On May 22, the United States Senate voted 51 to 44 to overturn the waiver granted to California by the U.S. EPA, which allowed California to set vehicle pollution standards stricter than federal regulations. The House of Representatives had voted to rescind the waivers earlier this month. The revoked waivers also include California’s "EV Mandate".
Through the state’s Advanced Clean Car program, car manufacturers are required to have an increasing number of cars sold in California to be zero-emission vehicles (ZEVs) starting in 2026, with a complete ban on sales of non-ZEVs by 2035. A number of other states have also adopted California’s goal in implementing the EV Mandate.
The California waivers have been a constant target for the Trump administration. The first Trump administration also rescinded the waivers, before they were restored under the Biden administration. During the first attempt to rescind them, car manufacturers generally supported the waivers. However, this time, car manufacturers supported revoking the waivers, citing difficulties in meeting the EV Mandate as ZEV sales have slowed across the country.
Support to repeal the California waivers received considerable Democratic support in the House of Representatives, and one "yes" vote from a Democrat in the Senate. These lawmakers cited the high cost of EV adoption and the importance of vehicle choices. The Congressional Review Act (CRA) was employed to reverse the waivers. The CRA allows Congress to review a new rule finalized during a specified lookback period. If lawmakers disagree with the rule, they can pass a joint resolution of disapproval to cancel the rule with a simple majority in both chambers. Disapproval via the CRA means the rule cannot be reissued in the same or a substantially similar form without a new law specifically authorizing it, presumably preventing a future Democratic presidential administration from restoring the waivers easily.
The U.S. Government Accountability Office (GAO) and the Senate Parliamentarian both concur that the California waivers are not subject to the CRA because they do not constitute rules subject to the CRA process. Nonetheless, Congress voted to rescind the waivers despite objections from the GAO and the Parliamentarian.
The CRA was introduced in 1996 and was rarely used until the first Trump administration. This is the first time the CRA has been employed despite objections from the GAO and the Parliamentarian. Democratic members of Congress have warned that employing the CRA in this case is illegal and that overruling the Parliamentarian sets a dangerous precedent. The California Attorney General, in an interview in March, indicated that the state is prepared to launch litigation if the CRA was used to repeal the waivers. It is currently unclear what arguments California will use to fight the Congressional vote.
Rescinding the waivers would threaten California’s goal of having 5 million ZEVs on the road by 2030, potentially increasing long-term emissions. ZEV sales in the state have been slowing, with sales in the first quarter of 2025 being down slightly compared to the same period in 2024. This marks the first quarterly decline since 2020. We do not expect much price reaction for CCAs to the waiver news, as CCAs continue to be dominated by regulatory developments. However, we expect the waiver disapproval to lead to higher emissions, providing a long-term bullish factor for CCAs once the regulatory issues are resolved.