Top Stories
Top Stories
Autos

Ford, BMW, Honda, and Volkswagen agree to California emissions framework

Key Points
  • Ford, BMW, Honda, and Volkswagen have agreed to a compromise on emissions with the state of California.
  • The automakers will improve their fleet’s average efficiency by 3.7% a year starting in the 2022 model year.
  • A dozen U.S. states have also adopted California's vehicle emissions rules.
EXTREME-PHOTOGRAPHER | E+ | Getty Images

Four major automakers said Thursday that the companies have reached a voluntary agreement with the state of California to adopt compromise vehicle emissions rules.

The agreement by Ford, BMW, Volkswagen and Honda to recognize California's legal authority to set emissions standards sets up a clash with the White House's plan to strip the state of that power.

"Ensuring that America's vehicles are efficient, safe and affordable is a priority for us all," the automakers said in a joint statement that described the accord with California as a step to maintain nationwide emissions requirements.

Mary Nichols, who chairs the California Air Resources Board, told Reuters in an interview on Wednesday that the four automakers sought regulatory certainty and had agreed not to legally challenge the state's vehicle regulatory authority.

"They didn't want to face the expense, distraction and the bad publicity that comes from being part of a big rollback on clean cars" she said.

In August 2018 the Trump administration proposed revoking California's legal right to impose its own state emissions standards or require a rising number of electric vehicles. The administration argued that federal law should supersede California's emissions rules.

As part of that plan, the U.S. Environmental Protection Agency and National Highway Traffic Safety Administration backed freezing emissions requirements for new cars and trucks at 2020 levels through 2026. The proposal is not expected to go to the White House for final review for at least several more weeks, people briefed on the matter told Reuters.

The Obama-era emissions standards, which were adopted in 2012, called for a fleet-wide fuel efficiency average of 46.7 miles per gallon by 2025. That average was coupled with annual increases of about 5% that were much more stringent than the 37 miles per gallon required by 2026 under the Trump administration's plan.

The compromise between California and the four automakers hopes to strike a balance between the two.

The California standards would increase efficiency at a nationwide average annual rate of 3.7% annually beginning the 2022 model year through 2026. The agreement also stipulated that 1% of that annual improvement could be covered by credits given to automakers for building electrified vehicles.

Beyond credits for the electric, plug-in hybrids and hydrogen cars, the deal will hike the cap for winning credits for fuel efficiency improvements not captured by traditional testing. Requirements to account for upstream emissions of fuels were also scrapped.

The proposal would allow automakers to adopt the California compromise and operate under one set of rules.

"A 50-state solution has always been our preferred path forward, and we understand that any deal involves compromise," the automakers' joint statement said.

"These terms will provide our companies much-needed regulatory certainty by allowing us to meet both federal and state requirements with a single national fleet, avoiding a patchwork of regulations while continuing to ensure meaningful greenhouse gas emissions reductions," the statement continued.

In June, 17 major automakers wrote a letter to President Donald Trump and California Governor Gavin Newsom looking to restart emissions talks and with an emphasis on a "midway" compromise between the parties to avoid "an extended period of litigation and instability."

The White House declined that invitation, and the automakers launched private talks with California that led to the Thursday's announcement.

Nichols told Reuters that under the compromise deal the White House could still claim "victory" because it "slowed down the pace" of required fuel economy improvements. She also added California is getting "substantially the same results in terms of getting cleaner cars onto the road, but it makes it happen a year later."

Newsom said in a statement that the deal will "make the air cleaner and safer for us all ... I now call on the rest of the auto industry to join us, and for the Trump administration to abandon its regressive proposal and do what is right for our economy, our people, and our planet."

A dozen U.S. states have adopted California's vehicle emissions rules. The 12 states account for more than a third of all U.S. sales auto sales. California alone accounts for about 12% of all U.S. vehicle sales.

The state has said it would certify automakers in compliance with its rules if it adopted the compromise.

VIDEO1:1101:11
Ford goes after Tesla in new electric pickup video

—Reuters contributed to this report.