Briefing on California GHG Vehicle Standards for Linda Adams Secretary, Cal EPA

1. Briefing on California GHG Vehicle Standards for Linda Adams Secretary, Cal EPA June 2, 2006

2. Structure of Regulation • Fleet average standards • Applies to each manufacturer • Two categories (same as LEV II smog standards) • PC/LDT1 • LDT2 • Credit trading allowed • Less stringent requirements for small volume manufacturers

3. Regulated Pollutants and Sources • Standards apply to: • Combined GHG emissions (CO2, CH4, N2O, HFCs) • All vehicular GHG sources (tailpipe, air conditioner) • Standards expressed as “CO2-equivalent” • Emissions weighted according to global warming potential of each gas

4. Standards Designed So All Models Can Comply • Standards set to be feasible for manufacturer with heaviest fleet • Ensures all manufacturers can comply without altering their model mix • Even the largest SUVs able to comply • Consumer choice maintained • All models remain available to consumers

5. Fleet Average Emission Standards ~22% reduction in 2012 ~30% reduction in 2016

6. Effect on Climate Change Emissions – In-use Fleet

7. Other Possible Impacts • Looked at two potentialeffects • Fleet turnover (impact on sales) • Rebound(impact on miles driven) • Not part of traditional analysis • Developed California-specific tools • Bottom line--effects are small

8. Contribution to Governor’s GHG Goals *Based on assumed 50% reduction from 2002 baseline

9. Average Price Increase of New Low GHG Vehicles

10. Net Savings for Consumer (Example--Passenger Cars/Small Trucks) *Assumes gasoline @ $3.00/gallon

11. Current Status • 10 other states have adopted CA regulation • Technology is progressing • Procedural challenges • Litigation • USEPA waiver

12. AB 1493 Litigation – Overview • Three suits • Federal: 5 preemption-based claims, focused on EPCA/CAFE and Clean Air Act • State CEQA: focused on criteria pollutant effect of fleet turnover and VMT rebound • State Administrative: allegations of procedural and Peer Review violations

13. AB 1493 Litigation – Federal • Federal EPCA/CAFE claim • Auto makers claim GHG reg. ‘related’ to fuel economy standard, thus preempted by EPCA • Staff response: EPCA trumped by CAA • Federal Clean Air Act Claim • Auto makers claim GHG regulation not consistent with CAA so no waiver allowed • Staff response: GHGs are pollutants, and regulation meets waiver criteria • Entering resource-intensive discovery phase • By whom and where case will be heard in flux

14. AB 1493 Waiver Requestto U.S. EPA • Submitted December 21, 2005 • ARB argues EPA must apply traditional 3-part Waiver Analysis • Protectiveness • Extraordinary and compelling conditions • “Consistent with” CAA Section 202(a) • Feasible within lead time, given costs • Can use same emission test vehicle to meet U.S. and CA standards

15. AB 1493 Litigation – Related Issues and Cases • § 177 “opt-in” states’ suits: NY, VT, RI • ACRI v. CEC (9th Circuit EPCA case) • The “202 case” v. EPA • State AGs’ NSPS Power Plant GHG §111 case v. EPA • State AGs’ (including CA) suit v. NHTSA on recent CAFE rulemaking (NEPA) • Federal nuisance common law v. power plants

16. Next Steps • Possible decision on legal issues (Fall 06) • Trial on factual issues set early 2007 • No injunction sought by auto makers • Waiver hearing expected later this year • Auto makers reducing GHG on new models • Driven by higher fuel prices • Probably not enough to meet ARB regs.