June 11, 2025 • 45 mins
California has long led the US in tackling air emissions, but Congress recently voted to block a key tool employed by the state to accomplish its goals. In this episode of ESG Currents, BI senior ESG analysts Gail Glazerman and Rob Du Boff are joined by Mary Nichols, distinguished counsel for the Emmett Institute on Climate Change and the Environment at UCLA, who previously served as chair of the California Air Resources Board. They discuss implications of the auto-emissions waiver repeal, ways the state could still push emissions improvements and how companies may respond to the rollback in federal ambitions. This episode was recorded on June 5.
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Episode Transcript
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Speaker 1 (00:09):
ESG has become established as a key business theme as
companies and investors seek to navigate the climate crisis, energy transition,
social megatrends, mounting regulatory attention and pressure from other stakeholders.
The rapidly evolving landscape has become inundated with acronyms, buzzwords
and lingo, and we aim to break these down with
industry experts. Welcome to ESG Currents, your guide to navigating
(00:33):
the evolving ESG space, one topic at a time. Brought
to you by Bloomberg Intelligence, part of Bloomberg's research department,
with five hundred analysts and strategists working across all major
world markets. Our coverage includes over two thousand equities and credits,
as well as outlooks on more than ninety industries and
one hundred market indices, currencies and commodities. I am Gail Glazierman,
(00:57):
Senior ESG.
Speaker 2 (00:58):
Analyst, robbdie Boff, Senior ESG Analyst, and we are your
host for today's episode. A key tool in limiting emissions
of climate warming greenhouse gases is regulations such as the
Seminal Clean Air Act from nineteen seventy in the US.
While such regulation is typically done at a national level.
The state of California has taken a lead in this fight.
(01:19):
On today's episode, we are joined by Mary Nichols, Distinguished
Council for the Emmitt Institute on Climate Change and the
Environment at UCLA, who previously served as Chair of the
California Air Resources Board or CARB, a position she held
during the first Trump administration. We'll discuss California's unique history
of environmental regulation, how a recent US congressional vote may
(01:41):
affect this, and what states like California can do to
maintain momentum. Thanks for joining us, Mary.
Speaker 3 (01:47):
Very welcome. It's a pleasure to be with you.
Speaker 2 (01:50):
Awesome. Now set the stage for us explain for our
audience California's approach to managing emissions and air quality, how
it may differ from federal regulations, and why it needs
waiver to accomplish this.
Speaker 3 (02:02):
California actually began a regulating air pollution before any other
state in the country, So California already had a reasonably
well developed program, including a governance structure at the Air
Resources Board now mostly known as CARB, before Congress actually
(02:25):
acted to set up the EPA program under the Federal
Clean Air Act. So when that legislation was going through Congress,
the California delegation took a united stand that they would
not vote for the federal bill unless they were given
(02:46):
the right to continue to pursue more stringent regulations than
what they thought was likely to happen. When the federal
government stepped in and developed an approach that was more
or less of a lowest common denominator that would work
in Mississippi as well as California. And that is how
(03:08):
it came about that California was the only state and
is the only state that is given the right to
have stricter regulations on motor vehicles of all kinds than
whatever has been adopted by the USAPA. So this goes
back to nineteen seventy. The way it works is that
(03:32):
if California wants to go ahead and adopt a stricter rule,
they can do so, but it can't actually be enforced
unless it's given a waiver by the us EPA. The
language in the statute is very clear and has never
(03:54):
changed over all these decades. EPA is required to give
away if California can show that our state needs a
stricter regulation and that the regulation that we're proposing to
enforce is feasible, and that language has been interpreted now
(04:16):
over many, many years and more than one hundred different waivers,
to mean that California only has to show that our
air quality situation requires more stringent standards because we have
a have worse air quality, and that we have done
(04:37):
the technical work to show that our regulation can be
achieved by the industry, and if we do that, then
EPA is supposed to just grant the waiver. In practice,
this may be more than you really want to know,
but almost every time there is some resistance on the
(05:00):
part of the industry. That is, the industry has never
really warmed to the idea that California gets to have
its own system. And even when they're actually even complying
with the California regulation, some companies will oftentimes file objections
(05:22):
on the record with EPA, but in every case, eventually
California has won and gotten the waiver.
Speaker 2 (05:31):
That's great context, and I think, you know, it's very
important to understand administrations from both parties have branded this waiver.
You know, obviously there's the natural push and pull with industry,
but you know, what's changed with the current administration. Why
what are they doing now.
Speaker 3 (05:46):
Well. The first thing that happened is that when the
Trump two administration came in, the new administrator Lee Zelden
didn't wait for Congress to ask to overturn the waiver
from the previous administration that had been granted under President Biden.
(06:07):
He sent the role himself. He just picked it up
and basically announced that he was going to send it
to Congress and ask them to review it using the
Congressional Review Act authority, which is intended to allow Congress
to act when there's a change in parties or change
(06:28):
in administrations and something has happened at the last minute.
We have several objections to this process, but we understood
from the beginning that the Trump administration would try to
repeal the California waiver because they tried a similar maneuver
(06:49):
when Trump was in office the first time around. The
difference was that they went through a process, which we
believe is what they're required to do, which is to
undo the previous waiver by going through a rule making
process under the Administrative Procedure Act. That is, we believe
that once the waiver has been enacted, it has to
(07:13):
be reviewed and rescinded if that's what they want to
do using an Administrative Procedure Act process, which is well
established in law, but takes more time because they have
to follow rules about notice and comment and hearings, and
it also requires that they have a record, which means
(07:35):
that their decision could be appealed to a court. By
going this alternative route using the CRA, they hope to
avoid all that process as Trump has now done in
so many different instances, and using a faster, cheaper method
(07:55):
get to the same result and not be able to
not be at risk of having a court overturn them.
That's what they're hoping for.
Speaker 1 (08:03):
Okay, I mean, I guess it leads to a couple
of questions. One, can you just remind us so court
was it ever resolved in court? Their effort unwinded under
Trump one? And let's say it holds doing this under
the Congressional Review Act? Yeah, how does this alter the
dynamic if you look ahead? Because obviously, regardless of whatever
(08:27):
Trump one did, it was reinstated pretty quickly when the
administration turned and I understand it might be a little
bit more complicated.
