[Federal Register Volume 74, Number 129 (Wednesday, July 8, 2009)]
[Notices]
[Pages 32744-32784]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-15943]
[[Page 32743]]
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Part III
Environmental Protection Agency
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California State Motor Vehicle Pollution Control Standards; Notice of
Decision Granting a Waiver of Clean Air Act Preemption for California's
2009 and Subsequent Model Year Greenhouse Gas Emission Standards for
New Motor Vehicles; Notice
Federal Register / Vol. 74 , No. 129 / Wednesday, July 8, 2009 /
Notice
[[Page 32744]]
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ENVIRONMENTAL PROTECTION AGENCY
[FRL-8927-2]
California State Motor Vehicle Pollution Control Standards;
Notice of Decision Granting a Waiver of Clean Air Act Preemption for
California's 2009 and Subsequent Model Year Greenhouse Gas Emission
Standards for New Motor Vehicles
SUMMARY: The Environmental Protection Agency (EPA) is granting the
California Air Resources Board's (CARB's) request for a waiver of Clean
Air Act preemption to enforce its greenhouse gas emission standards for
model year 2009 and later new motor vehicles. This decision is under
section 209(b) of the Clean Air Act (the ``Act''), as amended. This
decision withdraws and replaces EPA's prior denial of the CARB's
December 21, 2005 waiver request, which was published in the Federal
Register on March 6, 2008.
DATES: Petitions for review must be filed by September 8, 2009.
ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-OAR-2006-0173. All documents and public comments in the
docket are listed on the www.regulations.gov Web site. Publicly
available docket materials are available either electronically through
www.regulations.gov or in hard copy at the Air and Radiation Docket in
the EPA Headquarters Library, EPA West Building, Room 3334, 1301
Constitution Ave., NW., Washington, DC. The Public Reading Room is open
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding holidays.
The telephone number for the Reading Room is (202) 566-1744. The Air
and Radiation Docket and Information Center's Web site is http://www.epa.gov/oar/docket.html. The electronic mail (e-mail) address for
the Air and Radiation Docket is: [email protected], the telephone
number is (202) 566-1742 and the fax number is (202) 566-9744.
FOR FURTHER INFORMATION CONTACT: Specific questions may be addressed to
David Dickinson, Office of Transportation and Air Quality, Compliance
and Innovative Strategies Division (6405J-NLD), EPA, 1200 Pennsylvania
Ave., NW., Washington, DC 20460, telephone: (202) 343-9256, e-mail:
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
II. Background
A. California's Greenhouse Gas Program for New Motor Vehicles
B. EPA's Consideration of CARB's Request
III. Analysis of Preemption Under Section 209(a) of the Clean Air
Act
A. Clean Air Act Preemption Provisions
B. Deference to California
C. Burden of Proof
IV. California's Protectiveness Determination
A. What Are ``Applicable Federal Standards''?
1. Are ``Applicable Federal Standards'' Limited to Clean Air Act
Emission Standards or Do They Include NHTSA's Fuel Economy
Standards?
2. If EPA Did Consider CAFE Standards as ``Applicable Federal
Standards,'' Are the CAFE Standards More Stringent Than California's
Greenhouse Gas Emission Standards?
B. How Does EPA Evaluate Impacts on Other States?
C. Is California's Protectiveness Determination Arbitrary and
Capricious?
1. Based on EPA's Traditional Analysis, Is California's
Protectiveness Determination Arbitrary and Capricious?
2. Is California's Protectiveness Determination Arbitrary and
Capricious Based on the Real-World In-Use Effects of California's
Greenhouse Gas Standards?
a. Fleet Turnover/Delayed Scrappage
b. The ``Rebound Effect''
c. Upstream Emissions Impacts
D. Section 209(b)(1)(A) Conclusion
V. Does California Need Its Standards To Meet Compelling and
Extraordinary Conditions?
A. Basis of March 6, 2008 Denial
B. Should EPA Review This Criterion Based on the Need for
California's Motor Vehicle Program or the Need for the GHG
Standards?
1. Comments Supporting a Review of the Entire Program
2. Comments Supporting a Review of the GHG Standards Separately
3. Decision
C. Does California Need Its Motor Vehicle Program To Meet
Compelling and Extraordinary Conditions?
D. Does California Need Its Motor Vehicle GHG Standards To Meet
Compelling and Extraordinary Conditions?
1. Are California's GHG Standards Designed in Part To Address an
Air Pollution Problem That is Local or Regional in Nature?
2. Do the Impacts of Climate Change in California Support a
Denial of the Waiver?
a. What Test Applies Under This Alternative Approach?
b. Would a Waiver Be Denied Under This Alternative Approach?
3. Must California's GHG Standards Achieve a Demonstrated
Reduction in GHG Atmospheric Concentrations or Impacts Under Section
209(b)(1)(B)?
E. Section 209(b)(1)(B) Conclusion
VI. Are the California GHG Standards Consistent With Section 202(a)
of the Clean Air Act?
A. Historical Approach: The Standard of Review for Consistency
With Section 202(a)
B. CARB's Assessment of the State of Development of GHG
Reduction Technology and Comments Supporting CARB's Assessment
1. Development of GHG Reduction Technology
2. Overview of Technologies and Their Projected Applications
3. CARB's Update on Technological Development
4. Manufacturers' Comments on the Technological Feasibility of
the GHG Standards
C. Technological Feasibility and the Cost of Compliance
1. Historical Approach
2. Technology Cost Information in This Proceeding
3. Consistency of Certification Test Procedures
4. Safety Implications of the CARB GHG Standards
E. Conclusion on Technological Feasibility
F. Other Issues Related to Consistency With Section 202(a)
1. Impacts of EPA's March 6, 2008 Denial on Lead Time
2. Endangerment of Public Health or Welfare
a. Is it Appropriate To Review Endangerment of Public Health or
Welfare Under the ``Consistency With Section 202(a)'' Criterion?
b. Parties Opposing the Waiver Have Not Met Their Burden of
Showing Lack of Endangerment to Public Health or Welfare
G. Section 209(b)(1)(C) Conclusion
VII. Additional Issues Raised
A. EPA's Administrative Process for Evaluating California's
Waiver Request
1. Public Comment Process
2. EPA's Reconsideration Process
3. Is a Waiver Required Before California or Section 177 States
Adopt California's Motor Vehicle Emission Standards?
B. Scope of EPA's Waiver Review
1. Relevance of the Energy Policy and Conservation Act (EPCA) to
the Waiver Decision
2. Do California's GHG Emission Standards Create an
Impermissible ``Patchwork''?
3. What Impact Does Granting California a Waiver for Its GHG
Emission Standards Have on PSD Requirements for GHGs?
VIII. Decision
I. Executive Summary
Today, I, as Administrator of the Environmental Protection Agency,
am granting California's request for a waiver of Clean Air Act
preemption for California's greenhouse gas emission standards for 2009
and later model years of new motor vehicles, adopted by the California
Air Resources Board on September 24, 2004. This decision withdraws and
replaces EPA's previous March 6, 2008 Denial of California's waiver
request.
In the March 6, 2008 Denial, EPA determined that one of the three
criteria for denial of a waiver had been met, namely, that California
did not need its
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State standards to meet compelling and extraordinary conditions. I have
reconsidered that determination, which was based on an interpretation
of section 209(b)(1) of the Clean Air Act that I now reject. Based on a
review of the statutory language, legislative history, and the comments
received, I am returning to EPA's traditional interpretation of this
provision. Applying EPA's traditional interpretation I have determined
that the waiver should not be denied under this criterion. Since the
March 6, 2008 Denial did not evaluate or make any determinations
concerning either of the other two waiver criteria, I have evaluated
those criteria and determined that the waiver should not be denied
under either of them. This includes careful consideration of all of the
evidence presented concerning technological feasibility of the model
year 2009 and later model year standards, considering lead time and the
cost of implementation.
The legal framework for this decision stems from the waiver
provision first adopted by Congress in 1967, and later modified in
1977. Congress established that there would be only two programs for
control of emissions from new motor vehicles--EPA emission standards
adopted under the Clean Air Act and California emission standards
adopted under its state law. Congress accomplished this by preempting
all state and local governments from adopting or enforcing emission
standards for new motor vehicles, while at the same time providing that
California could receive a waiver of preemption for its emission
standards and enforcement procedures. This struck an important balance
that protected manufacturers from multiple and different state emission
standards, and preserved a pivotal role for California in the control
of emissions from new motor vehicles. Congress recognized that
California could serve as a pioneer and a laboratory for the nation in
setting new motor vehicle emission standards. Congress intentionally
structured this waiver provision to restrict and limit EPA's ability to
deny a waiver, and did this to ensure that California had broad
discretion in selecting the means it determined best to protect the
health and welfare of its citizens. Section 209(b) specifies that EPA
must grant California a waiver if California determines that its
standards are, in the aggregate, at least as protective of the public
health and welfare as applicable Federal standards. EPA may deny a
waiver only if it makes at least one of three findings specified under
the Clean Air Act (including whether California's ``protectiveness
finding'' noted above is arbitrary and capricious). Therefore, EPA's
role upon receiving a request for waiver of preemption from California
is to determine whether it is appropriate to make any of the three
findings specified by the Clean Air Act and if the Agency cannot make
at least one of the three findings then the waiver must be granted. The
three waiver criteria are properly seen as criteria for a denial--EPA
must grant the waiver unless at least one of three criteria for a
denial is met. This is different from most waiver situations before the
Agency, where EPA typically determines whether it is appropriate to
make certain findings necessary for granting a waiver, and if the
findings are not made then a waiver is denied. This reversal of the
normal statutory structure embodies and is consistent with the
congressional intent of providing deference to California to maintain
its own new motor vehicle emissions program.
The three criteria for denial of a waiver are: First, whether
California's determination that its standards are, in the aggregate, at
least as protective as applicable Federal standards is arbitrary and
capricious (Section 209(b)(1)(A)); second, whether California has a
need for such standards to meet compelling and extraordinary conditions
(Section 209(b)(1)(B)); and third, whether California's standards are
consistent with Section 202(a) of the Act (Section 209(b)(1)(C)). EPA
has consistently interpreted the waiver provision as placing the burden
on the opponents of a waiver to demonstrate that one of the criteria
for a denial has been met. In this context, since 1970, EPA has
recognized its limited discretion in reviewing California waiver
requests. EPA has granted over 50 waivers of preemption and has only
fully denied one waiver request, the decision under reconsideration
here.
In this case, California first requested that EPA waive preemption
for its new motor vehicle greenhouse gas emission standards on December
21, 2005. EPA did not begin its formal consideration of the waiver
request until after the Massachusetts v. EPA decision in April 2007, in
which the Supreme Court determined that greenhouse gases are air
pollutants within that term's meaning in the Clean Air Act. On March 6,
2008, after an administrative process that included two public hearings
and a written comment period, EPA published its final decision denying
California's request. EPA's waiver denial was based on the second
waiver criterion, with EPA determining that California did not need its
greenhouse gas standards to meet compelling and extraordinary
conditions. EPA did not address the other two waiver criteria.
The reconsideration process started early this year. On January 21,
2009, California Governor Schwarzenegger sent a letter to President
Obama, and the California Air Resources Board sent a letter to
Administrator-designee Jackson, requesting the Agency reconsider the
prior denial. After reviewing CARB's reconsideration request and the
concerns raised by many different parties, EPA found that there were
significant issues regarding the Agency's denial of the waiver. The
denial was a substantial departure from EPA's longstanding
interpretation of the Clean Air Act's waiver provision and EPA's
history of granting waivers to California for its new motor vehicle
emissions program. Many different parties, including California, states
that have adopted or are interested in adopting California's standards,
members of Congress, scientists, and other stakeholders, had expressed
similar concerns about the denial of the waiver. Based on this, EPA
believed there was merit to reconsidering its decision denying
California's waiver request and on February 12, 2009, EPA published a
Federal Register notice announcing its reconsideration of California's
greenhouse gas waiver request. EPA held a public hearing on March 5,
2009, and received written comments through April 6, 2009.
EPA received substantial comment on each of the three waiver
criteria. The entire administrative process in consideration of
California's request provided the Agency with extensive legal argument
and evidence, including oral testimony from three public hearings and
nearly 500,000 written comments. This material has been substantive and
invaluable in the Agency's review. EPA has received extensive comments
from many states; federal, state and local officials; industry;
environmental groups; scientists; and other stakeholders. The vast
majority of comments EPA received were in support of the waiver.
After a thorough evaluation of the record, I am withdrawing EPA's
March 6, 2008 Denial and have determined that the most appropriate
action in response to California's greenhouse gas waiver request is to
grant that request. I have determined that the waiver opponents have
not met their burden of proof in order for me to deny the waiver under
any of the three criteria in section 209(b)(1). The findings I have
made concerning each of the criteria are summarized below.
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Concerning the criterion with respect to the protectiveness of
California's standards in the aggregate, I find that the opponents of
the waiver have not met their burden to demonstrate that California's
determination was arbitrary and capricious. This evaluation can
properly by made in situations where EPA has not issued its own
standards, and this finding is appropriate whether or not comparison is
made to EPA's current emissions standards or the National Highway
Transportation Safety Administration's (NHTSA's) fuel economy
standards, and whether or not it includes an evaluation of the real-
world in-use effect of California's greenhouse gas standards on its
broader motor vehicle program.
With respect to the criterion concerning the need for California's
state standards to meet compelling and extraordinary conditions, I have
found that the March 6, 2008 Denial was based on an inappropriate
interpretation of the waiver provision. The March 6, 2008 Denial
determined that Congress intended to allow California to promulgate
only those state standards that address pollution problems that are
local or regional, and this provision was not intended to allow
California to promulgate state standards designed to address global
climate change problems. In the alternative, EPA found that the effects
of climate change in California are not compelling and extraordinary
compared to the effects in the rest of the country.
The text of section 209(b) and the legislative history, when viewed
together, lead me to reject the interpretation adopted in the March 6,
2008 Denial, and to apply the traditional interpretation to the
evaluation of California's greenhouse gas standards for motor vehicles.
If California needs a separate motor vehicle program to address the
kinds of compelling and extraordinary conditions discussed in the
traditional interpretation, then Congress intended that California
could have such a program. Congress also intentionally provided
California the broadest possible discretion in adopting the kind of
standards in its motor vehicle program that California determines are
appropriate to address air pollution problems and protect the health
and welfare of its citizens. The better interpretation of the text and
legislative history of this provision is that Congress did not use this
criterion to limit California's discretion to a certain category of air
pollution problems, to the exclusion of others.
Under that interpretation, I cannot find that opponents of the
waiver have demonstrated that California does not need its state
standards to meet compelling and extraordinary conditions. The
opponents of the waiver have not adequately demonstrated that
California no longer has a need for its motor vehicle emissions
program. I have also determined that even under the interpretation
announced in the March 6, 2008 Denial, opponents of the waiver have not
demonstrated that California does not need its greenhouse gas emission
standards to meet compelling and extraordinary conditions. In addition,
I have interpreted the ``compelling and extraordinary conditions''
criterion to not properly include a consideration of whether the
impacts from climate change are compelling and extraordinary in
California. Nevertheless, I have evaluated the comments received and
evidence in the record and have determined that the opponents of the
waiver have not met their burden in demonstrating why evidence such as
the impacts of climate change on existing ozone conditions in
California along with the cumulative impacts identified by proponents
of the waiver (e.g., impacts on snow melt and water resources and
agricultural water supply, wildfires, coastal habitats, ecosystems,
etc.) is not compelling and extraordinary.
Concerning the criterion with respect to consistency of the
greenhouse gas emission standards with section 202(a), EPA has reviewed
extensive comments and records received from California and from the
regulated community concerning the kinds of technology needed to comply
with California's standards, including costs and lead time, as well as
evidence concerning the current compliance status of manufacturers. In
light of the previous waiver denial, EPA specifically asked for comment
on how lead time should be evaluated as part of the Agency's
reconsideration. Based on all of that information, I cannot find that
opponents of the waiver have demonstrated that the greenhouse gas
emission standards are inconsistent with section 202(a). While I
believe that a grant of the waiver for model year 2009 would not be a
retroactive change in the law, to limit any potential concerns that
have been raised by the manufacturers over their potential reliance
upon EPA's previous waiver denial, my decision provides that CARB may
not hold a manufacturer liable or responsible for any noncompliance
civil penalty action caused by emission debits generated by a
manufacturer for the 2009 model year.
EPA finds that those opposing the waiver request have not met the
burden of demonstrating that California's regulations do not satisfy
the statutory criteria of section 209(b). For this reason, I am
granting California's waiver request to enforce its greenhouse gas
motor vehicle emission regulations.
II. Background
A. California's Greenhouse Gas Program for New Motor Vehicles
As further explained below, CARB has adopted amendments to title
13, California Code of Regulations (CCR), sections 1900 and 1961, and
established standards to regulate greenhouse gas (GHG) emissions from
new passenger cars, light-duty trucks and medium-duty vehicles in a new
section 1961.1.
California's GHG standards are included as part of its second
generation low-emission vehicle program known as LEV II. EPA previously
issued a waiver for the LEV II program and also issued a waiver for
CARB's zero-emission vehicle program (known as ZEV) through the 2011
model year (MY).\1\ By Resolution 04-28, CARB approved the GHG
standards for motor vehicles on September 24, 2004, and California's
Office of Administrative Law approved the regulations on September 15,
2005.\2\
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\1\ 68 FR 19811 (April 22, 2003) and 71 FR 78190 (December 26,
2006).
\2\ California Air Resources Board, EPA-HQ-OAR-2006-0173-0004.2.
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CARB's regulation covers large-volume motor vehicle manufacturers
beginning in the 2009 model year, and intermediate and small
manufacturers beginning in the 2016 model year and controls greenhouse
gas emissions from two categories of new motor vehicles--passenger cars
and the lightest trucks (PC and LDT1) and heavier light-duty trucks and
medium-duty passenger vehicles (LDT2 and MDPV). The regulations add
four new greenhouse gas air contaminants (carbon dioxide
(CO2), methane (CH4), nitrous oxide
(N2O), and hydrofluorocarbons (HFCs)) to California's
existing regulations for criteria and criteria-precursor pollutants and
air toxic contaminants. There are separate fleet average emission
standards for the two vehicle size categories and within each category
the sales-weighted average of a manufacturer's vehicles is required to
comply with the standard. The regulations establish a manufacturer
declining fleet average emission standard for these gases (expressed as
grams of carbon dioxide equivalent per mile (``gpm'')), with separate
standards for each of the two categories of passenger vehicles noted
above. CARB places the declining standards into two phases: near-term
standards phased in
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from the 2009 through 2012 model years, and mid-term standards, phased
in from the 2013 through 2016 model years. Manufacturers may receive
credits for meeting the standards before model year 2009, for
surpassing the standards in later model years, and for selling
alternative fuel vehicles. These credits may be banked for later use,
transferred between vehicle categories, or sold to another
manufacturer. If a manufacturer fails to meet the standard in a
particular model year, it will begin to accrue debits. At that point it
will have five years to make up for the debits, either by generating
credits, or by purchasing credits from another manufacturer.
B. EPA's Consideration of CARB's Request
By letter dated December 21, 2005, CARB submitted a request
(``Waiver Request'') seeking a waiver of Section 209(a)'s prohibition
for its motor vehicle GHG standards.\3\ On February 21, 2007, EPA
notified the Executive Officer of CARB that the timing of EPA's
consideration of the GHG waiver request was related to the then-pending
Massachusetts v. EPA case before the United States Supreme Court. EPA
stated that the decision in that case could potentially be relevant to
issues EPA might address in the context of the GHG waiver proceeding.
The Supreme Court issued its Massachusetts v. EPA decision on April 2,
2007, finding that greenhouse gases are air pollutants under the Clean
Air Act, and that EPA is required to decide the pending rulemaking
petition under section 202(a) of the Act, based on the statutory
criteria of whether, in the Administrator's judgment, emissions of
greenhouse gases from new motor vehicles cause or contribute to air
pollution that may reasonably be anticipated to endanger public health
or welfare.\4\
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\3\ California Air Resources Board, EPA-HQ-OAR-2006-0173-0004.
\4\ Massachusetts v. EPA, 549 U.S. 497, 127 S. Ct. 1438 (2007).
On April 24, 2009, EPA issued ``Proposed Endangerment and Cause or
Contribute Findings for Greenhouse Gases under Section 202(a) of the
Clean Air Act'' at 74 FR 18885 (April 24, 2009).
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On April 30, 2007, a Federal Register notice was published
announcing an opportunity for hearing and comment on CARB's request.\5\
EPA subsequently held two public hearings on May 22, 2007, in
Washington, DC, and on May 30, 2007, in Sacramento, CA. The written
comment period closed on June 15, 2007. On several occasions, EPA
received requests to extend or re-open the comment period; however, the
Agency did not extend the June 15, 2007 deadline. The Agency instead
indicated that consistent with past waiver practice it would continue,
as appropriate, to communicate with stakeholders and evaluate any
comments submitted after the close of the comment period to the extent
practicable. By letter dated December 19, 2007, EPA notified California
Governor Schwarzenegger that EPA would be denying the waiver.\\ On
March 6, 2008, EPA published its decision denying California's waiver
request (March 6, 2008 Denial).\6\
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\5\ 72 FR 21260 (April 30, 2007).
\6\ 73 FR 12156 (March 6, 2008). The State of California brought
litigation against EPA in the United States Court of Appeals, DC
Circuit. This litigation is held in abeyance pending further order
of the court. (February 25, 2009).
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EPA's March 6, 2008 Denial was based on a finding that California
did not need its GHG standards for new motor vehicles to meet
compelling and extraordinary conditions. Because this finding was
sufficient to deny California's waiver request, the Administrator found
it unnecessary to determine whether the criteria for denial of a waiver
under sections 209(b)(1)(A) and (C) had been met.
On January 21, 2009, CARB submitted a request for EPA to reconsider
its March 6, 2008 Denial (``Reconsideration Request'').\7\ CARB's
Reconsideration Request stated its belief that EPA has the inherent
authority to reconsider its previous waiver denial and EPA should do so
in order to restore the Agency's interpretations and applications of
the Clean Air Act to continue California's longstanding leadership role
in setting emission standards. Specifically, CARB noted several bases
for the reconsideration centered on EPA's misinterpretation of the
Clean Air Act to set new flawed tests and misapplication of facts to
those tests.
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\7\ California Air Resources Board, EPA-HQ-OAR-2006-0173-7044.
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President Obama issued a Presidential Memorandum to the
Administrator of the Environmental Protection Agency on January 26,
2009, stating that ``In order to ensure that the EPA carries out its
responsibilities for improving air quality, you are hereby requested to
assess whether the EPA's decision to deny a waiver based on
California's application was appropriate in light of the Clean Air Act.
I further request that, based on that assessment, the EPA initiate any
appropriate action.'' \8\
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\8\ 74 FR 4905 (January 28, 2009).
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Subsequently, EPA published a Federal Register notice on February
12, 2009, which responded to CARB's reconsideration request and
announced that EPA would fully review and reconsider its March 6, 2008
Denial.\9\ The February 12, 2009 notice specifically sought comment on:
any new or additional information regarding the three section 209(b)
waiver criteria; whether EPA's interpretation and application of
section 209(b)(1)(B) in the March 6, 2008 Denial was appropriate; and,
the effect of the waiver denial on whether CARB's GHG standards are
consistent with section 202(a), including lead time. After holding a
public hearing on March 5, 2009, the written comment period closed on
April 6, 2009.
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\9\ 74 FR 7040 (February 12, 2009).
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III. Analysis of Preemption Under Section 209(a) of the Clean Air Act
A. Clean Air Act Preemption Provisions
Section 209(a) of the Act provides:
No State or any political subdivision thereof shall adopt or
attempt to enforce any standard relating to the control of emissions
from new motor vehicles or new motor vehicle engines subject to this
part. No State shall require certification, inspection or any other
approval relating to the control of emissions from any new motor
vehicle or new motor vehicle engine as condition precedent to the
initial retail sale, titling (if any), or registration of such motor
vehicle, motor vehicle engine, or equipment.\10\
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\10\ Clean Air Act section 209(a).
Section 209(b)(1) of the Act requires the Administrator, after an
opportunity for public hearing, to waive application of the
prohibitions of section 209(a) for any State that has adopted standards
(other than crankcase emission standards) for the control of emissions
from new motor vehicles or new motor engines prior to March 30, 1966,
if the State determines that its State standards will be, in the
aggregate, at least as protective of public health and welfare as
applicable Federal standards.\11\ However, no such waiver shall be
granted by the Administrator if she finds that: (A) The protectiveness
determination of the State is arbitrary and capricious; (B) the State
does not need such State standards to meet compelling and extraordinary
conditions; or (C) such State standards and accompanying enforcement
procedures are not consistent with section 202(a) of the Act. In
previous waiver decisions, EPA has stated that Congress intended EPA's
review of California's decision-making be narrow. This has led EPA to
reject arguments that are not specified in the statute as grounds for
denying a waiver:
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\11\ California is the only State which meets section
209(b)(1)'s requirement for obtaining a waiver. See S. Rep. No. 90-
403 at 632 (1967).
[[Page 32748]]
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The law makes it clear that the waiver requests cannot be denied
unless the specific findings designated in the statute can properly
be made. The issue of whether a proposed California requirement is
likely to result in only marginal improvement in air quality not
commensurate with its cost or is otherwise an arguably unwise
exercise of regulatory power is not legally pertinent to my decision
under section 209, so long as the California requirement is
consistent with section 202(a) and is more stringent than applicable
Federal requirements in the sense that it may result in some further
reduction in air pollution in California.\12\
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\12\ 36 FR 17458 (Aug. 31, 1971). Note that the more stringent
standard expressed here, in 1971, was superseded by the 1977
amendments to section 209, which established that California must
determine that its standards are, in the aggregate, at least as
protective of public health and welfare as applicable Federal
standards.
Thus, my consideration of all the evidence submitted concerning a
waiver decision is circumscribed by its relevance to those questions
that I may consider under section 209(b).
B. Deference to California
In previous waiver decisions, EPA has recognized that the intent of
Congress in creating a limited review based on the section 209(b)(1)
criteria was to ensure that the federal government did not second-guess
the wisdom of state policy. This has led EPA to state:
It is worth noting * * * I would feel constrained to approve a
California approach to the problem which I might also feel unable to
adopt at the federal level in my own capacity as a regulator. The
whole approach of the Clean Air Act is to force the development of
new types of emission control technology where that is needed by
compelling the industry to ``catch up'' to some degree with newly
promulgated standards. Such an approach * * * may be attended with
costs, in the shaped of reduced product offering, or price or fuel
economy penalties, and by risks that a wider number of vehicle
classes may not be able to complete their development work in time.
Since a balancing of these risks and costs against the potential
benefits from reduced emissions is a central policy decision for any
regulatory agency under the statutory scheme outlined above, I
believe I am required to give very substantial deference to
California's judgments on this score.\13\
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\13\ 40 FR 23103-23104; see also LEV I Decision Document at 64.
EPA has stated that the text, structure, and history of the
California waiver provision clearly indicate both a congressional
intent and appropriate EPA practice of leaving the decision on
``ambiguous and controversial matters of public policy'' to
California's judgment.\14\
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\14\ 40 FR 23104; 58 FR 4166.
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The House Committee Report explained as part of the 1977 amendments
to the Clean Air Act, where Congress had the opportunity to restrict
the waiver provision, it elected instead to explain California's
flexibility to adopt a complete program of motor vehicle emission
controls. The amendment is intended to ratify and strengthen the
California waiver provision and to affirm the underlying intent of that
provision, i.e., to afford California the broadest possible discretion
in selecting the best means to protect the health of its citizens and
the public welfare.\15\
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\15\ MEMA I, 627 F.2d at 1110 (citing H.R. Rep. No. 294, 95
Cong., 1st Sess. 301-02 (1977).
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C. Burden of Proof
In Motor and Equip. Mfrs Assoc. v. EPA, 627 F.2d 1095 (DC Cir.
1979) (MEMA I), the U.S. Court of Appeals stated that the
Administrator's role in a section 209 proceeding is to:
consider all evidence that passes the threshold test of materiality
and * * * thereafter assess such material evidence against a
standard of proof to determine whether the parties favoring a denial
of the waiver have shown that the factual circumstances exist in
which Congress intended a denial of the waiver.\16\
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\16\ MEMA I, 627 F.2d at 1122.
The court in MEMA I considered the standards of proof under section
209 for the two findings necessary to grant a waiver for an
``accompanying enforcement procedure'' (as opposed to the standards
themselves): (1) Protectiveness in the aggregate and (2) consistency
with section 202(a) findings. The court instructed that ``the standard
of proof must take account of the nature of the risk of error involved
in any given decision, and it therefore varies with the finding
involved. We need not decide how this standard operates in every waiver
decision.'' \17\
---------------------------------------------------------------------------
\17\ Id.
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The court upheld the Administrator's position that, to deny a
waiver, there must be `clear and compelling evidence' to show that
proposed procedures undermine the protectiveness of California's
standards.\18\ The court noted that this standard of proof also accords
with the congressional intent to provide California with the broadest
possible discretion in setting regulations it finds protective of the
public health and welfare.\19\
---------------------------------------------------------------------------
\18\ Id.
\19\ Id.
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With respect to the consistency finding, the court did not
articulate a standard of proof applicable to all proceedings, but found
that the opponents of the waiver were unable to meet their burden of
proof even if the standard were a mere preponderance of the evidence.
Although MEMA I did not explicitly consider the standards of proof
under section 209 concerning a waiver request for ``standards,'' as
compared to accompanying enforcement procedures, there is nothing in
the opinion to suggest that the court's analysis would not apply with
equal force to such determinations. EPA's past waiver decisions have
consistently made clear that: ``[E]ven in the two areas concededly
reserved for Federal judgment by this legislation--the existence of
compelling and extraordinary' conditions and whether the standards are
technologically feasible--Congress intended that the standards of EPA
review of the State decision to be a narrow one.'' \20\
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\20\ See, e.g., 40 FR 21102-103 (May 28, 1975).
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Finally, opponents of the waiver bear the burden of showing that
the criteria for a denial of California's waiver request has been met.
As found in MEMA I, this obligation rests firmly with opponents of the
waiver in a section 209 proceeding, holding that: ``[t]he language of
the statute and it's legislative history indicate that California's
regulations, and California's determinations that they must comply with
the statute, when presented to the Administrator are presumed to
satisfy the waiver requirements and that the burden of proving
otherwise is on whoever attacks them. California must present its
regulations and findings at the hearing and thereafter the parties
opposing the waiver request bear the burden of persuading the
Administrator that the waiver request should be denied.'' \21\
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\21\ MEMA I, 627 F.2d at 1121.
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The Administrator's burden, on the other hand, is to make a
reasonable evaluation of the information in the record in coming to the
waiver decision. As the court in MEMA I stated, ``Here, too, if the
Administrator ignores evidence demonstrating that the waiver should not
be granted, or if he seeks to overcome that evidence with unsupported
assumptions of his own, he runs the risk of having his waiver decision
set aside as `arbitrary and capricious.' '' \22\ Therefore, the
Administrator's burden is to act ``reasonably.'' \23\
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\22\ Id. at 1126.
\23\ Id. at 1126.
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EPA received comment suggesting that the burden of proof upon
reconsideration of EPA's March 6, 2008 Denial should be reversed and
placed on California.\24\ It is not clear whether
[[Page 32749]]
the commenter is also suggesting that the entire burden of proof now
shifts to California in that ``[s]uch an allocation of the burden of
proof ensures that decisions in which EPA has invested time and
resources are not lightly overturned, and that those decisions enjoy
the finality to which they are entitled.'' Moreover, the commenter
suggests that EPA carries a separate responsibility, in order to
reverse its prior decision, to explain why its first decision on the
waiver request is no longer the correct one. The commenter cites
several cases for the proposition that ``[A]n agency changing its
course * * * is obligated to supply a reasoned analysis for the change
beyond that which may be required when an agency does not act in the
first instance'' and that an agency must offer sufficient explanation
to ensure the court that it is not ``repudiating precedent to conform
with shifting political mood.'' \25\
---------------------------------------------------------------------------
\24\ Alliance of Automobile Manufacturers, EPA-HQ-OAR-2006-0173-
8994 at 6-7.
