On 12 June 2025, President Donald Trump officially repealed California’s authority to set its own Electric Vehicle (EV) mandate by signing three Congressional Review Act resolutions into law. While this repeal has been looming since the beginning of this administration and after the Senate’s vote in May to repeal these mandates, this marks the official signing into law of these resolutions.
The Senate’s vote in May represented the first time Congress used the Congressional Review Act (CRA), which is a federal law that allows Congress to review and potentially overturn regulations issued by federal agencies, to dismiss Environmental Protection Agency (EPA) waivers granted under the Clean Air Act. Despite the Government Accountability Office stating that these waivers are not eligible for repeal under the CRA, Congress pressed forward by expanding the scope of what is considered a rulemaking.
Three Waivers
The EV mandate is comprised of three waivers, which gave California the agency to implement its own targets and mandates, as follows.
- Omnibus Low NOx Rule: aims to reduce nitrogen oxides (NOx) and particulate matter (PM) emissions from medium- and heavy-duty engines and vehicles starting with the 2024 model year
- Advanced Clean Trucks (ACT) rule: mandates a gradual increase in zero-emission vehicle (ZEV) sales for medium and heavy-duty vehicles
- Advanced Clean Cars II (ACC II) rule: encompasses a set of rules phasing in stricter emissions standards for new cars, trucks, and SUVs, culminating in a requirement that 100% of new light-duty vehicle sales be zero-emission by 2035.
These mandates were mirrored by twelve other states, with three others pending adoption. In response, California Governor Gavin Newsom, Attorney General Rob Bonta, and ten other states immediately filed a federal lawsuit, arguing the revocation was unlawful and undermined clean-air efforts and federal–state balance.
Advanced Clean Cars III
Governor Newsom immediately signed an executive order to double down on California’s commitment to ZEV adoption by initiating the development of the Advanced Clean Cars III regulation. This would serve as a backup measure against any federal actions, or it may be used as an alternative if federal rulings are not upheld in court. The executive order also directs the state to update purchasing requirements to align with manufacturers that continue to comply with the ACC regulations, prioritize state funding for these manufacturers, and continue bi-annual progress reports and work for the Clean Truck partnership. It also directed state agencies to assess additional actions to continue momentum for ZEV adoption and to provide recommendations to the Governor’s office within 60 days.
Impact on Climate Policy and Carbon Markets
While the repeal of California’s waiver threatens to stall progress on vehicle electrification and emissions reduction, the broader implications of this tug-of-war between state and federal authority bring about uncertainty in carbon markets. This can introduce unpredictability in emissions trajectories, availability of funding, and progress in ongoing projects.
The overall shift in tone with regards to climate policy could have impacts nationwide. For instance, progress in the California Cap-and-Invest program has been delayed since earlier this year. On Monday, 9 June, the California State Assembly and Senate published a joint budget plan as part of California’s budget approval process. As expected, the Legislature’s budget does not approve the Cap-and-Trade/Invest extension bill as proposed by the California Governor in May. Instead, the legislative budget plan leaves the Cap-and-Trade extension to the “Legislature’s policy bill process.”
With regard to fundamentals in carbon markets, regulatory frameworks influence the valuation and demand for carbon credits. For example, the potential increase in emissions from reduced ZEV adoption and relaxed federal oversight could create long-term bullish factors for California Carbon Allowances (CCAs) and for the Low-Carbon Fuels Standard (LCFS) credits. Last week, the Environmental Protection Agency (EPA) also proposed to replace existing power plant regulations that mandate a reduction in emissions from the sector. This can alter market fundamentals in programs such as the Regional Greenhouse Gas Initiative (RGGI), which is a carbon market applied to the power sector in Northeastern states.
ClearBlue Markets will continue to follow these developments and will provide updates as needed.