Trump admin threatens California, automakers over emissions deal

Four major automakers that recently reached an agreement with the state of California to hold to certain emissions standards over the next decade are now the target of a federal antitrust investigation.

Ford, Honda, BMW, and Volkswagen confirmed to media they have been contacted about the probe, which was first reported by The Wall Street Journal.

"Honda will work cooperatively with the Department of Justice with regard to the recent emissions agreement reached between the State of California and various automotive manufacturers, including Honda," the company said. BMW and Ford also confirmed receiving a letter from the DOJ, and Volkswagen said it is in "regular contact" with US authorities.

The companies reached an agreement with the California Air Resource Board (CARB) in July to produce cars for the US market that exceed national level-fuel efficiency standards. Under the terms of the deal, the automakers will improve their overall fleets' average fuel efficiency by 3.7% per year, starting with the 2022 model year. The plan also includes certain incentives to promote a transition to widespread manufacture and adoption of electric vehicles.

In a separate action from the DOJ probe, the Environmental Protection Agency and Department of Transportation also sent a letter (PDF) to "put California on notice."

"This framework agreement appears to be inconsistent with Federal law," the agencies said. "We urge you to act immediately to disassociate CARB from the commitments made by the four automakers. Those commitments may result in legal consequences given the limits placed in Federal law on California's authority."

State leadership, however, does not appear likely to give way in response to the threat. "The Trump Administration has been attempting and failing to bully car companies for months now," California Governor Gavin Newsom said in an emailed statement. "We remain undeterred. California stands up to bullies and will keep fighting for stronger clean car protections that protect the health and safety of our children and families."

CARB chairwoman Mary D. Nichols in an emailed statement said the DOJ "brings its weight to bear against auto companies in an attempt to frighten them out of voluntarily making cleaner, more efficient cars and trucks than EPA wants. Consumers might ask, who is [EPA Administrator] Andy Wheeler protecting?"

The deal the automakers agreed to with CARB echo a standard set by the Environmental Protection Agency in 2012, which called for gradually increasing the average miles-per-gallon rating for most cars to 54.5mpg by 2025 (about 40mpg under real-world conditions). Like many other Obama-era standards, however, such as methane emissions limits or lightbulb standards, the EPA's fuel efficiency rule became an early target of the Trump administration.

Federal regulators do indeed have the statutory right to set national fuel-efficiency guidelines, as the EPA and DOT wrote. California, however, is historically something of a special case. The state, which used to suffer from an extreme smog problem, has for several decades had a waiver allowing it to set more stringent fuel-efficiency guidelines than federal law calls for. When the EPA rolled back the 2012 standard, California fought back.

For a brief time, the Trump administration was theoretically negotiating with CARB to search for a compromise position, but those talks never amounted to much, and they completely collapsed in February.

California law is critical to carmakers because emissions regulations in California spread far beyond the Golden State's borders. Most states can't set their own fuel-efficiency guidelines; California is a special case. While the other 49 states in the union are not allowed to set their own fuel efficiency standards, they can choose to adopt California's stricter limits instead of the federal guideline. At least 16 said earlier in the year they would choose California's rather than support the federal rollback.

Ford, Honda, BMW, and Volkswagen are all among the 17 automakers that asked the Trump administration in June to negotiate with California to find a single, unified national standard.

Although the four companies agreed to stricter, voluntary terms with California, "a 50-state solution has always been our preferred path forward," they said in a joint statement. "These terms will provide our companies much-needed regulatory certainty by allowing us to meet both federal and state requirements with a single national fleet, avoiding a patchwork of regulations while continuing to ensure meaningful greenhouse gas emissions reductions."