This week, host Kristin Hayes talks with Emily Wimberger, a climate economist at the Rhodium Group and the former chief economist for the California Air Resources Board, where she analyzed the economic impact of California’s portfolio of climate change and air quality policies, focusing on programs related to carbon markets and transportation. Wimberger provides an overview of the California waiver―the waiver’s history, the purpose the waiver serves in California’s climate and air quality management, and why the Trump administration is moving to revoke the waiver. Wimberger also discusses the broader impact the waiver has on the auto industry, the rest of the United States, and perhaps even the rest of the world.
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Top of the Stack
- Rising: Dispatches from the New American Shore by Elizabeth Rush
The Full Transcript
Kristin Hayes: Welcome to Resources Radio, a weekly podcast from Resources for the Future. I’m your host, Kristin Hayes. My guest today is Emily Wimberger, a climate economist at the Rhodium Group, working on the energy and climate team. Prior to Rhodium, Emily served as the chief economist for the California Air Resources Board, where she analyzed the economic impact of California’s portfolio of climate change and air quality policies. She focused on programs related to carbon markets and transportation, and she has graciously agreed to hearken back to her California policy days on the podcast today, where she’ll be joining us to talk about the so-called California waiver.
The waiver has sort of flown under the public radar for decades, but it’s now getting a closer look from the Trump administration, and it’s turning up in the headlines. We’ll discuss what the waiver is, how it came to be, and why it matters, both for California and for the rest of the US, and, I think Emily would argue, perhaps even for the rest of the world. Stay with us.
Emily, I am so pleased that you are willing and able to join us on Resources Radio to discuss one of the nerdiest hot topics in environmental policy, the so called California waiver or more officially known as Section 177 of the Clean Air Act. We'll get into that in a moment, of course, but first can you tell our listeners a little bit more about you and how you entered the world of environmental policy making?
Emily Wimberger: Sure. Thanks Kristin for having me on. So currently, I am a climate economist at Rhodium Group, which is an independent research firm that combines economic data, analytics, and policy insight to really analyze the market impact of energy and climate policy and the economic risks of global climate change. Prior to this position I was the chief economist at the California Air Resources Board which is a state agency in California that implements the whole host of climate and air quality regulations for the state. In that role, I estimated the economic impacts of the whole suite of California policies—that ranged from carbon pricing and the cap-and-trade program to the low-carbon fuel standard, advanced clean car regulations, short-lived climate pollutants—California Air Resources Board even regulates VOCs [volatile organic compounds] from hairspray and deodorant—so it covers quite the gamut.
Deodorant however, is not what really got me into this—it was actually vehicle emissions. I came to California from Pennsylvania for grad school, and I drove across the country in a Honda Civic whose previous owner was a grandma who I think literally drove it one day a week to the grocery store. It was in seemingly great condition. And in California before you register your vehicle with the Department of Motor Vehicles, you have to pass a smog check. So this is an emissions test that is really a critical piece of California's effort to reduce air pollution from vehicles. Well, grandma's Honda did not pass a smog check.
Kristin Hayes: Really?
Emily Wimberger: Yes. And so, this was very infuriating. I was a poor grad student and $3,000 later, it finally was able to pass. There had been repairs made and I could register my vehicle in California. Well, as a very earnest grad student, I set about to finding out more information on this program and to figure out, mostly out of spite to be honest with you, how the benefits of this were calculated, and how it could be made better, and why was I paying this absorbent amount to register what seemed like a very clean vehicle in California. So, I went down this rabbit hole in grad school and ended up writing my dissertation on the California Smog Check Program and thinking about optimal incentives and how to estimate the benefits of that program.
So, it really was grandma's Honda and failing a smog check when I came to California for grad school that really put me into this space. The California Smog Check Program is administered by the California Resources Board, so, I got a little exposure to the agency and saw the policies that they were promulgating, and got really interested in the back and forth with stakeholders, and really how you can design optimal policies to satisfy a really complicated objective function trying to maximize benefits and minimize costs across a whole host of pollutants and air quality impacts. So, that's really how I got into it.
Kristin Hayes: Wow. That might be the best story we've had on the podcast about how someone got into these particular issues, thanks for sharing that. That was very intriguing. Thanks grandma.
Emily Wimberger: Exactly.
Kristin Hayes: So you have been in California for a number of years. You've seen a lot of iterations in California environmental policy, but it seems like it's fair to say that they've been a leader for a long time. And so, I guess I want to start back in the history, a little bit, for this California waiver, and ask you to define it for us or describe it to us, and then maybe if you could speak to why California got that waiver in the first place.