\25\ Id.
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EPA believes that, regardless of the previous waiver denial, once
California makes its protectiveness determination the burden of proof
falls on the opponents of the waiver. This burden is inherent in the
statutory requirement that EPA grant the waiver unless it makes one of
the specific negative findings in section 209(b)(1).\26\ This is
consistent with the legislative history, which indicates that Congress
intended a narrow review by EPA and to preserve the broadest possible
discretion for California.\27\
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\26\ MEMA I, 627 F.2d at 1121.
\27\ MEMA I, 627 F.2d at 1110-11, citing H.R. Rep. No. 294, 95th
Cong., 1st Sess. 301-02 (1977).
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As EPA explained in the previous waiver denial, the Agency did not
address the section 209(b)(1)(A) and (C) criteria in its decision;
therefore EPA is not in a position of reversing any interpretations or
evidentiary findings. As further discussed in section VI, although
commenters argue various adverse effects of the prior waiver denial on
lead time, the burden remains on the opponents of the waiver to
demonstrate why California's GHG standards are not consistent with
section 202(a). With regard to section 209(b)(1)(B) and EPA's prior
waiver denial, EPA has provided a reasoned analysis and explanation for
any reversal of positions taken in this new decision. In the context of
this reasoned explanation, EPA believes it is only required to
demonstrate that it is aware that it is changing positions and that
there are good reasons for the change in position.\28\ As discussed
above, the burden of proof under section 209(b)(1)(B) still falls on
those who wish EPA to deny the waiver, based on the statutory structure
of section 209(b)(1) and the legislative history. This requirement is
not disturbed by EPA's initial denial.
---------------------------------------------------------------------------
\28\ Federal Communications Commission v. Fox Television
Stations, Inc., 129 S.Ct. 1800, 1809 (2009).
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IV. California's Protectiveness Determination
Section 209(b)(1)(A) of the Act requires EPA to deny a waiver if
the Administrator finds that California was arbitrary and capricious in
its determination that its State standards will be, in the aggregate,
at least as protective of public health and welfare as applicable
Federal standards. EPA recognizes that the phrase ``States standards''
means the entire California new motor vehicle emissions program.
Therefore, as explained below, when evaluating California's
protectiveness determination, EPA compares the California-to-Federal
standards. That comparison is undertaken within the broader context of
the previously waived California program, which relies upon
protectiveness determinations that EPA have previously found were not
arbitrary and capricious.\29\
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\29\ In situations where there are no Federal standards directly
comparable to the specific California standards under review, the
analysis then occurs against the backdrop of previous waivers which
determined that the California program was at least as protective of
the federal program ((LEV II + ZEV) + GHG). See 71 FR 78190
(December 28, 2006), Decision Document for Waiver of Federal
Preemption for California Zero Emission Vehicle (ZEV) Standards
(December 21, 2006).
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Traditionally, EPA has evaluated the stringency of California's
standards relative to comparable EPA emission standards.\30\ That
evaluation follows the instruction of section 209(b)(2), which states:
``If each State standard is at least as stringent as the comparable
applicable Federal standard, such State standard shall be deemed to be
at least as protective of health and welfare as such Federal standards
for purposes of [209(b)(1)].''
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\30\ 36 FR 17458 (Aug. 31, 1971). (``The law makes it clear that
the waiver requests cannot be denied unless the specific finding
designated in the statute can properly be made. The issue of whether
a proposed California requirement is likely to result in only
marginal improvement in air quality not commensurate with its cost
or is otherwise an arguably unwise exercise of regulatory power is
not legally pertinent to my decision under section 209, so long as
the California requirement is consistent with section 202(a) and is
more stringent than applicable Federal requirements in the sense
that it may result in some further reduction in air pollution in
California.''). The ``more stringent'' standard expressed here in
1971 was superseded by the 1977 amendments to section 209, which
established that California's standards must be, in the aggregate,
at least as protective of public health and welfare as applicable
Federal standards. The stringency standard remains, though, in
section 209(b)(2).
---------------------------------------------------------------------------
To review California's protectiveness determination in light of
section 209(b)(2), EPA conducts its own analysis of the newly adopted
California standards to comparable applicable Federal standards.
Reviewing that comparison quantitatively answers whether the new
standards are more or less protective than the Federal standards. That
comparison of the newly adopted California standards to the comparable
applicable Federal standards is conducted in light of prior waiver
determinations. That is, the California-to-Federal analysis is
undertaken within the broader context of the previously waived
California program, which relies upon protectiveness determinations
that EPA has not found arbitrary and capricious.\31\
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\31\ In situations where there are no Federal standards directly
comparable to the specific California standards under review, the
analysis then occurs against the backdrop of previous waivers which
determined that the California program was at least as protective of
the federal program ((LEV II + ZEV) + GHG). See 71 FR 78190
(December 28, 2006), Decision Document for Waiver of Federal
Preemption for California Zero Emission Vehicle (ZEV) Standards
(December 21, 2006).
---------------------------------------------------------------------------
A finding that California's determination was arbitrary and
capricious under section 209(b)(1)(A) must be based upon ```clear and
compelling evidence' to show that proposed [standards] undermine the
protectiveness of California's standards.'' \32\ Even if EPA's own
analysis of comparable protectiveness or that suggested by a commenter
might diverge from California's protectiveness finding, that is not a
sufficient basis on its own for EPA to make a section 209(b)(1)(A)
finding that California's protectiveness finding is arbitrary and
capricious.\33\
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\32\ MEMA I, 627 F.2d at 1122.
\33\ ``Once California has come forward with a finding that the
procedures it seeks to adopt will not undermine the protectiveness
of its standards, parties opposing the waiver request must show that
this finding is unreasonable.'' MEMA I, 627 F.2d at 1124.
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California made a protectiveness determination with regard to its
greenhouse gas regulations in Resolution 04-28, adopted by the
California Air Resources Board on September 23, 2004.\34\ Included in
that Resolution were several bases to support
[[Page 32750]]
California's protectiveness determination. Most generally, CARB made a
broad finding that observed and projected changes in California's
climate are likely to have a significant adverse impact on public
health and welfare in California, and that California is attempting to
address those impacts by regulating in a field for which there are no
comparable federal regulations.\35\ CARB also found that its greenhouse
gas standards will increase the health and welfare benefits from its
broader motor vehicle emissions program by directly reducing upstream
emissions of criteria pollutants from decreased fuel consumption.\36\
Beyond that analysis of the new regulations' impact on its broader
program, CARB projected consumer response to the greenhouse gas
regulations. With respect to consumer shifts due to a potential
``scrappage effect'' (the impact of increased vehicle price on fleet
age) and ``rebound effect'' (the impact of lower operating costs on
vehicle miles travelled), CARB found minor impacts--but net
reductions--on criteria pollutant emissions.\37\ Further, even assuming
larger shifts in consumer demand attributable to the greenhouse gas
emission standards, CARB found that the result remains a net reduction
in both greenhouse gas emissions and criteria pollutant emissions.\38\
That is, CARB found that the addition of its greenhouse gas emission
standards to its larger motor vehicle emissions program (LEV II), which
generally aligns with the federal motor vehicle emissions program (Tier
II), renders the whole program to be more protective of public health
and welfare. CARB noted that EPA has already determined that California
was not arbitrary and capricious in its determination that the pre-
existing California standards for light-duty vehicles and trucks, known
as LEV II, is at least as protective as comparable Federal standards,
the Tier II standards.\39\ Implicit in California's greenhouse gas
protectiveness determination, then, is that the inclusion of greenhouse
gas standards into California's existing motor vehicle emissions
program will not cause California's program to be less protective than
the federal program.
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\34\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.107, ``Resolution 04-28, State of California, Air Resources
Board, September 23, 2004'' (``BE IT FURTHER RESOLVED that the Board
hereby determines that the regulations approved herein will not
cause California motor vehicle emission standards, in the aggregate,
to be less protective of public health and welfare than applicable
federal standards.'').
\35\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.107 at 9 (``Over the last hundred years, average temperatures
in California have increased 0.7% F, sea levels have risen by three
to eight inches, and spring run-off has decreased 12 percent. These
observed and future changes are likely to have significant adverse
effects on California's water resources, many ecological systems, as
well as on human health and the economy. The signs of a global
warming trend continue to become more evident and much of the
scientific debate is now focused on expected rates at which future
changes will occur.''); California Air Resources Board, EPA-HQ-OAR-
2006-0173-0010.107 at 13 (``There are no comparable federal
regulations that specifically require the control of greenhouse gas
emissions from motor vehicles.'').
\36\ ``The establishment of greenhouse gas emission standards
will result in a reduction in upstream emissions (emission due to
the production and transportation of the fuel used by the vehicle)
of greenhouse gas, criteria and toxic pollutants due to reduced fuel
usage.'' EPA-HQ-OAR-2006-0173-0010.107 at 8.
\37\ ``Supplemental analysis of the potential response of
consumers (consumer response) to the regulations was performed as
part of the staff evaluation. The evaluation of consumer response
indicates that the impact of vehicle price increases on fleet
turnover (changes to the average age of the motor vehicle fleet) as
well as the impacts of lower operating costs on vehicle miles
traveled (rebound effect) by consumers have minor impacts (less than
one percent of the passenger vehicle emissions inventory) on
criteria pollutant emissions.'' EPA-HQ-OAR-2006-0173-0010.107 at 12.
\38\ ``Taking into account the penetration of 2009 and later
vehicles meeting the new standard, the proposed regulation will
reduce greenhouse gas emission by an estimated 87,700
CO2-equivelent tons per day statewide in 2020 and by
155,200 CO2-equivelent tons per day in 2030. This
translates into an 18 percent overall reduction in greenhouse gas
emissions from the light duty fleet in 2020 and a 27 percent overall
reduction in 2030; Taking into account the penetration of 2009 and
later vehicles meeting the new standard, the proposed regulation
will reduce upstream emissions of non-methane organic gases (NMOG)
by 4.6 tons per day statewide in 2020 and 7.9 tons per day statewide
in 2030, and will reduce upstream emissions of NOX by 1.4
tons per day statewide in 2020 and 2.3 tons per day statewide in
2030. The regulation will provide a criteria pollutant benefit even
taking into account possible pollutant increases due to consumer
response.'' EPA-HQ-OAR-2006-0173-0010.107 at 15.
\39\ 68 FR 19811 (April 22, 2003), Decision Document for Waiver
of Federal Preemption for Low Emission Vehicle Amendments (LEV II)
(April 11, 2003).
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A. What Are ``Applicable Federal Standards''?
EPA has received comments suggesting that the section 209(b)(1)(A)
comparison to ``applicable Federal standards'' should include corporate
average fuel economy (CAFE) standards promulgated, or that in the
future may be promulgated, by the National Highway Traffic Safety
Administration under the Energy Policy and Conservation Act of 1975
(EPCA), as amended by the Energy Independence and Security Act of 2007
(EISA).\40\ That suggestion departs from EPA's traditional analysis.
EPA has always interpreted ``applicable Federal standards'' as limiting
EPA's inquiry to motor vehicle emission standards established by EPA
under the Clean Air Act. After a thorough examination of the text and
legislative history of the section 209(b) waiver provision, EPA has
determined that it should continue to interpret ``applicable Federal
standards'' to mean motor vehicle emission standards established by EPA
under the Clean Air Act that apply to the same cars and the same air
pollutants or group of air pollutants as considered in California's
aggregate protectiveness finding. Additionally, EPA has determined that
even if it were appropriate to take NHTSA's fuel economy standards into
account as ``applicable Federal standards,'' the waiver opponents have
not met their burden of proof to demonstrate that California's
protectiveness determination was arbitrary and capricious. No waiver
opponent has demonstrated that existing or proposed fuel economy
standards are more stringent or more protective of the public health
and welfare than California's greenhouse gas emission standards.
---------------------------------------------------------------------------
\40\ Association of International Automobile Manufacturers,
Inc., EPA-HQ-OAR-2006-1073-9005 at 13-14; Alliance of Automobile
Manufacturers, EPA-HQ-OAR-2006-0173-8994 at 16-23.
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1. Are ``Applicable Federal Standards'' Limited to Clean Air Act
Emission Standards or Do They Include NHTSA's Fuel Economy Standards?
Section 209(b)(1)(A) requires EPA to evaluate whether California's
determination regarding the comparative level of protectiveness of its
standards of the public health and welfare was ``arbitrary and
capricious.'' California's standards act to improve air quality, and
thus benefit the public health and welfare, by establishing limits for
emissions of air pollutants from new motor vehicles and new motor
vehicle engines. California is then required to compare these new motor
vehicle standards in the aggregate to ``applicable Federal standards''
to determine the relative protectiveness of California's standards.
Depending on whether the waiver is granted or denied, vehicle
manufacturers will either have to meet California standards for those
new vehicles subject to its standards and EPA standards for others, or
EPA standards for all of the new vehicles.
The most straightforward reading of the comparison called for by
the statute, between California and Federal standards, is an ``apples
to apples'' comparison. California has standards that apply to new
motor vehicles and the standards set limits for emissions of air
pollutants. California would then compare its standards to the same
kind of Federal standard--Federal standards that apply to the same new
motor vehicles and also set limits for emissions of air pollutants. The
term ``applicable'' has to refer to what the Federal standards apply
to, and the most straightforward meaning is that they apply in the same
way that the
[[Page 32751]]
California standards apply, by setting limits on emissions of air
pollutants from specified new motor vehicles. ``[A]pplicable Federal
standards'' would be standards that impose a requirement on new motor
vehicles and that directly establishes limits on emissions of air
pollutants, as do the California standards. The ``applicable'' Federal
standards are those set by EPA that directly apply by regulation to the
same vehicles and, like the California regulations, set limits for the
same air pollutants.
This is a straightforward and logical approach that provides clear
guidance for California on what standards to compare. It avoids an
open-ended inquiry into what other potential Federal standards might
regulate different vehicles or regulate different aspects of the
vehicles than emissions, and instead focuses the comparison on a
clearly-defined and identifiable set of Federal standards that are
parallel to the California standards at issue.
This interpretation also ties the comparison to the only Federal
standards that are affected by the results of the comparison. If the
California comparison shows it is more protective and the waiver is
granted, the California standards would apply to the vehicles under
section 209(b) and compliance with the California's standards will be
deemed to mean compliance with the EPA standards under section
209(b)(3). If the California comparison is arbitrary and capricious and
a waiver is denied, then EPA's Federal emission standards apply to
those vehicles and California's standards do not. The applicability of
emission standards under section 209(b) that results from the waiver
decision is parallel to and fully consistent with the comparison made
between the California and applicable Federal standards.
EPA has always limited its interpretation of the section 209(b)
waiver provision to the scope of section 209(a)'s preemption.\41\
Section 209(a) creates the explicit preemption of state emission
standards, and at the same time leaves EPA to set federal emission
standards, under the authority of section 202(a). Within the context of
section 209, and the preemption of 209(a), section 209(b)'s waiver
provision allows California the ability to set its own emission
standards. Notably, section 209(b) merely gives back to California what
was taken away by section 209(a)--the ability to adopt and enforce its
own state emission standards. This interaction between sections 209(a)
and 209(b) supports interpreting the ``applicable Federal standards''
mentioned in section 209(b)(1)(A) to mean the same types of emission
standards as the emission standards that are actually set by California
are preempted under section 209(a), and are the subject of a waiver
request under section 209(b).
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\41\ ``The legislative history of section 209 supports the
Administrator's interpretation that the waiver provision is
coextensive with the preemption provision, thereby permitting the
Administrator to consider waiving preemption of California's entire
program of emissions control.'' MEMA I, 627 F.2d 1095, 1108.
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Additionally, EPA's construction of ``applicable Federal
standards'' provides a single, consistent usage of that phrase in the
context of the section 209(b) waiver provision. In section 209(b), the
phrase ``applicable Federal standards'' appears three times. The first
two instances appear in sections 209(b)(1) and 209(b)(2) and pertain to
EPA's review of California's protectiveness determination and the
relative stringency of California's standards, as has been discussed
above. The third instance occurs in section 209(b)(3) and specifically
contemplates treatment of waived California standards for the purpose
of Clean Air Act compliance. Section 209(b)(3) states: ``in the case of
any new motor vehicle or new motor vehicle engine to which State
standards apply pursuant to a waiver granted under paragraph (1),
compliance with such State standards shall be treated as compliance
with applicable Federal standards for purposes of this title.''
(Emphasis added) The reference to Title II of the Clean Air Act in
section 209(b)(3) is further reason to limit the construction of
``applicable Federal standards'' to comparable Clean Air Act emission
standards in sections 209(b)(1) and 209(b)(2). All three occurrences of
``applicable Federal standards'' in section 209(b) are then given the
same meaning, in a context where all three occurrences function
interactively to allow California to enforce its own emission
standards.
The textual structure and legislative history of the waiver
provision also support EPA's interpretation of ``applicable Federal
standards.'' The structure of section 209(b) is notable in its focus on
limiting the ability of EPA to deny a waiver and preserving ``the
broadest possible discretion'' for California to construct its motor
vehicle program as it deems appropriate to protect its public health
and welfare.\42\ Where, as in this case, California's emission
standards are specified in terms of direct regulation of emissions from
new motor vehicles, it is most clearly reasonable for EPA to limit its
review under this criterion to those federal standards that likewise
set limits for the same air pollutant emissions from the same motor
vehicles. This is consistent with Congress' intent to provide
California the broadest discretion and avoids limiting California's
authority and frustrating this congressional intent.\43\ EPA, thus, has
determined it is reasonable to interpret ``applicable Federal
standards'' to mean those EPA standards under the Clean Air Act that
apply in the same manner as the California emission standards,
regulating emissions of air pollutants from new motor vehicles.\44\
Under this approach, any EPA standard that, like California's
standards, sets limits for motor vehicle emissions could be considered
an ``applicable Federal standard'' for the purpose of California's
protectiveness determination.\45\
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\42\ H.R. Rep. No. 294, 95th Cong., 1st Sess. 301-302 (1977);
MEMA I, 627 F. 2d at 1110-11.
\43\ See MEMA I, 627 F. 2d at 1111.
\44\ Entergy Corp. v. Riverkeeper, Inc., 129 S.Ct. 1498 (2009)
(``That view governs if it is a reasonable interpretation of the
statute--not necessarily the only possible interpretation, nor even
the interpretation deemed most reasonable by the courts. Chevron
U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
837, 8430844 (1984).'').
\45\ In this waiver there are no EPA or other Federal standards
that have been identified that explicitly and directly regulate
emissions of GHGs from new motor vehicles. While emission standards
promulgated by EPA have always been treated as applicable Federal
standards because they explicitly regulate the same vehicles and air
pollutants, there is the possibility that another Federal agency
could have a standard that also directly and explicitly regulates
emissions from some new motor vehicles. EPA is not aware of any such
circumstances at this time, but reserves the right to consider in
the future whether such a non-EPA Federal standard would be
considered an ``applicable Federal standards'' for the purpose of a
CAA waiver determination.
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Applying this interpretation, Federal fuel economy standards issued
by NHTSA would not be considered ``applicable Federal standards'' for
purposes of this waiver criterion. In contrast to standards set limits
for emissions from new motor vehicles, corporate average fuel economy
(CAFE) standards set limits on fuel efficiency, to reduce fuel
consumption. In contrast to EPA's and California's emission standards,
which typically establish grams per mile (``gpm'') levels of acceptable
pollutant emissions, CAFE standards establish ``miles per gallon''
(``mpg'') levels of acceptable fuel efficiency. Standards that set
limits for emission levels and standards that set limits for fuel
efficiency apply different legal requirements. The two kinds of
standards can overlap significantly, in that the technology used to
increase fuel efficiency will also lead to reductions in emissions of
one of the GHGs--CO2--
[[Page 32752]]
but they are not the same legal requirements and the regulations do not
apply in the same manner.\46\ Fuel economy standards do impact the
levels of one GHG--CO2--that is emitted from motor vehicles.
But fuel economy standards do not set limits on emission levels of
CO2 or any other air pollutant, as do California's
standards. Lacking that kind of regulation of emissions of an air
pollutant, fuel economy standards are not ``applicable Federal
standards.''
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\46\ The Supreme Court acknowledged this ``overlap'' between
fuel economy and emission standards in Massachusetts v. EPA, 127 S.
Ct. at 1438. (``[T]hat DOT sets mileage standards in no way licenses
EPA to shirk its environmental responsibilities. EPA has been
charged with protecting the public's `health' and `welfare.' 42
U.S.C. 7521(a)(1), a statutory obligation wholly independent of
DOT's mandate to promote energy efficiency. See Energy Policy and
Conservation Act, section 2(5), 89 Stat. 874, 42 U.S.C. 6201(5). The
two obligations may overlap, but there is no reason to think the two
agencies cannot both administer their obligations and yet avoid
inconsistency.'')
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The difference between emission standards and fuel economy
standards is highlighted by comparing the two sets of standards at
issue here. California's greenhouse gas emission standards establish
allowable grams per mile (``gpm'') levels for greenhouse gas emissions,
including tailpipe emissions of carbon dioxide (CO2),
nitrous oxide (N2O), and methane (CH4) as well as
emissions of CO2 and hydrofluorocarbons (HFCs) related to
operation of the air conditioning system. By regulating emissions of
four different greenhouse gas pollutants, the standards do more than
reduce tailpipe CO2 emissions resulting from fuel
combustion. They do not directly equate to miles per gallon fuel
economy reductions. Fuel economy standards, on the other hand, directly
control miles per gallon (``mpg'') fuel economy levels. CO2
reductions will occur, but they are an expected indirect effect of
improved fuel economy standards because the same technology that
improves fuel economy effectively reduces CO2 emissions.
There is no doubt that a CAFE standard would clearly produce
companion reductions in CO2 as fuel economy improves, given
the technology used to improve fuel economy. However, for the reasons
described above EPA believes the better interpretation of section
209(b)(1)(A) is to look at whether the Federal standard is applicable
to the same vehicles and air pollutants as the California standards, by
considering whether they directly regulate the same vehicles and air
pollutants. It is clear that a CAFE standard does not meet this test.
While there is a large but non-identical overlap in effect between a
CAFE standard and a GHG emission standard with respect to emissions of
CO2, the CAFE standards do not set limits on emissions of
CO2 or any other GHG. There also remain important areas
where there is no overlap at all with the California standards,
including the regulation of greenhouse gas pollutants other than
CO2. Instead of making an exception to its interpretation of
``applicable Federal standards'' for NHTSA's CAFE fuel economy
standards, EPA believes it is more appropriate to apply its traditional
interpretation, for all of the reasons discussed above. Therefore, EPA
has determined that NHTSA's CAFE standards are not ``applicable Federal
standards'' for purposes of this waiver criterion.
2. If EPA Did Consider CAFE Standards as ``Applicable Federal
Standards,'' Are the CAFE Standards More Stringent Than California's
Greenhouse Gas Emission Standards?
Even if EPA were to take fuel economy standards into consideration
as ``applicable Federal standards,'' opponents of the waiver have not
met their burden of proof to demonstrate that California's
protectiveness determination was arbitrary and capricious. No waiver
opponent has demonstrated that existing CAFE standards are more
stringent or more protective of the public health and welfare than
California's greenhouse gas emission standards.
EPA has consistently stated in prior waiver determinations that
California's protectiveness determination must consider the
``applicable Federal standards'' in existence at the time of EPA's
waiver decision.\47\ Standards in existence at the time of a waiver
decision have only included finalized emission standards that EPA has
promulgated through its rulemaking process and pursuant to its Clean
Air Act authority.
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\47\ See e.g., Authorization of California's Under 25 Horsepower
Utility Lawn and Garden Equipment Engine Exhaust Emission Standards
(ULGE) (July 5, 1995) at 18. (``CARB's protectiveness determination
must be judged on the standards that are in existence at the time
EPA makes it authorization determination. However, as CARB correctly
states, until EPA's rules become final no changed circumstances
exist that affect CARB's protectiveness determination, and that it
would be premature to make a protectiveness comparison with non-
finalized federal standards.'')
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Applying that approach here, if EPA were to take NHTSA's fuel
economy standards into account when reviewing California's
protectiveness determination, our inquiry would be limited to those
final fuel economy standards that are currently in existence at the
time of the waiver decision. Although NHTSA is required by the EISA to
promulgate more stringent fuel economy standards in the future, the
only final fuel economy standard under EISA that is currently in
existence is that for the 2011 model year.\48\ Additionally, although
EPA and the Department of Transportation (DOT) have issued a notice of
intent to engage in a joint rulemaking, with NHTSA issuing fuel economy
standards under the EISA for the 2012 through 2016 model years and EPA
issuing greenhouse gas standards under the CAA for those same model
years, those standards are neither proposed nor final at this time.\49\
To consider CAFE standards that have been proposed or those standards
that may be proposed would be speculative about what standards will be
adopted, and EPA has consistently found it inappropriate to engage in
that speculation with respect to either EPA's or California's future
standards in prior waiver decisions.
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\48\ 74 FR 14196 (March 30, 2009).
\49\ 74 FR 24007 (May 22, 2009).
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Further, it is reasonable to limit our consideration of
``applicable Federal standards'' to those final standards that are in
existence, in light of the range of options that remain for California
and EPA after a decision on this waiver. If federal greenhouse gas
standards are promulgated in the future, and if such standards bring
this determination into question, then EPA can revisit this decision at
that time. The legislative history of section 209(b) makes clear that
Congress considered section 209(b) as including the authority for EPA
to withdraw a waiver if circumstances occur in the future that would
make this appropriate: ``Implicit in this provision is the right of the
[Administrator] to withdraw the waiver at any time [if] after notice
and an opportunity for public hearing he finds that the State of
California no longer complies with the conditions of the waiver.\50\
EPA need not decide now what action might be authorized or appropriate
under section 209(b) if EPA adopts greenhouse gas emission standards in
the future, as that is best decided when EPA takes such action.
Additionally, the possibility that CARB may revise its standards is
always present. Such a revision would be considered by EPA in a future
waiver proceeding. EPA would then determine whether those changes are
within-the-scope of its prior waiver or if a new, full waiver
determination would need to be made, as would be required if California
[[Page 32753]]
decided to increase the stringency of its greenhouse gas standards.
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\50\ S. Rep. No. 403, 90th Cong. 1st Sess. (1967), at 33-34.
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California's greenhouse gas emission standards begin with the 2009
model year and increase in stringency through the 2016 model year. For
that same time period, fuel economy standards only exist for the 2009
through 2011 model years. An appropriate comparison between
California's greenhouse gas standards and NHTSA's fuel economy
standards, then, would compare California's standards for the 2009 and
later model years to NHTSA's fuel economy standards for the 2009
through 2011 model years.
In his December 19, 2007 letter notifying California Governor
Schwarzenegger that California's waiver request would be denied, former
EPA Administrator Johnson stated that the EISA ``establishes an
aggressive standard of 35 miles per gallon for all 50 states, as
opposed to the 33.8 miles per gallon in California and a patchwork of
other states.'' California prepared and documented a technical
evaluation comparing federal fuel economy standards to its own
standards.\51\ Accounting for the differences between the two sets of
standards, CARB attempted an ``apples to apples'' comparison of the
standards and made several assumptions to that end. For its own
standards, CARB assumed its current greenhouse gas regulations--at
issue here--were in effect for the 2009 through 2016 model years and
that those standards increased in stringency for the 2016 through 2020
model years (its ``Pavley 2'' standards that are not at issue in this
waiver proceeding). Because EISA does not set standards, but directs
NHTSA to issue standards that increase fuel economy to a minimum of 35
miles per gallon by the 2020 model year, CARB projected that the new
CAFE standards would proportionally increase by 3.44 percent each year
after the 2011 model year. Also, because EISA allows a fuel economy
credit up to 1.2 miles per gallon for use of flexible fuel vehicles
(FFVs) that can operate on high-blend ethanol, such as E85, based on
manufacturer statements that they would produce large numbers of FFVs,
CARB assumed maximum use of that credit. CARB also took into account
differences in fleet mix in California and the other 49 states. To
compare this range of years of the California greenhouse gas emission
standards to the corresponding range of years of EISA fuel economy
standards, CARB translated the miles per gallon standards from EISA
into greenhouse gas emission rates. The rates of greenhouse gas
emission reduction from each set of standards were then compared from
2009 through 2020.\52\ CARB found that in California in 2016, its
greenhouse gas emission standards would achieve 51.9 million metric
tons of greenhouse gas emission reductions compared to 23.7 million
metric tons from federal fuel economy standards. By 2020, CARB found
100.5 million metric tons of greenhouse gas emission reductions from
its standards compared to 59.5 million metric tons of greenhouse gas
emission reductions from the federal fuel economy standards.\53\ Both
sets of reductions follow a similar pattern because both sets of
standards are relatively similar in stringency in the near-term (2009-
2011), with California's standards ramping up in the mid-term (2012-
2016), just as the proposed EISA standards begin to increase their
stringency. While both sets of standards gain stringency in the long-
term (2016 and beyond), California found that its standards are more
stringent sooner and in the long-term and, furthermore, that its
standards are more protective of its public health and welfare because
they achieve greater greenhouse gas reductions.
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\51\ California Air Resources Board, Comparison of Greenhouse
Gas Reductions for the United States and Canada under U.S. CAFE
Standards and California Air Resources Board Greenhouse Gas
Regulations, February 25, 2008, available at http://www.arb.ca.gov/cc/ccms/reports/pavleycafe_reportfeb25_08.pdf.
\52\ The 2009 through 2020 model year standards are not a
straightforward comparison of California's greenhouse gas standards
to EISA standards because the years do not align. The California
greenhouse gas standards at issue, here, are for the 2009 and later
model years, whereas EISA was enacted in 2007 and mandates standards
to reach 35 miles per gallon by the 2020 mode year, but as of yet
have only been promulgated for the 2011 model year. The 2009 and
2010 MY federal fuel economy standards were pre-EISA standards.
Neither California nor NHTSA has yet promulgated standards for the
2017-2020 model years: California greenhouse gas standards for those
years are currently proposed in California (as ``Pavley 2''
standards), as are all the EISA standards from the 2012 through 2015
model years.
\53\ California Air Resources Board, Comparison of Greenhouse
Gas Reductions for the United States and Canada under U.S. CAFE
Standards and California Air Resources Board Greenhouse Gas
Regulations, (February 25, 2008), at 13-14.
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EPA notes that this comparison requires speculation regarding what
final CAFE standards will be promulgated by NHTSA for the 2012-2020
model years, and what final GHG standards may be promulgated by CARB
for the 2017-2020 model years. If the comparison were truly between
final, promulgated standards of California GHG-to-CAFE, it would
compare California standards for the 2009 through 2016 model years to
the lone NHTSA fuel economy standard for the 2011 model year, and the
preexisting standards for the 2009-2010 model years. This highlights
that the appropriate approach is to compare standards that are final as
of the time of the waiver decision. However, California's approach
indicates that its standards are more stringent than federal CAFE
standards even if CAFE standards increased in the 2012 through 2016
model years. Therefore, this approach also would indicate that
California's standards, reviewing only those standards that are final
at this time, are more stringent in the aggregate.
No commenter has presented evidence that questions CARB's claim
that its greenhouse gas emission standards are more stringent than
EISA. Most commenters opposing the waiver do not focus on the
comparative stringency of the two sets of standards, but instead focus
on EISA's mandate for more stringent fuel economy standards as
undermining the currency of California's protectiveness determination
or California's ``need'' for its greenhouse gas emission standards. For
example, AIAM has argued that the increased stringency of CAFE
standards due to the EISA removes the basis for California's
protectiveness determination.\54\ Similarly, the Alliance argues that
``CARB erred in a fundamental way when it chose to ignore the impact of
the federal CAFE standards generally and EISA's passage in specific on
California's outdated protectiveness determination.'' \55\ These
arguments assume that CAFE standards are ``applicable Federal
standards'' and that non-final standards may be taken into
consideration at the time of a waiver determination. As explained in
detail above, those assumptions are not consistent with EPA's
interpretation of the section 209(b)(1)(A) criterion. Notably though,
neither argument presents a factually-based analysis of the stringency
of California's greenhouse gas emission standards as compared to
existing fuel economy standards that undermines California's
protectiveness determination.\56\ Such an
[[Page 32754]]
analysis would be necessary for EPA to make a section 209(b)(1)(A)
finding, if EPA were to depart from its traditional review of
California's protectiveness determination and interpret ``applicable
Federal standards'' to include NHTSA's fuel economy standards. As noted
below, the Alliance points to an analysis of the relative stringency of
the two sets of standards to find that: ``the combined vehicle-fuel
program created by the EISA would result in greater life-cycle GHG
reductions than the state standards that are the subject of this
proceeding by the end of the decade.'' That analysis, however, is
flawed for the purpose of this waiver consideration because it
speculates as to NHTSA standards that are not yet finalized, or even
proposed. Additionally, it infers that California's standards are more
protective until 2017.\57\
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\54\ Association of International Automobile Manufacturers,
Inc., EPA-HQ-OAR-2006-0173-9005 at 13-14.
