Four Automakers Make a Deal With California Regarding Vehicle Emissions

While we’ve dinged the media for erroneously reporting that automakers were unilaterally “backing” California in the fuel-economy fracas that’s currently taking place within American politics, it appears four of them actually are starting to choose a side. However, this again requires a bunch of clarification. Despite not adhering fully to the state’s ideal emissions scenario, Ford Motor Co., BMW Group, Volkswagen Group, and Honda Motor Co. released a joint announcement stating they have reached a voluntary agreement with the state of California to adopt compromised vehicle emissions rules.

Since there’s nothing binding in the joint agreement and automakers make (and break) promises all the time, the deal is largely meaningless. Doubly so, since the fuel-economy rollbacks have yet to be finalized. But this does illustrate how a handful of manufacturers are willing to accommodate others in order to get a nationwide solution. It also shows a softening of California’s previously ironclad environmental stance, which is much more interesting.

According to The Washington Post, California Air Resources Board (CARB) matriarch Mary Nichols said that the automakers approached her with the plan last month. “What we have here is a statement of principles intended to reach out to the federal government to move them off the track that they seem to be on and onto a more constructive track,” she said, saying it was a better proposal than the White House’s plan to halt creeping mileage standards between 2020 and 2026.

While California still wants to maintain its ability to self-regulate, the newly suggested deal is a compromise to the Obama-era standards the state previously vowed to adhere to by any means. Participating automakers will improve their fleet-wide efficiencies by 3.7 percent per year (starting in 2022), with California allowing for 1-percent of that to be covered by simply building electric vehicles (which includes plug-in hybrids and hydrogen-powered cars). In addition to those EV breaks, the deal raises the cap for winning credits for fuel efficiency improvements not captured by traditional testing. The compromise would also remove a requirement to account for upstream emissions of fuels — which seems counterintuitive when you’re hoping to regulate air pollution.

Nichols claimed CARB floated a similar proposal by the Trump administration months earlier. However, since both sides claim the other can’t compromise, it’s hard to know who is actually telling the truth. Talks were relentlessly unproductive and totally broke down in February. This single factor is every automaker’s primary concern. Regardless of which side manufacturers appear to be on in any given moment, their primary goal is achieving a national plan that avoids splitting the U.S. market in twain.

“A 50-state solution has always been our preferred path forward and we understand that any deal involves compromise,” reads the automakers’ 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.”

While stringent emission regulations in Europe and Asia are already shaping the vehicles we buy in North America, some of those trends don’t mesh with consumer tastes and the United States’ lower fuel prices. The Alliance of Automobile Manufacturers reported 69 percent of U.S. new vehicle sales were light trucks (SUVs, pickups, vans, etc.) in 2018. As a result, sales-weighted vehicle efficiencies have stagnated over the last few years. In fact, improvements in real-world economy over the last decade seem to be dictated more by gas prices and national finances than the Obama-era standards. The regulatory framework that’s being developed by the Environmental Protection Agency and the National Highway Traffic Safety Administration have attempted to address that at the expense of rising efficiency targets.

“This voluntary framework is a PR stunt that does nothing to further the one national standard that will provide certainty and relief for American consumers,” said Michael Abboud, a spokesman for the EPA, in an email to The Washington Post.

If you made it this far, the takeaway should be that California appears to be softening its hardline stance, which is good news if you’re rooting for compromise. The state’s leadership has called on other automakers to join the plan while urging the White House to play ball. California Governor Gavin Newsom has recently been asking that talks be reopened so that his state can avoid a lengthy legal battle with the federal government. He praised the new deal, suggesting it would improve air quality. “I now call on the rest of the auto industry to join us, and for the Trump administration to abandon its regressive proposal and do what is right for our economy, our people, and our planet,” he said.

As for the automakers, they’re still technically playing both sides while throwing California a bone. Ford, Volkswagen, Honda, and BMW all have a vested interest in appeasing the Golden State — especially if it is allowed to continue self-regulation. However, if the federal government strips it of that power and commences with an aggressive rollback, they’ll still be in the clear. All four already have a vested interest in electrification and will have to build increasingly efficient cars to adhere to regulations in China and Europe. But they also wan’t the best deal for their U.S. business. That’ll be the lowest possible standards available on a national level. After all, it wasn’t all that long ago when Trump was new to the Oval Office and the auto industry sent its top executives specifically to ask that he torpedo existing efficiency mandates and other pesky regulations.

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