Emily Wimberger: Sure. So, unfortunately it all starts with terrible air quality. In the fifties and sixties air quality in California, specifically Los Angeles and other big cities, was terrible. In 1967 then-Governor Ronald Reagan, he established what is now the California Resources Board, a state agency that would be rooted in science but would be given authority to adopt effective courses of action to reduce California's air pollution and protect public health. So, this all predates federal action on vehicle standards. So, by the time that the federal government began regulating motor vehicles, California had already passed regulations requiring new pollution control technologies on vehicles. So really California was the first mover when it came to regulating motor vehicles.
And so, in recognition of this and due to the success that was being seen in California, the Clean Air Act of 1970 specifically allows California to seek a waiver of the preemption in the Clean Air Act that prohibits individual states from enacting emission standards for new motor vehicles. And so, EPA must grant a waiver before California's rules can be enforced. But it's actually section 209 of the Clean Air Act that specifies that EPA shall grant California a waiver unless the administrator finds that California standards are either not as stringent as federal standards, that the air quality in California doesn't actually compel more stringent standards—that the air quality is not extraordinary and doesn't require more stringency—or that California standards are inconsistent with requirements in the Clean Air Act related to technical feasibility and lead time for auto manufacturers. So, that's really where this comes from. It's really that California was a first mover when it came to vehicle emissions and regulating pollution. And it is important to point out that no California waiver has ever been revoked, and there was one previous waiver that was denied, but it was quickly reversed and then approved.
Kristin Hayes: All right. So, just so I make sure I've got this right—the default is that the waivers are in fact approved, and that has in fact been the history over the course of the Clean Air Act the last 50 years.
Emily Wimberger: Yes.
Kristin Hayes: How many times has it actually been granted in the past? Does it get granted on an annual basis, on a regularized schedule?
Emily Wimberger: So, California has been granted over a hundred waivers, and these cover not only light-duty vehicle fuel efficiency or zero emission vehicles standards which are what we're talking about today, but also heavy-duty diesel engine standards, urban buses, off-road engines and vehicles. There's a whole host of different applications where California seeks a waiver to have more stringent regulations than at the federal level. The waivers in question here that we're discussing today really relate to our greenhouse gas emissions standards and our zero emission vehicle mandate, and these waivers are granted in 2009, 2011 for California's greenhouse gas emissions standards. A waiver was issued in 2011 for the zero emission vehicle regulation. And then in 2013 there was a waiver that combined these two programs into what is known as California's Advanced Clean Car Program.
So, as I said previously, no waiver has ever been revoked. In 2008, US EPA initially denied California's waiver for greenhouse gas emissions standards for 2009 and later vehicles. That denial was reversed, US EPA reconsidered it and ultimately granted that waiver. It is also important to note that there's no Clean Air Act process for revoking a waiver, and this makes sense because governments and industry really rely on waivers for years after they're granted in order to think about their product lines and to plan for investments in different technologies. And waivers do not expire. They might be superseded by a new waiver that approves more stringent standards, but they don't have an expiration date.
Kristin Hayes: Okay. Very good to know. So this is really helpful, I think, for giving our listeners a sense of how the waiver has been used within California. Maybe can you dive into a little bit more detail about one particular example of its use?
Emily Wimberger: Sure. Well, I think the most recent waiver and the one that is under discussion today is a waiver that was requested by the Air Resources Board in 2012. The Air Resources Board was pulling together all of their different air quality, GHG standards, and zero emission vehicle regulations into one comprehensive program known as Advanced Clean Car Program. And so, the Air Resources Board in 2012 requested a waiver from EPA and basically said, "Does this fit into our existing waiver, yes or no? Please allow us this preemption." In 2013 EPA did grant a waiver and so California could go forward and promulgate different amendments to their advanced clean car programs.
And so, what does that actually mean? Well, when the amendments to these regulations were adopted, they were projected to reduce greenhouse gas emissions from passenger vehicles by 36 percent, and 32 percent from trucks from 2016 levels by 2025. So that's a pretty significant reduction in greenhouse gas emissions. And across the state what that meant was that overall GHG emissions were anticipated or projected to drop by about 12 percent by 2025 relative to a business-as-usual baseline. That did not include these modifications under the waiver. So, that's a pretty substantial reduction. And I think it's important to note that there is a lot of flexibility within the regulation. Manufacturers can meet the new standards through engine and emissions control technologies, using more advanced hybrid technologies, using lighter and stronger materials.