\55\ Alliance of Automobile Manufacturers, EPA, HQ-OAR-2006-
0173-8994 at 20.
\56\ The Alliance's comments received April 6, 2009 state: ``It
should be noted that * * * it is also true that the fuel economy
improvements required by the California GHG standards are more
stringent, overall, for the industry than the CAFE standards in many
jurisdictions in which the state GHG standards would apply compared
to the CAFE standards. CARB does not disagree with this point. See
CARB, Comparison of Greenhouse Gas Reductions for the United States
and Canada Under U.S. CAFE Standards and California's Air Resources
Board Greenhouse Gas Regulations: An Enhanced Assessment, at 8
(February 25, 2008).'' Alliance of Automobile Manufacturers, EPA-HQ-
OAR-2006-0173-8994 at 20, note 4.
\57\ Id.
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Based on the above, and recognizing that federal fuel economy
standards are not ``applicable Federal standards,'' EPA notes that even
if the stringency of CAFE standards are considered in context of the
section 209(b)(1)(A) waiver criterion, the opponents of the waiver have
not presented sufficient evidence to show that California's
protectiveness determination is arbitrary and capricious. No commenter
has shown that California's determination was arbitrary and capricious
in finding that NHTSA's fuel economy standards are not in the aggregate
more protective of human health and welfare than California's
greenhouse gas standards, whether one considers just the CARB and NHTSA
standards that are currently finalized, or one considers possible
future standards that either agency might adopt.
B. How Does EPA Evaluate Impacts on Other States?
Several comments have suggested that EPA should consider the
impacts of California's greenhouse gas standards on other states.\58\
At present time, thirteen other states and the District of Columbia
have already adopted California's greenhouse gas emission standards
pursuant to section 177 of the Act.\59\ These comments raise two
objections concerning other states adoption of California's greenhouse
gas emission standards. First, these comments suggest that state-by-
state compliance with each state's adopted set of California standards
presents an unworkable compliance ``patchwork'' for automobile
manufacturers.\60\ Second, and related, the comments suggest that
enforcement of California's greenhouse gas standards in other states
will lead to ``environmental disbenefits'' in those states.\61\ EPA
takes no position on the merits of either argument because these
arguments are outside the scope of our section 209(b)(1) waiver
criteria. EPA's evaluation of California's waiver request is limited to
the State of California.\62\ To the extent that these comments raise
issues regarding the environmental impacts of consumer shifts within
California they are evaluated below.
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\58\ Association of International Automobile Manufacturers, EPA-
HQ-OAR-2006-0173-7176.11, p. 1-2, 24-25; National Automobile Dealers
Association, EPA-HQ-OAR-2006-0173-7176.1, EPA-HQ-OAR-2006-0173-8956;
NERA Economic Consulting and Sierra Research, EPA-HQ-OAR-2006-0173-
9053.1.
\59\ New York (6 NY Code, Rules & Regs., Part 218-8.3),
Massachusetts (310 Code of Mass. Regs. 7.40(2)(a)(6)), Maryland
(Code of Md. Regs. Sec. 26.11.34), Vermont (Vt Air Poll. Ctrl
Regs., Subchapter XI, 5-1106(a)(5)), Maine (06 Code of Maine Rules
Sec. 127), Connecticut (Conn. Admin. Code Sec. 22a-174-36b),
Arizona (18 A.A.C. 2), New Jersey (NJ Admin. Code Sec. Sec. 7:27-
29.13), New Mexico (20 NM Admin. Code, Chapter 2, Part 88), Oregon
(Or. Admin. Rules Sec. 340-257), Pennsylvania (36 Pa.B. 7424),
Rhode Island (RI Air Poll. Ctrl Reg. 37.2.3), Washington (Wash.
Admin. Code Sec. 173.423-090(2), and Washington, DC (DC Law 17-
0151) have adopted California's greenhouse gas emission standards.
See also http://www.pewclimate.org/what_s_being_done/in_the_states/vehicle_ghg_standard.cfm. Four more states, including
Florida, Colorado, Utah, and Montana are poised to adopt the
standards.
\60\ National Automobile Dealers Association, EPA-HQ-OAR-2006-
0173-7176.1, EPA-HQ-OAR-2006-0173-8956.
\61\ Alliance of Automobile Manufacturers, EPA-HQ-OAR-2006-0173-
8994 at 22.
\62\ These states and the District of Columbia have acted
pursuant to section 177 of the Clean Air Act, which is not relevant
to this proceeding, and that any issues commenters have regarding
section 177 and state compliance with that statutory provision, is
not appropriate for this proceeding. EPA notes that the language of
section 209(b(1) refers to the ``State'' in several instances but in
no instance does it refer to ``states'' or other areas of the
country.
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C. Is California's Protectiveness Determination Arbitrary and
Capricious?
1. Based on EPA's Traditional Analysis, Is California's Protectiveness
Determination Arbitrary and Capricious?
As described above, EPA's traditional analysis has been to evaluate
California's protectiveness determination by comparing the new
California standards to applicable EPA emission standards for the same
pollutants.\63\ In the context of greenhouse gas emissions this
analysis is simple. EPA has already determined that California was not
arbitrary and capricious in its determination that the pre-existing
California standards for light-duty vehicles and trucks, known as LEV
II, is at least as protective as comparable Federal standards, known as
the Tier II standards.\64\ In the context of the ZEV proceeding, EPA
conducted its traditional analysis to compare California's newly
enacted ZEV standards to a similar lack of applicable Federal
standards. At that time, California found, and EPA deemed reasonable,
that the addition of the ZEV standards did not render California's LEV
II program, for which a waiver had previously been granted, less
protective than the Federal Tier II program. In addressing the
Alliance's petition for reconsideration with respect to this issue, EPA
stated that ``the words `standards' and `in the aggregate' in section
209(b)(1)(A) * * * . at minimum, include all the standards relating to
the control of emissions for a category of vehicles (e.g. passenger
cars, etc.) subject to CARB regulation, particularly where the
standards are designed to respond to the same type of pollution.'' \65\
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\63\ See CAA section 209(b)(2).
\64\ 71 FR 78190 (December 28, 2006) and Decision Document for
Waiver of Federal Preemption for California Zero Emission Vehicle
(ZEV) Standards (December 21, 2006); 68 FR 19811 (April 22, 2003)
and Decision Document for Waiver of Federal Preemption for Low
Emission Vehicle Amendments (LEV II)(April 11, 2003).
\65\ EPA's August 13, 2008 Response to Petition for
Administrative Reconsideration of EPA's ZEV Waiver Decision (through
the 2011 Model Year) published on December 28, 2006, at 3.
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California's greenhouse gas standards are also an addition to its
existing LEV II program. Since the greenhouse gas standards add onto
California standards that have already been determined to be as least
as protective, and since there are no applicable federal greenhouse gas
emission standards, the point of comparison, here, is between
California's greenhouse gas standards and an absence of EPA greenhouse
gas emission standards. Comparing an absence of EPA greenhouse gas
emission standards to the enacted set of California greenhouse gas
emission standards provides a clearly rational basis for California's
determination that the California greenhouse gas emission program will
be more protective of human health and welfare than non-existent
applicable federal standards. California directly addressed this
traditional analysis in its finding that ``[t]here are no comparable
federal regulations that specifically require the control of greenhouse
gas emissions from motor vehicles.'' \66\
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\66\ Id. at 13.
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EPA received comments suggesting that this type of traditional
comparison is inappropriate, even ``impossible,'' in
[[Page 32755]]
the absence of Federal greenhouse gas emission standards.\67\ Such an
argument is contrary to legislative intent and EPA's practice.\68\ This
is not the first time that California has enacted emission standards in
the absence of Federal standards; in fact, California's pioneering role
in setting mobile source emission standards is one reason the waiver
provision exists.\69\ Given that section 209(b)(1) is designed to allow
California to have standards more stringent than Federal standards, it
would make little sense to use this provision to prevent California
from having such standards where the Federal government has not yet
acted. Moreover, in prior decisions EPA has found that such
protectiveness determinations by California in the absence of Federal
standards were reasonable.\70\ Indeed, California standards may be most
clearly ``at least as protective'' when they are compared to the
absence of Federal emission standards. This commenter further points to
the ``tremendous level of current federal activity'' as the primary
reason why ``it is impossible for EPA to evaluate how the GHG
Regulations will compare with federal regulation in this field.'' While
EPA has announced its intention to propose greenhouse gas emission
standards, EPA has consistently stated that CARB's protectiveness
determination must consider the Federal standards in existence at the
time of EPA's waiver decision.\71\
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\67\ Alliance of International Automobile Manufacturers, EPA-HQ-
OAR-2006-0173-1455 at 3; Alliance of Automobile Manufacturers, EPA-
HQ-OAR-2006-0173-1297 at 2, 5-7, 11-12; National Automobile Dealers
Association, EPA-HQ-OAR-0173-1671 at 3.
\68\ The waiver provision allows California to ``act as a
testing agent for various types of control and the country as a
whole will be a beneficiary of this research'' (113 Cong. Rec. 32478
[1967]); ``act as a laboratory for innovation'' (MEMA I at 1095).
See Decision Document for Authorization of State Standards for
Utility Lawn and Garden Equipment (ULGE) (July 5, 1995).
\69\ California first began regulating motor vehicle emissions
in 1957, nearly a decade before Congress enacted the Motor Vehicle
Air Pollution Control Act of 1965, which enabled a federal program.
\70\ See e.g., Authorization of California's Under 25 Horsepower
Utility Lawn and Garden Equipment Engine Exhaust Emission Standards
(ULGE) (July 5, 1995).
\71\ Id. at 18.
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Furthermore, waiting for future federal regulation would be
contrary to the purpose of the section 209(b) waiver provision--
effectively stalling California's ability to enforce its own program.
CARB's protectiveness determination was made on September 23, 2004, at
which time there were no federal greenhouse gas standards. CARB's
determination, then, correctly compared its standards to the absence of
federal emission standards. Since that time, there has been no relevant
intervening ``applicable Federal standard.'' \72\ Although AIAM points
to the Massachusetts v. EPA decision and Executive Order 13,432,
neither of those documents, nor any subsequent actions by the Federal
government,\73\ constitute final EPA regulation of greenhouse gas
emissions for new motor vehicles that could be used as a comparable
standard in this waiver proceeding.\74\ The current lack of federal
greenhouse gas emission standards maintains the factual basis for
CARB's September 23, 2004 protectiveness determination. As noted above,
if and when greenhouse gas standards are promulgated by EPA in the
future, and if such standards bring this determination into question,
then EPA can revisit this waiver decision at that time. Accordingly,
applying its traditional comparative analysis, opponents of the waiver
have not shown flaw or lack of reason in California's protectiveness
determination; and we cannot find that California's protectiveness
determination is arbitrary and capricious.
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\72\ See section IV.A., regarding ``applicable Federal
standards.''
\73\ The Alliance similarly argues that EISA's mandate for
reformed CAFE standards renders California's protectiveness
determination ``obsolete'' or ``stale.'' Alliance of Automobile
Manufacturers, EPA-HQ-OAR-2006-0173-8994 at 21.
\74\ Likewise, EPA and DOT's ``Notice of Upcoming Joint
Rulemaking To Establish Vehicle GHG Emissions and CAFE Standards''
does not include any final standards which EPA can take into account
as an ``applicable Federal standards.''74 FR 24007 (May 22, 2009).
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2. Is California's Protectiveness Determination Arbitrary and
Capricious Based on the Real-World In-Use Effects of California's
Greenhouse Gas Standards?
EPA received comments suggesting the need for and appropriateness
of applying an alternative interpretation of section 209(b)(1)(A),
based on an inquiry into the in-use effect of inclusion of greenhouse
gas standards upon the broader motor vehicle emissions program.\75\ EPA
does not take a position as to the validity of the suggestion that the
type of numerical analysis discussed above is insufficient. Noting the
legislative history and text of section 209(b)(2), EPA would need a
concrete factual basis to examine the in-use effect of California's
greenhouse gas standards on its broader LEV II program as compared to
the Federal Tier II program. We need not take a position on that matter
because to the extent that the in-use effects of the greenhouse gas
standards are considered, the waiver opponents do not meet their burden
to show that CARB's analysis of the effects is unreasonable.
---------------------------------------------------------------------------
\75\ Alliance of Automobile Manufacturers, EPA-HQ-OAR-2006-0173-
1297 at 5-12, and EPA-HQ-OAR-2006-0173-8994 at 22.
---------------------------------------------------------------------------
These comments suggest that consumer effects will cause
California's broader LEV II motor vehicle emissions program to be less
protective than the Federal Tier II emissions program.\76\ In support
of this analysis, the Alliance commissioned a study from Sierra
Research, NERA Economic Consulting, and Air Improvement Resource, Inc.
entitled ``Effectiveness of the California Light Duty Vehicle
Regulations as Compared to Federal Regulations,'' which was submitted
to EPA on June 15, 2007 (``June 2007 AIR/NERA/Sierra Study'').\77\ CARB
specifically responded to the June 2007 Study in comments it submitted
to the docket on July 24, 2007 (``CARB's July Comments'').\78\ Next,
the Alliance submitted a response to California's response prepared by
NERA Economic Consulting and Sierra Research (``October 2007 NERA/
Sierra Study'').\79\ Most recently, the Alliance submitted another
study produced by NERA Economic Consulting and Sierra Research entitled
``Impacts of the California Greenhouse Gas Emission Standards on Motor
Vehicle Sales'' (``April 2009 NERA/Sierra Study'').\80\ On this issue,
the Alliance also refers to a study published by the Society of
Automotive Engineers entitled ``Evaluation of California Greenhouse Gas
Standards and Federal Independence and Security Act--Part 2:
CO2 and GHG Impacts'' (``SAE Study'').\81\ At the same time,
Air Improvement Resource, Inc. has independently submitted comments
which include its ``Evaluation of California Greenhouse Gas Standards
and Federal Energy Independence and Security Act'' (``March 2009 AIR
Study'').\82\
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\76\ Id.
\77\ Sierra Research, Inc., EPA-HQ-OAR-2006-0173-1447,
1447.1-.5.
\78\ California Air Resources Board, EPA-HQ-OAR-2006-0173-3601.
\79\ NERA Economic Consulting, Inc. and Sierra Research, EPA-HQ-
OAR-2006-0173-3651.
\80\ NERA Economic Consulting and Sierra Research, EPA-HQ-OAR-
2006-0173-9053.
\81\ Thomas L. Darlington and Dennis F. Kahlbaum, Evaluation of
California Greenhouse Gas Standards and Federal Independence and
Security Act--Part 2: CO2 and GHG Impacts, SAE Paper No.
2008-01-1853 (2008), Alliance of Automobile Manufacturers, EPA-HQ-
OAR-2006-0173-8994 at 20, note 44.
\82\ Air Improvement Resources, Inc., EPA-HQ-OAR-2006-0173-
13662.
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The Alliance has raised this issue before, in its request for
reconsideration of EPA's waiver for California's ZEV
[[Page 32756]]
standards.\83\ In that reconsideration, the Alliance referred to the
same June 2007 AIR/NERA/Sierra Study, saying that the California
program, as a whole, was not at least as protective of public health
and welfare as comparable federal standards. EPA denied the Alliance's
request, in particular because the June 2007 AIR/NERA/Sierra Study was
produced under the assumption that California's ZEV standards would be
in effect until at least 2020 and that California's greenhouse gas
standards would also be in effect. As EPA had only granted the ZEV
waiver through the 2011 model year and had not granted the greenhouse
gas waiver, EPA found that the study was not based upon the proper
assumptions for comparing California's standards to federal standards.
EPA stated at that time: ``[T]o the extent that the real-world emission
effects of CARB's ZEV program (aggregated with its LEV II standards)
are relevant, if at all, the Alliance fails to submit sufficiently
focused information regarding these programs and their associated
effect on emissions. Thus, no basis exists to reconsider EPA's December
2006 waiver decision based on the NERA/Sierra/Air report.'' \84\
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\83\ Decision Document for Waiver of Federal Preemption for
California Zero Emission Vehicle (ZEV) Standards (December 21, 2006)
and EPA's August 13, 2008 Response to Petition for Administrative
Reconsideration of EPA's ZEV Waiver Decision (through the 2011 Model
Year) published on December 28, 2006.
\84\ EPA's August 13, 2008 Response to Petition for
Administrative Reconsideration of EPA's ZEV Waiver Decision (through
the 2011 Model Year) published on December 28, 2006, at 17-18. That
denial further opined: ``In light of the language of section
209(b)(1)(A) and associated legislative history, it may only be
necessary to examine the applicable emission limits in determining
California's ability to set more stringent standards and pursue
pioneering efforts (which may or may not lead to higher costs and
associated fleet turnover concerns) under section 209(b)(1)(A).
Given the legislative history * * * . EPA would need a concrete
basis to examine the ``real world'' or in-use effect of California's
standards in comparison to applicable federal standards (in this
case, a comparison of LEV II + ZEV versus Tier 2). To require CARB
to justify its standards and policy goals within the context of the
protectiveness criteria based on waiver opponents' complicated and
controversial models that apply assumptions that are themselves
controversial, and where there are no corresponding federal
standards, raises questions about whether demanding this type of
review conflicts with Congress' intent to allow California `the
broadest possible discretion' in fashioning its own motor vehicle
program without EPA second-guessing California's policy choices.''
Id. at 12.
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In evaluating its greenhouse gas standards, California's
protectiveness determination went beyond a simple numerical comparison
of its greenhouse gas standards to non-existent federal greenhouse gas
standards. Its protectiveness determination was also based upon its own
analysis of the impact of its greenhouse gas standards on its larger
program. California found that its new greenhouse gas standards would
yield not only reductions in greenhouse gas emissions but also a net
reduction in criteria pollutant emissions.\85\ Therefore, to the extent
this analysis is even relevant for an EPA waiver review opponents must
present ``clear and compelling'' evidence challenging the
reasonableness of this determination and California's analysis.
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\85\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.107 at 15 (``Taking into account the penetration of 2009 and
later vehicles meeting the new standard, the proposed regulation
will reduce greenhouse gas emission by an estimated 87,700
CO2-equivelent tons per day statewide in 2020 and by
155,200 CO2-equivelent tons per day in 2030. This
translates into an 18 percent overall reduction in greenhouse gas
emissions from the light duty fleet in 2020 and a 27 percent overall
reduction in 2030; Taking into account the penetration of 2009 and
later vehicles meeting the new standard, the proposed regulation
will reduce upstream emissions of non-methane organic gases (NMOG)
by 4.6 tons per day statewide in 2020 and 7.9 tons per day statewide
in 2030, and will reduce upstream emissions of NOX by 1.4
tons per day statewide in 2020 and 2.3 tons per day statewide in
2030. The regulation will provide a criteria pollutant benefit even
taking into account possible pollutant increases due to consumer
response.'').
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The June 2007 AIR/NERA/Sierra Study prepared for the Alliance
presents a finding that its results ``indicate that the California
Program, in the aggregate, is less protective of public health than the
Federal Program with respect to emissions of ozone precursors and
several other criteria pollutants.'' The study undertook consumer
choice modeling to evaluate the effect of the California greenhouse gas
emission standards on the new motor vehicle fleet and vehicle miles
travelled (VMT) and compare those effects with fleet and VMT conditions
were the Federal Program in effect in California. Its results showed
that compliance with the California greenhouse gas standards would
raise the cost of new motor vehicles in California, which would then
lead to higher new vehicle prices, decreased new vehicle sales,
increased retention of used vehicles (``scrappage effect''), increased
fuel economy which would lead to increased VMT (``rebound effect''),
and, finally, increased emissions of ozone precursors and several other
criteria air pollutants.
On July 24, 2007, CARB submitted a response to comments received by
EPA which specifically addressed the June 2007 AIR/NERA/Sierra
Study.\86\ First, CARB insisted that such a study should have been
presented for consideration during California's rulemaking process and
not later during EPA's consideration of California's waiver request.
Second, CARB substantively responded to the June 2007 AIR/NERA/Sierra
Study and claimed that its protectiveness determination was proper. In
sum, CARB objected that the June 2007 AIR/NERA/Sierra Study is
inappropriate because it is not focused on the relative stringency of
emission standards, but instead presents ``a series of speculative
events driven by disputed and unsupported compliance costs that would
supposedly result--contrary to experience with previous reduction and
automotive regulatory measures--in a substantial reduction in new motor
vehicle sales (fleet turnover); and * * * Californians' theoretical
desire to drive even more miles than already projected to reach
increasingly distant destinations in the face of increasing traffic
congestion (rebound effect).'' \87\ CARB further critiqued several
points of AIR/NERA/Sierra's analysis, including what it viewed as
``grossly overstated * * * highly speculative cost estimates,''
modeling errors, lack of methodological detail, and faulty assumptions.
CARB asserted that its staff reviewed similar analyses and had provided
its own analyses that are ``more reasonable and historically reliable''
and ``lead to dramatically different outputs.''
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\86\ California Air Resources Board, EPA-HQ-OAR-2006-0173-3601.
\87\ California Air Resources Board, EPA-HQ-OAR-2006-0173-3601
at 8.
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NERA/Sierra responded to that critique on October 29, 2007.\88\
That document includes specific responses to criticisms raised by CARB
and generally defends the integrity of its analyses. NERA/Sierra
affirmed its conclusions that CARB's protectiveness determination is
not fully supported because it understates or ignores costs, does not
consider the combined effects of the ZEV mandate and GHG requirements,
and does not assure compliance through technological implementation. As
to the specific modeling issues raised by CARB, NERA/Sierra maintained
the correctness of its modeling assumptions and estimations with regard
to technology cost, fleet turnover, rebound effect, and pollutant
emission effect.
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\88\ NERA Economic Consulting, Inc. and Sierra Research, EPA-HQ-
OAR-2006-0173-3651.
---------------------------------------------------------------------------
NERA/Sierra also submitted an additional study on April 6, 2009,
presenting many of the same methodological assertions noted above.
Notably, though, this study is less methodologically clear: It does not
quantify scrappage or its effects on emissions, assumes technology is
applied only to meet federal CAFE
[[Page 32757]]
standards (and not beyond that level of stringency), and assumes that
further compliance is achieved through fleet mix changes combined with
restrictions on vehicle availability. It is not clear whether and how
ZEV program requirements are included in this study. Most importantly,
though, the April 2009 NERA/Sierra Study is outside the scope of this
proceeding; it presents ``the effects on motor vehicle sales of the
California Standards, assuming that they are implemented in the 13
states that have adopted California's standards.'' \89\ That is, the
April 2009 NERA/Sierra Study seeks to present the effect of
California's greenhouse gas standards on new motor vehicle sales in
those 13 states. This is inappropriate because the waiver inquiry is
limited to the State of California (as noted above) and, even if this
study had been limited to California, it would still be inadequate
because it does not connect its findings with regard to depressed
vehicle sales to increased criteria pollutant emissions.
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\89\ NERA Economic Consulting and Sierra Research, EPA-HQ-OAR-
2006-0173-9053 at E-1.
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Air Improvement Resources, Inc. (``AIR''), who had originally
participated in the June 2007 AIR/NERA/Sierra Study but submitted
comment independently on April 6, 2009, evaluated California's
greenhouse gas standards as compared to EISA ``standards.'' As noted
above, this evaluation is not relevant to EPA's section 209(b)(1)(A)
inquiry because EISA ``standards'' are not ``applicable Federal
standards'' for the purpose of our waiver inquiry. Nor have any fuel
economy standards been promulgated beyond the 2011 model year. Those
underlying inadequacies render this study unpersuasive, if not entirely
irrelevant. However, it is interesting to note that the primary finding
of this study is that ``the California program has lower GHG emissions
until about 2016-2018.'' \90\ AIR also included as an attachment an SAE
Paper evaluating impacts on new vehicle fuel economy from California's
greenhouse gas standards and EISA ``standards.'' The finding of this
paper is that California's greenhouse gas standards will lead to higher
fuel economy than EISA ``standards'' until the 2017 model year.\91\ The
findings of both reports are based on inconsistent assumptions that
California's greenhouse gas standards will not become more stringent
after the 2016 model year, (because this waiver request ends with the
2016 model year standards) but the federal fuel economy standards will
become more stringent even though there are not yet any federal fuel
economy standards past the 2011 model year. As stated above, EPA is not
including fuel economy standards in its consideration of ``applicable
Federal standards.'' But, even if EPA were to engage in that analysis,
it can only consider standards in existence at the time of a waiver
decision, as stated above. Since no federal fuel economy standards
exist yet beyond the 2011 model year, EPA will not make predictions
about later year fuel economy standards in order to take them into
account here.
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\90\ Air Improvement Resources, Inc., EPA-HQ-OAR-2006-0173-13662
at 2. Yet this analysis presumes the promulgation of fuel economy
standards that have not yet been promulgated and does not
accordingly presume the promulgation of further greenhouse gas
standards by California, despite the fact that the Pavley law in
California makes such further standards a significant possibility.
\91\ Air Improvement Resources, Inc., EPA-HQ-OAR-2006-0173-
13662.
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As discussed below, EPA has evaluated both sets of analyses (from
CARB and NERA/Sierra) and makes note of the following with regard to
(1) fleet turnover/delayed scrappage, (2) the rebound effect, and (3)
upstream emissions impacts.\92\
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\92\ EPA's role in reviewing California's waiver request is
limited to finding whether opponents have shown that California's
protectiveness determination is arbitrary and capricious. In making
its protectiveness determination, CARB included these analyses and
the studies noted above have included similar analyses based on
diverging assumptions. EPA has evaluated these analyses to
demonstrate that CARB's protectiveness determination was not
arbitrary and capricious. This evaluation is separate and distinct
from any analysis that EPA would conduct in promulgating its own
regulation. Nothing in this evaluation should be construed as an
endorsement of CARB's or any other analysis or any particular
assumption they rely upon.
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a. Fleet Turnover/Delayed Scrappage
The Alliance argues that California's greenhouse gas standards will
cause delayed fleet turnover and, thus, increase criteria air pollutant
emissions. Delayed fleet turnover results when the prices of new
vehicles increase, causing prices of existing vehicles to increase as
well. A consumer's decision to scrap an existing vehicle depends upon
the trade-off between the value of existing vehicle in its working
condition and its scrappage value. Rising prices of existing vehicles
lead some consumers to decide to delay scrapping their vehicles. An
older vehicle stock on the road results in an increase in criteria air
pollution.
In conducting its analysis on consumer behavior impacts in its June
2007 study, NERA/Sierra/AIR evaluated the combined impacts of the
California greenhouse gas emission standards and the Zero Emission
Vehicle (``ZEV'') rules. It is difficult to discern the total cost per
vehicle over various model years of the greenhouse gas versus the ZEV
portion of the rules and, therefore, determine how much of the consumer
behavior impacts are appropriately attributable to the greenhouse gas
standards. Thus, it is difficult to undertake a direct comparison of
the NERA/Sierra/Air and CARB studies. According to NERA/Sierra/AIR, as
a result of price increases associated with the greenhouse gas and ZEV
rules in 2020, they project that new vehicle sales in California will
fall by approximately 130,000 vehicles. In addition, the number of
vehicles in the fleet prior to the effective date of the ZEV and GHG
regulations (i.e., pre-2009 model year vehicles) is more than 250,000
greater in 2020 than would otherwise be the case under a federal
program.
CARB, on the other hand, only looks at the economic impacts of the
California greenhouse gas standards, independent of the ZEV
requirements. Without the ZEV requirements, CARB estimates that
California's greenhouse gas standards will result in an increase in new
vehicle prices of approximately $1,000 per vehicle (i.e., $1,064 for
passenger vehicles, small trucks and sport utility vehicles (SUVs) and
$1,029 for certain medium-duty trucks/SUVs).\93\ Using a consumer
choice model, CARBITS, CARB estimated new vehicle sales from California
standards would increase in the near-term, resulting in accelerated
fleet turnover, but see declines in fleet turnover in the longer-term,
with a loss of vehicle sales of roughly 97,000 in 2020. By 2020, CARB
estimates that lost vehicle sales would lead to delayed fleet turnover.
The potential increase in ozone precursor emission in California in out
years (i.e., 2020) from delayed fleet turnover is about 2.5 tons/day.
CARB estimates that those ``disbenefits'' of fleet turnover delay are
more than offset by faster turnover in the early years of the
California standard and reductions in emissions associated with fuel
production. The more recent April 2009 NERA/Sierra study projects the
impacts of the California GHG standards on new motor vehicle sales in
the thirteen states that have adopted the California standards. Since
the study only examines the impacts on new vehicle sales, it does not
provide estimates of ozone precursor impacts of California standards.
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\93\ California Air Resources Board, EPA-HQ-OAR-2006-
0173.0010.116.
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b. The ``Rebound Effect''
The Alliance contends that criteria air pollutant emissions will
increase due to
[[Page 32758]]
the so-called vehicle ``rebound effect.'' The rebound effect for
vehicle fuel economy is defined as the increase in vehicle travel
resulting from a decrease in the fuel cost per vehicle miles as a
consequence of an increase in fuel economy. It is projected that
increasing fuel efficiency lowers the effective cost of driving to the
consumer, which results in an increase in vehicle usage (holding all
other factors constant). NERA developed their own econometric estimate
of the California rebound effect--17%--based on California vehicle
inspection data from 1983-2003. In addition, NERA re-estimated a CARB-
sponsored study on the rebound effect by Small & Van Dender and NERA
found the long-run rebound effect in California to be roughly 13%.
In contrast, CARB used two types of analysis to evaluate the impact
of the proposed regulations on changes in vehicle miles traveled:
Econometric work by Small and Van Dender and travel demand modeling
(Southern California Association of Governor's (SCAG)). The study by
Small & Van Dender allowed the rebound effect to vary based on changes
in income and congestion. In addition, the Small & Van Dender study
also analyzed the impact of higher vehicle costs on VMT. Based on the
econometric modeling, projected California incomes and transportation
conditions, Small and Van Dender estimated a dynamic rebound effect of
approximately 3% for the State of California in 2020. A major
difference between the NERA and Small and Van Dender study was the way
nominal income was converted to real income. NERA tried to approximate
state cost of living adjustments, but had to modify metropolitan cost
of living adjustments; Small and Van Dender used the national consumer
price index. Based on the difference in income calculation, NERA found
that income was no longer statistically significant in explaining
changes in the rebound effect. Therefore, they removed this term from
their model. California also used the Southern California Association
of Governor's (SCAG) travel demand model to project changes in demand
travel based on declining vehicle operating costs in the context of the
transportation system in the L.A. South Coast Air Basin. In contrast to
the econometric study, the travel demand modeling takes into account
the available transportation infrastructure. CARB examined the emission
impacts of changes in both the amount and the speed of motor vehicle
travel, relative to the cost of gasoline per mile traveled. Based on
the vehicle classes affected by the proposed GHG regulation, the
results from SCAG indicate an elasticity of VMT to fuel cost (i.e., a
rebound effect) of roughly 4 percent in 2020.
c. Upstream Emissions Impacts
California's greenhouse gas standards also will influence the
amount of fuel going through the petroleum marketing and distribution
infrastructure in California. This, in turn, will reduce the
``upstream'' criteria air pollutants from transportation, spills, and
other events associated with the infrastructure. There were large
differences between the CARB and NERA/Sierra estimates of upstream
emissions. NERA, focusing on fuel delivery trucks and transit
distances, characterized CARB's estimates as significantly flawed.