Speaker 3 (08:37):
Yeah, well, so the Congressional Review Act allows for Congress
to say this rule that we're looking at is now
completely defunct. It's vaporized, and the agency is not allowed
to go back and do anything similar because we Congress
(09:00):
have now passed this legislative action that says you can't
regulate in this area. So in effect, it would be
amending the Clean Air Act, although they haven't ever amended
the Clean Air Act, and they'd have to go through
another whole proceeding, which they would be very unlikely to
win at because if they really were to go a
(09:22):
legislative route, they would have to have a filibuster proof
majority in the Senate, which they would not have. They
don't have to change the whole Clean Air Act. So
what that means is they were able to use a
simple majority vote to get to this result. And if
(09:43):
it stands, and if they are able to succeed in
the courts don't stop them from using the CRA in
this way that they're trying to do, then you could
see that happening every time there's a change of administration
or every time you get a different majority in Congress.
At both you've got this effort to quickly undo whatever
(10:09):
actions the previous administration has taken that they don't agree
with the case of Trump. That's obviously a vast array
of actions across the entire federal government. The next time around,
assuming that the Democrats come back into office at some point,
you have a similar seesaw effect. This is obviously a
(10:33):
really bad situation for the country as a whole, certainly
bad for industry that's trying to make plans as to
how they're going to deal with regulations in some sort
of an orderly fashion. California is already headed to court
to challenge this use of the CRA because we don't
(10:55):
think it's appropriate. I can talk more about why we
think are this is the wrong approach for them to
be using from a legal perspective, but that's now very
much in contentionent.
Speaker 1 (11:07):
So, assuming this is going to be tied up in
courts for a while and you're not going to know
how that turns out, I'm just wondering how much of
a setback do you think it would be and what
other levers would the state have to pull to continue
to move forward and accomplish its emissions goals.
Speaker 3 (11:27):
Sure well, first of all, we have a history of
seeing compliance on the part of industry while waivers were
under review. So as a practical matter, historically, again over
all the years of the Clean Air Act being in effect,
(11:48):
when California adopts a regulation that's subject to this waiver provision,
we would send it a whole package off to EPA
and ask for them to approve it. But the industry
wasn't going to wait around for the action of EPA.
They would begin to comply as soon as California acted,
(12:11):
And again this is sort of a matter of custom really,
not of anybody having to force it, because industry makes
their plans years in advance, so they would start to comply.
California's regulations normally take time to come into full effect,
(12:33):
even without the waiver. They give the industry time if
they're asking for real changes, and the industry knows that
eventually they would be subject to enforcement actions. But frequently
new regulations come into effect that have stricter requirements that
industry is having some kind of difficulty achieving in terms
(12:58):
of full compliance with all the rules. And in general,
the state doesn't try to take enforcement action unless there's
been ample time for the new regulation to come into
a fact and for the industry to figure out how
to comply with it. So what you have, in a sense,
(13:19):
is a situation of voluntary compliance, and it's only under
rare circumstances such as we found. For example, you probably
remember that there was a major state and federal action
against Volkswagen for cheating on their testing and certifying that
(13:40):
they were in compliance with existing Knox regulations when they weren't.
The you know, they had been caught and making these
making these erroneous claims that they were meeting the standards
when they weren't. Uh. That took you know, several years
(14:02):
to unfold after the regulations were in effect. So I
think what people who aren't involved in this type of
system where you've got an industry which is you know,
large and is subject to important regulations, you have a
situation where people work with each other, talk to each other,
(14:24):
They are not always taking each other to court, and
even if there are tensions around how the regulations are
developed and enforced, they find a way to continue to
make progress in cleaning up the vehicles because ultimately this
is about bringing in new technology, tightening up the way
(14:47):
in which the cars are built or trucks in this case.
And it's not just it's not just a legal game
that people are playing.
Speaker 1 (15:00):
Do you have any guests, particularly maybe looking back to
the first Trump administration, how the industry will respond, because
if I remember correctly, and please do correct me if
I'm wrong, there were negotiations between California and the industry,
and even some of the holdouts that were kind of
questioning our challenging some of the efficiency and emissions goals
(15:22):
kind of came around. I mean, at this point it
feels like a ping pong ball, and given how they
plan with long cycles, that they wouldn't necessarily welcome this
maybe to the same degree that it might seem on
the outside. I mean, do you think there's a chance
for California to just kind of negotiate maybe somewhere in
between ALASA current like like current federal standards in California
(15:44):
standards and continue to progress in terms of emissions and
fuel reductions of fuel economy improvements.
Speaker 3 (15:51):
It's a really important question, and I think the answer
is we don't know. I am aware of the fact
this was not ever discussed in public, that there were
discussions underway between representatives the state of California and industry
(16:12):
representatives even before the waiver was granted. All three of
the waivers that were under review, but especially the one
for the passenger cars, because the industry had brought to
the attention of the state of California that they were
(16:35):
really uncomfortable with their ability to meet the requirements on
the time frame that was in the regulations across the
number of states that have adopted California's standards. So here's
another little wrinkle on this situation, which is that California
adopts a regulation, other states are permitted to opt into
(16:58):
that regulation and if they choose to do so so.
At various times, there have been anywhere between a dozen
and fourteen states that have been following the California regulations
as opposed to the federal regulations. And in some of
(17:19):
those states where they are also and have been asking
for a larger number of electric vehicles zero emission vehicles
to be sold. Following the California approach, the industry believed
(17:39):
believes that they can't meet those targets, mainly because those
states don't have the same level of incentives such as
the seventy five hundred dollars additional tax credit that California
put into affect or the rollout of charge stations that
(18:01):
California has supported or the special provisions for low income
drivers to help them get into zero emission vehicles. A
lot of these provisions that have been built up in
California don't exist in other states that were trying to
adopt and follow California's lead. And so in the states,
(18:27):
of course, were concerned about California losing the authority, and
some of them had decided to kind of back off.