And so, there are a lot of options and flexibility that can help drive innovation in the technologies in low and zero emission materials, and engines, and vehicles. The amendments to the zero emission vehicle regulation also required auto manufacturers to have a specific number of zero emission vehicles for sale and that includes full battery electric, hydrogen fuel cell, and also plug-in hybrid vehicles. By 2025, again, these amendments to the set regulation were projected to increase the sale of zero emission vehicles by about 1.4 million. So, that's a huge impact in the overall vehicle fleet especially given stock rollover, what that looks like, and how people hold onto vehicles. So the waiver has had a pretty dramatic impact on California's—or is anticipated to by 2025—have a pretty dramatic impact on California's greenhouse gas emissions and the vehicle stock.
Kristin Hayes: So the waiver has allowed California to push ahead in a number of areas, and to drive different reductions—in greenhouse gas emissions, at least in this particular example—than you might have in other parts of the country. But my understanding is that the California waiver also has, it has spillover effects into other states who decide to follow the standards that California sets. And in fact, that's one of the challenges, or one of the concerns that is being raised by the current administration—that California's leadership, and the states that come with it, actually create some tensions across markets. So, can you talk a little bit about the impact of the waiver beyond the state's borders?
Emily Wimberger: Yeah. So, after California obtains a waiver for a specific emission standard, its Section 177 of the Clean Air Act allows other states that have been noncompliant with federal ambient air quality standards to adopt California standards as their own. So, to-date that includes 13 states and the District of Columbia that have all adopted all or part of California's regulations. So they might adopt the vehicle emissions side, the greenhouse emissions standard side, or the ZEV mandate, or both. And this covers about 30 percent of US vehicle sales—are in states that follow some, or part, or all of California's fuel efficiency standards.
And I would say that the impact is not limited to these specific states. They're going to see market air quality improvements, but in 2012 we also saw that US EPA finalized greenhouse gas standards for passenger vehicles that were pretty similar to California's, very similar to California's. So basically what happened under the Obama administration is that there were two sets of standards, there was the California standards and federal standards. The Obama-era US EPA essentially approved the California standards federally. So this really brought up the level of stringency for fuel efficiency vehicles, and effectively California standards became federal standards.
There's also been a lot of innovation across the globe in zero emission vehicles, and lower emission technologies that have been used and are projected to be used to meet California's vehicle standards, and automakers have been supportive of California's vehicle standards. This didn't make the news—in July there were four automakers, Ford, BMW of North America, Honda, and Volkswagen, that voluntarily agreed to produce vehicles that are more fuel-efficient than what the current federal Trump administration standards are for 2022 to 2026 model years. And so, they made an agreement with California that they would reach a standard of about 50 miles per gallon by 2026. This is slightly less stringent than the existing California advanced clean car regulation requirement. But then California said an exchange for this agreement, that California would say they are in compliance with the California standards. So, this voluntary agreement would result in automakers producing more vehicles that are fuel-efficient, and really, we think will drive innovation and continue the pace of advancements in both zero and low emission vehicle technologies.
Kristin Hayes: I wanted to ask, so is it fair to say, is it in fact accurate to say, that the California waiver has now been revoked? Is this the first time where it's actually been revoked or is it still in limbo-land?
Emily Wimberger: That is a good question. The Trump administration announced that they were revoking it and I think that there is a specified timeline when that would happen. I think it's within 60 days. But, California has filed a lawsuit that would hopefully prevent the waiver from being revoked. And so, it's sort of in, it's a good question. I think we're still in the process of figuring how that would be unwound.
Kristin Hayes: Got it. Okay. So we have California driving forward with more stringent standards than the federal level. We have a number of states following those standards. We also have at least a number of industry representatives, at least at this moment in time, suggesting that they are quite comfortable with the more stringent standards that California is promoting. And yet the California waiver has become quite controversial, and in fact the Trump administration has made moves to revoke the waiver—it sounds like for the first time ever. And so, I guess I wanted to ask, what is the status of the waiver at the moment and then if it is in fact revoked, what are the practical implications of that in the short term and perhaps also in the long term? I know there are legal battles ongoing, but what happens next?
