Appeals court case underscores growing rift between automakers and oil industry

Car manufacturers battle oil industry for ability to meet stricter California emission standards

The decades-long alliance between the oil industry and auto manufacturers is coming to an end as the car companies shift their focus to electric vehicles  Recent years have seen hints of an increasing divergence of positions on energy-related issues, but the decision of five major automakers to participate in a lawsuit to support California’s restrictions on vehicle emissions of greenhouse gases and other pollutants solidifies it. The case exposes the growing rift between the interests of automobile manufacturers and the oil industry.

The U.S. Environmental Protection Agency (EPA) has authority under the Clean Air Act to set emissions standards for vehicles, preempting the ability of other states to do so—with one important exception. Section 209(b) of the Act allows EPA to grant a waiver for any state that had adopted vehicle emission standards before March 30, 1966. It’s a qualification that only California meets. Whenever California establishes stricter emission standards than EPA, other states can choose to adopt those standards as well. 

The case has become a major battleground.

Currently, 18 states have adopted California’s tighter vehicle emission requirements, leading to national reverberations from the state policy. The Trump administration, however, withdrew California’s waiver in 2019. The following year, EPA  weakened federal emission standards for new passenger cars and light duty vehicles produced in model years 2021 to 2026. 

Subsequently, the Biden administration superseded the prior administration’s actions. It established stronger emission standards for greenhouse gases and other pollutants from new passenger cars and light-duty vehicles for model years 2023 to 2026. It also rescinded the 2019 waiver withdrawal, reinstating California’s ability to establish stricter vehicle emission standards. 

The case has become a major battleground. Seventeen states seek to block EPA’s reestablishment of California’s waiver, including Ohio, Georgia, Texas and West Virginia. In a petition filed May 12, 2022, in the U.S. Court of Appeals for the District of Columbia, they argued the waiver constitutes improper special treatment of California. The American Fuel & Petrochemical Manufacturers and others also filed challenges to EPA’s action, which were consolidated with the states’ case. Meanwhile, 20 states, plus the District of Columbia and City of Los Angeles, have filed a motion to intervene in support of California’s authority to adopt stricter emissions standards.

In the middle of the fracas, several major automobile manufacturers including Ford, Volkswagen, BMW, Honda and Volvo this past week submitted a motion to the appeals court to intervene—on the side of California. These automakers include the Ford Motor Company, the Volkswagen Group of America, Inc., BMW of North America LLC, American Honda Motor Company, Inc., and Volvo Car USA LLC. The corporations, which according to EPA account for “nearly 30 percent of the nationwide auto market,” said in the June 7 motion that they “support the Waiver Decision and California’s ability to regulate greenhouse gas emissions from new light-duty motor vehicles.” The automakers told the court:

• Ford expects to produce more than 2 million electric vehicles annually by 2026, and expects electric vehicles to comprise half of its global sales by 2030.
• Volkswagen plans to make 55% of its U.S. sales fully electric by 2030.
• BMW predicts its vehicle emissions per mile will fall by about 40 percent by 2030.
• Honda plans to have all of its vehicles worldwide electrified by 2040.
• Volvo expects at least half of its cars sold to be fully electric by 2025, and all of its cars to be electric by 2030.

It is a rational argument, but behind it lies something more: A momentous, growing shift in corporate politics.

Even in the absence of a waiver, the companies had already implemented emission controls stricter than the federal requirements through a voluntary “California Framework Agreement.” The companies asserted in their petition that California’s emissions regulation has helped maintain a level playing field as the industry innovates to reduce pollution. In a changing political and economic environment, the automakers appear to recognize that they benefit more from regulatory conditions that provide fair competition for innovation than from fighting for the right to pollute.

It is a rational argument, but behind it lies something more: A momentous, growing shift in corporate politics.

Gasoline comprises roughly 44 percent of the market for oil in the United States. For decades, the interests of oil corporations and automobile manufacturers were typically closely aligned in favor of more gasoline-powered cars and less regulation of emissions. But a New York Times investigation in 2018 exposed a rupture in that traditional informal alliance when it uncovered evidence of under-the-radar lobbying by the oil industry for vehicle emissions regulations that were far weaker than those advocated by car manufacturers.

The automakers’ intervention motion places an indelible marker on a change that has been developing over the last few years in the relationship between automakers and oil corporations. Even General Motors, although not a signatory to the intervention motion, has dropped its opposition to California’s stricter emission standards. Its website states a goal “to put everyone in an EV because we need millions of EVs on the road to make a meaningful impact toward building a zero-emissions future.”

Several utilities just joined the suit in favor of California as well, reflecting yet another rift developing between oil companies and formerly reliable allies.

The California waiver case has not yet been scheduled for oral argument, but the shift in corporate politics is already upon us.