Case Study 1 — California's Vehicle Emissions Waiver: Federalism on the Tailpipe

The setup

In 1967, three years before the federal Clean Air Act was enacted, the state of California passed the country's first vehicle emissions standards. California had a problem the rest of the country did not yet have on the same scale: the Los Angeles basin, ringed by mountains and full of cars, was producing the worst urban air pollution in the United States. By the time Washington was ready to legislate, California already had a regulatory framework in place. Congress recognized this in §209 of the 1970 Clean Air Act: states are generally preempted from setting their own vehicle emissions standards (a uniform national auto market is a federal interest), but California, having already legislated, may apply to the EPA for a waiver to set standards stricter than the federal floor. Other states may then choose to follow California's standards rather than the federal ones, under §177 of the Clean Air Act.

This is an unusual constitutional structure. Generally, federal preemption is total — when Congress occupies a field, states cannot legislate in it. The Clean Air Act carved out a single state (California) as the exception, gave it a special role, and let other states join California's standards if they preferred. The California waiver has become one of the most important state-level policy levers in modern American environmental policy, and it sits at the center of an ongoing federalism dispute that has run through five presidential administrations.

How the waiver works

California sets a vehicle emissions standard. The California Air Resources Board (CARB) — a state agency — develops the standard through a regulatory process. CARB's standards have, for decades, been stricter than federal EPA standards in particular areas: tailpipe NOx emissions, particulate matter, and increasingly, greenhouse-gas emissions including CO2 (since the EPA was given authority over CO2 from vehicles after Massachusetts v. EPA, 549 U.S. 497 (2007)).

California then applies to the EPA for a waiver under §209. The waiver, by statute, must be granted unless the EPA finds that: 1. California's protective standards are not needed to meet "compelling and extraordinary conditions"; 2. California's standards are not, in the aggregate, at least as protective as federal standards; or 3. Compliance is not technologically feasible.

The historical pattern: California applies, EPA grants. From 1967 through 2017, more than 50 California waivers had been issued, and only one had ever been denied (briefly under the Bush administration in 2008, then granted by the Obama administration in 2009).

Other states may then adopt California's standards rather than the federal floor. As of 2024, 17 states (plus D.C.) had adopted some version of California's standards, representing roughly one-third of the U.S. light-duty vehicle market. When California sets a standard, automakers face a practical choice: produce vehicles that meet only the federal standard (and forfeit roughly one-third of the U.S. market) or design their vehicles to meet the stricter California standard for the entire market. They generally choose the latter. The California waiver is therefore a state-level lever with national-level effects on vehicle design.

The federalism conflict

The first significant attempt to revoke the waiver came in 2019, under the Trump administration's first term. The EPA and the National Highway Traffic Safety Administration (NHTSA) issued the "Safer Affordable Fuel-Efficient Vehicles" rule, which (1) set lower federal fuel-economy standards than the Obama-era rules and (2) revoked California's CO2-and-zero-emission-vehicle waiver. The administration's argument: federal authority over fuel economy under the Energy Policy and Conservation Act preempts state regulation of CO2 emissions, because regulating CO2 is functionally regulating fuel economy. California, twenty-two other states, the District of Columbia, several environmental organizations, and several automakers sued.

The administration's substantive argument had real federalism content beyond the immediate politics. The argument: a single state setting de facto national vehicle standards is in tension with the federal interest in a uniform national auto market. Congress, in the Energy Policy and Conservation Act of 1975, established that fuel economy is a federal matter. If California's CO2 regulation effectively regulates fuel economy by another name, federal preemption should apply. This is not a frivolous argument; it makes a coherent federalism case for limiting California's reach.

The counter-argument also had federalism content. The §209 waiver is a textual carve-out written by Congress itself; it has been granted dozens of times across both Republican and Democratic administrations; states have organized their environmental policies around its existence; manufacturers have organized their compliance strategies around its existence. Revoking it after 50 years of consistent practice raised reliance interests that are themselves part of how federalism actually works. The federal interest in a uniform national auto market exists, but Congress chose to balance it against California's special situation in 1967 and has not amended the choice since.