Other states were determined to go ahead, and the industry
was hoping they could get California to make some changes
in the way the rules work so that this national
(18:51):
problem could be alleviated. And they were having those discussions
pretty much up until the time of the election, so
in November of last year, and then the election happened, obviously,
and as far as I know, there are not any
(19:13):
ongoing conversations. But in the meantime, despite having one, and
you're right in your you know, initial comment about how
this time around industry was not as willing to stand
with California against what was going on in the Trump
administration and in Congress. This time around, you know, the
(19:39):
hardliners who were opposed to California's regulations have won for
the moment, but they may have won more than they
actually intended in the sense that California's regulatory ability still exists.
There's still is a separate program for certifying vehicles to
(20:01):
be sold in California. Other countries around the world, in
addition to some US states are looking at and following
California's approach, And I don't believe that the industry as
a whole really intends to simply ignore California's existence in
(20:24):
this situation. And there are aspects of the way California
does regulations that the industry supports or needs, especially when
it comes to their much more important goals in terms
of being viable globally. So you know, the immediate effect
(20:47):
of what's happened now is already to give the Chinese
a big boost in their global ambitions to be the
most important center for vehicle manufacturing in sales, and that
continues to be a serious challenge for the major companies
(21:09):
that were lobbying for this CRA. So there's a lot
that could happen just in terms of the current structure,
not even talking about other opportunities other legal authorities that
California and other states have that might get to the
same goals in terms of shifting the whole vehicle fleet
(21:33):
much more in the direction of battery powered or hydrogen
fuel cell vehicles.
Speaker 2 (21:39):
Yeah, so that's a good transition to maybe take a
step back. You know, in your experience, you know as
a regulator, what type of actions have really been the
most effective to accomplished environmental goals.
Speaker 3 (21:52):
So my sort of long issue view on all of this,
having spent seventeen years at the head of the agency
and other time as an outsider either overseeing or suing them,
I think I have a perspective on this, which is
that you need a combination of a regulatory push and
(22:15):
other activities that are more in the realm of market
incentives and voluntary activities in order to actually make progress.
So our programs ares California and the Nations for that matter.
You know, the whole shift that goes back to the
(22:36):
advent of the catalytic converter in the mid nineteen seventies
wouldn't have happened without technological innovation that led to a
regulatory requirement, but also to the existence of businesses that
were competing to be in the market, of companies that
(23:02):
recognized that they had some opportunities to benefit from being
better at meeting the regulatory requirements with attractive vehicles than others. So,
just to cite the example of the catalytic converter, after
years of resisting being required to put on these devices,
(23:28):
when the companies finally saw that the regulation was going
to come into effect, two things happened that were very
helpful and important. One was that because of the catalyst,
they could get rid of some clunkier emissions controls that
(23:48):
had been put in place that were actually causing a
fuel penalty or making the cars not run as well,
so that cars after the new regulations came into effect
actually achieved better fuel economy without any other action taking
place and were performing better. It Also, because the catalysts
(24:13):
required a cleaner fuel, got the lead out of gasoline,
which a few companies resisted at the time. Chrysler and
particular in those days, was a big advocate for leaded gasoline,
which they thought made the cars run better and gave them,
you know, more octane rating than they could get otherwise,
(24:36):
more pur for the for the gasoline that they were using.
But as it turned out, you know, getting rid of
the lead in gasoline allowed both the auto industry and
the oil industry to achieve some actual benefits. So you know,
there's always a it's a complicated ecosystem between the technology
(25:00):
that the original OEMs is there called, you know, the
actual oil companies and all the rest of that ecosystem
that depends on the automobile.
Speaker 2 (25:12):
So let's tick a little to that ecosystem. You know,
how do you balance legitimate business and consumer interests with
the need to manage environmental impact. So, for example, I
know in California some oil refineries have closed, and the
state has very high gas prices relative to the national average.
Some companies have moved their HQs out of the state,
So how do you think about balancing the interests of
(25:35):
all the stakeholders there?
Speaker 3 (25:37):
I guess the first thing I would say is that
whatever we've done over the years, it hasn't been bad,
because our air quality is very markedly better than it was,
and our economy continues to boom, with California once again
this year achieving the role of being the fourth largest
(25:59):
economy in the world. So even with these disadvantages that
you've talked about in terms of gasoline prices or vehicle prices,
California is still a very vibrant market for cars, and
we are still a very successful state in terms of
(26:23):
managing logistics. Our port of La Long Beach is the
biggest port in the United States, and most of the goods,
almost half of all the goods that come into the
country come in through the port and get loaded onto
trucks at least at some point. So we're doing okay
in spite of the closures and the sometimes differential in
(26:49):
terms of prices on the gasoline side, and that's partly
because the vehicles themselves have gotten to be so much
more efficient, and that intern is partly due to regulation,
including the Environmental Policy Act, APPICA, Energy Policy Act, the
(27:13):
cafe standards, as well as improvements in the vehicles themselves,
which have been caused in part by regulatory requirements, but
also by technology improvements that have come about again in
some cases driven by regulation and also by consumer demand.
It's a complicated system. As a regulator, you have to
(27:37):
be thinking about all of those issues, and you know,
there's an art to this as well as a sense
of being able to predict how the market and how
the inventors and entrepreneurs are going to respond to a
potential new regulation, and then there has to be the
(27:58):
ability to fine tune it if it turns out that
your predictions about how things are going to work are off,
if there's a big change in the economy. Has happened
a few times when we've had national recessions, you have
to be able to give some flexibility within the system. Nowadays,
(28:23):
there are no regulations that are adopted that don't include
some level of economic incentives inside the regulation itself. There's
even in the regulation that was just it was just
a subject of the Congressional Review Act. There's a provision
in which manufacturers who can't meet the mandates for sales
(28:47):
of zero emission vehicles can buy credits from other companies
like Tesla that may can sell electric vehicles, and so
this was obviously a big benefit to Tesla. It also
provided some flexibility to the companies to ease into meeting
those mandates. So the regulations themselves have to be designed
(29:11):
in a way that allows for the fact that you
can't always anticipate everything that's going to happen in the future,
although you certainly try your best, and also to recognize
the fact that you're balancing the needs of a complicated
(29:32):
economy that depends on suppliers, depends on the marketing, and
in the changing desires of consumers as well.
