The federal government has passed two main laws regulating the efficiency and emissions of motor vehicles nationwide. The Corporate Average Fuel Economy (CAFE) standards, created by the Energy Policy and Conservation Act (EPCA) in 1975 in reaction to the Arab fuel embargo, mandate higher fuel efficiency for vehicles in an effort to reduce U.S. reliance on foreign oil. The Clean Air Act (CAA), passed in 1970, includes a mandate for the regulation of tailpipe emissions of vehicles. The statutory responsibilities for these regulations rest with the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) respectively.
The EPCA, which created CAFE standards, expressly preempts states from establishing their own fuel economy standards. Under the CAA, federal air standards also generally preempt state level standards. This is perfectly appropriate from both a constitutional and a philosophical perspective when it comes to the car industry. Cars are sold in a national market and between travel and people relocating, cars move between states millions of times a year. It is not feasible for individual states to have separate standards for cars. Constitutionally, this is a clear matter of interstate commerce. Philosophically, while federalism usually is preferable it is not mandatory. In a highly integrated national market for a mobile product like cars, a patchwork of state regulation serves only to impair commerce, not to advance any liberty or self-government interest. Especially as to fuel economy standards, the original justification for which has been superseded by technology-driven domestic production gains, if they are going to exist at all for national security reasons, then they must be set based on nationwide interests.
The CAA does allow the state of California to seek a waiver of federal preemption in order to impose more stringent air standards under certain circumstances. Other states then have the option of adopting California’s standards (but not to create their own). However, this waiver opportunity does not apply to CAFE standards. This lack of waiver authority rightly derives from the justification for the CAFE program: reducing dependence on foreign oil, a national security question. Despite these statutory limitations, the state of California has consistently sought to push the bounds of regulation, eventually bringing itself into conflict with federal authority. In 2009 the Obama administration worked around this conflict, in a process about which they bragged “we put nothing in writing,” by deciding to make federal CAFE standards match California’s desired standards. This unprecedented decision was reached through secretive meetings between California and friendly federal regulators. The decision was then imposed on automakers—companies in the midst of federal bailouts and in no position to resist—without debate.
The Obama administration subsequently continued to push the regulatory boundaries of this new combined process, seeking to drive CAFE standards ever higher. Those standards were criticized by the auto industry for unnecessarily raising the price of new vehicles and for being unworkably stringent. After a brief respite under the Trump administration, the Biden administration has resumed this aggressive pace of increases in CAFE standards. Indeed, the Biden administration is setting standards so aggressive that the only means of compliance by carmakers is to switch to manufacturing electric vehicles, regardless of what actual customers might want. But even this de facto electric vehicle mandate is far less than what the state of California has planned, which is a ban on internal combustion engine vehicles sales starting in 2035.
Those on the right side of the political spectrum generally favor federalism and state-led solutions, but when it comes to CAFE standards that is not an appropriate approach. Due to the integrated national market for vehicles, what we have here is not one state regulating its own population, but one state setting regulatory standards for the other 49 states. The sheer size of the California market (combined with 14 additional states and the District of Columbia that conform to their standards) means that automakers must either make their entire fleet compliant with California or sell different car lines in different states, which is next to impossible for economic reasons. The rest of the country also inevitably ends up subsidizing California’s regulatory choices as carmakers have to increase prices nationwide to recoup the costs of compliance with California’s mandates. The California legislature and its Air Resources Board set these national standards without the opportunity for the governments and populations of other states to weigh in. That is not federalism. Congress and the executive branch must decide national issues that affect all states at the national level. Sacramento shouldn’t be able to limit the types of cars people can drive in Atlanta or Houston, but that is the practical impact of the current situation.
The problem of California setting national vehicle standards has become ever more salient as the attitude of the California government grows more radical. The state government heavily favors electric vehicles and the state has passed a plan to eliminate sales of some types of cars. There is no room in the California government’s imagined future for the types of cars or trucks sold in the rest of the country.
Inherent in the Clean Air Act is the concept of cooperative federalism, but in this instance, by forcing its will (with the blessing of the Biden administration), California is engaging in coercive federalism. So long as the EPA and DOT continue to defer to California, the other 49 states are disenfranchised in the creation of these regulations. Limiting California’s waiver ability is thus not a violation of federalism principles; it simply prevents unelected bureaucrats in Sacramento from dictating what kind of cars the rest of America drives. Limiting California’s waiver authority is in the best interest of American consumers and a check on coercive federalism.