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U.S. Drops Antitrust Probe of CO2 Deal by 4 Carmakers, California

Is the fight over emission standards nearing an end?
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It was a surprise last July when BMW, Ford, Honda and Volkswagen agreed to meet tougher emission standards in California.

The deal was a challenge to the Trump administration, which is now weeks away from unveiling a plan to scrap existing Obama era regulations that would sharply lower CO2 limits in 2021-2025.

Presidential Pique?

Skeptics were suspicious when the Justice Dept. announced two months after the four-company deal with California that it was launching an investigation into whether the agreement violated federal antitrust laws.

At the same time, the Trump administration revoked California’s power to set its own CO2 standards and impose sales quotas for electric vehicles. Authorities also threatened to withhold federal highway funds unless California took immediate action to improve its own air quality.

Now sources tell The New York Times that the Justice Dept. has quietly shut down the antitrust probe after concluding the four carmakers violated no laws. Skeptics suggest the short-lived investigation was prompted by presidential pique over California’s resistance rather than legal merit.

Three-Year War

Trump and California have been skirmishing over emission rules since the president took office three years ago. Trump vowed to scrap the Obama era regulations and simply freeze CO2 limits at 2020 levels. The White House argued that the tougher rules were too costly and would lead to higher car prices that deterred consumers from buying newer and safer cars.

California, citing its congressionally granted right to set its own standards, vowed to implement the Obama rules anyway. The state also sued the U.S. Environmental Protection Agency, demanding that the EPA reveals the data it used to reverse its own ruling three years earlier, which concluded the Obama rules were feasible.

Carmakers urged the two sides to find a middle ground. Failure would mean years of legal battles and a costly patchwork of dual regulations: one set for states covered by federal laws and one for California and 15 states (plus the District of Columbia) that follow California’s standards—and pledged to continue to do so.

Us or Them

The White House broke off talks with California a year ago. Each side blamed the other for the lack of progress, and the administration gave carmakers a stern “us-or-them” ultimatum. Three months later, the Trump administration rejected a last-minute plea by 17 carmakers for a compromise.

Which is when BMW, Ford, Honda and VW waded in with their own solution. They agreed to voluntarily raise their average new-car fleet fuel economy in California by 3.7% per year during the 2022-2026 model years, compared with the 5% annual hikes mandated by the Obama-era standards.

But other carmakers didn’t jump in. By November they were instead backing the Trump administration’s position in lawsuits over California’s right to issue CO2 standards.

Why did they reverse themselves? It may be because the White House began hinting that its proposed new regulatory plan will include mild cuts in CO2 after all, plus perhaps new ways in which carmakers could earn credits to achieve them.

Regulatory Truce

Carmakers never asked for the outright CO2 regulatory freeze the Trump administration proposed three years ago. Manufacturers indicated at the time that they favored milder targets, or at least more time to reach the original goals.

Above all, carmakers yearn for a solution that results in one set of pollution rules for the entire country. Whether that happens anytime soon will become clear very quickly after the Trump administration finally unveils its regulatory plan.

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