1992 Energy Policy Act, coupled with other government regulations renewed the interest of auto manufactures in electric vehicles.
  • Auto makers such as General Motors began to modify existing car models into electric vehicles to achieve “speeds and performance much closer to gasoline-powered vehicles, and many of them had a range of 60 miles.”
  • Toyota’s Prius became the first mass-produced hybrid car in 1997, which was the first major shift in energy technology.
  • The shift to electric plug-in vehicle was heralded by Nissan’s Leaf and Tesla’s Model S.
  • The impact of the environmental regulations on the automotive industry led automobile and fossil fuel companies to take to lobbying. According to reports, two days after President Trump won at the 2015 elections, the president and CEO of the Auto Alliance — Mitch Bainwol — emailed Trump’s transition team, “urging his incoming administration to roll back the higher fuel economy and emissions standards that were negotiated in 2012 between the Obama administration and CARB. Those standards require vehicle fleets to hit an average fuel efficiency standard of 54.5 miles per gallon by the middle of this decade,” while Trump’s government is proposing a lower requirement of about 37 miles per gallon.
  • Mitch Bainwol called on Trump’s government to establish “one national standard with lower fuel efficiency requirement, and to end California’s ability to force car companies to sell more zero emission vehicles (ZEVs) over the coming years—a market lever that increased the number of models on the market from two in 2012 to more than 40 by last year.”
  • Furthermore, The Nation speculated that should Trump win the November election, his government is likely to target California’s ZEV program, which requires auto companies to ensure that a large percentage of the automobiles sold in the state are electric or fuel cell vehicles.
Glenn is the Lead Operations Research Analyst at Simple Manifestation with experience in research, statistical data analysis and interview techniques. A holder of degree in Economics. A true specialist in quantitative and qualitative research.


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