Emily Wimberger: I think we're going to see a long, drawn out court battle. In September, California and 22 other states, and Washington DC, LA, and New York City filed a lawsuit against the Trump administration challenging the decision to revoke California's waiver. I think this is expected to be heavily litigated, but California is pretty confident that they are on very firm grounds and that the waiver will not be revoked. I think it is also worth noting that the waiver lawsuit is a very separate issue from the rollback of fuel efficiency standards that have been proposed by the Trump administration under the safer, affordable, fuel-efficient, Safe Vehicle Rule, which would effectively flat line fuel economy standards from 2021 through 2026. So there's lots of different lawsuits and lots of different issues when it comes to California standards both looking at standards through 2025, and then also the waiver—but those are two separate issues. There's a lot going on in the Golden State. I think the Attorney General has filed over 50 lawsuits against the Trump administration since he's been in office, so lots of busy things.
Kristin Hayes: Yeah, I will admit I could not name for you any other attorney general in the United States, except for the California attorney general because he's been so prominent in his reactions to this administration and his outreach. So yeah, he's famous at this point, I'd say, at least in environmental policy nerd land.
Emily Wimberger: That's right. That's right. And another lawsuit was filed yesterday. California, and 22 states, and seven cities are suing the Trump administration over the Clean Power Plan rule. So yet more to come. But I think in terms of back to the waiver, I think there's really three big impacts in the near-term of a potential waiver revocation that are really critical. I think it is important to know that there have been many automakers who are in favor of one standard federally. So that has been the desire. They want to have one standard. It creates certainty and it allows them to plan their product lines and to not have different pools of vehicles that go to different states.
And so, what this does and what the lawsuit is doing or the threat of the revocation, it really is creating a lot of uncertainty for automakers. California has always demonstrated that their vehicle standards are feasible and that automakers have enough lead time to develop the technologies. This has been part of every waiver that's ever been submitted. And the greenhouse gas emissions standards and the zero emission vehicles standards even underwent a midterm review that confirmed that the auto industry was on track to meet the new standards for 2022 to 2025.
So, now during what could be a lengthy litigation process, automakers don't know which set of standards will ultimately apply to them―will it be California's, will it be the CAFE standards under the Obama administration, or will it be the Trump administration fuel economy standards? And I think in the meantime, consumers globally are interested in more fuel-efficient vehicles and other countries are requiring improved fuel economy. So, I think there is a chance that the US could fall behind globally, in terms of investments and innovation in low and zero emission vehicle technologies, as that seems to be where everyone globally is headed.
Kristin Hayes: And so my understanding is that that was, in fact, the rationale that the Trump administration gave for the revocation of the waiver or the proposed revocation of the waiver, was that they felt the need for a uniform standard—in fact no pun intended—trumped the ability of California or the desire for California to be able to have its own standards. So, they were looking for certainty. But it sounds like in the process, at least in the short term the revocation or the potential revocation of this waiver has created more uncertainty than certainty. Is that a fair assessment?
Emily Wimberger: I would agree. I think from the start of the Trump administration, there was the thought that there would be challenges to a lot of the environmental regulations that were on the books, and that had been put on the books prior to the administration taking office. I think we've seen that play out in a whole host of areas. I think in terms of the actions that were taken in the vehicle space in terms of the safer, the proposed Safe Rule and now with the California waiver potentially in limbo, I think it was unclear—the stringency or the speed at which the administration was going to take action. And I think they went farther in terms of their proposal to flatline fuel efficiency standards and to revoke the waiver then maybe people had anticipated. But I do agree that the one standard does eliminate a lot of potential economic inefficiencies when it comes to leakage and overall reductions in greenhouse gas emissions. And so, I think many people, really I think everyone wants there to be one federal standard. I think the question was at what level of stringency should it be set?
I think the other really immediate impact that the waiver revocation could have is that it's going to impact air quality and public health, and that really is the reason for all of the vehicles standards in California and globally. The Zero Emission Vehicle Mandate is a really critical part of California's strategy to reduce ozone. The south coast air quality or air basin, which includes LA—in 2017 it exceeded federal ozone standards over one third of the year. So, there's still parts of California that have very poor air quality and we're seeing health impacts, we're seeing cases of asthma and bronchial diseases, and we are not in compliance with federal standards.
So, the Zero Emission Vehicle Mandate is a really key component of improving air quality in areas of California that do continue to have very poor air quality. And often these are communities that are on the forefront of—they're low-income communities, they are on the forefront of experiencing the changes and the costs and impacts of climate change. And so, it's very possible that the elimination of the waiver could potentially make air quality worse and prevent the south coast from being in compliance with the federal National Ambient Air Quality Standards.
Kristin Hayes: And that's actually a really interesting question related to the many threads that tie together California and the Trump administration. And so, I wanted to ask as well, is there any connection between the waiver and the other concerns that the Trump administration has expressed related to California's environmental performance, either on clean air or clean water? Are these formally linked, are they informally linked? Can you say a little bit more about that?
