On the California Waiver, Auto Dealers Get Left out in the Cold

by Sam Kazman on May 5, 2011

in Blog, Features

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Last Friday, April 29th, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit dismissed a challenge to EPA’s “California waiver”.  That waiver permitted California to set its own greenhouse-gas emissions for new vehicles.  Because CO2 was the major gas that California was seeking to control, its rules amounted to a new, more stringent automotive fuel-economy standard.  And because at least 14 other states had adopted California’s standard, its actions may well have effectively replaced the federal CAFE standard with a higher one set in Sacramento.

The California waiver has a complicated history.  CARB (the California Air Resources Board) originally filed its waiver request with EPA in late 2005, claiming that the state had a uniquely compelling need to control atmospheric CO2 levels.  (The fact that the alleged problem at issue is global warming, not California warming, apparently didn’t faze CARB.)  After deliberating for more than two years, EPA denied CARB’s request, finding that it hadn’t demonstrated any extraordinary conditions to justify the waiver.

But in January 2009, one day after President Obama was sworn in, CARB resubmitted its request, and EPA granted the waiver several months later.  Then, in April 2010, the Administration, California and the auto industry struck a deal which imposed a higher set of federal fuel economy standards through model year 2016.  During that time, California agreed to merge its own newly-approved standards into the federal program, giving the auto industry the national uniformity in standards that it dearly wanted.

As part of the deal, the automakers agreed not to litigate the California waiver.  The Chamber of Commerce and NADA (the National Auto Dealers Association), however, filed their own lawsuit, and it was this case that the D.C. Circuit dismissed last week.  The court did not reach the merits of the case, ruling instead that neither party had standing to bring the action because they had not shown injury to their members.

The court’s ruling is somewhat of a shocker.  Fuel economy standards clearly affect vehicle marketing and design in ways that run counter to consumer demand; that, in fact, is the very rationale for these government regulations.  And so the notion that auto dealers can’t litigate the legality of this impact on the products they sell seems strange.  It also appears to run counter to the fuel-economy cases that CEI and Consumer Alert brought in 1989 thru 1995, challenging the federal CAFE standards on the grounds that they increased traffic deaths by restricting the availability of larger, more crashworthy cars.

The court based its ruling on several points:  the fact that the carmakers had agreed to the deal and had indicated they could meet the higher standards with no adverse effects on their products; the amount of time which had already passed since the waiver’s approval; and the specifics of NADA’s affidavits on standing and the agency record.  And the court went into a detailed comparison of those specifics with the evidence that was presented in the CEI/Consumer Alert litigation.

I’m pleased to see CEI’s old CAFE cases discussed so approvingly in a current court decision.  Nonetheless, I wonder how this latest ruling may impact the ability of retailers, and the public, to challenge the regulations that affect our lives.


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