Speaker 1 (29:44):
Maybe taking a broader step back, is there any We've
obviously been focused a lot on cars. We alluded to trucks,
but have there been other kind of other environmental regulatory
changes at the new administration. Congress is put forth that
you think are getting the attention they deserve, and maybe
(30:08):
also you know, kind of what regulatory moves do you
think they could make that would be the most concerning,
and what recourse would states like California have to to
kind of keep momentum moving forward.
Speaker 3 (30:23):
I think that the action that the administration is engaged
in right now to review what's called the endangerment finding
is probably the most concerning because it underscores so many
other underlines so many other activities that are being taken
at the state and federal level. The endangerment finding is
(30:48):
legal code, I guess, for decision that was made again
going back to the Clean Air Act, but all the
way up to the US Supreme Court back at the
back in the time that Clinton was in office, this
began to be an issue as to whether global warming
(31:10):
is a danger to human health and the environment, and
the President told EPA to review that finding. It's hard
to believe that they can make a scientific case that
global warming is not a danger to health and the environment,
although I think they're going to try. Given the body
(31:32):
of science that exists on this topic, they would have
to come up with some sort of illegal rationale that
since it's a global problem, the US can't really solve
it and therefore we shouldn't even try, and anything we
might do that would address the issues of our contribution
(31:52):
past and present and future to making this problem even
worse should just be completely a band because it doesn't
make any economic sense. And I know there are people
in the current administration who would make that argument. Whether
that actually can be sustained under existing laws, or whether
(32:15):
they would have to go back and actually also amend
the basic framework of the Clean Air Act, I think
is highly unlikely, but I expect we're going to see
months and years of debate about that question. So that
would be kind of the biggest thing all of the
(32:36):
actions that are being taken though currently, to wipe out
every single tax incentive or grant or other program that
would benefit clean vehicles and clean electricity. There's a full
panoply of actions that this administration and its supporters in
(33:02):
Congress are taking to try to wipe out every vestige
of formal federal involvement in moving our country in the
direction of cleaner energy, more renewable energy, and a smaller
footprint on the planet. So it's hard to know where
(33:25):
to begin or how to keep track of the sheer
number of these initiatives, but there are lots of them.
Speaker 2 (33:34):
Yeah, I'm glad you brought up the engagement finding. I mean,
certainly that underpins a lot of modern climate regulation. But
I've heard from certain circles that you know, you know,
it could backfire on the administration that if the Fed
Feds abdicate their role as regulating greenhouse gas emissions and
(33:55):
that maybe opens the floodgate up for whether it's state
regulation or more law suits. Is that something we could
see happen.
Speaker 3 (34:03):
Sure, absolutely, a massive roiling of the waters here. Lots
of work for lawyers that was already engaged in dealing
with the immigration situation or any of the other changes
that are being sought by this administration. I'll be working
(34:23):
on working on environmental regulations.
Speaker 2 (34:28):
And then there's also been recent Supreme Court rulings that
have had some potential implications for environmental regulations, So curious
to hear your thoughts on the Supreme Court's recent ruling
on the scope of National Environmental Policy Act, or NEPA reviews.
Permitting has been kind of a double edged sword in
that it's helped environmental groups push back against fossil fuel development,
(34:49):
but by the same token, lots of green investments have
also been dragged out a little due to permitting delays.
Could there be some upside to a more streamlined process?
Speaker 3 (34:59):
Are the needs to be a more streamline process for
citing renewable energy and other clean tech facilities that the
country needs? So I don't think many people would argue
that we shouldn't find a way to make the permitting
(35:20):
process go faster for the things that people want. But
at the same time, there's a very strong history of
local communities fighting back against specific facilities that were subject
to NEPA, and also of a desire on the part
(35:42):
of many people to see governments think more holistically before
actions are taken. NEPA is not such a perfect tool
in that regard, and what the Supreme Court did was
to say you know, all that the federal government has
(36:02):
to do when they're evaluating a project is to look
at the specific project and its implication. That they can't
be required to also look at all the other related
things that might happen as a result. So, if for example,
a new pipeline is built, the pipeline itself is going
(36:22):
to cross land, it may touch on sites that are
sacred to Native Americans, it may go near a public park,
It may have potential to impact on the water quality.
You know, those are direct impacts of the pipeline. You
can't require them you being a citizen group that's opposed
(36:43):
to this pipeline, but it's really opposed to what that
pipeline represents in terms of future and rely supplies. You
can't force the agency that's looking to build the pipeline
to also do a full analysis of what the implications
of that might be for future production of oil or gas,
whatever the pipeline is built for, and use it as
(37:06):
a tool to really force a thoughtful evaluation of the
entire system that that project is a part of. I
think that's a decision that most people can accept as reasonable.
It does, however, open up the question of where and
when are we ever going to consider what the impacts
(37:29):
of facilitating and constructing and putting in place to you know,
have to amortize new infrastructure to deal with a system
of energy production and delivery that is in fact causing
us all kinds of major environmental problems. Nobody has Nobody
(37:54):
thinks that NEPA is the answer, but that is, you know,
the basic premise of but was you need a system
that forces agencies, government itself to think before they take
actions that are going to have long term or irreversible
effects on the environment. If we're not going to do
(38:14):
it at the level of a specific infrastructure project, where
are we going to do it? And you know, I
might have some ideas about that, but that wasn't the
question anybody was asking.
Speaker 1 (38:27):
Another big change from the Supreme Court was related to
the Chevron doctrine, which you can probably explain better than I,
but has to do with whether or not courts defer
to federal agencies. And kind of in line with Rob's
question on potentially backfiring, do you think that's pretent that
change might actually make it harder for the Trump administration
(38:50):
to reverse some of the climate rules that have been
put in place.
Speaker 3 (38:55):
Well, the Chevron decision says that an agent and see
that is interpreting the statutes that govern its activities is
entitled to some difference in terms of how they evaluate
what their legal authority is. That as they should be
treated as the experts on the meaning of a statute
(39:17):
that they're trying to implement that they're supposed to implement.
And that decision was effectively overturned by the US Supreme Court,
So it had been subject to some erosion over the
years in any case, because difference is one of those
concepts that's pretty elastic depending on who's actually interpreting it.