However, both estimated upstream emission reductions of ROG and
NOX, with CARB estimating a 6 ton per day reduction and NERA
estimating a 1.1-1.5 ton per day reduction. The table below presents
the rivaling estimates presented by the CARB and NERA/Sierra analyses.
------------------------------------------------------------------------
CARB NERA
------------------------------------------------------------------------
Fleet Turnover/Scrappage Accelerated fleet Delayed fleet
Effect. turnover in near- turnover in near
term; smaller term; larger
delayed fleet delayed fleet
turnover in out turnover in out
years (e.g., 2020). years (e.g., 2020).
Rebound Effect.............. 3% in 2020.......... 17% in 2003, 13% in
2007.
Upstream Emissions.......... 6 tons/day reduction 1.1-1.5 tons/day
in ROG+NOx. reduction in
ROG+NOx.
------------------------------------------------------------------------
Additionally, as with our analysis of the AIR/NERA/Sierra analysis
in the context of the ZEV waiver reconsideration, we note that the
study included a presumption that the ZEV standards would be in effect
until at least 2020, and that this assumption appears to have a
significant effect on other assumptions in the analysis. However, EPA
explicitly declined to approve its waiver for California's ZEV
standards beyond the 2011 model year, based in part on concerns that
echoed comments from the Alliance. This makes the AIR/NERA/Sierra
analysis an insufficient analysis to base a denial of California's
waiver request.
In evaluating the studies prepared by AIR/NERA/Sierra in light of
California's protectiveness determination, EPA takes important note of
CARB's response. As stated above, while CARB disagrees that these
studies are properly before EPA in the waiver proceeding, it points out
that even if it is proper for EPA to consider the AIR/NERA/Sierra
studies, they do not provide a basis for finding that California's
protectiveness determination was arbitrary and capricious. CARB
maintains that the Alliance has made no attempt to show that CARB's
analyses are irrational, which CARB states waiver opponents must make
given the ``arbitrary and capricious'' standard.
EPA agrees that to make a section 209(b)(1)(A) finding, it is not
enough for waiver opponents to provide competing analyses that they
claim are based on a rational set of assumptions. Rather, they must
show that California's analysis, or the assumptions California relied
on to support its protectiveness determination were arbitrary and
capricious. Competing analyses, each based on rational assumptions, are
not sufficient to deny a waiver.\94\
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\94\ EPA's August 13, 2008 Response to Petition for
Administrative Reconsideration of EPA's ZEV Waiver Decision (through
the 2011 Model Year) published on December 28, 2006, at 17, note 25.
---------------------------------------------------------------------------
As previously stated, EPA does not need to decide the validity of
the suggestion that the traditional numerical analysis is insufficient
and that EPA must also consider the in-use effects of the standards.
Given the legislative history and text of section 209(b)(2), EPA would
need a concrete factual basis to examine the in-use effect of
California's greenhouse gas standards on its broader LEV II program as
compared to the Federal Tier II program. We need not take a position on
that matter because the waiver opponents do not meet their burden to
show that CARB's analysis of the in-use effects is arbitrary and
capricious.\95\ Rather, they present
[[Page 32759]]
rivaling analyses--each making different assumptions so that the
differences in findings can be reduced to differences in assumptions.
EPA finds that the Alliance has not met its burden of proof that the
greenhouse gas regulations undermine California's previous LEV II and
ZEV protectiveness determinations or that California was arbitrary and
capricious in its greenhouse gas protectiveness determination.
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\95\ To the extent that an analysis of the in-use effects of
California's greenhouse gas standards may be appropriate, then such
analysis properly includes consideration of the upstream emission
reduction impacts identified and linked to the standards. A holistic
examination of the in-use effects of a regulation should naturally
include those effects that have a plausible connection to the
standards, including such consequences as indirect upstream emission
reductions. The March 6, 2008 Denial stated that California may
otherwise have independent authority to regulate stationary sources
and therefore there was no basis to include emission reductions from
such sources as part of a mobile source rulemaking. However, EPA
believes that the issue under section 209(b)(1)(A) is whether the
indirect reductions of ozone pollutants from stationary sources
created by the greenhouse gas emission standards for motor vehicles,
can reasonably be considered by California in its determination that
its standards are as protective of public health and welfare as
applicable federal standards. Given that the effects are reasonably
related to the regulations, if it is appropriate to consider in-use
effects then it was not arbitrary and capricious for California to
include such effects in this analysis.
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EPA, therefore, finds that opponents of the waiver have not
presented clear and compelling evidence that CARB was arbitrary and
capricious in finding that the real-world effect of its standards ``in
the aggregate'' would not lead to greater emissions of pollutants than
the federal program.
D. Section 209(b)(1)(A) Conclusion
Based on the record before me, I cannot find that CARB was
arbitrary and capricious in its finding that the California motor
vehicle emission standards including the greenhouse gas standards are,
in the aggregate, at least as protective of public health and welfare
as applicable Federal standards.
V. Does California Need Its Standards To Meet Compelling and
Extraordinary Conditions?
Under section 209(b)(1)(B) of the Act, I cannot grant a waiver if I
find that California ``does not need such State standards to meet
compelling and extraordinary conditions.'' EPA has traditionally
interpreted this provision as considering whether California needs a
separate motor vehicle program to meet compelling and extraordinary
conditions. However in the March 6, 2008 Denial, EPA limited this
interpretation to California's motor vehicle standards that are
designed to address local or regional air pollution problems. EPA
determined that the traditional interpretation was not appropriate for
standards designed to address a global air pollution problem and its
effects and that it was appropriate to address such standards
separately from the remainder of the program. EPA then proceeded to
find that California did not need such standards to meet compelling and
extraordinary conditions. The interpretation adopted in the March 6,
2008 Denial is now before me for reconsideration.
A. Basis of March 6, 2008 Denial
In the March 6, 2008 Denial, EPA provided its reasoning for
changing its long-standing interpretation of this provision, as it
pertains to California standards designed to address global air
pollution. EPA described its long-standing interpretation in some
detail, stating that:
Under this approach EPA does not look at whether the specific
standards at issue are needed to meet compelling and extraordinary
conditions related to that air pollutant. For example, EPA reviewed
this issue in detail with regard to particulate matter in a 1984
waiver decision.\96\ In that waiver proceeding, California argued
that EPA is restricted to considering whether California needs its
own motor vehicle program to meet compelling and extraordinary
conditions, and not whether any given standard is necessary to meet
such conditions. Opponents of the waiver in that proceeding argued
that EPA was to consider whether California needed these PM
standards to meet compelling and extraordinary conditions related to
PM air pollution.
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\96\ 49 FR 18887 (May 3, 1984).
---------------------------------------------------------------------------
The Administrator agreed with California that it was appropriate
to look at the program as a whole in determining compliance with
section 209(b)(1)(B). One justification of the Administrator was
that many of the concerns with regard to having separate state
standards were based on the manufacturers' worries about having to
meet more than one motor vehicle program in the country, but that
once a separate California program was permitted, it should not be a
greater administrative hindrance to have to meet further standards
in California. The Administrator also justified this decision by
noting that the language of the statute referred to ``such state
standards,'' which referred back to the use of the same phrase in
the criterion looking at the protectiveness of the standards in the
aggregate. He also noted that the phrase referred to standards in
the plural, not individual standards. He considered this
interpretation to be consistent with the ability of California to
have some standards that are less stringent than the federal
standards, as long as, per section 209(b)(1)(A), in the aggregate
its standards were at least as protective as the federal standards.
The Administrator further stated that in the legislative history
of section 209, the phrase ``compelling and extraordinary
circumstances'' refers to ``certain general circumstances, unique to
California, primarily responsible for causing its air pollution
problem,'' like the numerous thermal inversions caused by its local
geography and wind patterns. The Administrator also noted that
Congress recognized ``the presence and growth of California's
vehicle population, whose emissions were thought to be responsible
for ninety percent of the air pollution in certain parts of
California.'' \97\ EPA reasoned that the term compelling and
extraordinary conditions ``do not refer to the levels of pollution
directly.'' Instead, the term refers primarily to the factors that
tend to produce higher levels of pollution--``geographical and
climatic conditions (like thermal inversions) that, when combined
with large numbers and high concentrations of automobiles, create
serious air pollution problems.'' \98\
---------------------------------------------------------------------------
\97\ Id. at 18890.
\98\ 73 FR 12156, 12159-60 (March 6, 2008).
The Administrator summarized that under this interpretation the
question to be addressed in the second criterion is whether these
``fundamental conditions'' (i.e. the geographical and climate
conditions and large motor vehicle population) that cause air pollution
continued to exist, not whether the air pollution levels for PM were
compelling and extraordinary, or the extent to which these specific PM
standards will address the PM air pollution problem.\99\
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\99\ 73 FR at 12159-60.
---------------------------------------------------------------------------
However in the March 6, 2008 Denial, EPA limited this
interpretation to California's motor vehicle standards that are
designed to address local or regional air pollution problems. EPA
determined that the traditional interpretation was not appropriate for
standards designed to address a global air pollution problem and its
effects.\100\
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\100\ EPA recently reaffirmed that the traditional
interpretation still applied for motor vehicle standards designed to
address air pollution problems that are local or regional in nature.
71 FR 78190, 78192 (December 28, 2008); see also 71 FR 78190 and
Decision Document for Waiver of Federal Preemption for California
Zero Emission Vehicle Standards, at 34.
---------------------------------------------------------------------------
With respect to a global air pollution problem like elevated
concentrations of greenhouse gases, EPA's March 6, 2008 Denial found
that the text of section 209(b)(1)(B) was ambiguous and does not limit
EPA to this prior interpretation. In addition, EPA noted that the
legislative history supported a decision to ``examine the second
criterion specifically in the context of global climate change.'' The
legislative history:
[I]ndicates that Congress was moved to allow waivers of
preemption for California motor vehicle standards based on the
particular effects of local conditions in California on the air
pollution problems in California. Congress discussed ``the unique
problems faced in California as a result of its climate and
topography.'' H.R. Rep. No. 728, 90th Cong. 1st Sess., at 21 (1967).
See also Statement of Cong. Holifield (CA), 113 Cong. Rec. 30942-43
(1967). Congress also noted the large effect of local vehicle
pollution on such local problems. See, e.g., Statement of Cong. Bell
(CA) 113 Cong. Rec. 30946. In particular, Congress focused on
California's
[[Page 32760]]
smog problem, which is especially affected by local conditions and
local pollution. See Statement of Cong. Smith (CA) 113 Cong. Rec.
30940-41 (1967); Statement of Cong. Holifield (CA), id. at 30942.
See also, MEMA I, 627 F. 2d 1095, 1109 (DC Cir., 1979) (noting the
discussion of California's ``peculiar local conditions'' in the
legislative history). Congress did not justify this provision based
on pollution problems of a more national or global nature in
justifying this provision.\101\
---------------------------------------------------------------------------
\101\ 73 FR at 12161.
Relying on this, and without any further significant discussion of
either congressional intent or how this new approach properly furthered
---------------------------------------------------------------------------
the goals of section 209(b), EPA determined that it was appropriate to:
[R]eview California's GHG standards separately from the
remainder of its motor vehicle emission control program for purposes
of section 209(b)(1)(B). In this context it is appropriate to give
meaning to this criterion by looking at whether the emissions from
California motor vehicles, as well as the local climate and
topography in California, are the fundamental causal factors for the
air pollution problem--elevated concentrations of greenhouse gases--
apart from the other parts of California's motor vehicle program,
which are intended to remediate different air pollution concerns.
EPA then proceeded to apply this interpretation to the GHG
standards at issue in this waiver proceeding, and found that California
did not need the GHG standards under this interpretation. Having
limited the meaning of this provision to situations where the air
pollution problem was local or regional in nature, EPA found that
California's greenhouse gas standards do not meet this criterion. EPA
found that the elevated concentrations of greenhouse gases in
California are similar to concentrations elsewhere in the world, and
that local conditions in California such as the local topography and
climate and the number of motor vehicles in California are not the
determinant factors causing the elevated GHG concentrations found in
California and elsewhere. Thus, the March 6, 2008 Denial found that
California did not need its GHG standards to meet compelling and
extraordinary conditions, and the waiver was denied.
EPA also considered an alternative interpretation, where EPA would
consider ``the effects in California of this global air pollution
problem in California in comparison to the rest of the country, again
addressing the GHG standards separately from the rest of California's
motor vehicle program.'' Under this alternative interpretation, EPA
considered whether the impacts of global climate change in California
were significant enough and different enough from the rest of the
country such that California could be considered to need its greenhouse
gas standards to meet compelling and extraordinary conditions. EPA
determined that the waiver should be denied under this alternative
interpretation as well.
B. Should EPA Review This Criterion Based on the Need for California's
Motor Vehicle Program or the Need for the GHG Standards?
The essential first question to resolve in addressing whether
California needs ``such State standards to meet compelling and
extraordinary conditions'' is whether it is appropriate for EPA to
evaluate this criterion based on California's need for its motor
vehicle program as a whole, or to evaluate only the particular
standards being addressed in this waiver proceeding.
1. Comments Supporting a Review of the Entire Program
In its initial waiver request, CARB restates its need for its own
engine and vehicle programs to meet serious air pollution problems. It
notes that the relevant inquiry is whether California needs its own
emission control program as opposed to the need for any given standard
as necessary to meet compelling and extraordinary conditions. CARB
notes that in prior waivers the Administrator has determined that:
``[C]ompelling and extraordinary conditions'' does not refer to
levels of pollution directly, but primarily to the factors that tend
to produce them: geographical and climatic conditions that, when
combined with large numbers and high concentrations of automobiles
create serious air pollution problems.''
In its initial waiver request letter, CARB stated:
California, the South Coast and San Joaquin Air basins in
particular, continues to experience some of the worst air quality in
the nation. California's ongoing need for dramatic emission
reductions generally and from passenger vehicles specifically is
abundantly clear from its recent adoption of state implementation
plans for the South Coast and other California air basins. The
unique geographical and climatic conditions, and the tremendous
growth in the vehicle population and use which moved Congress to
authorize California to establish separate vehicle standards in
1967, still exist today.\102\
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\102\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 27.
CARB notes that these conditions have not changed to warrant a
change in confirmation by EPA and that the opponents of the waiver bear
the burden on showing why California no longer has a compelling need,
informed by its own circumstances and benefits that would accrue to it
and other states.
EPA also received comment that the Massachusetts v. EPA holding
suggests that EPA should treat greenhouse gases just like all other air
pollutants when evaluating a section 209(b) waiver request for
greenhouse gases. These comments suggest that once the Supreme Court
clarified that greenhouse gases are Clean Air Act air pollutants, there
was no room left to distinguish greenhouse gases from other air
pollutants when evaluating waiver requests under section 209(b). These
comments suggest that EPA ought not to treat elevated concentrations of
greenhouse gases as an air pollution problem different from
California's traditional air pollution problems. Likewise, the comments
suggest, greenhouse gas pollutants should be treated just like other
air pollutants which give rise to the need for California's motor
vehicle emission program, and, therefore, be subject to EPA's
traditional section 209(b)(1)(B) analysis.
Several commenters suggest that review of California's need for its
motor vehicle emissions program as a whole is not only appropriate but
is mandated by the statute.
2. Comments Supporting a Review of the GHG Standards Separately
Several commenters opposing the GHG waiver request have advocated
that EPA should review California's GHG standards separately under the
``compelling and extraordinary conditions'' criterion. Essentially,
this would require that EPA's determination be based on California's
need for GHG standards in isolation of its need for its own motor
vehicle emissions program.
These commenters state that the statute requires a linkage between
the compelling and extraordinary conditions and the particular
standards that California wishes to enforce, and that a set of
standards that cannot be linked to the compelling and extraordinary
conditions cannot be said to be needed to meet such conditions. The
commenters note that the statute refers to ``standards''--not to a
``program''--and that such an approach would shield regulations that
would not meet the criterion from any review simply by referring to
other regulations that do meet the criterion. Moreover, they state that
the need for such standards must be based on the particular
characteristics (topography, photochemistry) that make California's
conditions compelling and
[[Page 32761]]
extraordinary, whereas global climate change (and, thus, control of
GHGs) is not related to such conditions.
Included among the comments suggesting that section 209(b) was
intended to allow California to address local air pollution problems
and not global environmental issues like climate change was an argument
that the phrase ``need for such State standards to meet compelling and
extraordinary conditions'' is unambiguous.\103\ That lack of ambiguity,
according to these comments, compels the conclusion that global warming
is not the type of condition California was meant to address with its
motor vehicle emissions program. These commenters further suggest that
the intent of Congress was to allow California the ability to set its
own standards to address the state's unique local air pollution
problems and ``scientific evidence confirms that California's
temperature trends are neither unique nor particularly distinct from
those of at least a dozen other States.''
---------------------------------------------------------------------------
\103\ This comment, suggesting that the ``need for such State
standards to meet compelling and extraordinary conditions,'' is made
under Step 1 of the test established under Chevron, USA., Inc. v.
NRDC.
---------------------------------------------------------------------------
3. Decision
After reviewing the comments and the March 6, 2008 Denial, I
believe the better approach is to review California's need for its new
motor vehicle emissions program as a whole to meet compelling and
extraordinary conditions, and not to apply this criterion to specific
standards, or to limit it to standards designed to address only local
or regional air pollution problems. The traditional approach to
interpreting this provision is the best approach for considering a
waiver for greenhouse standards, as well as a waiver for standards
designed to address local or regional air pollution problems.\104\
Therefore, I believe the interpretation that was applied in the March
6, 2008 Denial should be rejected and no longer be followed.
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\104\ The traditional interpretation of section 209(b)(1)(B) is
certainly not ``unambiguous precluded'' by the language of the
statute. See Entergy Corp. v. Riverkeeper, Inc., 129 S.Ct. 1498
(2009)(``That view governs if it is a reasonable interpretation of
the statute--not necessarily the only possible interpretation, nor
even the interpretation deemed most reasonable by the courts.
Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837, 843-844 (1984).'') (``It seems to us, therefore, that the
phrase ``best available,'' even with the added specification ``for
minimizing adverse environmental impact,'' does not unambiguously
preclude cost-benefit analysis.''). Carrow v. Merit Systems
Protection Board, 564 F.3d 1359 (Fed. Cir. 2009) (``[W]e are
obligated to give controlling effect to [agency's] interpretation if
it is reasonable and is not contrary to the unambiguously expressed
intent of Congress'', citing Entergy Corp.) .
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This traditional interpretation is the most straightforward reading
of the text and legislative history of section 209(b). Congress decided
in 1977 to allow California to promulgate individual standards that are
not as stringent as comparable federal standards, as long as the
standards are ``in the aggregate, at least as protective of public
health and welfare as applicable federal standards.'' This decision by
Congress requires EPA to allow California to promulgate individual
standards that, in and of themselves, might not be considered needed to
meet compelling and extraordinary circumstances, but are part of
California's overall approach to reducing vehicle emissions to address
air pollution problems.
EPA is to determine whether California's determination is arbitrary
and capricious under section 209(b)(1)(A), and is to determine whether
California does not need ``such State standards'' to meet compelling
and extraordinary conditions. The natural reading of these provisions
leads EPA to consider the same group of standards that California
considered in making its protectiveness determination. While the words
``in the aggregate'' are not specifically applicable to section
209(b)(1)(B), it does refer to the need for ``such State standards,''
rather than ``each State standard'' or otherwise indicate a standard-
by-standard analysis.
In addition, EPA's March 6, 2008 Denial determined that this
provision was appropriately interpreted to consider California's
standards as a group for standards designed to address local or
regional air pollution problems, but should be interpreted in the
opposite fashion for standards designed to address global air pollution
problems. The text of the provision, however, draws no such
distinction, and provides no indication other than Congress intended a
single interpretation for this provision, not one that varied based on
the kind of air pollution problem at issue.
The March 6, 2008 Denial considered the legislative history, and
determined that Congress was motivated by concern over local conditions
in California that lead to local or regional air pollution problems.
From this, EPA determined that Congress intended to allow California to
address these kinds of local or regional air pollution problems, but no
others. In effect, EPA inferred from the discussion in the legislative
history that Congress intended to limit California's authority in this
way, and to prohibit a waiver for California standards aimed at global
air pollution problems.
This ignores the main thrust of the text and legislative history of
section 209(b), and improperly reads too much into an absence of
discussion of global air pollution problems in the legislative history.
The structure of section 209, both as adopted in 1967 and as amended in
1977, is notable in its focus on limiting the ability of EPA to deny a
waiver, and thereby preserves discretion for California to construct
its motor vehicle program as it deems appropriate to protect the health
and welfare of its citizens. The legislative history indicates Congress
quite intentionally restricted and limited EPA's review of California's
standards, and its express legislative intent was to ``provide the
broadest possible discretion [to California] in selecting the best
means to protect the health of its citizens and the public welfare.''
\105\ The DC Circuit recognized that ``[t]he history of the
congressional consideration of the California waiver provision, from
its original enactment up through 1977, indicates that Congress
intended the State to continue and expand its pioneering efforts at
adopting and enforcing motor vehicle emission standards different from
and in large measure more advanced than the corresponding federal
program. In short, to act as a kind of laboratory for innovation. * * *
For a court [to limit California's authority] despite the absence of
such an indication would only frustrate the congressional intent.''
\106\
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\105\ H.R. Rep. No. 294, 95th Cong., 1st Sess. 301-302 (1977).
See MEMA, 627 F. 2d at 1110-11.
\106\ MEMA, 627 F. 2d at 1111.
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In this context, it is fully consistent with the expressed
intention of Congress to interpret section 209(b)(1)(B) the same way
both for standards designed to address local and regional air pollution
problems, and standards designed to address global air pollution
problems. Congress intended to provide California the broadest possible
discretion to develop its motor vehicle emissions program. Neither the
text nor the legislative history of section 209(b) indicates that
Congress intended to limit this broad discretion to a certain kind of
air pollution problem, or to take away all discretion with respect to
global air pollution problems.\107\ In
[[Page 32762]]
addition, applying the traditional interpretation to greenhouse gas
standards does not change the basic nature of the compromise
established by Congress--California could act as the laboratory for the
nation with respect to motor vehicle emission control, and
manufacturers would continue to face just two sets of emissions
standards--California's and EPA's.
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\107\ This broad interpretation of section 209(b) is similar to
the broad reading the Court provided to section 302(g) of the Clean
Air Act when it held that the term ``air pollutant'' included
greenhouse gases, rejecting among other things the argument that
Congress limited the term to apply only to certain kinds of air
pollution. Massachusetts v. EPA, 549 U.S. 497, 532 footnote 26.
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This interpretation is directly in line with the purpose of
Congress, as compared to the interpretation adopted in the March 6,
2008 Denial. The 2008 interpretation relied on the discussion in the
legislative history of local conditions in California leading to air
pollution problems like ozone. While this was properly read to support
the view that this provision should be interpreted to address
California's need for a motor vehicle program as a whole, the March 6,
2008 Denial went further and inferred that by discussing such local
conditions, Congress also intended to limit California's discretion to
only these kinds of local or regional air pollution problems. The March
6, 2008 Denial pointed to no particular language in the legislative
history or the text of section 209(b) indicating such, instead,
congressional intent to limit California's discretion was inferred from
the discussion of local conditions. However, basing a limitation on
such an inference is not appropriate given the express indication that
Congress intended to provide California the ``broadest possible
discretion'' in selecting the best means to protect the health of its
citizens and the public welfare.
The text of section 209(b) and the legislative history, when viewed
as a whole, leads me to conclude that the interpretation adopted in the
March 6, 2008 Denial should be rejected. The better way to interpret
this provision is to apply the traditional interpretation to the
evaluation of California's greenhouse gas standards for motor vehicles.
If California needs a separate motor vehicle program to address the
kinds of compelling and extraordinary conditions discussed in the
traditional interpretation, then Congress intended that California
could have such a program. Congress also intentionally provided
California the broadest possible discretion in adopting the kind of
standards in its motor vehicle program that California determines are
appropriate to address air pollution problems that exist in California,
whether or not those problems are local or regional in nature, and to
protect the health and welfare of its citizens. The better
interpretation of the text and legislative history of this provision is
that Congress did not intend this criterion to limit California's
discretion to a certain category of air pollution problems, to the
exclusion of others. In this context it is important to note that air
pollution problems, including local or regional air pollution problems,
do not occur in isolation. Ozone and PM air pollution, traditionally
seen as local or regional air pollution problems, occur in a context
that to some extent can involve long range transport of this air
pollution or its precursors. This long-range or global aspect of ozone
and PM can have an impact on local or regional levels, as part of the
background in which the local or regional air pollution problem occurs.
As discussed later, the effects of global concentrations of greenhouse
gases can have an impact on local ozone levels. This context for air
pollution problems supports the view that Congress did not draw such a
line between the types of air pollution problems under this criterion,
and that EPA should not implement this criterion in a narrow way
restricting how California determines it should develop its motor
vehicle program to protect the health and welfare of its citizens.\108\
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\108\ See Massachusetts v. EPA, ``While the Congresses that
drafted section 202(a)(1) might not have appreciated the possibility
that burning fossil fuels could lead to global warming, they did
understand that without regulatory flexibility, changing
circumstances and scientific developments would soon render the
Clean Air Act obsolete. The broad language of section 202(a)(1)
reflects an intentional effort to confer the flexibility necessary
to forestall such obsolescence. See Pennsylvania Dept. of
Corrections v. Yeskey, 524 U.S. 206, 212 (1998) (``[T]he fact that a
statute can be applied in situations not expressly anticipated by
Congress does not demonstrate ambiguity. It demonstrates breadth''
(internal quotation marks omitted)). Because greenhouse gases fit
well within the Clean Air Act's capacious definition of ``air
pollutant,'' we hold that EPA has the statutory authority to
regulate the emission of such gases from new motor vehicles.'' 549
U.S. 497 at 532.
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This approach does not make section 209(b)(1)(B) a nullity, as some
have suggested. EPA must still determine whether California does not
need its motor vehicle program to meet the compelling and extraordinary
conditions discussed in the legislative history. If that is the case,
then a waiver would be denied on those grounds. As discussed below,
that is not the case at this point, even though conditions in
California may one day improve such that it no longer has the need for
a separate motor vehicle program. The statute contemplates that such
improvement is possible. In addition, the opponents of a waiver always
have the ability to raise their legal, policy, and other concerns in
the State administrative process, or through judicial review in State
courts. Congress, however, provided EPA a much more limited role under
section 209(b) in considering objections raised by opponents of a
waiver.
For these reasons, I believe that the better approach for analyzing
the need for ``such State standards'' to meet ``compelling and
extraordinary conditions'' is to review California's need for its
program, as a whole, for the class or category of vehicles being
regulated, as opposed to its need for individual standards.
Having adopted this interpretation of section 209(b)(1)(B), I apply
it below to determine whether EPA can find that California does not
need its motor vehicle program to meet compelling and extraordinary
conditions. Given the basis for EPA's March 6, 2008 Denial and the
considerable debate regarding the permissible interpretations of this
provision, EPA has also evaluated this criterion reviewing the
greenhouse gas standards separately--using the two interpretations
discussed in the March 6, 2008 Denial. In either case, EPA also cannot
deny California's request for a waiver based on a finding that
California does not need such standards to meet compelling and
extraordinary circumstances.
C. Does California Need Its Motor Vehicle Program To Meet Compelling
and Extraordinary Conditions?
As discussed above, the better interpretation of this criterion,
adopted herein, is the traditional approach of evaluating California's
need for a separate program to meet compelling and extraordinary
conditions. Applying this approach, with due deference to California, I
cannot deny the waiver.
CARB has repeatedly demonstrated the need for its motor vehicle
program to address compelling and extraordinary conditions in
California. In its Waiver Request letter, CARB stated:
California--the South Coast and San Joaquin Air basins in
particular--continues to experience some of the worst air quality in
the nation. California's ongoing need for dramatic emission
reductions generally and from passenger vehicles specifically is
abundantly clear from its recent adoption of state implementation
plans for the South Coast and other California air basins.\109\ The
unique geographical and climatic conditions, and the tremendous
growth in the vehicle population and use which moved Congress to
[[Page 32763]]
authorize California to establish separate vehicle standards in
1967, still exist today.\110\
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\109\ See e.g. Approval and Promulgation of State Implementation
Plans; California--South Coast, 64 FR 1770, 1771 (January 12, 1999).
See also 69 FR 23858, 23881-90 (April 30, 2004) (designating 15
areas in California as nonattainment for the federal 8-hour ozone
national ambient air quality standard).
\110\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1, at 16.
CARB notes in its July 14, 2007 comments that it testified at EPA's
earlier hearings on this waiver request that ``since nothing has
changed in the few months since EPA last easily made this determination
[regarding the need for the motor vehicle emission program] on December
28, 2006 (71 FR 78190), and since California still has the
``geographical and climatic conditions that, when combined with the
large numbers and high concentrations of automobiles, create serious
pollution problems,'' (49 FR at 18890 (citing legislative history)),
this is the end of a proper and legal EPA analysis of the extraordinary
and compelling conditions waiver prong.'' \111\
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\111\ California Air Resources Board, EPA-HQ-OAR-2006-0173-1686
at 7.
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EPA has not received any adverse comments suggesting that
California no longer needs a separate motor vehicle emissions program
to address the various conditions that lead to serious and unique air
pollution problems in California.
Based on the record, I am unable to identify any change in
circumstances or any evidence to suggest that the conditions that
Congress identified as giving rise to serious air quality problems in
California no longer exist. Therefore, using the traditional approach
of reviewing the need for a separate California program to meet
compelling and extraordinary conditions, I cannot deny the waiver based
on this criterion.
D. Does California Need Its Motor Vehicle GHG Standards To Meet
Compelling and Extraordinary Conditions?
As discussed above, EPA has also evaluated this criterion under two
alternative approaches, reviewing the greenhouse gas standards
separately using the two interpretations discussed in the March 6, 2008
Denial. While recognizing that they are not the interpretations adopted
here by EPA, this section discusses the Agency's consideration of these
alternative interpretations.
1. Are California's GHG Standards Designed in Part To Address an Air
Pollution Problem That Is Local or Regional in Nature?
In the March 6, 2008 Denial, EPA interpreted this criterion as
calling for a review of California's GHG standards separately from the
remainder of its motor vehicle emission control program. In that
context, it was determined appropriate to look at whether the emissions
from California motor vehicles, as well as the local climate and
topography in California, are the fundamental causal factors for the
air pollution problem of greenhouse gases. This interpretation limited
the meaning of this provision to situations where the motor vehicle
standards at issue were designed to address an air pollution problem
that was local or regional in nature, such that the local conditions in
California were the fundamental causes of the air pollution problem.
The March 6, 2008 Denial applied this interpretation by focusing on
elevated concentrations of greenhouse gases as the air pollution--a
global air pollution problem. The March 6, 2008 Denial rejected
arguments that the GHG standards should also been seen as an ozone
control strategy, on the grounds that even if elevated concentrations
of greenhouse gases lead to climate changes that exacerbate ozone, the
causes of elevated concentrations of greenhouse gases are not solely
local to California but are global in nature.
This overly narrow view fails to consider that although the factors
that cause ozone are primarily local in nature and that ozone is a
local or regional air pollution problem, the impacts of global climate
change can nevertheless exacerbate this local air pollution problem.
Whether or not local conditions are the primary cause of elevated
concentrations of greenhouse gases and climate change, California has
made a case that its greenhouse gas standards are linked to
amelioration of California's smog problems. Reducing ozone levels in
California cities and agricultural areas is expected to become harder
with advancing climate change. California and many other commenters
note that ``California's high ozone levels--clearly a condition
Congress considered--will be exacerbated by higher temperatures from
global warming.'' \112\ California also notes that there is general
consensus that temperature increases from climate change will
exacerbate the historic climate, topography, and population factors
conducive to smog formation in California, which were the driving
forces behind Congress' inclusion of the waiver provision in the Clean
Air Act.\113\ There is a logical link between the local air pollution
problem of ozone and California's desire to reduce GHGs as one way to
address the adverse impact that climate change may have on local ozone
conditions.\114\ Given the clear deference that Congress intended to
provide California on the mechanisms it chooses to use to address its
air pollution problems, it would be appropriate to consider its GHG
standards as designed in part to help address a local air pollution
problem, and, thus, a waiver should not be denied even under the narrow
interpretation employed in the March 6, 2008 Denial.
