In May, both houses of Congress passed a resolution that nullifies the Environmental Protection Agency’s (EPA) approval of the wavers granting California the ability to implement vehicle emission standards for light and heavy-duty vehicles beyond the national standards. Once signed into law, the resolution means that California can no longer enforce its ban on internal combustion engine (ICE) vehicle sales from 2035. The block will not only slow California’s electric vehicle (EV) transition, but the transition of all the other states that have since adopted California’s regulation. The slower rate of emission reductions that will ensue from the ruling will lead to California’s carbon price doubling from initial forecasts by 2030.
On 2 April, House Representative John Joyce (R-PA) introduced Joint Resolution 88 (HJ 88), which aims to invalidate the wavers granted to California by the EPA that allow that state to implement emission requirements beyond the agency’s standards. One of the wavers granted is for California’s Advance Clean Cars II (ACCII) allows the state to implement EV sales requirements from model year 2026 which would lead to a ban on all ICE light duty vehicle sales by 2035. The other waver allows California to enforce its Omnibus low-Nox regulation for heavy-duty vehicles that mandates a 90% reduction in nitrogen oxide emissions limits by 2031 and stricture particulate matter limits for vehicles in the class category. The wavers were granted upon the EPA’s determination that under the Clean Air Act, California has the authority to implement regulations beyond those from the EPA in order to best address its own air quality issues.
The joint resolution bases its block on the EPA’s wavers on two main claims. The first being that the wavers have allowed California to implement standards beyond its authority. Under Section 177 of the Clean Air Act, the EPA allows other states to adopt the ACC II and follow the vehicle emission standards California has set. Since the waver was granted, the ACC II has been adopted, either in part or in full, by 18 other states (categorized as Section 177 states) – a large share of which are RGGI member states. Those behind HJ 88 see these wavers as allowing California to establish a national emissions standard, which only the federal government has the ability to do. Secondly, HJ 88 claims that by its wide-scale adoption, the electrification requirements, emission standards, and timelines set in ACC II have imposed an unjust burden on the automotive sector. In order to circumvent overturning the California law directly, Congress utilized the Congressional Review Act (CRA) which allows the House and Senate to repeal the previous administration’s ruling with a simple majority vote.
The House passed the resolution on 1 May in a 246 – 164 vote. HJ 88 was then received in the Senate where it passed in a narrower, 51 – 46 vote. The bill will now go to the White House to be signed by President Donald Trump to then become law. Once signed, the ruling will not only block California’s enforcement of ACC II but challenge all the states that have adopted the regulations, slowing the EV transition across the country. Shortly following the congressional vote, California officials – including Governor Gavin Newsom (D) and Attorney General Robert Bonta – announced that they plan to file a lawsuit against the ruling. They claim that utilizing the CRA on a waiver is unlawful and the block on state regulation is an overreach of the federal government’s powers. The lawsuit will likely be filed shortly after the bill is signed into law, leaving ACC II’s future utilization uncertain.
The joint resolution comes amid wider federal efforts to scrap initiatives aimed at bolstering the EV sector. Donald Trump’s tax bill, “One, Big, Beautiful Bill”, which has already been passed by the House and now sits in the Senate, would repeal several climate subsidies and tax breaks from Inflation Reduction Act (IRA), one of which would be the USD 7,500 federal EV credit.
Despite the setback, the federal government’s ruling does not mean that the EV sector will stop growing. The transition to EVs has been underway across the automotive sector for several years and will continue to advance despite the Trump administration’s actions. As global EV competition grows and battery costs decline, so will the cost, and subsequently, the uptake of these vehicles. Furthermore, California will keep its EV subsidies in place. EV subsidies of up to USD 7,000 are made available through California’s Clean Vehicle Rebate Project in addition to several utility and county-level subsidies. Resistance towards EVs at a federal level will therefore slow, rather than stop, domestic innovation and adoption. Governor Newsom also announced that he will work alongside other members of the US Climate Alliance to establish the Affordable Clean Cars Coalition. The coalition, once established, will help states maintain an affordable transition to EVs while fostering the automotive industry’s growth and innovation.
The inability for California to enforce a ban on ICE sales from 2035 means that the automotive sector’s transition to EVs will slow substantially. The revocation of the EV sales mandate will lead to more new ICE vehicles on the road for a longer period of time, which will slow the rate at which the transportation sector, the highest emitting sector in the state, decarbonizes. As the rate of annual emission reductions slows while emission caps become more ambitious, carbon allowance prices are likely to see sizable increases in the coming years. According to Veyt’s price forecast, the inability to enforce the EV sales target will result in the carbon price reaching USD 88/t in 2030 and USD 129/t by 2035 – two times higher in the respective years than if current regulation is kept intact. A stronger carbon price amid fewer enforceable climate regulations means that the ETS will become a more central tool in driving state decarbonization. This is contingent, however, upon California regulators continuing to implement ambitious updates to its ETS as a part of the program reform process underway. The resistance already demonstrated towards the administration’s efforts to dismantle federal and state-level climate initiatives signals that California, and many RGGI states, will likely continue to value their climate commitments in the coming years.
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