(39:42):
But it's now no longer required that they give as
much difference as the Court seemed to have said should
have been the case in the past. So that definitely
will help those who are challenging regulationtions that come out
of the current administration or interpretations, including decisions to deregulate
(40:08):
or overturn previous regulation. That again, depending to some degree
on the judges and their attitude about what the agency
has done and how much they've made the case that
what they're doing makes sense, they will they will get
less of a less less of a deferential view than
(40:31):
they would have before the latest Supreme Court action. It's
a it's kind of a moving target. There's not a bright,
clear statutory definition of what difference actually means. But it's
definitely a tilt in the direction of saying that ACCORD
is entitled to read the statute itself and decide whether
(40:55):
what the agency did is a correct reading of the statute.
Speaker 2 (41:00):
Just want to circle back to your priorents are about
taking more holistic approach to regulation and what ideas you
might have, you know, around how governments should think about
kind of the longer term implications, as you said, to
long term decisions. You know, is there what ideas you
have and is there anything proactive or preemptive states can
(41:21):
do or even at the local level, you know, to
alleviate some of these issues, or to preserve environmental regulations
that maybe the federal government is currently trying to tear up.
Speaker 3 (41:32):
Quite a number of states, not necessarily the exactly same
group of states that follow California's vehicle regulations, have rules
in place or are working on regulations that are designed
to require businesses and others that operate in their states
(41:55):
to disclose their emissions of greenhouse gases, and that would
include not only the direct emissions from facilities that are
in the state, but also from the supply chain and
from the energy that goes into making those products. And
(42:16):
the reason for that is a belief that a better
approach to showing what the relative impacts of different products,
different activities are, that kind of information is going to
lead industries to look for ways to be more efficient
(42:38):
and to waste less energy, because that will also help
THED with their overall emissions and ultimately will lead to
some sort of more life cycle oriented approach on how
we manufacture and use all kinds of goods, uh, you know,
(43:01):
in our in our society. It sounds very high level
and abstract, but when you sort of get down to
the immediate implications of it, there's already situations in which cities, counties, states,
various agencies are making decisions, for example, on procurement based
(43:25):
on relative UH emissions per unit of product of things
that they buy, whether it's office furniture or paper or whatever,
and this actually is having an impact. It's already having
an impact on many different economic sectors. So that whole
(43:50):
area of looking at kind of how we as a
society can go about doing things that we would like,
buying things we would like in ways that are more efficient,
less wasteful of energy, and thereby produce fewer emissions. Is
already a kind of thinking that's underway, and there's different
(44:14):
ways to go about it. Disclosure certainly is you know,
step number one. But going back to ideas that we're
being talked about. You know, when al Gore was running
for president, the idea of having attacks on carbon or
a cap and trade program, which is what we have
(44:35):
in California. It's now called cap and invest, and Washington
and Oregon already have it, and other states are looking
at it. You know, these are regulatory ways to go
after the big picture, the big the big problem, which
is emissions that we don't want, but leave it up
to the affected companies, affected sectors of the economy to
(45:01):
figure out how to go about reducing their emissions. And
so this kind of thinking is already out there and
to some extent is being used, and I think it's
going to be more important in the future.
Speaker 2 (45:16):
Great, I think that's an excellent time to leave this
on a happy note like that that there is there
is hope. So Mary, thank you again. So much for
your time and for our listeners. You can find more
information on topics like environmental regulation by going to BI
space ESG go on the Bloomberg terminal. If you have
(45:36):
an ESG quandary or a burning question you would like
to ask bi's expert analysts, send us an email at
ESG currents at bloomberg dot net. Thanks again, Mary,
ESG has become established as a key business theme as
companies and investors seek to navigate the climate crisis, energy transition,
social megatrends, mounting regulatory attention and pressure from other stakeholders.
The rapidly evolving landscape has become inundated with acronyms, buzzwords
and lingo, and we aim to break these down with
industry experts. Welcome to ESG Currents, your guide to navigating
(00:33):
the evolving ESG space, one topic at a time. Brought
to you by Bloomberg Intelligence, part of Bloomberg's research department,
with five hundred analysts and strategists working across all major
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as well as outlooks on more than ninety industries and
one hundred market indices, currencies and commodities. I am Gail Glazierman,
(00:57):
Senior ESG.
Speaker 2 (00:58):
Analyst, robbdie Boff, Senior ESG Analyst, and we are your
host for today's episode. A key tool in limiting emissions
of climate warming greenhouse gases is regulations such as the
Seminal Clean Air Act from nineteen seventy in the US.
While such regulation is typically done at a national level.
The state of California has taken a lead in this fight.
(01:19):
On today's episode, we are joined by Mary Nichols, Distinguished
Council for the Emmitt Institute on Climate Change and the
Environment at UCLA, who previously served as Chair of the
California Air Resources Board or CARB, a position she held
during the first Trump administration. We'll discuss California's unique history
of environmental regulation, how a recent US congressional vote may
(01:41):
affect this, and what states like California can do to
maintain momentum. Thanks for joining us, Mary.
Speaker 3 (01:47):
Very welcome. It's a pleasure to be with you.
Speaker 2 (01:50):
Awesome. Now set the stage for us explain for our
audience California's approach to managing emissions and air quality, how
it may differ from federal regulations, and why it needs
waiver to accomplish this.
Speaker 3 (02:02):
California actually began a regulating air pollution before any other
state in the country, So California already had a reasonably
well developed program, including a governance structure at the Air
Resources Board now mostly known as CARB, before Congress actually
(02:25):
acted to set up the EPA program under the Federal
Clean Air Act. So when that legislation was going through Congress,
the California delegation took a united stand that they would
not vote for the federal bill unless they were given
(02:46):
the right to continue to pursue more stringent regulations than
what they thought was likely to happen. When the federal
government stepped in and developed an approach that was more
or less of a lowest common denominator that would work
in Mississippi as well as California. And that is how
(03:08):
it came about that California was the only state and
is the only state that is given the right to
have stricter regulations on motor vehicles of all kinds than
whatever has been adopted by the USAPA. So this goes
back to nineteen seventy. The way it works is that
(03:32):
if California wants to go ahead and adopt a stricter rule,
they can do so, but it can't actually be enforced
unless it's given a waiver by the us EPA. The
language in the statute is very clear and has never
(03:54):
changed over all these decades. EPA is required to give
away if California can show that our state needs a
stricter regulation and that the regulation that we're proposing to
enforce is feasible, and that language has been interpreted now
(04:16):
over many, many years and more than one hundred different waivers,
to mean that California only has to show that our
air quality situation requires more stringent standards because we have
a have worse air quality, and that we have done
(04:37):
the technical work to show that our regulation can be
achieved by the industry, and if we do that, then
EPA is supposed to just grant the waiver. In practice,
this may be more than you really want to know,
but almost every time there is some resistance on the
(05:00):
part of the industry. That is, the industry has never
really warmed to the idea that California gets to have
its own system. And even when they're actually even complying
with the California regulation, some companies will oftentimes file objections
(05:22):
on the record with EPA, but in every case, eventually
California has won and gotten the waiver.
