NHTSA moves to repeal regulatory preemption of state auto emissions regulation, advancing Biden plans to dramatically reduce US greenhouse gas emissions

The Biden Administration has proposed to rescind federal regulations prohibiting state regulation of vehicle greenhouse gas (GHG) emissions. Like the regulations it would repeal, NHTSA’s proposal is likely to be controversial, both legally and as a matter of policy.  While NHTSA’s action is technically discrete, it is a harbinger of imminent policy changes and a facet of the keystone to President Biden’s climate change mitigation plans. That keystone is catalyzing a US transition from vehicles propelled by GHG-emitting internal combustion engine vehicles to alternatives that do not generate GHG tailpipe emissions, such as battery electric and fuel-cell-powered vehicles.

On May 12, 2021, the National Highway Traffic Safety Administration (NHTSA) published a notice of proposed rulemaking in the Federal Register, proposing to repeal key portions of the “Safer Affordable Fuel-Efficient Vehicles Rule, Part I: One National Program” (SAFE I) Rule. SAFE I, adopted in a joint NHTSA/Environmental Protection Agency (EPA) rulemaking in 2019, was a regulatory priority of the Trump Administration. The agencies’ combined regulatory action in SAFE I withdrew States’ (primarily California) authority to set automobile tailpipe emission standards for GHG. NHTSA’s new proposed reversal would be essential to reinstating California’s prior authority to set vehicle GHG emission standards, including standards that exceed federal standards. Such authority would allow California and at least thirteen other states to impose more stringent GHG emissions limits and could permit additional California regulation, potentially including a mandate that electric or other “zero emission” vehicles comprise a specific proportion of vehicles sold in California.

NHTSA will accept public comments on the proposal for 30 days, until June 11, 2021.

The SAFE I Rule

In September of 2019, NHTSA and EPA issued the SAFE I Rule, designed to make the federal government the exclusive regulator of vehicle fuel economy and tailpipe GHG (predominantly carbon dioxide) emissions. In SAFE I, NHTSA concluded that state regulations limiting vehicle GHG emissions were in “irreconcilable conflict” with the agency’s exclusive authority to regulate motor vehicle fuel economy under the Energy Policy and Conservation Act (EPCA).^[1] Also in Safe I, the EPA revoked a Clean Air Act (CAA) waiver that it previously granted to California, which had authorized the State to set GHG emission standards that are more stringent than federal standards. California used that authority to establish more strict emissions standards including the Low Emissions Vehicle (LEV III) and Zero Emission Vehicle (ZEV) programs. Thirteen states and the District of Columbia have adopted California’s LEV III or ZEV standards, and at least three other states appear poised to do the same. 

By revoking California’s Clean Air Act waiver and promulgating regulations establishing broad federal preemption under the EPCA, the SAFE I Rule effectively barred California and other states from adopting stricter GHG tailpipe emission limits or related mandates. This is significant, because more stringent California emissions standards are likely to become the de facto national standards. In 2020, the Trump Administration adopted the complementary Safe II Rule, which reduced the stringency of federal fuel economy and GHG emission standards for model year 2022-2026 passenger cars and light-duty trucks.

NHTSA’s proposed repeal of the Safe I Rule's EPCA preemption regulations

On Day One of the Biden Administration, the President signed Executive Order 13990, which directed NHTSA and EPA to immediately review and consider suspending or rescinding the SAFE I Rule. NHTSA now has responded by formally proposing to rescind its portion of the SAFE I Rule. The proposal would repeal regulations regarding preemption under the EPCA on two primary legal bases:

• First, NHTSA has “tentatively” determined that the SAFE I Rule was a “legislative rule” that for the first time codified in binding regulations the scope of EPCA preemption of state and local law. However, NHTSA now has determined that the EPCA does not authorize the Agency to define the scope of EPCA preemption. Instead, the EPCA statutory preemption provision is self-executing and does not authorize NHTSA to issue further regulations purporting to establish whether certain state regulation is preempted.
• Second, NHTSA reasons, even if the EPCA does authorize NHTSA to adopt a legislative rule, the Agency believes it was not sound policy to apply preemption to broadly prohibit all state or local regulation of tailpipe GHG emissions. Accordingly, even if the SAFE I Rule were permissible, NHTSA proposes to exercise its discretion to reconsider its prior view by repealing the SAFE I Rule.

NHTSA proposes to go further by repealing not just the codified preemption regulations themselves but also expressly withdrawing and repealing all “interpretative views” (including analyses and findings) that it used to support the regulatory preemption text codified by SAFE I.^[2] The proposed withdrawal of interpretive views would include expunging NHTSA’s 2019 analyses that found California’s GHG and ZEV requirements preempted. NHTSA’s stated objective in proposing this root-and-branch repeal is to create a “clean slate” regarding the agency’s position on EPCA preemption of state GHG emission standards.

Proposal would remove a key obstacle to restoration of state authority to regulate GHG emissions

While NHTSA’s proposed repeal of its SAFE I preemption regulation is intentionally comprehensive, the agency does not currently propose to issue new regulations regarding the application of EPCA preemption to state regulation of GHG tailpipe emissions. Instead, NHTSA states that its objective is to “repeal but not replace” the SAFE I preemption regulations.

Accordingly, NHTSA declines to take a position on whether EPCA preempts state emissions standards such as California’s ZEV program. This approach seems consistent with NHTSA’s primary rationale for rescinding the existing preemption regulations, that the Agency lacks authority to issue binding substantive regulations further specifying the scope or application of preemption provided by statute in EPCA. However, NHTSA also makes clear that it does not mean to forecloses future regulatory actions with respect to EPCA preemption. Rather it leaves the door open, deferring consideration of any such actions and related questions to another day. 

