Action May Have Far-Reaching Impacts -

Today, the Environmental Protection Agency (“EPA”) and the National Highway Traffic Safety Administration (“NHTSA”) announced a joint rule intended to substantially affect California’s authority to regulate Greenhouse Gas (“GHG”) emissions. This action is part of the Administration’s proposal to set uniform fuel economy and GHG standards for cars and light-duty trucks, though the standards themselves have not yet been promulgated. Looming in the backdrop of this action is the potential impact to GHG credit markets, as certain companies have designed programs to produce Zero Emission Vehicles (“ZEVs”) in order to generate credits that are sold to other manufacturers for compliance purposes.

In today’s “One National Program Rule,” NHTSA determines that under the Energy Policy and Conservation Act (“EPCA”), only the federal government may set fuel economy standards. The reach of this determination is intended to sweep in all state laws that substantially affect fuel economy standards, including tailpipe GHG emissions and ZEV mandates. This would affect light-duty vehicles, medium-duty, and heavyduty vehicles as well. This means that state and local governments would be preempted from establishing their own separate fuel economy standards, including California and any states that have adopted California’s standards (known as “Section 177 states”) for vehicles that are subject to NHTSA’s authority under EPCA.