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California Car Wars: EPA, CARB, and Unintended Consequences

EPA administrator Lisa Jackson is currently weighing whether to reverse the Bush Administration’s policy and grant a waiver for the California Air Resources Board’s (CARB’s) stringent greenhouse gas (GHG) emission standards. Thirteen other states are poised to adopt the CARB program if Jackson reverses. But what will ensue is less a victory for “clean air” than the creation of a chaotic and likely intractable set of regulations with very modest emission reductions. In the current economic climate, in fact, the waiver will likely result in increased GHG emissions.

Background: Dr. Marlo Lewis, senior fellow at the Competitive Enterprise Institute and a principal blogger at Master Resource, has written about the patchwork nature of car design if allowed to go forward. He summarizes a report by the National Association of Auto Dealers (NADA), PatchworkProven, that provides two reasons Jackson should hold onto previous EPA head Stephen Johnson’s denial, albeit with different rationales: the California Standards violate the Energy Policy and Conservation Act (EPCA), and they would create a [unworkable] patchwork of individual state level regulations. As Lewis notes, the EPCA:

prohibits states from adopting laws or regulations “related to fuel economy.” Yes, I’m well aware that in Central Valley Chrysler-Jeep, Inc. v. Goldstone (2006), the U.S. District Court for Eastern California held that EPCA does not preempt CARB from establishing GHG standards for new motor vehicles. However, the Court’s reasoning was spurious, and Johnson should not have given it a free pass.

Lewis continues:

The CARB emissions program is essentially fuel economy regulation by another name, [a fact readily admitted by Californian politicians and regulators]. CO2 comprises 97% of the GHG emissions from motor vehicles. Since there is no commercial technology for capturing or filtering out motor vehicle CO2 emissions, the chief way to decrease CO2-equivalent grams per mile (that’s how the CARB GHG standards are calibrated) is to decrease fuel consumption per mile, i.e., increase fuel economy.

… The bottom line [in PatchworkProven]: “Absent a significant increase in new vehicle fleet fuel economy, it is impossible to comply with CARB’s regulation.” So the CARB emissions program is substantially “related to fuel economy.” As such, it is prohibited by EPCA.

CARB and its allies repeatedly deny that granting the waiver would create a regulatory “patchwork,” with automakers required to comply in different ways in different states. Automakers have had no trouble building cars that meet two different emission standards, CARB contends. Promulgating GHG emission standards would merely update a system that has worked well for decades, its argument goes.

But the number and percentage of vehicle models an auto company “delivers for sale” differ from state to state.  For any auto fleet, no two states, whether embracing the California standards or not, are likely to have the same average fuel economy or CO2-equivalent grams per mile.

As the NADA report puts it, “If CARB’s regulation were to take effect in all 50 states, the resulting 50-state patchwork would require automakers to manage 50 unique state fleets and to individually meet CARB’s standard 50 different ways.”

Emission Reductions? Lewis says it is not even clear that the CARB standards would achieve any significant reduction in emissions.

Yet CARB claims that adoption of its standards by 13 states would eliminate 59% more CO2 emissions in 2020 than would compliance with federal fuel economy rules. But companies forced to “deliver for sale” smaller, lighter, more fuel-economical vehicles in the CARB states would be allowed, under the federal fuel economy program, to sell more large, heavy, gas-guzzling vehicles in non-CARB states. Readers should note this is the same CARB (re AB 32) whose economic analysis “showed” that California would benefit economically from drastic GHG programs (including the standards subject of the waiver request). And it is the same CARB whose own peer reviewers found it had essentially “cheated” on the economic and technical analysis.

Going beyond the Lewis analysis based on PatchworkProven, there is a third reason for Jackson to deny granting the waiver.  By raising the price of new cars sold in California—at least $3,000 per car as admitted by CARB— it is likely to further slow the “fleet” turnover even below the already dismal new car sales rate. This will inevitably lead to an increased percentage of older cars on the roads, as driver hold on to their vehicles. This will likely result in lower—not higher—average mpg and higher emissions, than if the California waiver is not granted.

I hope that the EPA includes the slower fleet turnover in their re-consideration. How unfortunate it would be for both California and the federal government to increase emissions in the name of reducing emissions–at least in the current economic climate and probably longer. New cars are already more efficient and lower emitting than the cars on the road–not discouraging fleet turnover is key.

7 comments

1 Wes Winham { 02.16.09 at 3:14 pm }

It seems to me that by allowing these standards to be implemented, long-term good could be done. Proponents of these regulations sell it to the public as a “free” regulation with no cost or even as some sort of green job nirvana whereby imposing extra costs will somehow make the state more money. There’s no better way to discredit those arguments than to let people see the real results in the more limited selection and or higher costs in their states. It seems like competition amongst the states could pick a winner that balances acceptable regulation with actual costs.

2 Donkatsu { 02.16.09 at 4:56 pm }

Based on the “Bradley Thesis” of increasingly sustainable fossil fuel economics, based on improved combustion and transmission technologies, the impacts of the CARB proposals could be truly perverse. Once people purchase the very high fuel economy vehicles the marginal cost of driving will fall dramatically. Even when the price of mogas rises significantly. Only the imposition of truly revolting extreme vehicles standards (>75 mpg), resulting in cars that no one will want to be in for more than the ride to the train station, will get people out of their cars once they cost little to operate.

3 rbradley { 02.17.09 at 8:54 am }

The “Bradley Thesis” would probably have to be renamed the “Simon thesis” for Julian Simon.

I do think that the hydrocarbon family of energies is improving in virtually every dimension and that the “sustainability” challenge is government intervention in markets, not nature (“peak oil”) or carbon-content (climate-change).

4 Marlo Lewis { 02.17.09 at 9:31 am }

Thanks Tom for your blog about my blog. A point I did not mention in the blog, all-too-briefly discussed in a recent op-ed I did for Human Events (http://cei.org/articles/granting-emissions-waiver-will-lead-de-stimulus)
is that granting the waiver would arguably make CO2 a regulated pollutant under the Clean Air Act, triggering the economy-chilling regulatory cascade discussed in EPA’s Advanced Notice of Proposed Rulemaking (ANPR). For a more complete discussion of the administrative and economic perils of regulating CO2 under the Clean Air Act, see my comment on the ANPR (http://cei.org/node/21367).

5 Tom Tanton { 02.17.09 at 6:32 pm }

Mr. Winham—the competitive experiment has been going on for decades, with CA imposing one more onerous regulation after another. The end result is CA ranks #1 in business outmigration.
see for example http://www.ocregister.com/articles/california-taxes-state-2310198-highest-business

6 E.M.Smith { 04.24.09 at 1:46 am }

Tax beatings will continue until business morale improves…

7 Meme { 05.17.09 at 2:48 am }

Well, golly, darn it! You people make me giggle.

Neither California’s car standards, nor the finer points of AB32 have been implemented yet. Hmmm. Mebbe it’s due to pending fear of energy cost increases.

Giggle.

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