Speaker 2 (05:31):
That's great context, and I think, you know, it's very
important to understand administrations from both parties have branded this waiver.
You know, obviously there's the natural push and pull with industry,
but you know, what's changed with the current administration. Why
what are they doing now.
Speaker 3 (05:46):
Well. The first thing that happened is that when the
Trump two administration came in, the new administrator Lee Zelden
didn't wait for Congress to ask to overturn the waiver
from the previous administration that had been granted under President Biden.
(06:07):
He sent the role himself. He just picked it up
and basically announced that he was going to send it
to Congress and ask them to review it using the
Congressional Review Act authority, which is intended to allow Congress
to act when there's a change in parties or change
(06:28):
in administrations and something has happened at the last minute.
We have several objections to this process, but we understood
from the beginning that the Trump administration would try to
repeal the California waiver because they tried a similar maneuver
(06:49):
when Trump was in office the first time around. The
difference was that they went through a process, which we
believe is what they're required to do, which is to
undo the previous waiver by going through a rule making
process under the Administrative Procedure Act. That is, we believe
that once the waiver has been enacted, it has to
(07:13):
be reviewed and rescinded if that's what they want to
do using an Administrative Procedure Act process, which is well
established in law, but takes more time because they have
to follow rules about notice and comment and hearings, and
it also requires that they have a record, which means
(07:35):
that their decision could be appealed to a court. By
going this alternative route using the CRA, they hope to
avoid all that process as Trump has now done in
so many different instances, and using a faster, cheaper method
(07:55):
get to the same result and not be able to
not be at risk of having a court overturn them.
That's what they're hoping for.
Speaker 1 (08:03):
Okay, I mean, I guess it leads to a couple
of questions. One, can you just remind us so court
was it ever resolved in court? Their effort unwinded under
Trump one? And let's say it holds doing this under
the Congressional Review Act? Yeah, how does this alter the
dynamic if you look ahead? Because obviously, regardless of whatever
(08:27):
Trump one did, it was reinstated pretty quickly when the
administration turned and I understand it might be a little
bit more complicated.
Speaker 3 (08:37):
Yeah, well, so the Congressional Review Act allows for Congress
to say this rule that we're looking at is now
completely defunct. It's vaporized, and the agency is not allowed
to go back and do anything similar because we Congress
(09:00):
have now passed this legislative action that says you can't
regulate in this area. So in effect, it would be
amending the Clean Air Act, although they haven't ever amended
the Clean Air Act, and they'd have to go through
another whole proceeding, which they would be very unlikely to
win at because if they really were to go a
(09:22):
legislative route, they would have to have a filibuster proof
majority in the Senate, which they would not have. They
don't have to change the whole Clean Air Act. So
what that means is they were able to use a
simple majority vote to get to this result. And if
(09:43):
it stands, and if they are able to succeed in
the courts don't stop them from using the CRA in
this way that they're trying to do, then you could
see that happening every time there's a change of administration
or every time you get a different majority in Congress.
At both you've got this effort to quickly undo whatever
(10:09):
actions the previous administration has taken that they don't agree
with the case of Trump. That's obviously a vast array
of actions across the entire federal government. The next time around,
assuming that the Democrats come back into office at some point,
you have a similar seesaw effect. This is obviously a
(10:33):
really bad situation for the country as a whole, certainly
bad for industry that's trying to make plans as to
how they're going to deal with regulations in some sort
of an orderly fashion. California is already headed to court
to challenge this use of the CRA because we don't
(10:55):
think it's appropriate. I can talk more about why we
think are this is the wrong approach for them to
be using from a legal perspective, but that's now very
much in contentionent.
Speaker 1 (11:07):
So, assuming this is going to be tied up in
courts for a while and you're not going to know
how that turns out, I'm just wondering how much of
a setback do you think it would be and what
other levers would the state have to pull to continue
to move forward and accomplish its emissions goals.
Speaker 3 (11:27):
Sure well, first of all, we have a history of
seeing compliance on the part of industry while waivers were
under review. So as a practical matter, historically, again over
all the years of the Clean Air Act being in effect,
(11:48):
when California adopts a regulation that's subject to this waiver provision,
we would send it a whole package off to EPA
and ask for them to approve it. But the industry
wasn't going to wait around for the action of EPA.
They would begin to comply as soon as California acted,
(12:11):
And again this is sort of a matter of custom really,
not of anybody having to force it, because industry makes
their plans years in advance, so they would start to comply.
California's regulations normally take time to come into full effect,
(12:33):
even without the waiver. They give the industry time if
they're asking for real changes, and the industry knows that
eventually they would be subject to enforcement actions. But frequently
new regulations come into effect that have stricter requirements that
industry is having some kind of difficulty achieving in terms
(12:58):
of full compliance with all the rules. And in general,
the state doesn't try to take enforcement action unless there's
been ample time for the new regulation to come into
a fact and for the industry to figure out how
to comply with it. So what you have, in a sense,
(13:19):
is a situation of voluntary compliance, and it's only under
rare circumstances such as we found. For example, you probably
remember that there was a major state and federal action
against Volkswagen for cheating on their testing and certifying that
(13:40):
they were in compliance with existing Knox regulations when they weren't.
