California sues EPA over plan to send 4 state emissions waivers to Congress

California asked a federal court Thursday to block the U.S. Environmental Protection Agency from sending four state vehicle emissions waivers to Congress for potential repeal, escalating a legal battle that could reshape the auto industry's regulatory landscape across more than a dozen states.

The state's motion for a preliminary injunction, filed in the U.S. District Court for the District of Columbia, targets the EPA's decision earlier this month to submit the waivers under the Congressional Review Act, a law that allows lawmakers to overturn certain federal regulations within 60 legislative days.

"These latest illegal actions would mean more pollution, poorer air quality, more market uncertainty, and greater health risks for communities already overburdened by emissions," California Attorney General Rob Bonta said in a statement. The state has received more than 75 waivers for environmental actions under the Clean Air Act since the 1960s, he noted.

The four waivers at issue grant California authority to set its own emissions standards for cars, trucks and lawn-and-garden equipment — rules that have been adopted by more than a dozen other states representing roughly 40% of the U.S. auto market. California won approval for its current vehicle emissions program under the Biden administration's EPA in 2022, a framework that requires automakers to sell a rising number of electric vehicles and meet increasingly stringent tailpipe limits.

The legal mechanics at stake

California argues the EPA is improperly attempting to reclassify waivers — historically treated as adjudicatory orders — as rules subject to congressional review. "No agency has the power to wave a magic wand and transform an action that was finalized as an adjudicatory order into a rule, and certainly not without a public process," the state wrote in its lawsuit.

The EPA, under Administrator Lee Zeldin, has said it is "committed to promoting consumer choice and ensuring affordable vehicles for all Americans, while following the best reading of the law." The agency declined to comment on the litigation.

The Congressional Review Act has become a favored tool for Republicans seeking to unwind Biden-era environmental rules. Last year, Trump signed legislation under the CRA to overturn California's mandate phasing out new gasoline-powered cars by 2035, after Toyota Motor Corp., General Motors Co. and other automakers lobbied for relief from the state's emissions regulations. Congress subsequently rescinded California's authority to ban traditional gasoline vehicles after 2035.

What a ruling would mean for automakers

The outcome of the lawsuit carries direct financial implications for the auto industry. Automakers selling vehicles in California and the states that follow its standards face a bifurcated compliance regime: one set of rules for California-aligned states and another for the rest of the country. The Alliance for Automotive Innovation, an industry trade group, did not immediately respond to a request for comment.

A court ruling that upholds California's waiver authority would preserve the state's ability to set de facto national emissions standards — a power it has held since receiving its first Clean Air Act waiver in 1968. A ruling in favor of the EPA, by contrast, could open the door for Congress to unwind decades of California-led environmental policy through the CRA, potentially reshaping the regulatory framework that has pushed automakers toward electric vehicles.

The case adds to a growing list of legal confrontations between California and the Trump administration over environmental policy. The state has filed more than 50 lawsuits against the administration since Trump took office, covering issues from oil drilling to fuel economy standards.

This article is for informational purposes only and does not constitute investment advice.