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\112\ California submits evidence that at the national scale,
using global to regional air quality models, various papers
demonstrate that climate change alone can worsen summertime surface
ozone pollution in polluted regions of the United States including
one finding that ``climate change alone will increase summertime
ozone in polluted regions by 1-10 ppb over the coming decades, with
the largest effects in urban areas and during pollution episodes''
and therefore ``climate change will partly offset the benefit of the
emissions reductions.'' See Jacob and Winner (2009), EPA-HQ-OAR-
2006-0173-9010.4. CARB also cites the 2007 Interim Report of the
U.S. EPA Global Change Research Program Assessment of the Impacts of
Global Change on Regional U.S. Air Quality, a draft EPA study which
concludes that climate change may significantly increase ground-
level ozone in areas throughout the nation. See also EPA's final
April 2009 ``Assessment of the Impacts of Global Climate Change on
Regional U.S. Air Quality: A Synthesis of Climate Change Impacts on
Ground-Level Ozone'' which states as one of its general findings:
``[W]hile these modeling studies cannot tell us what the future will
hold, they demonstrate the potential for global climate change to
make U.S. air quality management more difficult, and therefore
future air quality management decisions should begin to account for
the impacts of climate change.'' EPA-HQ-OAR-2006-0173-9006 at 7-9.
\113\ Id.
\114\ California also submits evidence that its GHG emission
regulations would result in a slight reduction of ozone precursors.
EPA-HQ-OAR-2006-0173-9006 at 10.
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2. Do the Impacts of Climate Change in California Support a Denial of
the Waiver?
As part of EPA's March 6, 2008 Denial, EPA also considered an
alternative interpretation for this criterion, where EPA would consider
``the effects in California of this global air pollution problem * * *
in comparison to the rest of the country, again addressing the GHG
standards separately from the rest of California's motor vehicle
program.'' EPA considered evidence and arguments submitted by
commenters concerning whether the impacts of global climate change in
California were significant enough and different enough from the rest
of the country such that California could be considered to need its
greenhouse gas standards to meet compelling and extraordinary
conditions.\115\ EPA determined in the March 6, 2008 Denial that the
waiver should be denied under this approach as well.
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\115\ 73 FR 12156, 12164.
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[[Page 32764]]
As discussed above, this is not the interpretation that EPA now
adopts. However, even if EPA were to examine the impacts of climate
change in California under this interpretation, based on a review of
all the evidence in the record, I cannot deny the waiver.
a. What Test Applies Under This Alternative Approach?
In the March 6, 2008 Denial, EPA found that legislative intent
called for particular circumstances in California that are
``sufficiently different'' from the nation as a whole that justify
separate standards in California.
EPA received comment stating that there is no statutory foundation
for a ``sufficiently different'' test. Commenters noted there is
nothing in the term ``compelling and extraordinary conditions'' that
requires a comparison to the rest of the country. Similarly, commenters
point to EPA's 1984 PM waiver where EPA's Administrator found that
``there is no indication in the language of section 209 or the
legislative history that California's pollution problem must be the
worst in the country for a waiver to be granted.'' EPA also received
comment that it was not reasonable for EPA to conclude that California
does not face global warming impacts, including water supply,
agricultural production, and wildfire seasonal impacts that present
compelling and extraordinary conditions, since other states will face
similar impacts. Under this rationale, since states other than
California are also experiencing serious global warming impacts,
California could never receive a waiver to combat climate change.
Commenters find flaw in this rationale: similar impacts in other states
have never before prevented California from receiving a waiver. Even
though many states are faced with non-attainment ozone areas and smog
problems similar to California, California has never had a waiver
denied based on a finding under section 209(b)(1)(B) that it did not
need its standards to meet compelling and extraordinary conditions. As
such, EPA also received comment suggesting that the impacts of climate
change should be reviewed within the State of California to determine
their severity, and that such impacts need not be compared to impacts
experienced or projected to occur elsewhere in the country.
Several commenters maintain that although the impacts of climate
change in California may be compelling, they are not extraordinary when
compared to the rest of the nation.\116\ These commenters point to the
record and the many submissions from other states, which recount the
variety of impacts and risks of climate change in their respective
states and claim that California is no different than any other state.
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\116\ Association of International Automobile Manufacturers,
EPA-HQ-OAR-2006-0173-9005. This comment notes the finding in
Massachusetts v. EPA that the impacts of global warming are ``widely
shared'' among the states.
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EPA does not need to resolve this issue. As discussed below, EPA
has evaluated the evidence submitted concerning the observed and
projected impacts of global climate change in California and other
states and determined that even under the alternative approach used in
the March 6, 2008 Denial, EPA cannot deny a waiver.
b. Would a Waiver Be Denied Under This Alternative Approach?
Commenters supporting the waiver maintain that California has
clearly demonstrated that the impacts in California of global warming
are ``compelling and extraordinary.'' Several commenters point to the
impacts of global warming recited in EPA's March 6, 2008 initial denial
as evidence that EPA committed an error in judgment by not finding that
the extreme and various impacts of climate change in California are
compelling and extraordinary in nature and that, further, California
clearly satisfied the section 209(b)(1)(B) requirements.\117\
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\117\ EPA has not received any comment suggesting EPA's prior
inventory of evidentiary information is incorrect as set forth in
its discussion of the ``Relationship of Impacts of Global Climate
Change in California to the Rest of the Country'' at 73 FR 12156,
12163-12168. In addition, several new studies have been submitted to
EPA, including: a recent report from the Pacific Institute examining
the impacts that sea level rise would have on population,
infrastructure, and property in California (this report uses
projections of medium to medium-high greenhouse gas emissions
scenarios indicating a 1.4 meter rise in the seal level by 2100 with
480,000 people at risk and $100 million in property at risk from a
100 year flood event); California's Climate Action Team Reports that
emphasizes many of the points made in California's waiver request
including the air quality impacts (``Climate change could slow
progress toward attainment of health-based air quality standards and
increase pollution control costs by increasing the potential for
high ozone and high particulate days.'' The report itself
synthesizes 37 recent reports that address a wide body of
information on the range and gravity of the risks that climate
change poses to California's citizens, natural resources, and
economy); and the Public Policy Institute of California assessment
of climate change on public health in California and cites number
impacts including ``an increase in the frequency and severity of air
pollution episodes'' and ``an increase in extreme heat events and
associated increases in heat related morbidity and mortality.'' See
Environmental Defense Fund, EPA-HQ-OAR-2006-0173-9025 at 15-18; See
also California Air Resources Board, EPA-HQ-OAR-2006-0173-9006 at 7-
16.
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Commenters supporting the waiver, including California, have
submitted an extensive array of reports and data outlining the risks
and impacts of climate change on California. EPA received comment
restating EPA's own statements from its March 6, 2008 Denial, including
the following:
California has the largest agricultural based economy (13% of
the U.S. market value of agricultural products sold) which is
heavily dependent on irrigation, has the nation's highest crop value
and is the nation's leading dairy producer. There is improved
information on how livestock productivity may be affected by thermal
stress and through nutritional changes in forage caused by elevated
CO2 concentrations. In addition, wine is California's
highest value agricultural product, and wine grapes are very
sensitive to temperature changes. California has the largest state
coast population, representing 25% of the U.S. oceanic coastal
population. The conditions which create California's tropospheric
ozone problems remain (e.g., topography, regional meteorology,
number of vehicles) and climate change is expected to exacerbate
tropospheric ozone levels. California's water resources are already
stressed due to demands from agricultural, industrial and municipal
uses, and climate change is expected to introduce an additional
stress to an already over-allocate system by increasing temperatures
and by decreasing snowpack which is an important water source in
spring and summer. California has the greatest variety of ecosystems
in the U.S., and the second most threatened and endangered species
(of plants and animals combined) and the most threatened and
endangered animal species, representing about 21% of the U.S. total.
In addition, one commenter suggests that this summary of findings about
California's special characteristics that differentiate the magnitude,
intensity and range of impacts of climate change supports that
assessment. Dr. Stephen Schneider of Stanford University stated that
``not only are California's conditions `unique and arguably more
severe' (e.g. temperature impacts from global warming are more certain
for states like California) but also that no other state faces the
combination of ozone exacerbation, wildfire emission's contributions,
water system and coast system impacts and other impacts faced by
California.'' \118\ Conversely, opponents of the waiver do not contest
California's claims that the impacts of climate change in California
and elsewhere are substantial.\119\ Instead,
[[Page 32765]]
opponents of the waiver claim that the impacts in California are not
unique or extraordinary. EPA received comment suggesting that the
impacts of climate change in California are not sufficiently different
from the nation as a whole to warrant a waiver.\120\ Commenters note
that the ``need'' requirement in section 209(b)(1)(B) authorizes the
creation of regulatory standards specific to California only in cases
where it is necessary to meet conditions unique to California.
Commenters claim that California cannot meet this standard with respect
to a global problem that does not affect California in a unique way as
compared to other states. The commenters claim the impacts to
coastline, ozone levels, and other impacts are not unique to California
as they affect many other states as well.\121\
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\118\ Environmental Defense Fund, EPA-HQ-OAR-2006-0173-9025 at
11-12.
\119\ The Association of International Automobile Manufacturers
notes that although in the March 6, 2008 Denial, ``EPA found that
there is ample evidence that global warming is `compelling' in the
sense that it presents serious environmental issues, the agency
correctly determined that it does not present an extraordinary
condition in California.'' EPA-HQ-OAR-2006-0173-9005 at 9. EPA did
receive comment from Air Improvement Resources (AIR) suggesting that
it might be contesting whether positive feedback from CO2
concentrations on temperature increases (as seen in the models and
data submitted to EPA by proponents of the waiver) will be seen in
certain geographic areas due to an increase in cloudiness. EPA-HQ-
OAR-2006-0173-13662 at 5-6. However, in its same submission it also
states that while it may be true that California's cities will be
disproportionately affected by increased temperatures it is by no
means clear that this will be true in the future. (See p. 7). As
noted in the text, the burden of proof is on the opponents of the
waiver to demonstrate that the effects of climate change are not
compelling or serious. Such opponents have not clearly stated the
basis for making such a determination nor countered the many studies
and data submitted by California and other proponents of the waiver.
For purposes of this waiver proceeding, EPA is not making its own
judgment with regard to the issues under section 202(a).
\120\ Association of International Automobile Manufacturers,
EPA-HQ-OAR-2006-0173-9005 at 9, citing 73 FR 12168--``As the
discussion above indicates, global climate change has affected, and
is expected to affect, the nation, indeed the world, in ways very
similar to the conditions noted in California * * * These identified
impacts are found to affect other parts of the United States and
therefore these effects are not sufficiently different compared to
the nation as a whole. California's precipitation increases are not
qualitatively different from changes in other areas. Rise in sea
level in the coastal parts of the United States are projected to be
severe, or more severe, particularly in consequences, in the
Atlantic and Gulf Regions than in the Pacific regions, which
includes California. Temperature increases have occurred in most
parts of the United States, and while California's temperatures have
increased by more than the national average, there are other places
in the United States with higher or similar increases in
temperature.''
\121\ Id. at 9-10. The Association of International Automobile
Manufacturers notes that comments submitted from States supporting
the waiver include statements such as ``Connecticut faces loss of
its shoreline and beaches, forest die offs, destruction of shell
fisheries and marine resources, * * *'' ``Global warming is having a
serious impact on New Jersey's public health and economy * * *''
``Rhode Island * * * As the most densely populated State in the
country, direct impacts due to climate change, such as heat wave,
increased fire frequency, increased storm intensity resulting in
beach erosion, loss of property, and loss of life--pose great
concerns for us,'' and other concerns expressed by states such as
Pennsylvania, Maryland, and New Mexico. See also Alliance of
Automobile Manufacturers, EPA-HQ-OAR-2006-0173-1297 at 14-17 and
EPA-HQ-OAR-2006-0173-0421-12 at 61-70 and General Motors
Corporation, EPA-HQ-OAR-2006-0173-1596 at 6-8.
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EPA notes that under this alternative approach the opponents of the
waiver continue to bear the burden of proof to demonstrate their
claims. Commenters opposing the waiver primarily focus and argue on one
issue: Whether the effects of climate change in California are
sufficiently different from the nation as a whole. Opponents of the
waiver identify singular or multiple impacts in some other states but
they largely submit conclusions--not factual evidence--as to why such
adverse impacts demonstrate that California is not sufficiently
different. On the other hand, California has identified a wide variety
of impacts and potential impacts within California, which include
exacerbation of tropospheric ozone, heat waves, sea level rise and salt
water intrusion, an intensification of wildfires, disruption of water
resources by, among other things, decreased snowpack levels, harm to
high value agricultural production, harm to livestock production, and
additional stresses to sensitive and endangered species and ecosystems.
Opponents have not demonstrated that any other state, group of states,
or area within the United States would face a similar or wider-range of
vulnerabilities and risks. In addition, California has submitted
information that climate change can impact ozone levels in California
due to temperature exacerbation effects. Although other areas of the
country are also projected to experience increases in temperatures
which may also exacerbate local ozone levels, opponents of the waiver
have not demonstrated that California's ozone levels should not be
considered compelling and extraordinary conditions.
Under this alternative interpretation, the burden of proof is on
the opponents of the waiver to demonstrate that the impacts of global
climate change in California are either not significant enough or are
not different enough from the rest of the country to be considered
compelling and extraordinary conditions. The opponents of the waiver
have focused their argument on the latter part of this interpretation,
whether the impacts in California are sufficiently different from the
rest of the country. Limiting evaluation to this issue, California has
presented evidence of a wide variety of vulnerabilities, impacts and
potential impacts within California, while the opponents have not
demonstrated that any other state, group of states, or area within the
United States would face a similar or wider-range of vulnerabilities
and risks. Therefore, EPA believes that those opposing the waiver have
not met their burden of proof to demonstrate that the conditions in
California are not sufficiently different and that a waiver should be
denied under this alternative approach.
It is important to note that nothing in this decision or this
document should be construed as reflecting a judgment concerning the
issues pending before EPA under section 202(a) of the Act--whether
emissions of GHGs from new motor vehicles or engines cause or
contribute to air pollution which may reasonably be anticipated to
endanger public health or welfare. EPA recently proposed to make an
affirmative finding under that statutory provision.\122\ The issues
involved in that proposal are separate and different from those
involved in this decision on California's request for a waiver under
section 209(b). Nothing in this decision should be construed as
reflecting the Agency's judgment regarding any issue relevant to the
determinations in the pending proposal under section 202(a). The
statutory provisions and criteria are different, and the judgments
called for under these provisions are very different in nature. For
example, in evaluating the alternative section 209(b)(1)(B)
interpretation, I am not evaluating how serious the impacts or
potential impacts of global climate change are, either in California or
the rest of the country, as the opponents of the waiver have not
focused on that issue. My finding under this alternative interpretation
is a narrow one, and is limited to finding that the opponents of the
waiver have not met their burden of proof under this alternative
interpretation of section 209(b) concerning how the impacts in
California might differ from the rest of the country.
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\122\ See EPA's ``Proposed Endangerment and Cause or Contribute
Findings for Greenhouse Gases under Section 202(a) of the Clean Air
Act'' at 74 FR 18886 (April 29, 2009).
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3. Must California's GHG Standards Achieve a Demonstrated Reduction in
GHG Atmospheric Concentrations or Impacts Under Section 209(b)(1)(B)?
Regardless of whether EPA examines the need for California's motor
vehicle emissions program or conversely the need just for the GHG
emission standards, some commenters suggest
[[Page 32766]]
that the GHG emission standards must be proven to have some mitigative
effect in order for them to be needed. Some commenters suggest that to
the extent that California's high ozone levels could be exacerbated by
higher temperatures from global warming, there is no demonstration in
the waiver record that implementation of the California GHG standards
would have any perceptible impact on temperature trends in California.
Opponents of the waiver have argued that California, therefore, cannot
show that its GHG emission regulations will achieve a measurable and
specific temperature reduction in California, and thereby mitigate the
identified climate change impacts in California.\123\ They maintain
that California's GHG regulations will not be needed to meet a
particular condition since there is no analysis suggesting that
California's GHG standards will have any discernible impact on that
condition or achieve any perceptible improvement in environmental
conditions inside California. In terms of GHG concentrations in
California's atmosphere, EPA received comment stating there is no
offered proof that a reduction in GHG emissions from California
vehicles would have any impact on GHG concentrations in California's
atmosphere compared to the GHG concentration impacts already in the
record.
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\123\ However, the Alliance presented some evidence at the May
30, 2007 waiver hearing that some temperature reduction may be
achieved, based on application of the Wigley equation. EPA-HQ-OAR-
2006-0173-0421 at 71.
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In response, other commenters supporting the waiver assert that the
efficacy of California's standards is not at issue in this proceeding.
There is no requirement in section 209(b)(1)(B) that California prove a
certain level of environmental benefit. They assert that is
particularly true in this instance, where the actual and anticipated
impacts of global warming are complex and historically unprecedented,
and it is widely-recognized that a number of efforts by governments,
private entities, and individuals globally will be required to mitigate
climate change, as no single source of GHG emissions, whether from an
entire state, sector of the nation's economy, or of individual
countries, is completely dominant in terms of influencing atmospheric
concentrations of GHGs. They claim that California need not show that
the climate will in fact respond to its regulatory action; rather its
obligation is to show a rational connection between the regulation it
has promulgated and the problem it seeks to address.
As noted above, the Agency's inquiry under section 209(b)(1)(B) is
whether California needs its own motor vehicle emission control program
to meet compelling and extraordinary conditions. Under this criterion,
EPA does not consider, for example, the extent to which specific PM
standards will address the PM air pollution problem.\124\ Under this
approach, there is no need to delve into the extent to which the GHG
standards at issue here would address climate change or ozone problems.
That is an issue appropriately left to California's judgment.
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\124\ 74 FR 12156, 12159-60 (March 6, 2008).
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Given the comments submitted, however, EPA has also considered an
alternative interpretation, which would evaluate whether the program or
standards has a rational relationship to contributing to amelioration
of the air pollution problems in California. Even under this approach,
EPA's inquiry would end there. California's policy judgment that an
incremental, directional improvement will occur and is worth pursuing
is entitled, in EPA's judgment, to great deference.\125\ EPA's
consistent view is that it should give deference to California's policy
judgments, as it has in past waiver decisions, on California's choice
of mechanism used to address air pollution problems. EPA does not
second-guess the wisdom or efficacy of California's standards.\126\ EPA
has also considered this approach with respect to the specific GHG
standards themselves, as well as California's motor vehicle emissions
program.
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\125\ MEMA I at 1110-11.
\126\ California Air Resources Board, EPA-HQ-OAR-2006-0173-0004.
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After reviewing the arguments, I conclude that California has
submitted evidence demonstrating not only the causal connection between
higher temperatures from global warming and its general exacerbation of
tropospheric ozone, but also the serious effects of that potential
increase in ozone on the public health and welfare in California. EPA
notes that several commenters have stated that while California's GHG
regulations will provide only a small difference in temperatures and/or
GHG concentrations, there clearly will be some reductions. These
commenters note that given the numerous sources in California and
around the world that contribute to GHG concentrations, no single
regulation could on its own reduce GHG emissions to the levels
necessary to reduce all concerns, but that every small reduction is
helpful in reducing these concerns. As noted by the Supreme Court in
Massachusetts v. EPA, while it is true that regulating motor vehicle
GHG emissions will not by itself reverse global warming, a reduction in
domestic automobile emissions would slow the pace of global emissions
increase no matter what happens with regard to other emissions.\127\
Moreover, there is some evidence in the record that proffers a specific
level of reduction in temperature resulting from California's
regulations.\128\ EPA believes that under this alternative approach,
opponents have not met their burden of demonstrating that California's
motor vehicle program, or its GHG standards, does not have a rational
relationship to contributing to amelioration of the air pollution
problems in California.
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\127\ Massachusetts v. EPA, 59 U.S. 497, 525-526 (2007).
\128\ EPA also received comment during the second comment period
indicating that a local decrease in GHGs can have a direct effect on
reducing local ozone concentrations, as well as particulate matter
concentrations, in California, before they mix with other greenhouse
gases in the upper atmosphere. The comments that address Dr.
Jacobson's testimony do not dispute these atmospheric reactions and
the fact that they can increase local temperature which can increase
ozone concentrations.
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E. Section 209(b)(1)(B) Conclusion
With respect to the need for California's state standards to meet
compelling and extraordinary conditions, I have found that the March 6,
2008 Denial was based on a departure from the traditional
interpretation of the waiver provision. An examination of the text of
section 209(b) and the legislative history, when viewed together, lead
to the conclusion that the best way to interpret this provision and the
interpretation I adopt here, is to apply the traditional interpretation
to the evaluation of California's greenhouse gas standards for motor
vehicles. As such, if California needs a separate motor vehicle program
to address the kinds of compelling and extraordinary conditions
discussed in the traditional interpretation, then Congress intended
that California could have such a program. The best interpretation of
the text and legislative history of this provision is that Congress did
not use this criterion to limit California's discretion to a certain
category of air pollution problems, to the exclusion of others.
Under that interpretation, I cannot find that opponents of the
waiver have demonstrated that California does not need its state
standards to meet compelling and extraordinary conditions. The
opponents of the waiver have not adequately demonstrated that
[[Page 32767]]
California no longer has a need for its motor vehicle emission program.
Separately, even applying the alternative interpretations set forth
in the March 6, 2008 Denial, I cannot find that that the opponents of
the waiver have demonstrated that California does not need its
greenhouse gas emission standards to meet compelling and extraordinary
conditions. Nor can I find that the opponents of the waiver have
demonstrated that the impacts from climate change in California are not
compelling and extraordinary.
Therefore, upon reconsideration of the March 6, 2008 Denial, I
determine that I cannot deny the waiver request under section
209(b)(1)(B).
VI. Are the California GHG Standards Consistent With Section 202(a) of
the Clean Air Act?
EPA has reviewed the information submitted to the record of this
proceeding to determine whether the parties opposing this waiver
request have met their burden to demonstrate that the GHG standards are
not consistent with section 202(a). In its submissions, CARB has
submitted information and argument that these GHG standards do provide
regulated manufacturers with sufficient lead-time for the near term
standards regardless of how it is measured and regardless of the waiver
denial. For the mid-term standards, CARB has stated that initially,
manufacturers can achieve compliance with credits from the near-term
production, and subsequently can achieve compliance with refinements to
existing technology and advanced technology combinations. The industry
opponents of the waiver have submitted information and argument that
there is insufficient leadtime for the CARB near-term standards because
the already short time-frame for technology development was made even
shorter by EPA's waiver denial. For the mid-term standards, the
industry stated that it is likely that most large-volume manufacturers
will be able to comply with the CARB standards only by ``mix-shifting''
their products to offer for sale more higher mileage vehicles to ensure
meeting the CARB fleet average. The industry also submitted information
and argument that the GHG standards will result in unsafe vehicles
because vehicles meeting the standards will be lighter and more
hazardous to occupants in accidents, and will be driven more because of
higher fuel efficiency, so more accidents will occur. The industry
argued that these complying vehicles are technologically infeasible
because of the safety concerns. EPA's analysis of the consistency of
the CARB standards with section 202(a) of the Act follows.
A. Historical Approach: The Standard of Review for Consistency With
Section 202(a)
Under section 209(b)(1)(C), EPA must deny California's waiver
request if the Agency finds that California standards and accompanying
enforcement procedures are not consistent with section 202(a) of the
Act. The scope of EPA's review under this criterion is narrow. EPA has
previously stated that the determination is limited to whether those
opposed to the waiver have met their burden of establishing that
California's standards are technologically infeasible, or that
California's test procedures impose requirements inconsistent with the
Federal test procedure.\129\ Previous waivers of federal preemption
have stated that California's standards are not consistent with section
202(a) if there is inadequate lead time to permit the development of
technology necessary to meet those requirements, giving appropriate
consideration to the cost of compliance within that time.\130\
California's accompanying enforcement procedures would be inconsistent
with section 202(a) if the Federal and California test procedures
conflict, i.e., if manufacturers would be unable to meet both the
California and Federal test requirements with the same test
vehicle.\131\
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\129\ MEMA I, 627 F.2d at 1126.
\130\ See e.g., 38 FR 30136 (November 1, 1973) and 40 FR 30311
(July 18, 1975).
\131\ To be consistent, the California certification test
procedures need not be identical to the Federal test procedures.
California procedures would be inconsistent, however, if
manufacturers would be unable to meet both the state and Federal
requirements with the same test vehicle in the course of the same
test. See, e.g., 43 FR 32182, (July 25, 1978).
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EPA does not believe that there is any reason to review these
criteria any differently for EPA's evaluation of California's
greenhouse gas waiver request. There is nothing inherently different
about how GHG control technologies should be reviewed when making a
determination about technological feasibility or consistency of test
procedures.
In the GHG waiver proceeding, automobile industry opponents of the
waiver have presented evidence for EPA's consideration which they
believe will require EPA to make the finding of inconsistency with
section 202(a), and therefore require EPA to deny this waiver. They
believe this finding should be made on one or more grounds that there
is inadequate lead time provided by the CARB standards. EPA's process
for evaluating lead time is discussed immediately below. The industry
opponents also raise arguments based on the cost of compliance with the
standards, and claims of possible significant vehicle safety problems
caused, at least indirectly, by compliance with the GHG standards,
which will be discussed in other parts of this section.
Regarding lead time, EPA historically has relied on two decisions
from the U.S. Court of Appeals for the DC Circuit for guidance
regarding the lead time requirements of section 202(a). Section 202(a)
provides that an emission standard shall take effect after such period
as the Administrator finds necessary to permit the development and
application of the requisite technology, giving appropriate
consideration to the cost of compliance. In Natural Resources Defense
Council v. EPA (``NRDC''), 655 F.2d 318 (DC Cir. 1981), the court
reviewed claims that EPA's particulate matter standards for diesel cars
and light trucks were either too stringent or not stringent enough. In
upholding the EPA standards, the court concluded:
Given this time frame [a 1980 decision on 1985 model year
standards]; we feel that there is substantial room for deference to
the EPA's expertise in projecting the likely course of development.
The essential question in this case is the pace of that development,
and absent a revolution in the study of industry, defense of such a
projection can never possess the inescapable logic of a mathematical
deduction. We think that the EPA will have demonstrated the
reasonableness of its basis for projection if it answers any
theoretical objections to the [projected control technology],
identifies the major steps necessary in refinement of the
technology, and offers plausible reasons for believing that each of
those steps can be completed in the time available.\132\
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\132\ Natural Resources Defense Council v. EPA, 655 F.2d 318,
331. (emphasis added)
Another key case addressing the lead time requirements of section
202(a) is International Harvester v. Ruckelshaus (``International
Harvester''), 478 F 2.d 615 (DC Cir. 1979). In International Harvester,
the court reviewed EPA's decision to deny applications by several
automobile and truck manufacturers for a one-year suspension of the
1975 emission standards for light-duty vehicles. In the suspension
proceeding, the manufacturers presented data which, on its face, showed
little chance of compliance with the 1975 standards, but which, at the
same time, contained many uncertainties and inconsistencies regarding
test procedures and parameters. In a May 1972 decision, the
Administrator applied an EPA
[[Page 32768]]
methodology to the submitted data, and concluded that ``compliance with
the 1975 standards by application of present technology can probably be
achieved,'' and so denied the suspension applications.\133\ In
reviewing the Administrator's decision, the court found that the
applicants had the burden of coming forward with data showing that they
could not comply with the standards, and if they did, then EPA had the
burden of demonstrating that the methodology it used to predict
compliance was sufficiently reliable to permit a finding of
technological feasibility. In that case, EPA failed to meet this
burden.
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\133\ International Harvester v. Ruckelshaus, 478 F.2d 615, 626.
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With respect to lead time, the court in NRDC pointed out that the
court in International Harvester ``probed deeply into the reliability
of EPA's methodology'' because of the relatively short amount of lead
time involved (a May 1972 decision regarding 1975 model year vehicles,
which could be produced starting in early 1974), and because ``the
hardship resulting if a suspension were mistakenly denied outweigh the
risk of a suspension needlessly granted.'' \134\ The NRDC court
compared the suspension proceedings with the circumstances concerning
the diesel standards before it: ``The present case is quite different;
`the base hour' for commencement of production is relatively distant,
and until that time the probable effect of a relaxation of the standard
would be to mitigate the consequences of any strictness in the final
rule, not to create new hardships.'' \135\ The NRDC court further noted
that International Harvester did not involve EPA's predictions of
future technological advances, but an evaluation of presently available
technology.
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\134\ NRDC, 655 F.2d 318, 330.
\135\ Id. The ``hardships'' referred to are hardships that would
be created for manufacturers able to comply with the more stringent
standards being relaxed late in the process.
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EPA also evaluates CARB's request in light of congressional intent
regarding the waiver program generally. This is consistent with the
motivation behind section 209(b) to foster California's role as a
laboratory for motor vehicle emission control, in order ``to continue
the national benefits that might flow from allowing California to
continue to act as a pioneer in this field.'' \136\
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\136\ 40 FR 23102, 23103 (waiver decision citing views of
Congressman Moss and Senator Murphy) (May 28, 1975).
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For these reasons, EPA believes that California must be given
substantial deference when adopting motor vehicle emission standards
which may require new and/or improved technology to meet challenging
levels of compliance. This deference was discussed in an early waiver
decision when EPA approved the waiver request for California's 1977
model year standards:
Even on this issue of technological feasibility I would feel
constrained to approve a California approach to the problem which I
might also feel unable to adopt at the Federal level in my own
capacity as a regulator. The whole approach of the Clean Air Act is
to force the development of new types of emission control technology
where that is needed by compelling the industry to `catch up' to
some degree with newly promulgated standards. Such an approach to
automotive emission control might be attended with costs, in the
shape of a reduced product offering, or price or fuel economy
penalties, and by risks that a wider number of vehicle classes may
not be able to complete their development work in time. Since a
balancing of these risks and costs against the potential benefits
from reduced emissions is a central policy decision for any
regulatory agency, under the statutory scheme outlined above I
believe I am required to give very substantial deference to
California's judgment on that score.'' \137\
---------------------------------------------------------------------------
\137\ Id. at 23103.
EPA has traditionally considered lead time as starting with the date
that the rules are adopted and become effective under California state
law--not from the subsequent date of a request for a waiver or the
decision on a waiver.\138\ This is consistent with the structure of
section 209(b), where the waiver criteria are presumed to be met absent
an affirmative finding that requires EPA to deny it, which gives EPA a
limited scope of review and affords deference to California. At the
time that California adopts its rules, manufacturers have clear
knowledge and are fully on notice of California's requirements and the
date when such requirements will be implemented. In this case, the CARB
GHG regulations became final and effective in 2004. This was five years
before the first phase of compliance (the 2009 model year) and eight
years before compliance with the ``mid-term'' standards, which include
the most stringent standards (model year 2016). Because of this large
amount of lead time available to manufacturers under CARB's regulatory
schedule, the approach described in NRDC is the most appropriate under
the circumstances at issue here.
---------------------------------------------------------------------------
\138\ See e.g., 59 FR 40625 (September 22, 1994).
---------------------------------------------------------------------------
EPA notes, however, that manufacturers have disputed whether ample
lead time exists. Because EPA initially denied this waiver request,
manufacturers have asserted that the lead time should have ``tolled''
at the time of the denial, since California could not implement and
enforce standards which had not received a waiver. This tolling issue
is discussed below in section VI.F.1. Additionally, if the tolling
might be considered to cause a reduction in lead time for the CARB
near-term standards, it could be argued that the International
Harvester approach, involving circumstances where the lead time is
short, should apply. CARB, while maintaining that the NRDC approach is
the correct measurement here, commented that even if International
Harvester was the correct guide, ``we believe that a combination of
manufacturers' statements and plans indicated that manufacturers are
already in, or with minor changes can demonstrate compliance for the
2009 and 2010 model years.'' \139\ Under International Harvester, the
burden was on the industry to demonstrate that the evidence supported
the grant of an extension, then, the burden shifted to EPA to
demonstrate the reasonableness of its projection. As discussed below,
the manufacturers have not met their burden to show that the California
standards are not technologically feasible, considering the lead time
provided and cost of compliance.
