Recent actions by federal regulators have targeted two legacy frameworks: the EPA’s Endangerment Finding and California’s vehicle emissions waiver under the Clean Air Act, reshaping two key pillars of U.S. climate policy. Both have served as cornerstones of the nation’s climate and air quality policies, and their potential rollback raises questions about the future of climate regulation in the United States.
Reconsidering the EPA's Endangerment Finding
The Endangerment Finding, established in 2009, has been the backbone of federal climate regulation for over 16 years. By recognizing greenhouse gases as pollutants that endanger public health and welfare, this finding granted the EPA authority to regulate emissions from vehicles, power plants, and industries under regulations such as the Clean Air Act. EPA Administrator Lee Zeldin has proposed redefining the term "significantly" within the Act's provisions. The redefinition of the Endangerment Finding was triggered following President Trump's Unleashing American Energy Executive Order, where Zeldin began calling the metric into question. Zeldin claims that "mental leaps" were made in determining the scientific finding, and therefore must be corrected. Such a reinterpretation could narrow the scope of what qualifies as a "significant" contributor to air pollution, potentially curtailing the EPA’s ability to regulate greenhouse gas emissions.
While legal experts acknowledge that the term "significantly" is not explicitly defined in the statute, any reinterpretation would face robust judicial scrutiny. Moreover, given its basis in extensive peer-reviewed research and previous Supreme Court rulings, dismantling the Endangerment Finding could prove legally challenging. Critics warn that such a move would disregard decades of scientific consensus linking greenhouse gases to climate change, potentially undermining progress in environmental protection and public health. Proponents, on the other hand, argue that revisiting the finding could reduce regulatory burdens on businesses and promote economic growth.
The Endangerment Finding has weathered challenges before. During the Trump administration, efforts to weaken or reevaluate the finding were stymied by legal and procedural barriers. As such, any successful attempt to dismantle it now would mark a profound departure from legacy climate policy, with far-reaching implications for federal regulatory authority.
Revoking California’s Emissions Waiver
Parallel to this, the U.S. Senate voted on May 22, 2025, to revoke California’s waiver under the Clean Air Act. This waiver allowed California to set stricter vehicle emissions standards than those mandated federally, enabling the state to lead the charge in clean vehicle adoption. California's EV Mandate has also been revoked, which was the state's target to require all new passenger vehicles to be zero-emission by 2035, which hinged on this waiver.
The decision, enacted via the Congressional Review Act (CRA), has sparked legal and political debates. Both the Government Accountability Office and the Senate parliamentarian raised concerns about whether the CRA applies to waivers, as they do not meet the legal definition of a "rule." California officials have pledged to challenge the repeal in court, underscoring the state’s historical leadership in air quality innovation. Given that 11 other states follow California’s emissions standards, this policy change could ripple across the nation, affecting vehicle markets and emissions trajectories.
The timing of the revocation is particularly consequential. Sales of zero-emission vehicles (ZEVs) in California recently saw a slight decline for the first time in five years, reflecting challenges in scaling adoption. Without the waiver, California’s goal of having five million ZEVs on the road by 2030 could face significant setbacks, with broader implications for national emissions reductions.
Implications for Climate Policy and Carbon Markets
These moves signify a broader recalibration of U.S. climate policy, targeting two landmark frameworks that have shaped federal and state efforts for decades. The weakening of the Endangerment Finding could erode the EPA's regulatory authority and undermine the foundation on which many environmental regulations are based, while the repeal of California’s waiver threatens to stall progress on vehicle electrification and emissions reduction.
In the context of carbon markets, such policy shifts introduce new uncertainties. Regulatory frameworks influence the valuation and demand for carbon credits. For instance, the potential increase in emissions from reduced ZEV adoption and relaxed federal oversight could create long-term bullish factors for California Carbon Allowances (CCAs).
Whether these policy changes endure or are overturned in court, they underscore the interplay of science, law, and politics in shaping environmental policy. ClearBlue will continue to monitor these developments and will provide updates on an ongoing basis.