Trump and the California clean air waiver

James Sallee has a nice analysis here. Galling as it is to see Trump trying to revoke California's waiver, which allows the state to impose more stringent gas mileage standards than the national, Sallee suggests that the damage was really done when Trump rolled back the national standards imposed by Obama. The reason has to do with the way the federal CAFE standards interact with California's:

The federal greenhouse gas rule for automobiles, called Corporate Average Fuel Economy (CAFE) standards, require automakers to sell vehicles that, on average, have fuel economy above a certain threshold. If California has its own, stricter greenhouse gas rule, the cars sold in California still count as part of the federal fleet under CAFE. This means that every Leaf, Prius and Tesla sold in California improves the industry’s federal average. That enables automakers to sell more Mustangs and Suburbans in the rest of the country, which means that much, if not all, of the greenhouse gas mitigation that takes place in California will be offset by increased emissions throughout the nation. 

The application of this so called “waterbed effect” to California fuel economy standards was described elegantly in a paper by Larry Goulder, Mark Jacobsen and Arthur van Benthem back in 2012. They studied the implementation of a California-specific fuel economy rule and concluded that between two-thirds and three-quarters of emissions reductions in California would be offset by increases in other states. In the meantime, the burden of complying with strong regulations would fall on Golden State consumers.

At any rate, the issue is now in the courts– of law and of public opinion. The best rule change would follow regime change in the White House.