WASHINGTON (Reuters) - U.S. federal officials have decided to end negotiations with California over the Trump administration's plans to roll back fuel economy rules designed to reduce greenhouse gas emissions, a government official said on Wednesday.
California and 19 other states have demanded the Trump administration abandon a proposal made in August to freeze fuel efficiency standards after 2020 and strip California of the ability to impose stricter rules.
Aside from the threat of increased pollution, Detroit automakers have the greatest financial interests at stake.
General Motors (NYSE:GM), Ford Motor (NYSE:F) Co and Fiat Chrysler Automobiles generate most of their global profits from sales of fuel-thirsty large pickup trucks and sport utility vehicles in the United States. All three have discontinued or planned to drop small and medium-sized sedans from their lineups to focus on trucks and SUVs.
The rules to require automakers to roughly double average fuel efficiency by 2025 – with a corresponding decline in carbon dioxide emissions – were one of the Obama administration’s most significant climate policy actions.
Since taking office, Trump has worked to roll back a broad range of Obama environmental policies that were opposed by the oil and coal industries.
As the 2020 election cycle heats up, the fight over automotive emissions promises to be a dividing line between Trump and Democrats, many of whom are embracing a platform of aggressive action to curb climate emissions in what they call the Green New Deal.
Scrapping the talks also comes as power struggle between California and Trump grows. The Trump administration on Tuesday canceled $929 million in federal funds for a California high-speed rail project. California's governor quickly linked that move to California leading a 16 state coalition challenging Trump's national emergency to obtain funds for building a wall along the U.S.-Mexico border.
The California Air Resources Board (CARB), California’s top clean air regulator, has been meeting with officials from the White House, U.S. Environmental Protection Agency and Transportation Department over Trump administration efforts to stop California from tightening vehicle emissions rules in the state.
The government official offered no further details on the end of the talks and it was not immediately clear when an announcement would be made.
California officials already have filed suit to block the Trump administration proposal to roll back federal fuel economy targets for 2022-2025. It is not clear how the industry would respond to the formal adoption of Trump’s proposed freeze, and likely litigation by California and other states.
CARB Chair Mary Nichols last year said the state was willing to give automakers more flexibility to comply with vehicle greenhouse gas limits.
EPA Administrator Andrew Wheeler and Nichols met two weeks ago in San Francisco but there were no substantive discussions, said CARB spokesman Stanley Young.
"The administration broke off communications before Christmas and never responded to our suggested areas of compromise -- or offered any compromise proposal at all. We concluded at that point that they were never serious about negotiating," Young said.
A source familiar with those discussions said EPA officials did not work on the rule during the government shutdown. "There was no real effort to get to yes," the source said.
Trump's EPA and the National Highway Traffic Safety Administration proposed a rule in August that would maintain emissions standards at 2020 levels rather than requiring that they improve.
Scientists have linked rising fossil fuel emissions to higher temperatures that have worsened drought conditions in California blamed for devastating fires.
California officials and environmental groups have said the Trump administration proposal would deal a blow to efforts to contain that damage.
Ford Motor Co on Wednesday said it was "disappointed" in reports the talks had fallen apart. "The auto industry needs regulatory certainty, not protracted litigation," Joe Hinrichs, Ford’s president of global operations said in a statement.
Fiat Chrysler declined comment. General Motors and the Alliance for Automobile Manufacturers did not respond to a request for comment for this story.
Trump's proposed freeze would result in 500,000 barrels per day more oil consumption by the 2030s. The administration says it would reduce regulatory costs for automakers by more than $300 billion over the next decade.
The administration was supposed to finalize the new rules by the end of March in order for the softer requirements to take effect by the 2021 model year, but some automakers and officials have questioned if it will meet that deadline.
Most automakers oppose freezing the requirements but also want relief from standards approved during the Obama administration that called for a roughly 5 percent annual reduction in carbon emissions - targets that translate to fuel efficiency requirements for various classes of vehicles.