The political reversals

The waiver was restored by the Biden administration in 2022. EPA Administrator Michael Regan signed a reinstatement order in March 2022, returning California's authority to set CO2 and zero-emission-vehicle standards. California then issued the Advanced Clean Cars II rule (2022), requiring 100% of new vehicle sales in California to be zero-emission by 2035. Several other states adopted parallel rules. The auto industry restructured its compliance plans around this trajectory.

The waiver became a campaign issue in the 2024 election. The Trump campaign promised to revoke the waiver again. Following the 2024 election and the start of the second Trump administration in January 2025, the EPA initiated a new revocation process. As of late 2025, the revocation was working its way through the regulatory process, with California again preparing litigation. The administration also pursued a parallel approach: in May 2025, both chambers of Congress passed Congressional Review Act resolutions purporting to revoke specific California waivers, raising the additional legal question of whether the Congressional Review Act applies to waivers (which California argues are case-specific adjudications, not general rules subject to CRA review).

The pattern over fifty-plus years: Republican administrations move toward revocation, Democratic administrations toward preservation, and California, the auto industry, and the seventeen Section 177 states navigate the resulting whiplash by hedging their compliance plans across regulatory cycles.

What this case shows about federalism

Several lessons:

1. Federalism is not constitutional theory in the abstract; it is statute, regulation, and litigation. The §209 waiver is not in the Constitution. It is in a 1967 amendment to the Clean Air Act. Most of what we mean by "states' authority" in modern policy is not constitutionally guaranteed; it is statutorily granted, and statutory grants can be revoked by future Congresses or reinterpreted by future administrations.

2. State-level standards can become national in effect. Because the auto market is national, and because automakers don't generally make different cars for different state markets, California's standards have effectively functioned as national standards for many design parameters. This is a feature of modern federalism that the Founders could not have anticipated: a state can, in some industries, set national policy by setting state policy. Other examples: Texas's K–12 textbook standards (because Texas is a large enough textbook market that publishers tailor national products to Texas requirements), New York's financial-services regulations.

3. Federal preemption arguments are politically symmetric. The argument "California's standards undermine the national interest in a uniform market" is a federalism-narrowing argument when made by a Republican administration against a Democratic state. The mirror argument — "federal preemption of state climate regulation undermines state autonomy" — is a federalism-broadening argument made by a Democratic state against a Republican administration. Both arguments have constitutional and statutory content; neither is inherently more legitimate than the other; the question of which one wins is partly textual, partly precedential, and partly political.

4. Federalism produces policy whiplash. The auto industry has, since 2017, been planning around emissions standards that have changed direction at least four times (Obama → Trump → Biden → Trump). This is genuinely costly; vehicle development cycles run 4–7 years. Whether the costs of the volatility are worth the costs of locking in either standard is a real and contested question, and one that does not break cleanly along left-right lines.

5. The constitutional question may matter less than the political question. Even if the Roberts Court were to definitively rule that the §209 waiver is constitutional and statutorily mandatory, the EPA has substantial discretion in how it applies the waiver criteria. The regulatory process is itself a venue of policy contestation. Litigation can constrain but rarely settles questions of this kind.

A note on the steel-man

A reader sympathetic to vigorous environmental policy will read this case as a story of California's leadership being intermittently sabotaged by federal opposition. A reader sympathetic to skeptical environmental policy will read this case as a story of one state imposing its preferences on the rest of the country through a fifty-year-old statutory accident. Both readings are coherent. The case is a federalism case partly because it pits state and federal authority against each other, and partly because reasonable observers, looking at the same statute and the same regulatory history, can disagree about which level of government should be making which decisions about which questions. That is not a flaw in the analysis; that is what federalism, in the contemporary American context, looks like.

The next case study (Case Study 2) takes the same federalism logic and applies it to a different and more emotionally charged area: state-level abortion regulation after Dobbs. The pairing is deliberate. The point is to see federalism as politically symmetric — it cuts whichever way it cuts, and each side has been a defender or critic of state autonomy depending on which questions are at stake.