The you know, they had been caught and making these
making these erroneous claims that they were meeting the standards
when they weren't. Uh. That took you know, several years
(14:02):
to unfold after the regulations were in effect. So I
think what people who aren't involved in this type of
system where you've got an industry which is you know,
large and is subject to important regulations, you have a
situation where people work with each other, talk to each other,
(14:24):
They are not always taking each other to court, and
even if there are tensions around how the regulations are
developed and enforced, they find a way to continue to
make progress in cleaning up the vehicles because ultimately this
is about bringing in new technology, tightening up the way
(14:47):
in which the cars are built or trucks in this case.
And it's not just it's not just a legal game
that people are playing.
Speaker 1 (15:00):
Do you have any guests, particularly maybe looking back to
the first Trump administration, how the industry will respond, because
if I remember correctly, and please do correct me if
I'm wrong, there were negotiations between California and the industry,
and even some of the holdouts that were kind of
questioning our challenging some of the efficiency and emissions goals
(15:22):
kind of came around. I mean, at this point it
feels like a ping pong ball, and given how they
plan with long cycles, that they wouldn't necessarily welcome this
maybe to the same degree that it might seem on
the outside. I mean, do you think there's a chance
for California to just kind of negotiate maybe somewhere in
between ALASA current like like current federal standards in California
(15:44):
standards and continue to progress in terms of emissions and
fuel reductions of fuel economy improvements.
Speaker 3 (15:51):
It's a really important question, and I think the answer
is we don't know. I am aware of the fact
this was not ever discussed in public, that there were
discussions underway between representatives the state of California and industry
(16:12):
representatives even before the waiver was granted. All three of
the waivers that were under review, but especially the one
for the passenger cars, because the industry had brought to
the attention of the state of California that they were
(16:35):
really uncomfortable with their ability to meet the requirements on
the time frame that was in the regulations across the
number of states that have adopted California's standards. So here's
another little wrinkle on this situation, which is that California
adopts a regulation, other states are permitted to opt into
(16:58):
that regulation and if they choose to do so so.
At various times, there have been anywhere between a dozen
and fourteen states that have been following the California regulations
as opposed to the federal regulations. And in some of
(17:19):
those states where they are also and have been asking
for a larger number of electric vehicles zero emission vehicles
to be sold. Following the California approach, the industry believed
(17:39):
believes that they can't meet those targets, mainly because those
states don't have the same level of incentives such as
the seventy five hundred dollars additional tax credit that California
put into affect or the rollout of charge stations that
(18:01):
California has supported or the special provisions for low income
drivers to help them get into zero emission vehicles. A
lot of these provisions that have been built up in
California don't exist in other states that were trying to
adopt and follow California's lead. And so in the states,
(18:27):
of course, were concerned about California losing the authority, and
some of them had decided to kind of back off.
Other states were determined to go ahead, and the industry
was hoping they could get California to make some changes
in the way the rules work so that this national
(18:51):
problem could be alleviated. And they were having those discussions
pretty much up until the time of the election, so
in November of last year, and then the election happened, obviously,
and as far as I know, there are not any
(19:13):
ongoing conversations. But in the meantime, despite having one, and
you're right in your you know, initial comment about how
this time around industry was not as willing to stand
with California against what was going on in the Trump
administration and in Congress. This time around, you know, the
(19:39):
hardliners who were opposed to California's regulations have won for
the moment, but they may have won more than they
actually intended in the sense that California's regulatory ability still exists.
There's still is a separate program for certifying vehicles to
(20:01):
be sold in California. Other countries around the world, in
addition to some US states are looking at and following
California's approach, And I don't believe that the industry as
a whole really intends to simply ignore California's existence in
(20:24):
this situation. And there are aspects of the way California
does regulations that the industry supports or needs, especially when
it comes to their much more important goals in terms
of being viable globally. So you know, the immediate effect
(20:47):
of what's happened now is already to give the Chinese
a big boost in their global ambitions to be the
most important center for vehicle manufacturing in sales, and that
continues to be a serious challenge for the major companies
(21:09):
that were lobbying for this CRA. So there's a lot
that could happen just in terms of the current structure,
not even talking about other opportunities other legal authorities that
California and other states have that might get to the
same goals in terms of shifting the whole vehicle fleet
(21:33):
much more in the direction of battery powered or hydrogen
fuel cell vehicles.
Speaker 2 (21:39):
Yeah, so that's a good transition to maybe take a
step back. You know, in your experience, you know as
a regulator, what type of actions have really been the
most effective to accomplished environmental goals.
Speaker 3 (21:52):
So my sort of long issue view on all of this,
having spent seventeen years at the head of the agency
and other time as an outsider either overseeing or suing them,
I think I have a perspective on this, which is
that you need a combination of a regulatory push and
(22:15):
other activities that are more in the realm of market
incentives and voluntary activities in order to actually make progress.
So our programs ares California and the Nations for that matter.
You know, the whole shift that goes back to the
(22:36):
advent of the catalytic converter in the mid nineteen seventies
wouldn't have happened without technological innovation that led to a
regulatory requirement, but also to the existence of businesses that
were competing to be in the market, of companies that
(23:02):
recognized that they had some opportunities to benefit from being
better at meeting the regulatory requirements with attractive vehicles than others. So,
just to cite the example of the catalytic converter, after
years of resisting being required to put on these devices,
(23:28):
when the companies finally saw that the regulation was going
to come into effect, two things happened that were very
helpful and important. One was that because of the catalyst,
they could get rid of some clunkier emissions controls that
(23:48):
had been put in place that were actually causing a
fuel penalty or making the cars not run as well,
so that cars after the new regulations came into effect
actually achieved better fuel economy without any other action taking
place and were performing better. It Also, because the catalysts
(24:13):
required a cleaner fuel, got the lead out of gasoline,
which a few companies resisted at the time. Chrysler and
particular in those days, was a big advocate for leaded gasoline,
which they thought made the cars run better and gave them,
you know, more octane rating than they could get otherwise,
(24:36):
more pur for the for the gasoline that they were using.
But as it turned out, you know, getting rid of
the lead in gasoline allowed both the auto industry and
the oil industry to achieve some actual benefits. So you know,
there's always a it's a complicated ecosystem between the technology
(25:00):
that the original OEMs is there called, you know, the
actual oil companies and all the rest of that ecosystem
that depends on the automobile.