---------------------------------------------------------------------------
\139\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006,
at 23.
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Under NRDC, when compliance with CARB standards is phased-in over a
lengthy time period, the reasonableness of a projection of
technological feasibility can be based on answering any theoretical
objections to the projected control technology; identifying the major
steps necessary in refinement of the technology; and offering plausible
reasons for believing that each of those steps can be completed in the
time available.\140\ EPA's review of the evidence on the technological
feasibility of GHG technologies follows.
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\140\ NRDC, 655 F.2d 318, 331.
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B. CARB's Assessment of the State of Development of GHG Reduction
Technology and Comments Supporting CARB's Assessment
1. Development of GHG Reduction Technology
Under the terms of Assembly Bill 1493, which is the legislation
that directed CARB to establish greenhouse gas emission standards, the
CARB staff was directed to set those standards in a manner that would
``achieve the maximum feasible and cost-effective reduction of
greenhouse gas emissions from motor vehicles.'' CARB has
[[Page 32769]]
identified four basic areas of GHG reduction technology: (1) Engine,
drivetrain and other vehicle modifications; (2) mobile air conditioning
system modifications; (3) alternative fuel vehicles; and (4) exhaust
catalyst improvements.
To accomplish the assessment mandated by AB 1493, CARB staff held
several meetings and workshops in 2003 and 2004 on GHG vehicle
technology. Those meetings brought together technology developers,
researchers from the auto industry, vehicle component suppliers,
academic participants, and vehicle simulation firms to discuss
technologies and their potential to reduce climate change emissions
from motor vehicles. CARB staff presented its preliminary findings in a
draft technology and cost assessment and held a public workshop to
receive comments in April 2004. Following that presentation, CARB
issued a draft proposal on the methodology for developing the GHG
standards and the preliminary standards themselves, in June 2004. A
public workshop on this draft was held in July 2004. After considering
all the comments from these sessions, CARB published its final staff
proposal in the Staff Report: Initial Statement of Reasons (ISOR) in
August 2004.\141\
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\141\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44.
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The CARB vehicle technology results in the ISOR relied on an
existing vehicle simulation study (discussed below), as well as other
existing studies and research, rather than on any sort of primary
development or engineering work. CARB staff acknowledged that ``because
powertrain changes will be the focus for obtaining the reductions
sought in this (GHG) rulemaking rather than aftertreatment
technologies, staff could not reasonably build prototypes and test them
in our laboratory. * * * Because building and testing prototypes is so
expensive, and time consuming, even major automobile manufacturers rely
on vehicle simulation firms to predict the performance of new
technology either individually or in combination, and to assess their
performance and emissions.'' \142\ CARB further commented that the
advantage of systems modeling ``is to allow a wide diversity of
combinations of technologies to be modeled together and examine how
they interact when simulating a vehicle operating on various driving
cycles.'' \143\
---------------------------------------------------------------------------
\142\ Id. at 43.
\143\ Id. at 58.
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The study forming the basis of the ISOR vehicle technology results
was a comprehensive vehicle simulation modeling effort and a thorough
cost analysis performed for the Northeast States Center for a Clean Air
Future (NESCCAF), by the recognized expert companies AVL Powertrain
Engineering, Martec, and Meszler Engineering Services.\144\ CARB staff
believed that ``the NESCAAF study is the most advanced and accurate
evaluation of vehicle technologies that reduce greenhouse gas emissions
yet performed.'' \145\ Besides the NESCAAF study on vehicle
technologies, CARB monitored a separate analysis of the GHG benefits of
alternative fuel technologies, including upstream benefits and the cost
associated with alternative fuel technologies, from work performed by
TIAX, LLC. Finally, for air conditioning research, CARB staff met with
various groups (including EPA) to develop its approach for reducing the
emissions of air conditioning refrigerant and excess CO2
emissions from air conditioning use.
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\144\ NESCCAF undertook this study ``to help define GHG--
reducing motor vehicle technologies that are expected to be
feasible, commercially available and cost effective in the 2009-2015
timeframe.'' It was ``inspired by the California's legislature's
passage of Assembly Bill 1493 * * *'' and it related to the
Northeast U.S. because ``the results presented in this report have
significant implications for states in the Northeast and elsewhere
that share California's commitment to reducing transportation
related GHG emissions as part of a broader effort to address the
risks posed by global climate change.'' Reducing Greenhouse Gas
Emissions from Light-Duty Motor Vehicles, NESCCAF, p 1-1, September
2004.
\145\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44 at 44.
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After the release of the Initial Staff Report, CARB received
comments on its evaluation of technological steps that could be taken
to meet its GHG standards from parties who supported the CARB study,
and from various industry parties who disagreed with many of the CARB
conclusions. As part of its standard-setting process, CARB staff
considered the comments from all parties on both sides, and responded
to industry concerns in its Final Statement of Reasons (FSOR),
published in August 2005.\146\ CARB concluded that it had identified
the necessary technology in existence at that time that could enable
vehicles to meet the GHG standards; or specifically identified the
projected control technologies; answered the industry objections
regarding the technology; and has explained its reasons for believing
that each of the steps can be completed in the time available.
---------------------------------------------------------------------------
\146\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.116.
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2. Overview of Technologies and Their Projected Applications
The NESCAAF study identified technologies for reducing
CO2 emissions that were modeled both individually and in
various technology combinations (or ``packages''). Because there were a
multitude of technologies available for the CO2 reductions,
CARB realized that there needed to be engineering guidelines for
choosing combinations that would be economical to the consumer. The
guidelines tried to avoid combining technologies that tend to address
the same categories of losses or technologies that may not complement
one another from a drivability standpoint. Participants in the NESCAAF
study and CARB staff then assembled a wide variety of combined
technologies to evaluate through simulation modeling in order to
identify those which would provide the greatest CO2
reductions. In an effort to cover the full spectrum of CO2
reductions that could be accomplished, CARB staff divided the results
into two categories: near-term phase-in and mid-term phase-in
applications. These translate to the following model year ranges: Near-
term (2009-2012) and mid-term to fully phased-in (2013-2016).\147\
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\147\ The NESCAAF study had a different schedule: Near-term
technologies (2009-2012), mid-term (2013-2015) and long term (2015
and later). California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 27.
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In the Initial Staff Report, CARB staff summarized the state of
near-term technology for meeting its proposed CO2 standards:
The technologies explored (in the Initial Staff Report) are
currently available on vehicles in various forms, or have been
demonstrated by auto companies and/or vehicle suppliers in at least
prototype form * * * There is near term, or off the shelf technology
package in each of the vehicles classes evaluated (small and large
car, minivan, small and large truck) that resulted in a reduction of
CO2 emissions of at least 15 to 20 percent from baseline
values. In addition there is generally a near-term technology
package in each of the vehicle classes that results in about a 25
percent CO2 emission reduction.'' \148\
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\148\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44 at iii.
For engines, CO2 is emitted with engine exhaust as a
result of the combustion process. CARB projected that by 2009,
reductions in engine CO2 emissions would result from these
primary technology drive-train changes which could be expected in all
vehicle classes: Dual cam phasing, turbocharging with engine
downsizing, automated manual transmissions, and
[[Page 32770]]
camless valve actuation.\149\ CARB also described several other
technology items that may not be present in most vehicles in the early
years of the standards, but are expected to be used in later years as
development continues. These include: Gasoline direct injection, engine
friction reduction, aerodynamic drag and rolling resistance, more
aggressive shift logic, and early torque converter lock-up. Finally,
CARB staff identified two other technology choices that while offering
real GHG reduction capability were not as cost effective as the other
technologies, and, accordingly, were not projected to be applied in the
near-term--these are hybridization and greater dieselization of the
fleet.
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\149\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44 at 59-60.
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For the later years of these standards, CARB stressed that its GHG
regulations ``rely less on traditional technology-forcing than
repackaging a combination of off-the-shelf technologies to meet the
adopted standards.'' \150\ The NESCAAF Report included, for each of the
five vehicle categories, a table showing several promising technology
packages, for each of the three time frames (near-, mid-, and long-
term), their resulting CO2 reductions, and expected
costs.\151\ Additionally, for the long-term phase of the standards
(2015-2016), CARB projects that there will be increased market
penetration of hybrid-electric vehicles and advanced multi-mode diesel
vehicles.\152\ In its December 2005 request letter, CARB discussed how
improvements will occur, as it expects ``that a manufacturer would plan
for a rollout of new technologies that would begin in 2009 and then
build on the initial efforts with additional near and mid-term
technologies that would be commensurate with previous
investments.''\153\
---------------------------------------------------------------------------
\150\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 34.
\151\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 27 and 35, and OAR-2006-0173-0010.44 at 59.
\152\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 27.
\153\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 35-36.
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For air conditioning systems, GHG emissions are either direct or
indirect. Direct emissions are the result of normal leakage of the air
conditioning refrigerant from the system over time, as well as leakages
that occur because of vehicle accidents, poorly performed maintenance,
or improper refrigerant recovery prior to vehicle scrappage. Air
conditioning refrigerants used in vehicles today are typically a hydro-
fluorocarbon (HFC), which is a very strong GHG. Indirect emissions are
the additional CO2 emissions from the engine which occur
because of the added load on the engine from operation of the air
conditioning system. CARB, using the modeling in the NESCAAF Report,
projected that CO2 equivalent reductions could result from
these improvements in the air conditioning system: improved variable
displacement compressor with revised controls, improved low-leak
systems, and the use of an improved refrigerant.\154\
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\154\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44 at 69-73, and EPA-HQ-OAR-2006-0173-0004.1 at 22-23.
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CARB notes that alternative fueled vehicles generally can help
reduce GHG emissions by: (1) Direct reduction of GHG emissions because
the alternative fuels will produce fewer GHG emissions, and (2)
indirect reductions in GHG emissions because of the decreased upstream
emissions. Upstream emissions are well-to-tank emissions, including the
fuels' extraction, processing, distribution and marketing. The
alternative fuels which result in GHG reductions are CNG, LPG, ethanol
(including E85), electric, and hybrid-electric.
In its ISOR, CARB identified exhaust catalyst improvement as
another technology area that could lead to GHG emission reductions,
specifically the reduction of methane and nitrous oxide
(N2O). These gases are greenhouse gases just like
CO2, but their mass emissions from motor vehicles are very
small compared to CO2. CARB notes that ``although it is
conceivable that these methane and N2O emissions could be
reduced by faster catalyst heating at vehicle start-up and enhanced
catalysts systems with higher surface density or higher and/or revised
catalyst loadings, staff is not aware of such efforts at this time
(August 2004).'' \155\ There were no further submissions to the record
by CARB or any other party on this particular technology area.
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\155\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44 at 78-79.
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3. CARB's Updates on Technological Development
At the time of the first set of EPA hearings on the CARB waiver
request, in April 2007, CARB presented additional information to
bolster its assertions on technological feasibility to highlight
developments in GHG technology since CARB originally submitted its
request to EPA in 2005. CARB summarized the recent developments and
additional examples of real-life implementation of the technologies
identified in its waiver request. In its comments following the April
2007 hearings, and its July 2007 letter responding to post-hearing
comments, CARB offered additional information to bolster their GHG
technology projections. Generally, CARB pointed to numerous instances
in which many of the near-term and mid-term technologies have been
applied in vehicles which have been produced in the years since 2004
(when the CARB standards became final) right up to mid-2007. For
example, attached to additional comment letters it submitted to EPA's
Docket in June and July 2007, CARB discussed the increased use of the
GHG technologies discussed in the ISOR and provided summaries of GHG
technology used in 2007 and 2008 model year vehicles showing increased
use of all the near-term and mid-term technologies.\156\ CARB also
offered numerous examples, contained in manufacturer news releases and
advertisements, and trade press stories, illustrating real-life
adoption of the GHG technologies in both domestic and foreign
manufacturers' vehicles.\157\
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\156\ California Air Resources Board, EPA-HQ-OAR-2006-0173-1686,
Attachments 84 and 85.
\157\ California Air Resources Board, EPA-HQ-OAR-2006-0173-1686,
Attachments 86 through 93 and 103, 104, 114, and California Air
Resources Board, EPA-HQ-OAR-2006-0173-3601, Attachments 173-177.
---------------------------------------------------------------------------
At its March 5, 2009 hearing following EPA's decision to reconsider
its previous denial, CARB presented additional new information
highlighting developments in GHG technology since the last opportunity
to submit public comment on this issue. In addition, some environmental
groups submitted testimony and comments in support of the CARB finding
of technological feasibility of the GHG standards. This next section
will summarize the technological feasibility information submitted by
CARB and other parties. CARB noted that the manufacturers were
employing the individual GHG-reducing technologies as well as the
packages of those technologies CARB had projected as viable compliance
pathways as early as 2004. CARB also noted that in addition to phasing-
in technologies, as CARB had originally predicted, manufacturers were
using other technologies that CARB did not rely on originally--
including increased hybrid sales, downsized turbocharged engines in
light truck lines, a large influx of diesel vehicle sales, and improved
air conditioning systems. In some cases, the resulting reductions
produced as much as 10% of the GHG reductions needed for manufacturers'
fleet averages to meet the CARB standards.
CARB also cited to recent EPA studies on technological feasibility
and costs for
[[Page 32771]]
GHG reductions in motor vehicles, conducted by EPA in 2007. These EPA
reports were discussed in EPA's Advanced Notice of Proposed Rulemaking
on Regulating Greenhouse Gas Emissions Under the Clean Air Act
published on July 30, 2008.\158\ The findings in these studies were
very consistent with the technological feasibility, cost and lead time
estimates from the CARB ISOR in 2004.
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\158\ Advanced Notice of Proposed Rulemaking, Regulating
Greenhouse Gas Emissions Under the Clean Air Act, 73 FR 44354 (July
30, 2008).
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Three EPA studies were referenced by CARB. First, CARB discussed
the June 2008 document ``Vehicle Technical Support Document: Evaluating
Potential GHG Reduction Programs for Light-Duty Vehicles (Light-Duty
Vehicle TSD).'' \159\ The Light-Duty Vehicle TSD represented EPA's
assessment during 2007 of how a light-duty vehicle program for GHG
emission reductions under the Clean Air Act might be designed and
implemented, with two program options: either (1) a fixed percentage
reduction (4%) in CO2 emissions per model year from 2011 to
2018, or (2) an annual reduction in CO2 emissions per model
year from 2011 to 2018, based on a model developed by the Department of
Transportation's Volpe Center, establishing CO2 emission
standards, at the point the model projects maximum net benefits for
those model years.\160\ The Light-Duty Vehicle TSD collected
information from a wide range of sources, including a 2002 National
Academy of Sciences report, the 2004 NESCAAF report (also used by
CARB), current technical literature, and information from vehicle
manufacturers and automotive suppliers. CARB noted that the emission
reduction potentials and costs in the EPA study were similar to the
reduction potentials and costs estimated by CARB in its ISOR. In
discussing the Light-duty TSD in the ANPRM, EPA also acknowledged that,
based on enhancements to the Volpe Model later in 2007, the earlier EPA
analysis ``tended to underestimate the benefits and/or overestimate the
costs of light-duty vehicle CO2 standards that could be
established under the CAA.'' \161\
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\159\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.5.
\160\ This approach uses a computer model developed by the
Department of Transportation Volpe Center called the ``CAFE Effects
and Compliance Model'' (``Volpe Model'').
\161\ This EPA assessment of the Light-Duty Vehicle TSD was
contained in the Advanced Notice of Proposed Rulemaking, Regulating
Greenhouse Gas Emissions Under the Clean Air Act, 73 FR 44354, at
44444 (July 30, 2008).
---------------------------------------------------------------------------
CARB also referenced the March 2008 ``EPA Staff Technical Report:
Cost and Effectiveness Estimates of Technologies Used to Reduce Light-
duty Vehicle Carbon Dioxide Emissions.'' This report presented the EPA
staff assessment of costs and effectiveness of over 40 CO2
reduction technologies in the categories of engines, transmissions,
hybrids, accessories and other technologies (e.g., aerodynamic
improvements). EPA noted that the majority of the technologies
investigated are in production and available on current vehicles,
either in the U.S., Europe or Japan. As part of that report, EPA worked
with an internationally recognized automotive technology firm to
perform a detailed vehicle simulation modeling study of the GHG
reduction effectiveness of a number of advanced automotive
technologies. As noted by CARB, the EPA Report obtained technology
package reductions and cost estimates very similar to those in the CARB
ISOR.\162\ As in the earlier Light-Duty TSD, EPA noted that the
estimates in this report are conservative because they rely on data
sources from one to six years old and declared that the ``automotive
industry is a technology-driven industry, and new technologies are
developed and introduced quickly. A number of technologies which have
only recently been introduced or will be within the next year are
likely to see improvements in their effectiveness and cost reductions
beyond what we estimate (in this report).'' \163\
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\162\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006,
at 21.
\163\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.6. at 1.
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Finally, CARB referenced an EPA staff technical memorandum
``Documentation of Updated Light-duty Vehicle GHG Scenarios,'' dated
June 23, 2008.\164\ This memorandum summarized the staff work to update
the ``4% per year'' GHG reduction scenario that was first documented in
the Light-duty Vehicle TSD, by addressing some of the deficiencies of
the earlier study,\165\ and was discussed in the ANPRM for GHG
Standards. EPA once again noted that because the updated analysis did
not address all the issues identified in the earlier TSD, it continued
to believe that the results of this updated analysis are conservative,
tending to overestimate the costs and/or underestimate the benefits. In
its most recent comment, CARB noted that the EPA lead time estimates in
EPA's ANPRM cite implementation rates supportive of CARB's estimates
for implementing vehicle GHG reducing technologies.\166\
---------------------------------------------------------------------------
\164\ California Air Resources Board, EPA-HQ-OAR-2007-0173-
9019.7.
\165\ For example, this updated analysis included factors such
as consideration of multi-year planning cycles available to
manufacturers, consideration of CO2 trading between car
and truck fleets within the same manufacturer, and inclusion of
plug-in hybrids as a viable technology beginning in 2012. Advanced
Notice of Proposed Rulemaking, Regulating Greenhouse Gas Emissions
Under the Clean Air Act, 73 FR 44354, at 44444 (July 30, 2008).
\166\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006,
at 21.
---------------------------------------------------------------------------
CARB summarizes the reports from EPA, NESCAAF and others by
declaring that ``the technologies examined are well known and most are
already being implemented on today's vehicles, while the others are
simply advanced versions of conventional technologies that are already
being demonstrated by vehicle manufacturers and component suppliers.''
\167\ To bolster this statement, CARB submitted a list of Model Year
2009 vehicles which employ GHG reduction technologies, which shows a
gradual phasing-in of these technologies across all manufacturers and
all product lines. CARB also submitted a list showing 2009 Model Year
vehicles that comply with the CARB GHG standards; the list shows
significant numbers of 2009 passenger cars and light trucks meeting the
2012 and later standards, significantly ahead of the deadlines.
---------------------------------------------------------------------------
\167\ Id.
---------------------------------------------------------------------------
With respect to the overall technological feasibility of its GHG
standards, CARB believes that it has reasonably projected technological
feasibility, consistent with the approach employed in the NRDC
decision, when manufacturers have several years of lead time before
compliance. CARB notes that it ``either has demonstrated that the
necessary technologies presently exist to meet the established
standards or we have specifically identified the projected control
technologies, answered objections raised by industry regarding those
technologies, and explained why we believe that each of the steps can
be completed in the time available.'' \168\
---------------------------------------------------------------------------
\168\ Id. at 23.
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In support of its conclusion, CARB submitted for the record three
analyses showing that the manufacturers are employing the GHG
technologies at least as fast as CARB predicted, and certainly in time
for compliance with the early model years. First, CARB did an
``industry-wide'' projection using manufacturers' 2009 sales
projections and worst case CO2 values per single test
vehicle, and used the 2009 projected sales as unchanged for 2010 and
2011 model years.\169\ The results of this analysis show industry-wide
GHG
[[Page 32772]]
credits for 2009 and 2010 and a debit for 2011, but an overall credit
for the three-year period. CARB noted that because this was done on a
worst-case testing basis, it is likely that testing with additional
vehicles in each test group would show even the debiting companies in
compliance.\170\
---------------------------------------------------------------------------
\169\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.12.
\170\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006
at 24.
---------------------------------------------------------------------------
Second, CARB looked at the compliance projection for the major
domestic manufacturers (Ford, GM and Chrysler) for the 2009 and 2010
model years.\171\ CARB used the actual 2009 model year registration
data (from Polk) and, then, applied CO2 emissions data by
vehicle model obtained from EPA, selecting the highest CO2
emissions data for those vehicle models with multiple engines. The
results showed that for the 2009 model year, GM and Ford have ample
compliance margins for both PC/LDT1 and LDT2/MDV, while Chrysler has a
debit for its PC/LDT1 fleet, but a wide margin for its LDT2/MDV fleet.
The overall net result is compliance for all three companies. For 2010,
the three companies run debits for PC/LDT1 but have compliance margins
for LDT2/MDV (a small margin for GM, and substantial margins for Ford
and Chrysler). Again, based on the use of accumulated credits, these
companies would comply with the model years analyzed.
---------------------------------------------------------------------------
\171\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.13. CARB limited this particular analysis to the domestic
manufacturers because, in its assessment, ``the international auto
companies are better positioned to comply and will unquestionably
meet early model year standards.'' As summarized in the first
(industry-wide) CARB analysis, although at least one international
manufacturer (BMW) projected a slight debit for 2009, all the
manufacturers were projected for overall compliance for the period
2009-2011.
---------------------------------------------------------------------------
Third, CARB focused on just GM for the 2009 model year, using a
different technique than their study directly above.\172\ CARB used
certification data provided by GM, projected sales based on GM's latest
manufacturer update to CARB, and CO2 results provided by
EPA. Then each GM certification test group was divided by GM into sales
sub-groups, each having one or several vehicle models. For each sub-
group, the CO2 emissions of the highest emitting model were
multiplied with the total number of vehicles in the subgroup to
calculate the sub-group's GHG value. The GHG values from all sales
subgroups in a test group were summed up to represent the sales group
GHG value. For the 2009 model year, under this analysis, the GM PC/LDT1
fleet over-complies by 14 grams per mile and the LDT2/MDV fleet over-
complied by 27 grams per mile, generating substantial credits for 2010
and beyond.
---------------------------------------------------------------------------
\172\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.14.
---------------------------------------------------------------------------
Additional support for 2009-2011 compliance was provided by the
Natural Resources Defense Council. At EPA's March 5, 2009 waiver
hearing, NRDC presented testimony regarding the technological
feasibility of the GHG standards for the early years of compliance.
NRDC performed its analysis by using EPA fuel economy trends data for
MY 2008, which predicted a national average fuel economy level without
CAFE credits for flexible fuel vehicles. NRDC then converted the miles
per gallon numbers to CO2 grams per mile levels using the
California sales mix and the GHG conversion established by CARB. The
result is that industry accrues substantial amount of credits in 2009
and 2010, and then runs a small deficit in 2011 that can be easily made
up using banked credits from the first two years.\173\
---------------------------------------------------------------------------
\173\ Natural Resources Defense Council, EPA-HQ-OAR-2006-0173-
7176.13, at 5-6. The NRDC testimony also noted that developments in
the period between the first waiver hearing (May 2007) and the new
hearing strengthen the California case that the GHG standards are
cost-effective and technically feasible--namely, higher gas prices,
the market shift to cleaner cars and the passage of new Federal fuel
economy standards.
---------------------------------------------------------------------------
Beyond submitting results from its own recent analyses, CARB
submitted a very recent (March 2009) study by Energy & Environmental
Analysis (EEA) entitled ``Automakers Ability to Comply with California
GHG Standards Through 2012.'' \174\ The EEA study notes that, if the
California waiver is granted, manufacturers would be required to comply
with standards for MY 2009 vehicles, which are already in production
and being sold, and would have very little lead time to make changes
for MY 2010 (which will start production in mid-calendar year 2009),
and limited opportunity to make changes at this point for MY 2011 and
2012. EEA looked at the product plans for the ``Big Six'' manufacturers
in the U.S. (GM, Ford, Chrysler, Toyota, Honda and Nissan) based on
commercially available data, and from public information reported in
the trade press, as well as the information submitted by the
manufacturers to the Federal government in connection to the auto
restructuring plans.\175\ Generally, because of projected large sales
of hybrids and to a lesser extent, sales of diesel vehicles, EEA
projected that Toyota and Honda will meet California GHG standards
through 2012, and that Nissan may have a shortfall in LDV/LDT1 for
2012, but will easily comply with LDT2/MDV in 2012, and will be able to
meet the 2012 standards by trading between categories and using banked
credits from prior years.
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\174\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.15.
\175\ EEA completed a detailed study of product plans for the
Big Six manufacturers for the U.S. Department of Energy in late
2008, and they used that study as a baseline for this report on
California GHG compliance.
---------------------------------------------------------------------------
For the domestic manufacturers, EEA noted concerns about compliance
with the California GHG standards, in part because these companies have
Federal CAFE values which are significantly below the three Japanese
companies, meaning that it will be harder for them to reach the target.
Nevertheless, the EEA report noted that the product plans of these
companies show the following industry-wide technology improvements
coming on line in the next 4 to 5 years:
--Luxury vehicles adopting GDI across most product lines;
--4 valve OHC/DOHC engines with VVT replacing the few remaining 2-valve
OHC 4 and 6 cylinder engines;
--6-speed transmissions replacing 4 or 5 speed units in most mass
market vehicles
--Electric power steering replacing hydraulic units in compact and mid
size cars;
--Cylinder cut-out applications to V-8 and some V-6 units;
--Variable valve lift used more widely by Japanese manufacturers;
--Introduction of several new diesel models and hybrid models by all
manufacturers;
--Introduction of new small ``crossover'' SUV and car models that are
one size class below the existing smallest models offered by the
domestic manufacturers to compete with the Toyota Scion XD and XB
models and the Honda Fit model.
To perform the GHG estimate, the EEA study used the actual fuel
economy data by vehicle model for MY 2009, and used the product-plan
based technology forecasts to derive fuel economy by model for MY 2010
through 2012. For sales numbers, EEA used 2008 sales data and sales for
the first two months of 2009 both nationally and for California as
sales indicators for the near term (MY 2009 and 2010). For 2011 and
2012, EEA used the sales forecast it had developed in the 2008 DOE
study, which was a 15 million annual sales level of light duty vehicles
nationally. The power train mix numbers (engine/transmission
combinations) for all years were the 2008 numbers because this was the
latest data available from the CAFE data base.
Using this approach, EEA found that all three domestic
manufacturers are in
[[Page 32773]]
compliance with current and expected CAFE through 2012, with Chrysler
lagging somewhat behind Ford and GM. EEA then translated these
forecasts to GHG forecasts for the California vehicle class
definitions, assuming no A/C improvement credits or alternative fuel
credits, and no trading of credits between manufacturers, and predicted
as follows:
--All manufacturers will comply with GHG requirements for 2009;
--GM and Chrysler will comply with GHG regulation in 2010 while Ford is
on the edge of compliance. Ford can likely comply by either using
banked credits from 2009 or with small adjustments to the power train
and sales mix sold in California if necessary;
--Chrysler and GM may be able to meet 2011 GHG standards using banked
credits from 2009 and 2010 and credit trading between classes. All
three manufacturers could require additional efforts such as air
conditioner improvements to comply with 2011 GHG requirements.
--Compliance with 2012 GHG requirements will be a challenge and may
require credit trading and banked past and future credits over and
above credits from air conditioner improvements and introduction of
alternative fuel vehicles.
--The results appear to be very realistic based on the auto-
manufacturers public statements of future fuel economy.\176\
---------------------------------------------------------------------------
\176\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.15.
Regarding the long-term (MY 2012 and later) outlook, CARB compared
the restructuring plans submitted by the automakers to the arguments
manufacturers made in this proceeding, regarding later model year
feasibility. CARB stated that ``by 2015, even those manufacturers
facing the most difficult challenge complying with California's
standards have made statements that on their face show they plan to
comply with the later model years standards, even before receiving
additional credit for GHG reductions from air conditioning improvements
and regardless of 2009 and 2010 credits carrying forward.'' \177\ For
example, CARB cited from the GM restructuring plan that the company
stated that it will work to develop any changes needed to * * * meet
such additional requirements as California's.\178\ Further, at EPA's
March 5, 2009 hearing, NRDC pointed out that the plans of both GM and
Ford show MY 2012 fuel economy levels for cars and light trucks fleet
average that come very close to allowing the automakers to comply with
the GHG standards with little or no additional effort.\179\
Additionally, CARB noted that Chrysler stated that, should this GHG
waiver be granted, the company would try its best to comply using
available technology; however, as a last resort it might restrict sales
of certain vehicle models in California and other states adopting the
California standards, out of necessity.\180\ Finally, regarding Ford,
NRDC stated in its testimony that Ford plans to improve the average
fuel economy by 26 percent by 2012 and by 36 percent by 2015.\181\
---------------------------------------------------------------------------
\177\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006,
at 27.
\178\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9021.1, at 21.
\179\ Natural Resources Defense Council, EPA-HQ-OAR-2006-0173-
7176.13, at 4.
\180\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9020.2, at U116, and California Air Resources Board, EPA-HQ-OAR-
2006-0173-9020.3, at 118-120.
\181\ Natural Resources Defense Council, EPA-HQ-OAR-2006-0173-
7176.13, at 4, citing from Ford Motor Company Business Plan,
Submitted to the House Financial Services Committee, December 2,
2008.
---------------------------------------------------------------------------
4. Manufacturers' Comments on the Technological Feasibility of the GHG
Standards
Manufacturers raised arguments regarding the feasibility of the
CARB GHG standards both in the underlying rulemaking in California, and
in the EPA waiver proceeding. In the CARB rulemaking, the manufacturers
generally criticized some aspects of the CARB modeling work that
substantiated CARB's conclusions on technological feasibility. For
example, a manufacturer argued that CARB overestimated the emission
reductions from the powertrain changes in many of the technology
packages used in the modeling studies, such as the NESCAAF study.
Because the studies assumed changes in the use of advanced
transmissions and engines in such a magnitude to be unrealistic for the
U.S. fleet, the manufacturer stated that the changes would require
retooling of all U.S. driveline plants, perhaps more than once.\182\
Manufacturers also argued that the modeling of technology packages
risked ``double-counting'' emission benefits produced by the individual
technologies, thus producing an unrealistic estimate of emission
reductions.\183\ CARB responded to these comments by stating that
manufacturers were already planning to incorporate advanced
transmissions and engine technologies in their vehicles, and that the
gradual phase-in of the CARB standards allowed manufacturers to
accomplish this during regular scheduled vehicle upgrades. CARB also
noted that its modeling done by AVL specifically avoided double-
counting (while some manufacturers' modeling did not).
---------------------------------------------------------------------------
\182\ California Air Resources Board, EPA-HQ- OAR-2006-0173-
0010.116, Comment 154 (at 107) and Comments 158-159(-115).
\183\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.116, Comment 162 at 117.
---------------------------------------------------------------------------
Regarding the EPA waiver proceeding, while the manufacturers did
take issue with some of the CARB modeling work during the CARB
rulemaking, the manufacturers did not challenge CARB's general
conclusions that the necessary technology presently exists to meet the
near-term standards, that projected control technologies for future
years have been identified, and that objections raised by industry have
been answered. Rather, the industry offered an assessment that much of
this technology is already at hand. At the first EPA hearing in March
2007, although no individual manufacturer presented testimony, the
Alliance of Automobile Manufacturers discussed the progress of the
industry in producing more fuel-efficient vehicles. The Alliance stated
that ``every model available today is equipped with some kind of fuel
efficient technology, including direct fuel injection, variable valve
timing, continuously variable transmissions, cylinder deactivations,
and more.'' \184\ These technologies in the 2007 and 2008 MY vehicles
are among those that CARB projected as being in use for the near-term
GHG standards (see above discussion on ``Overview of Technologies and
Their Projected Applications,'' section VI.B.2).
---------------------------------------------------------------------------
\184\ Testimony of Alliance of Automobile Manufacturers, EPA-HQ-
OAR-2006-0173-0422, at 98.
