Automakers buck Trump, sign fuel economy deal with Calif.

Source: By Maxine Joselow, E&E News reporter • Posted: Friday, July 26, 2019

In a sharp rebuke to President Trump, four major automakers have struck a deal with California to increase the fuel efficiency of their cars and light trucks in the coming years.

The remarkable compromise between the California Air Resources Board and the four automakers — Ford Motor Co., Honda Motor Co. Ltd., Volkswagen AG and BMW of North America — stands to undercut the Trump administration’s rollback of Obama-era clean car standards.

The Washington Post first reported the compromise, which was the result of weeks of behind-the-scenes negotiations.

The deal signals overwhelming frustration with Trump’s rollback, which would lead to years of litigation and regulatory uncertainty for the auto industry.

The participating car companies hail from three continents. Together, they represent roughly 30% of the U.S. auto market.

Under the terms of the deal, the companies agreed to improve the fuel economy of their cars and light trucks by 3.7% each year, with the ultimate goal of achieving 50 mpg on average by model year 2026.

That’s slightly less aggressive than the Obama-era standards, which would have required automakers to improve fuel economy by roughly 5% each year, with the ultimate goal of reaching 54.5 mpg in laboratory conditions by 2026.

But it’s significantly more ambitious than Trump’s rollback, which would flatline fuel economy requirements at 2020 levels through 2026, allowing automakers to remain at just 37 mpg.

California Gov. Gavin Newsom (D) said the state is encouraging other automakers to join the deal.

“We are proactively engaged, reaching out directly to leadership of the other automobile manufacturers, making our case in private,” Newsom said on a conference call with reporters.

“Now, these four companies are making their case in public as advocates for others to join,” he said, adding, “I’m very confident that you’ll see other companies joining.”

Dan Lashof, director of the World Resources Institute, called the announcement a “critically important breakthrough.”

“The Trump administration had shown that it had absolutely no interest in finding a way forward,” Lashof said in an interview. “So I think this is a testament to California’s commitment to making progress.”

‘We sought them out’

The Trump administration is expected to finalize the car rules rollback after Labor Day, according to sources with knowledge of the matter (Climatewire, July 16).

In addition to freezing fuel economy requirements, the administration is proposing to revoke California’s Clean Air Act waiver, which allows the state to set tougher tailpipe pollution limits than the federal government.

Once the rollback is finalized, litigation is certain. California Attorney General Xavier Becerra (D) and several environmental groups have promised to sue.

While the court battle played out, automakers would be left with prolonged regulatory uncertainty. That would undermine their long-term planning.

Seventeen automakers acknowledged as much in a letter to Trump last month, saying the rollback would lead to “an extended period of litigation and instability” (Climatewire, June 7).

“We are going to be able to make plans and kind of ignore litigation that may result from the rule that comes out later this year,” Honda spokesman Robert Bienenfeld told E&E News.

“After the letter on June 4 from the [automakers] to the Trump administration to reopen negotiations with California, we were told by the administration that they did not plan to continue the dialogue with California. Then we sought them out,” Bienenfeld added.

Notably absent from the compromise are two of the “Big Three” automakers: General Motors Co. and Fiat Chrysler Automobiles NV.

An FCA spokesman said in an email that the company was “not invited to participate” in the deal.

“FCA US is committed to continuing the improvement of our fleet fuel economy,” the spokesman said. “We have been clear throughout the federal rulemaking process that the current standards need to be adjusted to reflect changing conditions in the marketplace, and today’s announcement acknowledges that is true. We look forward to reviewing the details of this agreement, as well as the federal rule later this year.”

GM spokesman Jeannine Ginivan said in an email, “We are driving toward a future of zero crashes, zero emissions, and zero congestion. As we have stated, the pathway includes continuously improving fuel economy and our commitment to an all-electric future. Our focus remains on working with all parties on a solution that would involve a 50-state solution and a national electric vehicle program.”

Impact on emissions, rulemaking

The rollback of clean car standards is expected to increase carbon emissions from the transportation sector, which is already the country’s largest source of greenhouse gases.

Paul Billings, vice president of public policy for the American Lung Association, said the compromise could mitigate the effects of the rollback on planet-warming pollution.

“We can’t afford not to make progress on reducing those emissions, and certainly not on reducing emissions that also lead to the formation of ozone and particulate matter,” he said.

Billings added that he hopes the deal spurs the Trump administration to reconsider or soften the rollback.

But Tom Pyle, president of the American Energy Alliance, predicted the deal would change little.

“It doesn’t change anything, really, in terms of the path forward,” Pyle said. “The president’s proposal will come out this fall. It will go through the rulemaking process. It will go through the courts. And California will lose in court.”

He added, “These four companies have failed to recognize that California is no longer in charge of this program. Their time would have been better spent negotiating with the Trump administration.”

On the Hill

On Capitol Hill, the announcement received strong support from Democrats who have long advocated for strong clean car standards.

“I commend California and these automakers for working together in good faith to find a principled compromise that will support the development of the clean cars of the future,” said Sen. Tom Carper of Delaware, the top Democrat on the Environment and Public Works Committee, in a statement.

“I urge all automakers to embrace this responsible path and seize this important opportunity,” Carper said. “It remains my hope that this administration will abandon its efforts which are reckless, illegal and bound to send the automotive sector into years of litigation and economic disarray, and instead adopt the terms of this agreement.”

Rep. Debbie Dingell (D-Mich.), a former General Motors executive whose home state is heavily dependent on the auto industry, said she hopes more companies consider joining the compromise.

“I would urge this framework to be a catalyst for all stakeholders to go back to the table. It would be win-win for everyone,” Dingell said in a statement.

At a House Energy and Commerce Committee hearing last month, the Michigan congresswoman was more blunt.

“I’m really not interested in a pissing contest between California and this administration,” she said then (E&E Daily, June 21).