Ruling paves way for Biden to approve stricter California vehicle rules, but SCOTUS looms

WASHINGTON – A federal court ruling this week allows California to keep setting air pollution and vehicle emissions standards above and beyond federal limits, with potentially far-reaching impacts for an auto industry that’s navigating a bumpy electric transition.

The decision preserves a regulatory double standard across the country. There are 17 states and the District of Columbia that have chosen to adopt some or all aspects of California’s stricter vehicle standards, while others have kept the more lenient federal ones.

“The federal regulations continue to act as the floor for emissions regulations, but California can seek to enact its own more stringent regulatory program above those federal requirements,” the three-judge panel from the U.S. Court of Appeals for the District of Columbia Circuit wrote in their Tuesday decision.

With the legal challenge led by Republican states and fossil fuel groups decided for now – though a potential Supreme Court appeal looms – the focus shifts to the Biden administration’s pending decision on whether to approve a new waiver for California. The state is seeking federal approval for even tougher standards beginning in 2026 that mandate a full shift to electric vehicles, placing strain on automakers that have so far struggled through a rocky transition.

“This has been the law of the land for decades,” said Democratic U.S. Rep. Debbie Dingell of Michigan. “The court recognized a regulatory framework the auto industry has long been working under. No one was surprised by this, and it was the right decision.”

The court ruling in the case, known as Ohio v. Environmental Protection Agency, upheld the EPA’s authority to grant California waivers to set its own emissions reduction policies under the Clean Air Act.

Even though the decision preserves a longstanding practice, it is still “a very big deal for the state of Michigan and the auto industry,” according to Patrick Anderson, CEO of East Lansing, Michigan-based Anderson Economics Group.

Unlike recently finalized Biden policies that encourage EVs but do not explicitly require automakers to sell them, pending California regulations would enable a true EV mandate in California and other states that copy its rules.

“This is something quite a bit larger and more intrusive,” said Anderson, comparing the regulations to past ones allowed by EPA waivers.

The California rule package, known as Clean Cars II, will require that 35% of new light-duty vehicles sold in 2026 produce zero emissions. By 2035, the requirement will rise to 100%.

The vehicles can have fully electric, plug-in hybrid or hydrogen fuel cell powertrains – though the latter has little acceptance in the consumer market.

“The state of California will be able to accomplish the banning of the sale of gas-powered cars in many states in the country within approximately the next decade,” Anderson said.

So far, 12 states and the District of Columbia have committed to adopting the Clean Cars II standard.

The adoption of California’s regulations in those states will push automakers to sell more EVs, even as they have struggled to profit off such cars and consumers have shown apprehension about switching from gas-powered models.

Tu Le, founder of Sino Auto Insights, acknowledged that California’s continued ability to set its own emissions policy presents a challenge for automakers’ short-term profitability. “I think it’s a decent-sized bump on a very long road,” he said.

But he added that the California rules help “save OEMs from themselves.” He also said the rules “force them to stay fit,” referencing global competition in the EV market.

“Without the regulatory pressure, the OEMs wouldn’t do it,” Le said.

Waivers past, present and future

California has received environmental waivers from the federal government under the Clean Air Act for decades. The landmark 1970 law, according to the court ruling Tuesday, was even written to give California leeway to continue already-underway efforts to rein in the state’s excessive and harmful pollution.

Over the last 20 years, however, the waivers have become more politically contentious.

In 2008, President George W. Bush denied a California waiver request. That was a reversal not only from his Democratic predecessor Bill Clinton, but also his father and fellow Republican, former president George H. W. Bush.

Waiver decisions have swung like a pendulum since then. The Obama administration reversed the 2008 decision. The Trump administration later revoked the waiver and, in 2022, the Biden administration restored it.

Biden has prioritized curbing vehicle emissions and promoting EVs as part of his efforts to combat climate change. The 2022 restoration was part of his climate-minded regulatory agenda.

In line with that decision, several industry experts told The Detroit News that they expect Biden to approve California’s current request for a new waiver within the next few months.

But they also said political and legal challenges remain ahead.

Anderson said that he expects former President Donald Trump, if elected, to try to revoke California’s EPA waiver once again. There is also widespread speculation that the plaintiffs in Ohio v. EPA could appeal to the U.S. Supreme Court.

Albeit in a limited form, the Supreme Court already heard oral arguments for an emergency petition in the case in February. The plaintiffs asked the court to temporarily block enforcement of California’s regulations while lower courts reached a final decision.

The Supreme Court never issued a ruling for that narrow ask, but some of the justices did express skepticism of the EPA’s authority to grant California waivers.

The court, in a 6-3 vote by its conservative majority, previously limited the EPA’s authority to regulate greenhouse gas emissions in West Virginia v. EPA.

A group of Republican lawmakers – including U.S. Reps. John James and Tim Walberg, both of Michigan – encouraged a similar outcome in an amicus brief filed Monday. The brief was filed in the D.C. District Court of Appeals but alludes to potential action from the Supreme Court.

“Energy policy is a complex undertaking, which is why Congress has sparingly and specifically delegated policy authority to agencies and why the Supreme Court has guarded Congress’ authority in West Virginia and other major question cases,” the brief said.

“This Court should reject another attempt by EPA to circumvent Congress.”