---------------------------------------------------------------------------
In comments sent to EPA after the March 2007 hearing, the industry
commenters focused on whether there was adequate lead time to comply
with the near-term standards, citing testimony from a CARB official (in
the Vermont litigation) that some manufacturers may need up to six
years to comply with the 2011 MY standards and up to 7 years to comply
with the 2012 MY standards.\185\ Also, the industry criticized CARB for
not providing sufficient information on some technology issues for the
EPA (or the public) to make an informed decision.\186\ CARB responded
to these
[[Page 32774]]
points, stating that the CARB official also testified that most of the
CARB-identified technologies are already developed and required only a
few years of lead time for implementation. Additionally, based on lead
time beginning at the time of the final adoption of the standards by
CARB (August 2005), CARB notes that the 6 or 7 year lead time for the
2011 and 2012 model years respectively is reasonable.\187\ CARB also
provided, in its June 2007 and July 2007 comments, information from the
Vermont litigation where various manufacturers testified that they
would be able to meet the early years of the California GHG
standards.\188\ Concerning the list of technical issues on which the
industry claimed CARB had not provided enough information to allow
public comment, CARB stated that these issues were among many issues
previously addressed fully both in submissions to the Docket (primarily
the CARB Final Statement of Reasons) as well as in the Federal
litigation.\189\
---------------------------------------------------------------------------
\185\ Association of International Automobile Manufacturers,
EPA-HQ-OAR-2006-0173-1455.2 at 11-12. The litigation in Vermont is
Green Mountain Chrysler-Plymouth Dodge-Jeep v. Crombie, 508 F. Supp,
295 (D. Vt.).
\186\ Alliance of Automobile Manufacturers, EPA-HQ-OAR-2006-
0173-1297.2 at 35-36.
\187\ California Air Resources Board, EPA-HQ-OAR-2006-0173-3601,
at 26-27.
\188\ CARB referenced the industry assessments of early model
year compliance from the litigation in Vermont, Green Mountain
Chrysler-Plymouth Dodge-Jeep v. Crombie, 508 F. Supp, 295 (D. Vt.),
California Air Resources Board, EPA-HQ-OAR-2006-0173-1686 at 20-21,
California Air Resources Board, EPA-HQ-OAR-2006-0173-3601, at 27-28.
\189\ The list of issues and the CARB response are discussed in
the CARB July 2007 letter. EPA-HQ-OAR-2006-0173-3601, at 26.
---------------------------------------------------------------------------
Manufacturers also presented information on technological
feasibility at EPA's March 5, 2009 hearing and the subsequent comment
period. At the EPA hearing, the Alliance continued to acknowledge
technological advances in GHG control. The Alliance stated that
``automakers have made major contributions into developing new fuel
efficient technologies and the results are now coming to dealer
showrooms. More than 50 technologies offered in vehicles today reduce
emissions, increase mileage and allow vehicles to run on cleaner
fuels.'' \190\ Regarding technological feasibility for the early years
(near-term), the industry trade groups generally argued that CARB
relied on manufacturer credits for these years to provide a cushion for
compliance in the later years, but that the several years of lead time
required for mid-term compliance combined with uncertainty resulting
from the EPA waiver denial makes even the near-term lead time
inadequate.\191\ CARB, in its testimony and subsequent comments,
presented its new analyses of compliance (for the industry in general,
and for GM) that showed industry compliance is likely if not certain
for the 2009 through 2011 model years (see discussion above at section
VI.B.3.). Additionally, if any individual manufacturers incur a debit
in any model year, the CARB regulations provide the manufacturer up to
five model years afterwards to make up the debit to avoid any
noncompliance penalty.
---------------------------------------------------------------------------
\190\ Testimony of Association of Automobile Manufacturers, EPA-
HQ-OAR-2006-0173-7177, at 108.
\191\ Association of Automobile Manufacturers, EPA-HQ-OAR-2006-
0173-8994.1, at 24-25; Association of International Automobile
Manufacturers, EPA-HQ-OAR-2006-0173-9005.2 at 4.
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Regarding the mid-term (2012-2016) model years of the GHG
standards, the industry commenters have argued that the only means by
which most large-volume manufacturers will be able to meet the CARB
standards is by ``mix-shifting'' their product lines to offer for sale
more higher mileage vehicles to ensure meeting the CARB fleet
average.\192\ The Alliance stated that ``it is simply too late for
manufacturers to meet all the Pavley standards for future model years
through the use of technologies, if for no other reason than because
approximately 18 months of the product planning and development cycle
was pretermitted while the waiver was denied (assuming for purposed of
this analysis that a waiver would be granted in June 2009).'' \193\ As
discussed earlier, CARB responded to these arguments by noting that in
the restructuring plans recently submitted to the government, the
manufacturers have made statements demonstrating they plan to comply
with the later model years of the CARB standards, even before receiving
additional credit for GHG reductions from air conditioning improvements
and regardless of 2009 and 2010 credits carrying forward. Regarding the
manufacturers' mix-shifting argument, EPA notes that under the narrow
standard of review applied to California's technological feasibility
determinations, consistency with section 202(a) does not mean that all
manufacturers will be able to sell all vehicle models in California and
that a reduced product offering in California resulting from California
emission standards is a policy decision left to the state.\194\
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\192\ Regarding mix-shifting, the National Automobile Dealers
Association also commented that this would be costly to dealers who
would lose business due to the ``scrappage effect'' (see above pp
46-49), being forced to accept smaller vehicles regardless of local
consumer demand, rationing of larger vehicles, and out-of state
dealers unencumbered by CARB's regulations. National Automobile
Dealers Association, EPA-HQ-OAR-2006-0173-8956.1, at 8-9.
\193\ Association of Automobile Manufacturers, EPA-HQ-OAR-2006-
0173-8994.1 at 26.
\194\ 40 FR 23102, 23103 (May 28, 1975).
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C. Technological Feasibility and the Cost of Compliance
1. Historical Approach
Congress has stated that the consistency requirement of section
202(a) relates to technological feasibility.\195\ Section 202(a)(2)
states, in part, that any regulation promulgated under its authority
``shall take effect after such period as the Administrator finds
necessary to permit the development and application of the relevant
technology, considering the cost of compliance within that time.''
Section 202(a) thus requires the Administrator to first review whether
adequate technology already exists, or if it does not, whether there is
adequate time to develop and apply the technology before the standards
go into effect.
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\195\ H.R. Rep. No. 95-294, 95th Cong., 1st Sess. 301 (1977).
---------------------------------------------------------------------------
In MEMA I, the court addressed the cost of compliance issue at some
length in reviewing a waiver decision. According to the court:
Section 202's cost of compliance concern, juxtaposed as it is
with the requirement that the Administrator provide the requisite
lead time to allow technological developments, refers to the
economic costs of motor vehicle emission standards and accompanying
enforcement procedures. See S. Rep. No. 192, 89th Cong., 1st Sass.
5-8 (1965); H.R. Rep. No. 728 90th Cong., 1st Sass. 23 (1967),
reprinted in U.S. Code Cong. & Admin. News 1967, p. 1938. It relates
to the timing of a particular emission control regulation rather
than to its social implications. Congress wanted to avoid undue
economic disruption in the automotive manufacturing industry and
also sought to avoid doubling or tripling the cost of motor vehicles
to purchasers. It, therefore, requires that the emission control
regulations be technologically feasible within economic parameters.
Therein lies the intent of the cost of compliance requirement.\196\
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\196\ MEMA I at 1118 (emphasis added). See also id. at 1114 n.
40 (``[T]he `cost of compliance' criterion relates to the timing of
standards and procedures.'').
Previous waiver decisions are fully consistent with MEMA I, which
indicates that the cost of compliance must reach a very high level
before the EPA can deny a waiver. Therefore, past decisions indicate
that the costs must be excessive to find that California's standards
are inconsistent with section 202(a).\197\ It should be noted that, as
with other issues related to the determination of consistency with
[[Page 32775]]
section 202(a), the burden of proof regarding the cost issue falls upon
the opponents of the grant of the waiver.
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\197\ See, e.g., 47 FR 7306, 7309 (Feb. 18, 1982), 43 FR 25735
(Jun. 14, 1978), and 46 FR 26371, 26373 (May 12, 1981).
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Consistent with MEMA I, the Agency has evaluated costs in the
waiver context by looking at the actual cost of compliance in the time
provided by the regulation, not the regulation's cost-effectiveness.
Cost-effectiveness is a policy decision of California that is
considered and made when California adopts the regulations, and EPA,
historically, has deferred to these policy decisions. EPA has stated in
this regard, ``the law makes it clear that the waiver request cannot be
denied unless the specific findings designated in the statute can be
made. The issue of whether a proposed California requirement is likely
to result in only marginal improvement in air quality not commensurate
with its cost or is otherwise an arguably unwise exercise of regulatory
power is not legally pertinent to my decision under section 209 * * *''
\198\ Thus, under the language of section 202(a)(2), EPA will look at
the compliance costs for manufacturers in developing and applying the
technology with the costs being broken down on a cost per vehicle or
unit basis.
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\198\ 36 FR 17158 (August 31, 1971). See also 40 FR 23102,
23104; 58 FR 4166 (January 7, 1993), LEV Waiver Decision Document at
20.
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2. Technology Cost Information in This Proceeding
At the time of CARB's original waiver request, CARB presented the
projected technology costs for the GHG vehicle standards based on cost
estimates for necessary components provided by Martec, the company that
did the modeling studies that produced the CARB technology assessment
in its ISOR. The costs were calculated by applying a mark-up factor,
determined by the Argonne National Laboratory, for the components
needed for the vehicles. Additionally, CARB assumed an additional 30%
discount for a limited number of components where unanticipated
improvements in production processes or simplifications or
consolidation in parts after additional further development would be
likely.\199\
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\199\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 40.
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At that time, CARB stated that the average cost of control for
near-term technology packages on PC/LDT1 category vehicles was
estimated at $383 per vehicle, and for LDT2/MDV category vehicles was
estimated at $327 per vehicle. Performing similar calculations for the
mid-term technology packages, CARB put the estimates for PC/LDT1 at
$1,115, and for LDT2/MDV at $1,341. CARB also presented information on
the estimates of costs for the ``major 6'' manufacturers cost of
compliance over the term of these standards. These figures ranged from
$0 (for the three Japanese companies and GM) for the 2009 MY (i.e., the
fleets of these companies would comply with the 2009 standards with no
changes) to the highest costs in the 2016 MY, with a $1,288-$1,341
range for the domestic manufacturers and a $272-$298 range for the
Japanese manufacturers.
During the CARB GHG rulemaking, the manufacturers commented that
CARB underestimated costs of individual technologies because CARB did
not use the manufacturers' costs to individually develop each of the
technologies, and CARB used a mark-up factor for final technology cost
that was too low. The Alliance commissioned a study by Air Improvement
Resources, NERA Economic Consulting, and Sierra Research (the above
noted ``June 2007 AIR/NERA/Sierra Study'') that found the average
vehicle cost increase to be about $3000, several times larger that the
CARB estimates. In response, CARB provided a detailed critique of why
the cost conclusions in this study were not reasonable. CARB found
faulty technical analysis and inflated component costs.\200\ In the
time period since the CARB request, CARB has updated its technology
cost estimates with new real-life information to show that
manufacturers are continuing to implement the GHG technology packages
and combinations CARB had identified at the outset--at costs in line
with CARB's projections.\201\
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\200\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.116 at 141-155.
\201\ California Air Resources Board, EPA-HQ-OAR-2006-0173-1686
at 19, and EPA-HQ-OAR-2006-0173-3601 at 28-29. CARB also notes that
in the Green Mountain case, 508 F. Supp. 2d at 365-366, the Court
found that the industry consultant's (T. Austin) baseline
assumptions and resulting cost estimates--double that of defendants'
expert--were unsupported by the evidence.
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EPA also received comments from the National Auto Dealers
Association (NADA) and the National Association of Minority Automobile
Dealers (NAMAD) concerning the costs of the CARB standards to its
constituents, above the costs that GHG technology adds to the vehicle
price to buyers. NADA notes that because of ``dire financial straits''
in the auto industry due to the economic recession, dealers are
experiencing financial difficulties from vastly reduced vehicle sales
(among other problems). NADA believes that if this waiver is granted,
and the various other states which have adopted the GHG standards begin
their own programs, the result will be a ``state-by-state patchwork
approach to fuel economy that would fill their lots with more unsold
vehicles.'' \202\\\ NAMAD believes that ``dealer will lose sales if
automakers have to ration delivery of large vehicles in CARB (Section
177) states to meet the fleet average, and * * * if dealers are forced
to take delivery of more small cars that their customers don't want,
dealers will be stuck paying the interest charges while these vehicles
sit on their lots.'' \203\\\ EPA notes the comments of NADA and NAMAD
on this particular type of cost, but also notes that these comments are
not relevant to the issue of whether the technology feasibility of the
GHG standards are consistent with section 202(a). The comments
regarding the ``patchwork'' of the GHG standards in other states are
discussed below in section VII. B. 2.
---------------------------------------------------------------------------
\202\ National Automobile Dealers Association, EPA-HQ-OAR-2006-
0173-8956.1 at 5-6.
\203\ Testimony of National Association of Minority Automobile
Dealers, EPA HQ-OAR-2006-0173-7177, at 126-127.
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3. Consistency of Certification Test Procedures
The enforcement procedures that accompany California's greenhouse
gas standards would also be inconsistent with section 202(a) if the
California test procedures impose testing requirements inconsistent
with the Federal testing requirements. Such inconsistency means that
manufacturers would be unable to meet both the California and the
Federal test requirements with the same test vehicle.\204\
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\204\ See, e.g., 43 FR 32182 (Jul. 25, 1978).
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CARB stated in its December 2005 Waiver Request letter that there
``are no Federal test procedures that measure GHG for climate change
purposes, [so] there are no potential inconsistencies precluding a
manufacturer from using the same test vehicle to meet both Federal and
California requirements'' and noted in its most recent (April 2009)
comment letter that this was still true.\205\
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\205\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 42 and EPA-HQ-OAR-2006-0173-9006 at 29.
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EPA received no comments suggesting that CARB's GHG testing
requirements pose a test procedure consistency problem with federal
test procedures.
4. Safety Implications of the CARB GHG Standards
The industry raised a vehicle safety issue for consideration within
the technological feasibility criterion. The industry has proffered the
idea that the CARB GHG standards will result in the production of
vehicles which will be unsafe for two reasons. First, they claim
[[Page 32776]]
that many GHG-compliant vehicles will achieve compliance because they
will be downsized, and will be inherently less safe in collisions.
Second, they claim that because GHG-compliant vehicles will also have
higher fuel economy than today's fleet, owners will drive more, and
that additional VMT means more accidents will occur. The industry
asserts that because the GHG standards will cause these problems, the
resulting vehicles are technologically infeasible because of the safety
concerns.
EPA takes safety into account in evaluating technology, feasibility
and lead time of California emission standards. For example, when CARB
in 1994 requested authorization for its original set of emission
standards for small spark-ignition engines used in utility, lawn and
garden equipment, the industry trade association raised safety concerns
in the EPA authorization proceeding. The industry argued that
compliance with the CARB standards would require the use of catalyst
technology in equipment, and that current catalysts produced high
exhaust and surface temperatures, and could also possibly cause
sparking and flaming, so these safety issues must be addressed before
this technology could become feasible, and the authorization should be
denied on that basis. EPA examined these safety issues within the
traditional consistency with section 202(a) criterion, with the
requisite deference given to CARB and the burden placed on those
arguing that safety concerns should give cause for EPA to deny the
authorization. CARB responded to the industry objections by offering a
detailed review of steps necessary to refine small engine catalyst
technology to meet the standards while reducing the high temperature
risks, as well as identifying some current small engines that met the
standards without using a catalyst. After reviewing all relevant
information from CARB and other commenters on the safety issues (and
other technological feasibility issues) the Administrator stated he was
``unable to make the finding that the CARB Tier 2 standards are not
technologically feasible within the available lead time.'' \206\
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\206\ Decision Document, Authorization of California's Under 25
Horsepower Utility Lawn and Garden Equipment Engine Exhaust Emission
Standards (ULGE) (July 5, 1995), EPA Docket A-91-01 at 61-70.
---------------------------------------------------------------------------
In the California GHG proceeding, CARB has responded to the
industry safety arguments, both during the underlying California
rulemaking and in comments submitted to EPA in this waiver proceeding.
In summary, CARB rejected the industry arguments in several ways.
First, it pointed out that under the terms of AB 1493, CARB is
precluded from requiring vehicle down-weighting as a means of achieving
compliance. Second, CARB has laid out a broad pathway of potential
technologies for achieving compliance for all vehicle types, none of
which require any weight reduction of vehicles. Third, CARB notes that
an industry study (Sierra 2004) shows that weight reduction is far from
cost-effective and therefore becomes an unlikely compliance option.
Fourth, CARB submitted reports from experts that tend to dispute any
safety impacts from the GHG standards by demonstrating that any weight
reduction that may be made to comply with the GHG standards need not
adversely affect vehicle safety. Finally, the opponents VMT safety
theory is entirely based on their flawed rebound and fleet turnover
arguments (discussed above in section IV.C.2).
Regarding the safety issue, EPA notes that CARB has provided
considerable evidence that its GHG standards can be met without any
increase in concern regarding vehicle safety. Even accepting the
industry arguments regarding the safety implications of downsizing--
which are disputed by CARB, particularly for downsizing of larger
vehicles--EPA cannot make the finding that the CARB standards are
technologically infeasible because manufacturers may choose to use a
method of compliance that is not as safe as the methods CARB has
identified, particularly where there are many business reasons for
manufacturers not to choose such a method. The burden, here, is on
manufacturers to demonstrate that safety concerns with the technology
available for compliance were unavoidable and substantial and that
manufacturers would have no reasonable technological option available
to them in the lead time provided for compliance. Based on the entire
record, they have not made such a demonstration. Beyond this limited
type of review under section 209(b), EPA's proper role is to leave for
California the judgment of what greenhouse standards are appropriate in
light of safety concerns raised by manufacturers.
With regard to the claim that increased VMT will increase the
number of accidents, this argument is not relevant to the safety of the
vehicle but to an outcome based on the possible actions or changes of
driving patterns of people who own these vehicles. This argument does
not go to the technological feasibility of the vehicle itself. This is
a public policy argument that is left for California's discretion but
is not relevant to the narrow technological feasibility analysis
authorized for EPA under section 209(b).
For these reasons, EPA finds that the industry opponents of this
waiver request, with respect to the vehicle safety impact of the CARB
GHG standards have not met their burden of proof for EPA to find that
these standards are not consistent with section 202(a) of the Act.
E. Conclusion on Technological Feasibility
After its review of the information in this proceeding, EPA has
determined that CARB has demonstrated a reasonable projection that
compliance with its GHG standards is reasonable, based upon the current
and future availability of the described technologies in the lead-time
provided and considering the cost of compliance. The industry opponents
have not met the burden of producing the evidence necessary for EPA to
find that California's GHG standards are not consistent with section
202(a).
With regard to motor vehicles required to meet the near-term
standards for the 2009 through 2011 model years, the CARB technical
information presented in this record clearly indicates that these
requirements are feasible. CARB has presented the case that the
industry as a whole will be able to meet these standards for this
period--for the 2009 and 2010 model years--with compliance with the
standards including credit generation, and for the 2011 model year--
with a carry-forward of credits earned in the 2009 and 2010 model
years. Within the industry, several manufacturers are not expected to
need credits to comply in the 2011 model year. Moreover, California has
provided several technological avenues that are currently available for
meeting the 2011 MY standards without the need for credits.
Manufacturers have provided no evidence that these technologies cannot
be applied to meet the 2009-2011 MY standards.
For the mid-term standards, 2012 MY and beyond, CARB again
identified various and reasonable technological avenues that
manufacturers could use to meet the mid-term standards. CARB initially
presented that the continued use of technologies identified for the
near-term along with more sophisticated technologies and the expected
upswing in hybrid-electric and diesel vehicles would result in industry
compliance for these years. In its June 2007 comments,
[[Page 32777]]
CARB noted that it expected manufacturers to use combinations of the
initially introduced technologies to meet the mid-term standards and
cited several examples of this already happening in several
manufacturers' products. CARB also noted that in 2007, manufacturers
were aggressively introducing new hybrid vehicles well ahead of the
mid-term standards. For the longer term, as noted earlier, CARB states
that ``by 2015, even those manufacturers facing the most difficult
challenge complying with California's standards have made statements
that on their face show they plan to comply with the later model years
of standards, even before receiving additional credit for GHG
reductions from air conditioning improvements and regardless of 2009
and 2010 credits carrying forward.'' \207\
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\207\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006
at 27.
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In its comment submitted after EPA's March 5, 2009 hearing, CARB
summarized the industry discussion on technological feasibility as
follows:
In our July 24, 2007 comments CARB stated ``* * * not a single
manufacturer from either the Alliance or AIAM has independently
presented any substantive comment concerning the principal and
proper focus of the (EPA) proceeding--the technological feasibility
and lead time for those manufacturers to comply with the subject
greenhouse gas standards.'' Document ID No. EPA-HQ-OAR-2006-
0173.3601 at 26. That statement remains true today, and stands in
stark contrast to the renewed demonstration CARB has made in this
reconsideration proceeding.\208\
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\208\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006
at 29. CARB also noted, that in the final efforts to persuade EPA to
deny this waiver, waiver opponents cited policy arguments against
the waiver, such as the preference for a uniform national standard
to avoid a ``patchwork'' of state regulations, rather than any
attack on the technological feasibility of the standards.
Regarding the lead time provided by California to meet the near-
term and the mid-term and later standards, the commenters have not met
their burden to show that the lead time is insufficient. California
provided manufacturers 4-5 years before the near-term GHG standards
would go into effect and 8-9 years before the later standards, giving
substantial time for development of technologies to meet the standards.
The industry commenters have not shown that this lead time was
insufficient, both for the near-term GHG standards, that were based on
technologies already known and developed, as well as for the mid-term
GHG standards, where CARB provided a reasonable pathway to be
followed--answering theoretical objections, identifying major steps
needed to refine technology, and offering plausible reasons for
predicting successful technologies.\209\
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\209\ Regarding lead time, some industry comments suggest that
EPA should count lead time from the time the waiver is granted. EPA,
however, believes that lead time should run from the time the rule
is adopted by California. As EPA made clear in its waiver decision
for California's standards regulating medium-duty motor vehicles (59
FR 48625 (Sept. 22, 1994), Decision Document at 39-41), lead time
should generally be measured from the point at which California
adopts its regulations. At that point, the regulations, and their
obligations on regulated parties, are clear. EPA measures lead time
for its regulations from the time of promulgation, which is
analogous to California's adoption of its regulations. EPA review of
CARB waiver requests causes no more uncertainty than judicial review
of EPA regulations. In addition, California and regulated parties do
not know when EPA will make a final decision on a request for waiver
of preemption, so California would have little ability to evaluate
lead time at the time it adopts its standards if lead time were
based on a future action by another entity the timing of which is
uncertain. In any case, the commenters have not shown that the
amount of lead time provided from the date of the waiver is
insufficient.
---------------------------------------------------------------------------
Regarding the cost component of the technological feasibility test,
EPA believes that the opponents of the waiver have not met the burden
of proof to show that the GHG standards are not technologically
feasible because of excessive cost. The industry cost study (from
Sierra Research) from the CARB rulemaking found an average vehicle cost
increase of about $3,000 to comply with the CARB standards, an increase
which CARB rebutted in detail, and which was also found not credible by
the district court in the Vermont litigation. Alternatively, even if
the industry estimates were closer to the mark than the CARB estimates,
CARB points out that Congress was concerned with standards causing a
doubling or tripling of vehicle costs (MEMA 627 F.2d at 1118), not the
cost increases that CARB has projected (ranging from under $100 for
some manufacturers in near-term to a maximum of $1,100 to $1,350 for
vehicles in the 2016 MY).\210\
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\210\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.14 at 80-83 and, EPA-HQ-OAR-2006-0173-0004.1 at 39-40.
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Therefore, for the above reasons, I am unable to find that the CARB
GHG motor vehicle emission standards are not technologically feasible
within the available lead-time giving consideration to the cost of
compliance.
F. Other Issues Related to Consistency With Section 202(a)
1. Impact of EPA's March 6, 2008 Denial on Lead Time
In EPA's February 12, 2009 Federal Register notice, EPA
specifically sought comment on the effect of the March 6, 2008 Denial
on whether CARB's GHG standards are consistent with section 202(a),
including lead time.
In comments submitted for this reconsideration, the industry
commenters asserted that any lead time clock that may have been running
should have stopped completely and immediately upon EPA's March 6, 2008
Denial. Both the Alliance of Automobile Manufacturers and the
Association of International Automobile Manufacturers noted that even
CARB officials testified that manufacturers should have started
development of their 2010-2012 MY product lines at the time the final
standards were finalized in the 2004-2005 time frame, and that there
should be a presumption that the industry could and would stop ongoing
development efforts when this waiver was denied.\211\ In its comments,
the Alliance noted that it should not be assumed that a ``retroactive''
waiver would impose no hardship because manufacturers are able to earn
credits for sales for the 2009 and 2010 MYs in advance of any waiver
grant. They claim that the regulated parties would have conducted their
business differently if they knew in advance that these regulations
would be enforced.\212\
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\211\ Alliance of Automobile Manufacturers, EPA-HQ-OAR-2006-
0173-8994.2 at 27, and, Alliance of International Automobile
Manufacturers, EPA-HQ-OAR-2006-0173-9005.2 at 16, Note 4.
\212\ Alliance of Automobile Manufacturers, EPA-HQ-OAR-2006-
0173-8994.2 at 23-25, see also National Automobile Dealers
Association, EPA-HQ-OAR-2006-0173-8956.1, at 10-12.
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On the other hand, CARB urges EPA to reject the argument that the
March 6, 2008 Denial tolled the lead time countdown. CARB noted that it
always maintained that it intended to enforce the GHG standards from
their start point for the 2009 MY, discussed how it pursued promptly
all available avenues to overturn the March 6, 2008 Denial, and noted
that the denial was all but guaranteed to be revisited because its
waiver request was supported by both candidates for President in 2008.
Additionally, CARB argues that any period the March 6, 2008 Denial was
in effect was not significant compared to the four to ten years of lead
time available to the manufacturers, and that technological
advancements continued to appear during the denial period.
The manufacturers argue that EPA's earlier denial was reasonably
relied upon by manufacturers, that the denial tolled or suspended lead
time and allowed them to stop working towards compliance, which affects
the adequacy of the lead-time for California's standards. This amounts
to an argument that they reasonably had the opportunity to stop work
towards
[[Page 32778]]
compliance at that point if they chose. However it does not change the
basic issue before EPA: whether the manufacturers, as opponents of the
waiver, demonstrated that the standards are not consistent with section
202(a) because of inadequate lead time.
Based on a review of the entire record, and even assuming the
reasonableness of the manufacturers' claim that they could have
reasonably stopped work towards compliance upon the March 6, 2008
Denial, the industry commenters have not shown that the lead time
provided under these circumstances was insufficient. This is
particularly true regarding the near-term GHG standards, which were
based on technologies already known and developed. But this is also
true for the mid-term GHG standards, where CARB provided a reasonable
pathway to be followed--answering theoretical objections, identifying
major steps needed to refine technology, and offering plausible reasons
for predicting successful technologies.\213\ I believe that this is
borne out by the evidence submitted to the record by CARB and the NRDC,
which show industry-wide compliance with the near-term GHG standards
and with future-term compliance attainable using technology
developments as well as early credits. Manufacturers have not come
forward with evidence to show that they cannot feasibly achieve the
near-term or mid-term GHG standards, based on lead time. Although the
industry trade association comments generally discussed manufacturers'
reliance on the EPA waiver denial to suspend or stop planning for
California compliance, no manufacturer came forward and asserted that
it actually stopped planning. Whatever disruptions may or may not have
occurred as a result of the denial, near-term standards have clearly
been shown to be feasible and mid-term standards are clearly feasible
given the lead time provided, even taking account of the denial.
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\213\ EPA notes here (again) that lead time begins when
California promulgates its standards, not when the waiver is
granted.
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Regarding implementation and enforcement by CARB for the 2009 MY,
manufacturers claim that approving the waiver for that year would be a
retroactive grant of a waiver and would be improper. However, approval
of the waiver for the 2009 MY technically would not be a retroactive
action. EPA would not be determining that past conduct was or was not
lawful when it occurred in the past, or rewriting past legal
obligations. The legal obligation at issue is still a future
obligation--compliance with the annual fleet-averaging requirements for
the 2009 MY standards by the end of 2009, based on sales throughout the
year. The fact that some conduct which occurred in 2009 prior to the
grant of the waiver is relevant to determining compliance with the 2009
MY obligation, after the end of the model year, does not by itself make
the obligation to comply with the 2009 MY standards a retroactive legal
obligation. In any case, even if a waiver for the 2009 MY was
considered to impose retroactive obligations, EPA has the authority in
an adjudication to take such action under appropriate
circumstances.\214\
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\214\ Securities and Exchange Commission v. Chenery Corp., 332
U.S. 194 at 203 (``That such action might have a retroactive effect
was not necessarily fatal to its validity. Every case of first
impression has a retroactive effect, whether the new principle is
announced by a court or by an administrative agency. But such
retroactivity must be balanced against the mischief of producing a
result which is contrary to a statutory design or to legal and
equitable principles. If that mischief is greater than the ill
effect of the retroactive application of a new standard, it is not
the type of retroactivity which is condemned by law.'').
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Under these circumstances, all of the evidence presented to date
indicates that manufacturers will be in compliance with the 2009
standards. EPA is granting the waiver for 2009 and later years.
However, out of an abundance of caution, and since any delay in
granting this waiver stems from EPA's prior March 2008 Denial, EPA is
imposing one specific limitation designed to ensure that CARB not hold
a manufacturer liable or responsible for any noncompliance civil
penalty action that could be caused by emission debits generated by a
manufacturer for the 2009 model year. For the 2009 model year, CARB can
fully implement and enforce its regulations, including implementation
of CARB's Executive Orders for 2009 model year families issued both
before and after the date of today's waiver, as described below. While
debits from model year 2009 may offset credits generated in later
years, and reduce the amount of credits available to a manufacturer,
any debits from model year 2009 may not be used as a basis for holding
a manufacturer in noncompliance and no civil penalties may be assessed
based on such debits. Other than that restriction, CARB may fully
implement and enforce, and manufacturers may use the GHG standards
program as promulgated, such that CARB may implement certification for
MY 2009 motor vehicles, and may grant manufacturers credits that can be
used for future obligations. This restriction on handling of any
possible debits appropriately limits any potential concern raised by
manufacturers over their potential reliance upon EPA's previous waiver
denial.
2. Endangerment of Public Health or Welfare
a. Is it Appropriate To Review Endangerment of Public Health or Welfare
Under the ``Consistency With Section 202(a)'' Criterion?
EPA has traditionally stated that a state standard would be
inconsistent with section 202(a) if there is inadequate lead time to
permit the development of the necessary technology, given the cost of
compliance within that time, or if the Federal and State test
procedures impose inconsistent certification requirements.\215\ The
legislative history of this provision and judicial precedent indicate
that technological feasibility in the lead time provided was intended
to be the primary focus of this criterion.\216\
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\215\ 68 FR 19811, 12 (April 22, 2003).
\216\ MEMA III, 142 F. 3d at 463; Ford, 606 F. 2d at 1296, n.
17, 1297; H.R.Rep, No. 728, 90th Cong, at 22-23.
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However, several industry commenters have suggested that in the
context of this waiver, it is also appropriate for EPA to include
endangerment to public health or welfare in its evaluation of
consistency with section 202(a). They note the language in section
202(a)(1) of the Clean Air Act that requires the Administrator to
promulgate standards ``applicable to the emission of any air pollutant
* * * which in his judgment cause, or contribute to, air pollution
which may reasonably be anticipated to endanger public health or
welfare.''