NHTSA’s more restrained approach to affirmative determination of the effect of EPCA preemption probably will not impede reinstatement of State authority to issue GHG emissions standards that are more stringent than federal standards. Significantly, the proposed repeal would eliminate an express regulatory barrier to restoration of the power of California and aligned States to impose more stringent GHG emissions standards than those established by the federal government. If the current Administration wishes to return GHG emissions regulation authority to California, at a minimum its agencies must find both that a waiver of Clean Air Act preemption is warranted (EPA’s jurisdiction) and that lawful EPCA regulations do not separately prohibit such additional State regulation (NHTSA’s jurisdiction). 

In April, EPA separately requested public comment on a proposal to rescind its portion of the SAFE I Rule, which would allow EPA to reinstate the CAA preemption waiver enjoyed by California prior to adoption of SAFE I in September 2019.Even if EPA restored the CAA waiver, however, NHTSA’s EPCA preemption regulations would preclude California from regulating GHG emissions. Those regulations, adopted by NHTSA in SAFE I, clearly and directly prohibit such additional state regulation of auto GHG emissions, and specifically reject California’s regulatory program. By repealing the SAFE I preemption regulations, NHTSA would eliminate a nearly insurmountable legal barrier to reinstating California’s authority to impose more stringent GHG.^[3]

Combined, the repeals presently proposed by NHTSA and EPA would effectively restore California’s tailpipe GHG regulation authority and very likely revive other states’ authority to adopt California’s standards. It would remain to be seen whether and to what extent California would exercise such authority to establish standards or requirements that are different from federal standards. However, because of the difficulty and expense of designing, manufacturing, and selling alternative vehicle fleets to comply with different standards, any more stringent GHG emissions standards adopted by California and aligned states would become the de facto national standards for vehicles sold for use in the United States. 

Further Administration actions aimed at reducing GHG emissions and promoting electric vehicles

NHTSA’s proposed SAFE I preemption repeal is significant, but it is only one part of the Biden Administration’s pending efforts to reduce automobile emissions of greenhouse gases and promote a transition to vehicles with cleaner tailpipe emissions. In addition to the proposed repeal of preemption regulations, the Administration and Congressional Democrats have announced several other actions and proposals aimed at reducing vehicle GHG emissions, including:

• Granting a request filed by the US Department of Justice, the US Court of Appeals for the DC Circuit recently issued orders holding in abeyance legal challenges (filed by California and others) to SAFE I and SAFE II Rules, pending reconsideration of those rules by NHTSA and EPA.
• On April 26, 2021 EPA issued a notice of intent to reconsider its 2019 withdrawal of California’s Clean Air Act waiver that had allowed California to regulate GHG tailpipe emissions more strictly than federal standards (effectively a proposal to reinstate California GHG regulation)
• NHTSA and EPA have announced their intention to propose a new rulemaking to reconsider or replace the Safe II Rule issued in 2020 (which reduced CAFE and GHG emission standards for model year 2022-2026 vehicles) by July 2021.
• The US formally rejoined the Paris Climate Agreement in February 2021, and the President announced ambitious new GHG emissions reduction targets for the US.
• President Biden’s American Jobs Plan includes:
  • $15 billion investment to fund a national network of 500,000 EV charging stations
  • $100 billion in direct subsidies to purchasers of EVs
  • Incentives to support increased US battery production capabilities.
• The Growing Renewable Energy and Efficiency Now Act (GREEN Act) of 2021 – the latest version of the bill would increase the electric vehicle tax credit cap for vehicle manufacturers and extend credits to fuel cell vehicles and two- and three-wheeled electric vehicles.
• The Climate Leadership and Environmental Action for our Nation’s Future (CLEAN Future) Act. The bill provides for substantial investments in transportation electrification, including funding for deployment of EVs, charging stations, and zero-emissions school buses.
• President Biden’s increased public advocacy for a proposed $174 billion public investment in electric vehicle manufacturing and infrastructure, including a May 18, 2021, speech at a new electric vehicle manufacturing facility, in which he highlighted benefits of electric vehicles and proposed federal funding for battery manufacturing and charging infrastructure.

Conclusion

As widely anticipated, the Biden Administration is taking swift action to adopt regulations and policies designed to reduce greenhouse gas emissions and catalyze a transition to low- or zero-GHG-emissions vehicles. NHTSA frames this component proposal as seeking to rescind a binding regulation it lacked authority to issue and to establish a tabula rasa for future consideration of EPCA preemption of specific state emissions regulation. 

Viewed in context, however, the proposal would have broader and more immediate effects. The Safe I regulation erected a categorical prohibition of state regulation of automobile carbon dioxide emissions. Its repeal would eliminate that existing flat legal prohibition of any and all state regulation aimed at reducing tailpipe carbon dioxide emissions and allow EPA to authorize state regulation of such emissions. In combination with other projected policy and regulatory changes, state regulations and incentives may foster a transition from today’s predominant internal combustion engine vehicles toward electric and alternative-fuel-powered vehicles. While the wisdom, costs and benefits of such regulation-driven changes are subjects for debate, there is little doubt that NHTSA’s proposed repeal would be a significant move in that direction.

If you would like more information about these or other policy and regulatory developments affecting vehicle emissions and fuel economy standards, electric and alternative fuel vehicles and infrastructure, and related matters, please contact the authors or your regular DLA Piper relationship attorney.