Emily Wimberger: Well, I think part of the Trump administration's stance, or what has been said about California's ability to have a waiver, is that it needs to be based just on air pollution and it should not be related to greenhouse gas emissions. And so, in California there is a very clear tie between the actions that are taken to reduce the impacts of climate change and reduce greenhouse gas emissions—they can also have local air quality impacts as well. And so I think this is one, the Zero Emission Vehicle Mandate, is a really good place where you see that by introducing zero emission vehicles and you're basically displacing combustion from petroleum products, you are going to see improved air quality in different locations. And so, I do think there is a tie between these issues.
Kristin Hayes: Maybe just one very different, but question that really is popping into my head this whole time is, what actually leads California to have considerable air quality problems? What about the topography or geography?
Emily Wimberger: Yes, that's it. A lot of it is topography. Yeah, it's just—we have air basins where a local air pollutant can just sit and it's really based on the geography of California.
Kristin Hayes: Right. So in many ways California has always been unique in its challenges and it was this first mover at trying to address those challenges.
Emily Wimberger: Out of necessity, yeah.
Kristin Hayes: Yeah, out of necessity.
Emily Wimberger: Unfortunately, it was terrible air quality that drove us into being the first mover. But California has also really experienced great successes in the air quality and in the climate change space.
Kristin Hayes: Yeah. Yeah.
Emily Wimberger: I wanted to mention one more thing, if that's all right, in terms of the impacts. So it's not just air quality but it's also greenhouse gas emission reductions and really revoking the waiver could have really large impacts on the greenhouse gas reduction potential that were anticipated under the Federal Fuel Efficiency Standards.
Internal Rhodium projections show that the waiver rollback could result in about 600 million metric tons of carbon emissions from 2020 to 2035, which is not insignificant, especially given the really existential threat that is climate change. And the waiver could also impact our longer term goals by reducing the amount of zero emission vehicles that we see on the market. Rhodium estimates that EV sales could drop by about 6 to 7 percent in 2030 if the waiver were to be revoked, and this is again thinking federally. But really any change is really going to put us off the trajectory that we need to be on to at least get within spitting distance of reductions that we need to limit our global temperature rise below 1.5 degrees. So I think it's really—it's the air quality, it's the climate impact, and then it's the uncertainty that this really just creates a lot of turmoil moving forward.
Kristin Hayes: Well, and as you noted it may take quite some time to resolve, so I guess this is an issue that we can all keep our eyes on.
Emily Wimberger: Many billable hours yes.
Kristin Hayes: Yeah, the topic of many podcasts to come, I imagine, if we wanted it to be. But Emily, thank you so much for joining us and talking through this issue that I think can be quite wonky, but is, as you've illustrated, also very important to understanding the trajectories of both air quality and climate policy in the US, not just in the state of California, but obviously this has ripple effects far beyond its borders. So yeah, I really appreciate the time, and I wanted to close with our usual feature which we call Top of the Stack. And I wanted to ask you, Emily, if you could recommend for our listeners something that you have been reading, or looking forward to reading, or listening to, or watching. We take all types of suggestions from our guests. Something that you'd recommend on these broad themes of energy, and environment, and natural resources that others might want to check out.
Emily Wimberger: Yeah, I'm a little late to the game on this one, but I just started a great book that I'm sure is very familiar to all of your listeners. It's called Rising: Dispatches from the New American Shore by Elizabeth Rush. And so, it's great. It provides great first-person reporting from communities that are grappling with sea level rise. So, I think that's been—it's a very interesting book, and it's thinking about sea level rise in a whole new way and from a different perspective. So I would highly recommend that if people haven't already read it.
Kristin Hayes: That is great. That is fantastic. Okay, well Emily thanks again, and we look forward to talking to you again in the future.
Emily Wimberger: Awesome. Thank you so much.
Kristin Hayes: You've been listening to Resources Radio. Thanks for tuning in. If you have a minute, we'd really appreciate you leaving us a rating or a comment on your podcast platform of choice. Also, feel free to send us your suggestions for future episodes. Resources Radio is a podcast from Resources for the Future. RFF is an independent nonprofit research institution in Washington, DC. Our mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. Learn more about us at rff.org. The views expressed on this podcast are solely those of the participants. They do not necessarily represent the views of Resources for the Future, which does not take institutional positions on public policies. Resources Radio is produced by Elizabeth Wason with music by Daniel Raimi. Join us next week for another episode.