While acknowledging the limits of EPA's traditional review under
the ``consistency with section 202(a)'' criterion, they note that
previous waivers have generally reviewed standards designed to reduce
concentrations of air pollutants, like criteria air pollutants that EPA
has listed under section 108 of the CAA, for which an endangerment
finding required under section 202(a)(1) has already been made. Even
standards regulating PM and formaldehyde, for which EPA has granted
waivers, involved pollutants that had been identified by EPA, or by
Congress in the Clean Air Act, as needing regulation. Thus, the
question of endangerment was not in dispute in previous waivers. By
contrast, EPA has not made any final decision regarding whether
emissions of GHGs from new motor vehicles cause or contribute to air
pollution that may reasonably be anticipated to endanger public health
or welfare (this two-part
[[Page 32779]]
test is hereafter referred to as ``endangerment''). This is a
requirement for EPA to issue regulations under section 202(a).\217\
Thus, the commenters state that there is an issue for review in this
waiver under the consistency with section 202(a) criterion that was
never relevant for EPA's review of previous waiver requests.
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\217\ On April 24, 2009, EPA published a notice proposing to
find that elevated concentrations of greenhouse gases in the
atmosphere are reasonably anticipated endanger the public health and
welfare of current and future generations and also proposing to find
that emissions of carbon dioxide, methane, nitrous oxide, and
hydrofluorocarbons from new motor vehicles and new motor vehicle
engines are contributing to this air pollution under section 202(a)
of the Clean Air Act. 74 FR 18885, 18886.
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In contrast, CARB states that no new test of consistency with
section 202(a) is warranted or permissible. CARB argues that precedent
shows that nothing more than technological feasibility and test
compatibility is required under section 209(b)(1)(C).
I find that in this instance, I do not need to resolve the issue of
whether it is appropriate to address the issue of endangerment under
the consistency with section 202(a) criterion of section 209(b). This
is because in this instance, I find that even if the issue of
endangerment is relevant to EPA's evaluation of consistency with
section 202(a), those opposing the waiver have not met their burden of
proving that California's regulations are inconsistent with section
202(a) based on that concern.
b. Parties Opposing the Waiver Have Not Met Their Burden of Showing
Lack of Endangerment to Public Health or Welfare
As noted above, parties opposed to a waiver have the burden of
proof to show that one of the findings under section 209(b)(1) should
be made. To the extent that the two-part endangerment test is relevant
to a determination of consistency with section 202(a), those opposing a
waiver must affirmatively demonstrate that California's standards are
inconsistent with this criterion. They have failed to do so in this
instance.
Commenters who claim that EPA should deny the waiver generally base
their claim on the fact that EPA has not yet determined whether
greenhouse gas emissions from new motor vehicles cause or contribute to
air pollution which may reasonably be anticipated to endanger public
health or welfare, or promulgated greenhouse gas standards pursuant to
section 202(a). They claim that unless and until EPA makes such a
determination that authorizes regulation under section 202(a), EPA
cannot grant a waiver to California. They also state that the fact that
the current California waiver request pertains to global climate change
emissions, rather than to conventional pollutants, means that EPA
should not give California's waiver request a presumption of
consistency under Section 209(b)(1)(C).
In contrast, commenters supporting the waiver request contend that
EPA's lack of a determination on endangerment and lack of GHG emission
regulations is not relevant to EPA's consideration of the waiver
request. CARB notes in its comments that EPA may not find inconsistency
on the ground that EPA must first make its own endangerment finding on
GHG emissions before granting California's waiver request. CARB
suggests that Massachusetts v. EPA's contemplation of coordinated
activity at the federal level is entirely irrelevant to the waiver.
CARB also provides significant discussion on this issue providing
evidence that, according to CARB, shows that global climate change does
endanger public health and welfare.
Manufacturer suggestions that EPA should deny California's request
because it has not yet made a finding of endangerment mistake the
burden of proof that opponents of a waiver are obliged to meet before
EPA must deny a waiver. To deny a waiver based on section 209(b)(1)(C),
EPA must find that California's standards ``are not consistent with
section 202(a).'' It is not enough that EPA has not made a decision on
the subject of whether GHG standards are authorized under section
202(a). To deny a waiver the Administrator must affirmatively find that
the standards are inconsistent with section 202(a). The initial
presumption of consistency is not dependent on the pollutants being
regulated, as suggested by commenters--the presumption is provided for
in the statute.\218\ Regarding endangerment, therefore, I believe that,
to the extent it is even an appropriate criterion under section
209(b)(1)(C), it would not be appropriate to deny a waiver request
unless it is affirmatively demonstrated that the pollutants being
regulated do not ``cause, or contribute to, air pollution which may
reasonably be anticipated to endanger public health or welfare.''
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\218\ See MEMA I, 627 F. 2d at 1121 (``The language of the
statute and its legislative history indicate that California's
regulations, and California's determination to comply with the
statute, when presented to the Administrator are presumed to satisfy
the waiver requirements and that the burden of proving otherwise is
on whoever attacks them.'').
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To the extent endangerment is relevant to whether California's
standards are consistent with section 202(a), this criterion should be
narrowly interpreted and should require more than the fact that EPA has
not yet made a final decision concerning endangerment. Denial of a
waiver based on this issue should require either a previous
determination by EPA on the merits that the endangerment test has not
been met, or a demonstration in this proceeding by the opponents of the
waiver that EPA could not find that the endangerment test is met. Lack
of a final decision by EPA on this would not be sufficient to deny the
waiver. Those opposing the waiver cannot simply point to an open
question regarding the issue at hand--on the contrary, they must come
forward with evidence demonstrating that California's standards are not
consistent with section 202(a).\219\
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\219\ See MEMA I, 627 F. 2d at 1126.
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In order to regulate emissions of a particular pollutant under
section 202(a), EPA must review several issues, including whether the
emissions of the pollutant from motor vehicles cause, or contribute to,
air pollution which may reasonably be anticipated to endanger public
health or welfare, and whether the standards are technologically
feasible within the lead time provided. EPA has to make such
determinations as part of lawfully adopting GHG standards under section
202(a). However, lack of either kind of action by EPA is not by itself
evidence that GHG standards are in fact inconsistent with section
202(a). The fact that EPA has not yet made either determination, in the
context of its own rulemaking, is by itself not a basis to deny a
waiver.
Congress understood that California may act a ``laboratory for
innovation'' in the regulation of motor vehicles, and intended section
209 to allow such innovation.\220\ Yet the ability of California to
encourage such innovation would be greatly compromised if EPA were to
determine that California could take no action under section 209 unless
EPA had already made all of the necessary determinations regarding the
consistency of its own standards in the context of its own regulation
under section 202(a).
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\220\ See MEMA I, 627 F. 2d at 1111.
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In similar instances where EPA reviewed California standards and
EPA had not promulgated similar standards, EPA has determined that the
absence of EPA standards does not by itself preclude a waiver or
prevent its ability to review California's standards under section 209.
Any comparisons necessary
[[Page 32780]]
under section 209 would simply take account of the absence of EPA
regulations, i.e., the comparison would be California standards to the
absence of EPA standards. For example, under the similar procedures of
section 209(e), EPA authorized California to enforce its standards on
evaporative emissions for small nonroad engines despite the fact that
EPA had not yet promulgated evaporative standards for such
engines.\221\ In any case, commenters' discussions of ``comparisons to
federal standards'' in this context is more suited to review of section
209(b)(1)(A), which discusses comparisons between California and
applicable federal standards. Section 209(b)(1)(C) concerns whether
California standards are consistent with section 202(a). This criterion
is not dependent on the existence of comparable federal standards.\222\
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\221\ 71 FR 75536 (December 15, 2006).
\222\ Commenter Alliance appears to put much weight on the
existence of section 202(b)(3). That subsection was added in 1977 to
ensure that where EPA provides a waiver for vehicle standards,
vehicles meeting California standards can still receive a Federal
certificate and be sold in California and other states where
California standards are applicable. This was needed as some of the
California standards may not individually be as stringent as federal
standards, given the ``in the aggregate'' protectiveness provision.
See discussion in Ford v. EPA, 606 F.2d 1293 (DC Cir. 1979). Without
this provision, where more stringent individual federal standards
applied, vehicles complying only with California standards could not
receive a federal certificate of conformity. The language therefore
is designed to deal with situations where federal standards exist,
and may be more stringent than California's. It was not intended to
add or imply any new substantive requirements regarding the
existence of federal standards. Similarly, Alliance's reference to
use of the word ``the'' in section 202(b)(2) is directed towards the
first criterion of section 209(b), not the third. In any case, the
argument raised could at most mean that section 209(b)(2) is not
applicable to this waiver request. California does not rely on
section 209(b)(2) in its request. Also, as noted above, EPA has long
held that the absence of comparable federal standards would not
automatically result in a denial of a waiver request under the ``in
the aggregate'' criterion because EPA believes the appropriate
comparison is between the protectiveness of the California standards
as compared to the absence of the federal standards.
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An additional reason for interpreting the waiver criterion this
way, and not determining inconsistency with section 202(a) based on
lack of an EPA final decision on an issue, is that EPA may always take
action in the future that may impact the criteria for a waiver. For
example, if in the future EPA promulgated standards that were more
stringent than California's standards, this could implicate the
``protectiveness'' criterion of section 209(b)(1)(A). The possibility
of such future events should not be used as a reason to deny a waiver
now. Instead, the impact of a future EPA action should be considered if
and when EPA takes action. Otherwise, the waiver could be denied now,
even though in the future it could be determined that it should have
been granted. This would tend to reverse the statutory presumption of
the grant of waiver unless opponents demonstrate it should be denied
for certain specific reasons. Instead, it would be denied because of
some future possible action that may or may not occur, and may be
delayed for an unspecified period of time. Basing a denial on the
possibility of events that may happen in the future is not consistent
with Congress' goal to preserve the broadest possible discretion to
California. A more prudent approach is to take action based on the
record at hand, with the possibility of reviewing such action in the
future if facts change that merit such a review. As discussed above in
section IV.C.1, EPA may withdraw a waiver in the future if
circumstances make such action appropriate.
It is important to remember that the criterion being reviewed under
section 209(b)(1)(C) is consistency with section 202(a) and not
consistency with EPA standards. EPA has considerable deference within
section 202(a) to promulgate the regulations it believes are most
reasonable. The test for EPA under section 209(b)(1)(C) is not whether
California standards are the same as the standards that EPA has
promulgated or would promulgate under section 202(a), but whether the
opponents of the waiver have met their burden to show, based on the
record before the Agency, that the standards promulgated by California
could not lawfully be promulgated in a manner consistent with section
202(a). As a prior Administrator has stated:
I would feel constrained to approve a California approach to the
problem which I might also feel unable to adopt at the federal level
in my own capacity as a regulator. The whole approach of the Clean
Air Act is to force the development of new types of emission control
technology where that is needed by compelling the industry to
``catch up'' to some degree with newly promulgated standards. Such
an approach * * * may be attended with costs, in the shape of a
reduced product offering, or price or fuel economy penalties, and by
risks that a wider number of vehicle classes may not be able to
complete their development work in time. Since a balancing of these
risks and costs against the potential benefits from reduced
emissions is a central policy decision for any regulatory agency
under the statutory scheme outlined above, I believe I am required
to give very substantial deference to California's judgments on this
score.\223\
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\223\ 40 FR 23104.
In this case, opponents of the waiver have not met their burden of
proving that EPA could not find that emissions of GHGs from new motor
vehicles cause or contribute to air pollution which may reasonably be
anticipated to endanger public health or welfare. To the contrary,
while California and others have provided a great deal of evidence
regarding the dangers posed by GHGs, opponents of the waiver have not
provided significant evidence that emissions of GHGs from motor
vehicles do not cause or contribute to air pollution that can
reasonably be anticipated to endanger public health or welfare. The
recent EPA proposal to find that elevated concentrations of greenhouse
gases in the atmosphere are reasonably anticipated to endanger public
health and welfare, and to find that emissions of carbon dioxide,
methane, nitrous oxide, and hydrofluorocarbons from new motor vehicles
and new motor vehicle engines are contributing to this air pollution
under section 202(a) of the Clean Air Act is further indication that
opponents of the waiver did not meet their burden of proof on this
issue.\224\ Thus, I cannot find that those opposing the waiver have met
their burden of proving that California's GHG standards are not
consistent with section 202(a) for reasons of the endangerment
test.\225\
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\224\ 74 FR 18885 (April 24, 2009).
\225\ Some commenters have indicated that if EPA chooses not to
deny the waiver based on lack of an endangerment finding, EPA should
hold its decision in abeyance until it makes a finding. However,
given the burden of proof on opponents of a waiver, and the lack of
any significant evidence to the contrary in the record on this
issue, I believe it is not appropriate to delay further a decision
on this matter.
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G. Section 209(b)(1)(C) Conclusion
Based on its review of the information in the docket of this
proceeding, I have determined that the opponents have not met their
burden to demonstrate that the CARB GHG standards are not consistent
with section 202(a). Therefore, I am unable to find that the CARB motor
vehicle GHG emission standards are not consistent with section 202(a)
of the Act.
VII. Additional Issues Raised
A. EPA's Administrative Process for Evaluating California's Waiver
Request
1. Public Comment Process
Section 209(b)(1) states in part that ``The Administrator shall,
after notice and opportunity for public hearing, waive application of
this section * * *'' In response to this language, EPA has consistently
announced in the Federal Register the opportunity for a public
[[Page 32781]]
hearing for any waiver request received from CARB. As a general matter
EPA has also offered an opportunity for written comment which has
opened on the date of the Federal Register notice and closed on a date
after the public hearing. As part of EPA's public hearings, the
presiding officer has consistently stated that the hearing was being
conducted in accordance with section 209(b) of the Clean Air Act and
that any interested parties have the opportunity to present both oral
testimony and written comments.
EPA has received comment suggesting that EPA has failed to provide
any systematic procedure for commenters opposing the waiver to rebut
the comments of those commenters supporting the waiver. Because
opponents bear the burden of proof, this commenter believes that EPA
should not treat the waiver proceeding like an informal rulemaking but
instead clearly announce what evidence is admissible and applicable
burdens of proof and evidentiary procedures, such as order of proof and
argument that parties must follow.\226\
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\226\ Alliance of Automobile Manufacturers, EPA-HQ-OAR-2006-
0173.8994 at C-2 through C-4.
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EPA's waiver proceedings and actions under section 209(b)(1) are
informal adjudications. In a waiver proceeding, EPA receives a request
from one entity (CARB) that is presenting an existing regulation
established as a matter of California law. The request is for a waiver
of preemption for that party, so it may adopt and enforce the specific
regulations. In deciding this request, EPA interprets and applies the
three specific criteria established by the Act, and under this
provision EPA is required to grant the waiver unless EPA makes one of
the three specified findings. EPA applies the pre-existing law, section
209(b), to a specific request covering a specific regulation or
regulations, and applies the three statutory criteria to the facts of
the specific request. The decision to grant or deny a waiver changes
the legal rights of the party before EPA, California. If EPA grants the
waiver, then CARB may enforce its state regulations. In that case, the
rights and obligations of other parties, for example, the
manufacturers, are affected by the operation of the state regulation
that is no longer preempted. In addition, under a separate statutory
provision, other States may then adopt and enforce California's'
standards, under their state law. While these subsequent impacts
clearly affect the legal rights and obligations of various parties, the
only legal rights and obligations directly determined by EPA in the
waiver proceeding are the rights of the State of California to adopt
and enforce its state regulations. The other legal impacts flow from
the operation of other laws, once the waiver is granted. Therefore EPA
believes that its waiver proceedings and actions therein should be
considered an informal adjudication rather than a rulemaking. EPA has
been conducting its waiver proceedings in this manner for decades, and
while Congress has amended provisions in section 209 on two separate
occasions, Congress has not chosen to alter EPA's administrative
requirements. Instead, Congress has expressed support for EPA's
practice in applying and interpreting section 209(b).\227\
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\227\ The Committee on Interstate and Foreign Commerce that
drafted the amendments to section 209 in 1977 stated that the
amendment was ``intended to ratify and strengthen the California
waiver provision and to affirm the underlying intent of that
provision, i.e., to afford California the broadest possible
discretion in selecting the best means to protect the health of its
citizens and the public welfare.'' (H.R. Rep. No. 294 301-302
(1977)).
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EPA disagrees with the suggestion that its waiver proceedings are
governed by section 554 of the Administrative Procedure Act (APA) or
any other provision of Title 5 of the United States Code, including
sections 556, 557 and 558. Section 554 of the APA, regarding formal
adjudications, only applies to adjudications required by statute to be
determined on the record after an opportunity for an agency hearing.
Section 209(b)(1) merely states that the Administrator shall provide
notice and opportunity for a public hearing and does not include
language stating that EPA's decision shall be on record after an
opportunity for a hearing. Conversely, other provisions in the Clean
Air Act, including section 205(c)(1) specifically state that EPA's
actions shall be made on the record after opportunity for a hearing in
accordance with sections 554 and 556 of title 5 of the United States
Code. Section 205(c)(1) also requires the Administrator to issue
reasonable rules for discovery and other procedures for hearings.
Any potential action on the waiver request is not subject to the
requirements of APA section 558(c). Any potential action by EPA would
not constitute granting a ``license'' to California. The fundamental
purpose of section 209(b) is to waive application of the preemption set
forth in section 209(a) of the Act, and is not a formal approval of the
type contemplated in the APA. As noted previously, CARB must merely
submit its regulations to EPA with a finding that its standards, in the
aggregate, are as protective of public health and welfare as applicable
federal standards. Unlike a license or permit applicant, the burden of
proof is on the opponents of the waiver and EPA must make an
affirmative finding of one of the three waiver criteria in order to
deny California's waiver request. On the face of the Act, what
California receives from EPA is a waiver, not a license or permit.
Contrary to commenter's claim, APA section 558 does not require the
``adversary process'' described in sections 556 and 557 for this
action. APA section 558 requires the agency to ``complete proceedings
required to be conducted in accordance with sections 556 and 557 of
[the APA] or other proceedings required by law.'' 5 U.S.C. 558(c)
(emphasis added). By complying with the procedural requirements of
section 209(b) of the Act, EPA is complying with both the CAA and any
relevant standards set in the APA.
Regardless, the approval provision in APA section 558 was not meant
to establish additional procedural requirements beyond those required
by law. Instead, the goal of the approval provision of the section is
to ensure ``that an agency shall hear and decide licensing proceedings
as quickly as possible.'' Attorney General's Manual of the APA (1947),
89. Horn Farms is not applicable to this situation, as the dicta
statement regarding APA section 558 applied only to section 558's
provisions regarding revoking a previously granted license, which is
not at issue here.
EPA believes that only those actions or sections of the Clean Air
Act that specifically reference section 554 or otherwise state that
EPA's decision must be determined on the record after an opportunity
for a hearing are subject to the formal adjudication requirements of
the Administrative Procedure Act. EPA nevertheless, as part of good
administrative practice, provides every interested party the
opportunity to present oral testimony and provide written comment based
on a Federal Register notice that clearly sets out the criteria by
which EPA will evaluate CARB's waiver requests. EPA believes all
commenters, including opponents of the waiver, have had ample
opportunity to comment and meet their applicable burdens of proof.
Opponents of CARB's GHG regulations and of its waiver request have had
ample opportunity to present their viewpoints during the course of
CARB's rulemaking and EPA's waiver proceeding. First, as noted in the
March 6, 2008 Denial, in response to several requests to extend the
comment period during EPA's initial consideration of CARB's waiver
request EPA indicated that consistent with past waiver practice, it
would continue, as appropriate, to communicate with any
[[Page 32782]]
stakeholders in the waiver process after the comment period ended and
that it would continue to evaluate any comments submitted after the
close of the comment period to the extent practicable.\228\ EPA did not
receive any request to extend the written comment period during the
reconsideration of CARB's request. Opponents have also had the
opportunity to submit lengthy comments during two separate comment
periods (one of which occurred well after CARB had submitted all of
their initial comments) and to testify at three separate public
hearings. The regulated industry has in its possession, along with
CARB, the necessary information to adequately comment on whether the
GHG emission standards are technologically feasible and also what CARB
has said about the protectiveness of its standards from both CARB's
rulemaking phase and from earlier comments. Opponents have the same
access to the necessary information in order to formulate comments in
regard to the second waiver criterion at section 209(b)(1)(B).
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\228\ 73 FR 12156, 12157 (March 6, 2008).
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2. EPA's Reconsideration Process
Upon receiving CARB's January 21, 2009 request for reconsideration
of the March 6, 2008 waiver Denial, EPA published a notice on February
12, 2008 notifying the public that EPA was reconsidering its March 6,
2008 Denial, and was providing an additional hearing and the
opportunity to submit comment on all issues relevant to the waiver,
including inviting comment on certain specific criteria and questions.
EPA received comment suggesting that the February 12, 2009 notice
failed to inform the public of relevant issues and contained misleading
statements and, therefore, the Agency must issue a new notice before
proceeding with any reconsideration of the denial.\229\ This commenter
notes the EPA fails to discuss the legal standards EPA believes it must
meet to justify reconsideration of a major policy action including the
legal standards EPA believes governs how it is to reopen a previously
decided matter. EPA believes this commenter fundamentally
misunderstands the purpose of the February 12, 2009 notice. EPA's
February 12, 2009 notice did not constitute a final decision to change
the Agency's position with regard to California's greenhouse gas waiver
request, and did not implicate any arguable requirement to supply a
justification for changing previous interpretations of law or
evidentiary findings. The Agency set forth sufficient reason for
initiating a reconsideration process, and is under no obligation to
provide anything further in the Notice announcing the process. EPA
clearly set forth the criteria and issues it would review in the notice
for reconsideration, which covered all of the issues relevant under
section 209(b). It was unnecessary to provide any further justification
for its reconsideration beyond that which was supplied in the notice.
Commenters have failed to disclose that any procedural error by EPA
prejudiced them in any way, or that EPA's February 12, 2009 notice
limited their ability to fully comment on any of the issues relevant to
California's request for a waiver.
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\229\ Utility Air Regulatory Group, EPA-HQ-OAR-2006-0173-8690 at
2-5.
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3. Is a Waiver Required Before California or Section 177 States Adopt
California's Motor Vehicle Emission Standards?
------Several commenters have suggested that section 209(a), which
provides that no ``political subdivision shall adopt or enforce any
standard,'' should be read to mean that neither California nor any
Section 177 state may ``adopt'' a motor vehicle emission emissions
regulation before EPA grants a waiver. Since lead time is an issue
under section 209(b)(1)(C), see section VI, EPA believes it appropriate
to clarify this issue especially since EPA has previously stated that
lead time runs from the date of adoption of the regulation. Similarly,
because of the number of states that have already adopted CARB's GHG
emission standards EPA believes it appropriate to clarify this issue
for purposes of section 177 as well.
EPA believes that section 209(b) on its face provides the necessary
clarification as to whether California should adopt its regulations
before or after receiving a waiver from EPA. Section 209(b)(1) clearly
envisions EPA commencing a waiver process after California has
submitted standards that have been adopted. Section 209(b)(1) states in
part ``The Administrator shall, after notice and opportunity for public
hearing waive application of this section to any State which has
adopted standards * * *'' (Emphasis added). It would be illogical, if
not impossible, for EPA to analyze the criteria in section 209(b) if it
does not have a final regulation upon which to do the analysis. It
would not be appropriate for EPA to analyze non-final documents that
may or may not become final and that may or may not be revised prior to
becoming final. Similarly, the courts have long interpreted the Clean
Air Act to authorize pre-waiver adoption of California standards by an
opt-in state.\230\
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\230\ See Motor Vehicle Manufacturers Association v. New York
Dept. of Environmental Conservation, 17 F.3d 521, 533-34 (2d Cir.
1994)--``[T]he plain language of 177, coupled with common sense,''
leads to the conclusion that other states `may adopt the
[California] standards prior to the EPA's having granted a waiver,
so long as [the state] makes no attempt to enforce the plan prior to
the time when the waiver is actually granted.''
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B. Scope of EPA's Waiver Review
1. Relevance of the Energy Policy and Conservation Act (EPCA) to the
Waiver Decision
In EPA's initial Federal Register notice of California's request
for a waiver, we requested comment on whether the Energy Policy and
Conservation Act (EPCA) fuel economy provisions are relevant to EPA's
consideration of the request and to California's authority to implement
its vehicle GHG regulations.\231\
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\231\ 72 FR 12261.
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EPA received many comments regarding EPCA and its effect, or lack
thereof, on this proceeding. Several commenters stated that the
provisions of EPCA are not relevant to EPA's waiver determination. They
note that the language of section 209(b) limits the authority of EPA to
deny a waiver to three criteria and does not reference inconsistency
with EPCA (or with any other statute, other than section 202(a) of the
Clean Air Act) as a basis for denial. One commenter noted that EPCA was
already in existence when Congress strengthened California's authority
to adopt motor vehicle emission standards, and Congress indicated no
intent to limit such authority based on EPCA. Some commenters noted the
Supreme Court decision in Massachusetts v. EPA, which stated that EPCA
does not license EPA to shirk its environmental responsibilities under
the Clean Air Act.
Several commenters also provided arguments regarding their view
that California's GHG standards were consistent with the provisions of
EPCA.
Other commenters stated that California's standards violate EPCA.
Several of these commenters noted that EPA and court precedent
regarding section 209(b) indicate that EPA cannot rule on EPCA
preemption under section 209(b). However, the commenters state that if
EPA does consider EPCA-related issues in this waiver proceeding, it
must rule that California's standards violate EPCA. One commenter
states that recent court cases have created confusion regarding the
scope and effect of EPA waivers. The commenters state that if EPA
decides not to address the issue of EPCA preemption in this proceeding,
it
[[Page 32783]]
needs to explicitly state that it is not addressing the issue of
express preemption under EPCA or conflict with EPCA, and that those
issues are best left to the courts.
As EPA has stated on numerous occasions, section 209(b) of the
Clean Air Act limits our authority to deny California's requests for
waivers to the three criteria therein, and EPA has refrained from
denying California's requests for waivers based on any other criteria.
As EPA noted in its initial decision denying California's waiver
request, the decision was ``based solely on the criteria in section
209(b) of the Clean Air Act and this decision does not attempt to
interpret or apply EPCA or any other statutory provision.'' \232\ Where
the Court of Appeals for the District of Columbia Circuit has reviewed
EPA decisions declining to deny waiver requests based on criteria not
found in section 209(b), the court has upheld and agreed with EPA's
determination.\233\
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\232\ 74 FR at 12159.
\233\ See Motor and Equipment Manufacturers Ass'n v. Nichols,
142 F.3d 449, 462-63, 466-67 (DC Cir. 1998), Motor and Equipment
Manufacturers Ass'n v. EPA, 627 F.2d 1095, 1111, 1114-20 (DC Cir.
1979).
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As many of the commenters note, evaluation of whether California's
GHG standards are preempted, either explicitly or implicitly, under
EPCA, is not among the criteria listed under section 209(b). EPA may
only deny waiver requests based on the criteria in section 209(b), and
inconsistency with EPCA is not one of those criteria. In considering
California's request for a waiver, I therefore have not considered
whether California's standards are preempted under EPCA. As in the
March 2008 decision, the decision on whether to grant the waiver is
based solely on the criteria in section 209(b) of the Clean Air Act and
this decision does not attempt to interpret or apply EPCA or any other
statutory provision. EPA takes no position regarding whether or not
California's GHG standards are preempted under EPCA.
2. Do California's GHG Emission Standards Create an Impermissible
``Patchwork''?
Under section 177 of the Act, other states may adopt California new
motor vehicle emission standards under certain conditions.\\ In this
waiver proceeding EPA received comment suggesting that sections 202(a),
209(a) and 177 of the Act establish a regulatory framework designed to
foster a national marketplace for vehicles while recognizing
California's ability to establish its own program which can be adopted
by other states. EPCA however, sets a single national fuel economy
standard and is designed to prevent a fracturing of the marketplace
into individual state programs. Commenters argue that manufacturers
will have at least 15 different fleets they will have to balance for
purposes of fuel economy and greenhouse gas emissions flowing from the
fleet-average emission requirements of each state. Manufacturers also
are concerned that there are significant differences between
manufacturers' fleets in California and those in individual section 177
states creating unnecessary compliance burdens. The commenters suggest
that the federal government should establish a single, national program
for regulation of vehicle greenhouse gas standards and fuel economy.
EPA also received comment stating that to the extent the auto
industry is arguing that a patchwork is created because of differences
between fleet composition in different states, that argument lacks
merit and is irrelevant to this waiver proceeding. Citing an EPA waiver
decision from 1971, this commenter notes that claims such as the
patchwork issue are not appropriate in a waiver proceeding since EPA's
consideration of evidence submitted during a waiver proceeding is
limited by its relevance to the three waiver criteria EPA must consider
under section 209. This has led EPA to previously reject arguments that
are not specified in the statute as grounds for denying a waiver.\234\
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\234\ 36 FR 17458 (August 31, 1971).
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Similar to EPA's response to the EPCA claims noted above, EPA may
only deny waiver requests based on the criteria in section 209(b). The
actions of other states relating to the adoption of the California GHG
emission standards is not a factor I may consider under section 209(b).
The actions of such states are authorized under a separate section of
the Act, section 177, and must conform to the requirements of that
section, including identicality. Section 209(b) does not authorize me
in reviewing a waiver request to consider the impact of actions or
potential actions taken by other states under section 177 of the
Act.\235\ I therefore will not consider this claim in determining
whether to grant California's waiver request.
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\235\ 43 FR 1829, 1833 (January 12, 1978), LEV I waiver decision
document at 185-186.
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It is important to note that on May 19, 2009, EPA and the
Department of Transportation (DOT) issued a ``Notice of Upcoming Joint
Rulemaking to Establish Vehicle GHG Emissions and CAFE Standards''
announcing EPA and DOT's intent to work in coordination to propose
standards for control of emissions of greenhouse gases and for fuel
economy, respectively. If proposed and finalized, these standards would
apply to passenger cars, light-duty trucks, and medium-duty passenger
vehicles (light-duty vehicles) built in model years 2012 through 2016.
EPA believes that if these standards are ultimately adopted, they would
represent a harmonized and consistent national policy pursuant to the
separate statutory frameworks under which EPA and DOT operate.
3. What Impact Does Granting California a Waiver for Its GHG Emission
Standards Have on PSD Requirements for GHGs?
Several commenters suggest that there would be a major consequence
if an EPA waiver were to trigger other requirements under the Act,
including Prevention of Significant Deterioration (PSD) requirements,
and should it grant the waiver, EPA should state clearly that the
waiver does not render GHGs ``subject to regulation'' under the Act.
EPA also received comment suggesting that the question of when and how
GHGs should be addressed in the PSD program or otherwise regulated
under the Act should instead be addressed in separate proceedings
dedicated to evaluating the complicated issues and impacts associated
with those issues.
EPA agrees that these issues are not relevant to the waiver
decision criteria, and are most appropriately addressed in a separate
forum. EPA is not addressing these issues in today's decision.
VIII. Decision
After review of the information submitted by CARB and other parties
to this Docket, I find that those opposing the waiver request have not
met the burden of demonstrating that California's regulations do not
satisfy any of the three statutory criteria of section 209(b). For this
reason, I am granting California's waiver request to enforce its motor
vehicle GHG emission regulations.
My decision will affect not only persons in California but also
persons outside the State who would need to comply with California's
GHG emission regulations. For this reason, I hereby determine and find
that this is a final action of national applicability.
Under section 307(b)(1) of the Act, judicial review of this final
action may be sought only in the United States Court of Appeals for the
District of Columbia Circuit. Petitions for review must be filed by
September 8, 2009.
[[Page 32784]]
Under section 307(b)(2) of the Act, judicial review of this final
action may not be obtained in subsequent enforcement proceedings.
As with past waiver decisions, this action is not a rule as defined
by Executive Order 12866. Therefore, it is exempt from review by the
Office of Management and Budget as required for rules and regulations
by Executive Order 12866.
In addition, this action is not a rule as defined in the Regulatory
Flexibility Act, 5 U.S.C. 601(2). Therefore, EPA has not prepared a
supporting regulatory flexibility analysis addressing the impact of
this action on small business entities.
The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, does not
apply because this action is not a rule, for purposes of 5 U.S.C.
804(3).
Dated: June 30, 2009.
Lisa P. Jackson,
Administrator.
[FR Doc. E9-15943 Filed 7-6-09; 8:45 am]
BILLING CODE 6560-50-P