January 08, 2008

California v. U.S. EPA–Fighting for the Last Word on Mobile Source Greenhouse Gas Emissions

Posted on January 8, 2008 by Michèle Corash

Following the United States Supreme Court’s landmark decision in Massachusetts v. EPA, deciding that greenhouse gases are a pollutant under the Clean Air Act, a federal-state skirmish has emerged in the climate change arena over mobile source emissions. The United States Government estimates that the transportation sector accounts for approximately one-third of all greenhouse gas emissions in the U.S. Over the past months, the question of how to reduce those emissions has evolved into a dramatic political and legal battle, pitting California’s Governor Arnold Schwarzenegger against U.S. President George Bush. 

The stage for this tussle was set long ago when Congress adopted the federal Clean Air Act and included in the law a special provision for California. Specifically, Section 209(a) of the Clean Air Act prohibits individual states from adopting emission standards for new motor vehicles. However, in recognition of California’s unique smog problems, a subsection (b) was added to enable California to adopt standards more stringent than federal standards so long as it applies for and obtains a waiver from the U.S. EPA. As one court recently explained, under Section 209(b), “Congress has essentially designated California as a proving ground for innovation in emission control regulations.” Other states are then free to adopt California’s standards pursuant to Section 177 of the Clean Air Act, so long as the standards are adopted at least two years before the model year that they regulate. 

In 2002, California invoked its unique Clean Air Act authority to address greenhouse gas emissions from mobile sources. In particular, the State passed AB 1493 requiring the California Air Resources Board to develop and adopt regulations for the greenhouse gas emissions of passenger automobiles and light duty trucks. In September of 2004, the Air Resources Board adopted standards that apply to such vehicles beginning with model year 2009. As required by the Clean Air Act, California then requested a waiver from the U.S. EPA so that the standards could enter into force. While the waiver request was pending, no less than sixteen other states lined up to adopt California’s standards—for all practical purposes, the California standards were poised to become the de facto national standard.  

Automobile manufacturers challenged those regulations in federal courts in both Vermont and California, arguing that the state automobile emission standards for greenhouse gases constituted fuel efficiency standards, and that fuel efficiency standards are exclusively regulated by the federal government under the Environmental Policy and Conservation Act (“EPCA”).[1] Both courts rejected the manufacturers’ challenges, deciding that federal law did not preempt California’s ability to affect fuel economy through the regulation of greenhouse gas emissions from automobiles, so long as the U.S. EPA granted a waiver under the Clean Air Act—the stage was set for a showdown between California and the U.S. EPA.

The U.S. EPA played its hand slowly. During the summer of 2007, the U.S. EPA held hearings on California’s waiver request. Perhaps foreshadowing its upcoming decision on the request, the U.S. EPA then announced in the fall that it would begin its own “Rulemaking To Address Greenhouse Gas Emissions From Motor Vehicles,” planning for the adoption of federal regulations by October 2008. Finally, the shot was fired on December 19, 2007, when Stephen Johnson, the U.S. EPA Administrator, held a press conference announcing his agency would not grant a waiver to California’s regulation. At the same time, President Bush signed a new energy bill, the Energy Independence and Security Act of 2007, requiring a fleet average of thirty-five miles per gallon by 2020 and an annual production of thirty-six billion gallons of renewable fuels by 2022.[2] In making the announcement, Johnson specifically cited Bush’s recent signing of the bill and said, “The Bush administration is moving forward with a clear national solution, not a confusing patchwork of state rules. I believe this is a better approach than if individual states were to act alone.”

Retaliation came swiftly. Little more than two weeks after Johnson’s announcement, California, along with 15 other states and five environmental groups, petitioned the Ninth Circuit on January 2, 2008, for review of the waiver denial.  In the lawsuit, California will need to make the case that its regulation under Section 209 was necessary to “meet compelling and extraordinary conditions.”  As a coastal state with limited fresh water resources, the effect of climate change on California may indeed be severe, involving rising sea levels, a reduction in the Sierra snow pack, and higher temperatures that would exacerbate the state’s ozone nonattainment problem, which is already the worst in the nation. A recent Stanford University study added fodder to this argument when it found Californians’ health will be disproportionately affected by greenhouse gas emissions, because the state is home to six of the most polluted cities in the United States. California will also need to make the case under section 209, that its standards “will be, in the aggregate, at least as protective of public health and welfare as applicable Federal standards.” To that end, the California Air Resources Board released a January 2, 2008, assessment that concludes the federal law, even when fully implemented, will not be as effective as California’s standards at reducing greenhouse gas emissions from new vehicles. Even if California is successful, California’s regulation will have to be modified as it was to apply to 2009 model cars—models that will shortly be coming to market. 

The EPA’s first legal maneuver in response to California’s petition may be to request a transfer from the Ninth Circuit to the more agency-friendly D.C. Circuit. Most challenges of EPA regulations must be filed in the D.C. Circuit—the relevant jurisdictional trigger being whether the action has “nationwide scope or effect.”  While the issue of the waiver makes its way through the courts, the U.S. EPA’s rulemaking will also go forward. To meet its goal of final action by October 2008, the U.S. EPA will have to move quickly, with the public comment period coming by summer 2008 at the latest. 

As these battles are fought, looming on the horizon is a general election in November, and a new federal administration beginning in January of 2009. If the U.S. EPA adopts regulations in October 2008 that do not go as far as the California standards, yet another legal challenge seems almost inevitable, if for no other reason than to stall any final rule until the administration changeover. When the dust does settle, presumably in 2009, the road to mobile source emission reductions will finally be paved.

Michèle Corash is a partner in the international law firm of Morrison & Foerster LLP and a member of the firm’s environmental law practice group. She served as General Counsel of the United States Environmental Protection Agency (EPA) from 1979 to 1982 and previously as Deputy General Counsel for the U.S. Department of Energy and Special Assistant to the Chairman of the Federal Trade Commission. Ms. Corash has consistently been listed in American Lawyer’s Corporate Counsel among the “Best Lawyers in America for Environmental Law” and in numerous other publications as being at the top of her field. She represents companies on a broad range of state, national and international environmental issues and claims regarding exposure to toxic substances. With the experience of being a former General Counsel of the EPA, Ms. Corash is well versed, and has been for many years, in the evolving area of clean technology, renewable resources and climate change. She advises clients on the many issues now facing corporations as they face the challenges of new technologies, infrastructures, markets and regulatory regimes.

Contact information: mcorash@mofo.com or (415) 268-7124

[1] Adopted in 1975, EPCA provides for the establishment of national corporate average fuel economy (“CAFÉ”) standards that apply to all passenger automobiles and light duty trucks.

[2] Coincidentally, at the same time, the European Commission adopted a proposal for legislation to dramatically reduce the average carbon dioxide (“CO2”) emissions of new passenger cars by 2012. If adopted by the European Parliament, the proposal requires, by 2012, a fleet average of 130 grams of CO2 emissions per kilometer, with another 10 grams per kilometer reduction from alternative sources such as biofuels and more efficient air-conditioning. Considering Europe’s cars currently emit on average 160 grams of CO2 per kilometer, this represents an almost twenty percent reduction of CO2 emissions in four years. 

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