Speaker 2 (25:12):
So let's tick a little to that ecosystem. You know,
how do you balance legitimate business and consumer interests with
the need to manage environmental impact. So, for example, I
know in California some oil refineries have closed, and the
state has very high gas prices relative to the national average.
Some companies have moved their HQs out of the state,
So how do you think about balancing the interests of
(25:35):
all the stakeholders there?
Speaker 3 (25:37):
I guess the first thing I would say is that
whatever we've done over the years, it hasn't been bad,
because our air quality is very markedly better than it was,
and our economy continues to boom, with California once again
this year achieving the role of being the fourth largest
(25:59):
economy in the world. So even with these disadvantages that
you've talked about in terms of gasoline prices or vehicle prices,
California is still a very vibrant market for cars, and
we are still a very successful state in terms of
(26:23):
managing logistics. Our port of La Long Beach is the
biggest port in the United States, and most of the goods,
almost half of all the goods that come into the
country come in through the port and get loaded onto
trucks at least at some point. So we're doing okay
in spite of the closures and the sometimes differential in
(26:49):
terms of prices on the gasoline side, and that's partly
because the vehicles themselves have gotten to be so much
more efficient, and that intern is partly due to regulation,
including the Environmental Policy Act, APPICA, Energy Policy Act, the
(27:13):
cafe standards, as well as improvements in the vehicles themselves,
which have been caused in part by regulatory requirements, but
also by technology improvements that have come about again in
some cases driven by regulation and also by consumer demand.
It's a complicated system. As a regulator, you have to
(27:37):
be thinking about all of those issues, and you know,
there's an art to this as well as a sense
of being able to predict how the market and how
the inventors and entrepreneurs are going to respond to a
potential new regulation, and then there has to be the
(27:58):
ability to fine tune it if it turns out that
your predictions about how things are going to work are off,
if there's a big change in the economy. Has happened
a few times when we've had national recessions, you have
to be able to give some flexibility within the system. Nowadays,
(28:23):
there are no regulations that are adopted that don't include
some level of economic incentives inside the regulation itself. There's
even in the regulation that was just it was just
a subject of the Congressional Review Act. There's a provision
in which manufacturers who can't meet the mandates for sales
(28:47):
of zero emission vehicles can buy credits from other companies
like Tesla that may can sell electric vehicles, and so
this was obviously a big benefit to Tesla. It also
provided some flexibility to the companies to ease into meeting
those mandates. So the regulations themselves have to be designed
(29:11):
in a way that allows for the fact that you
can't always anticipate everything that's going to happen in the future,
although you certainly try your best, and also to recognize
the fact that you're balancing the needs of a complicated
(29:32):
economy that depends on suppliers, depends on the marketing, and
in the changing desires of consumers as well.
Speaker 1 (29:44):
Maybe taking a broader step back, is there any We've
obviously been focused a lot on cars. We alluded to trucks,
but have there been other kind of other environmental regulatory
changes at the new administration. Congress is put forth that
you think are getting the attention they deserve, and maybe
(30:08):
also you know, kind of what regulatory moves do you
think they could make that would be the most concerning,
and what recourse would states like California have to to
kind of keep momentum moving forward.
Speaker 3 (30:23):
I think that the action that the administration is engaged
in right now to review what's called the endangerment finding
is probably the most concerning because it underscores so many
other underlines so many other activities that are being taken
at the state and federal level. The endangerment finding is
(30:48):
legal code, I guess, for decision that was made again
going back to the Clean Air Act, but all the
way up to the US Supreme Court back at the
back in the time that Clinton was in office, this
began to be an issue as to whether global warming
(31:10):
is a danger to human health and the environment, and
the President told EPA to review that finding. It's hard
to believe that they can make a scientific case that
global warming is not a danger to health and the environment,
although I think they're going to try. Given the body
(31:32):
of science that exists on this topic, they would have
to come up with some sort of illegal rationale that
since it's a global problem, the US can't really solve
it and therefore we shouldn't even try, and anything we
might do that would address the issues of our contribution
(31:52):
past and present and future to making this problem even
worse should just be completely a band because it doesn't
make any economic sense. And I know there are people
in the current administration who would make that argument. Whether
that actually can be sustained under existing laws, or whether
(32:15):
they would have to go back and actually also amend
the basic framework of the Clean Air Act, I think
is highly unlikely, but I expect we're going to see
months and years of debate about that question. So that
would be kind of the biggest thing all of the
(32:36):
actions that are being taken though currently, to wipe out
every single tax incentive or grant or other program that
would benefit clean vehicles and clean electricity. There's a full
panoply of actions that this administration and its supporters in
(33:02):
Congress are taking to try to wipe out every vestige
of formal federal involvement in moving our country in the
direction of cleaner energy, more renewable energy, and a smaller
footprint on the planet. So it's hard to know where
(33:25):
to begin or how to keep track of the sheer
number of these initiatives, but there are lots of them.
Speaker 2 (33:34):
Yeah, I'm glad you brought up the engagement finding. I mean,
certainly that underpins a lot of modern climate regulation. But
I've heard from certain circles that you know, you know,
it could backfire on the administration that if the Fed
Feds abdicate their role as regulating greenhouse gas emissions and
(33:55):
that maybe opens the floodgate up for whether it's state
regulation or more law suits. Is that something we could
see happen.
Speaker 3 (34:03):
Sure, absolutely, a massive roiling of the waters here. Lots
of work for lawyers that was already engaged in dealing
with the immigration situation or any of the other changes
that are being sought by this administration. I'll be working
(34:23):
on working on environmental regulations.
Speaker 2 (34:28):
And then there's also been recent Supreme Court rulings that
have had some potential implications for environmental regulations, So curious
to hear your thoughts on the Supreme Court's recent ruling
on the scope of National Environmental Policy Act, or NEPA reviews.
Permitting has been kind of a double edged sword in
that it's helped environmental groups push back against fossil fuel development,
(34:49):
but by the same token, lots of green investments have
also been dragged out a little due to permitting delays.
Could there be some upside to a more streamlined process?
Speaker 3 (34:59):
Are the needs to be a more streamline process for
citing renewable energy and other clean tech facilities that the
country needs? So I don't think many people would argue
that we shouldn't find a way to make the permitting
(35:20):
process go faster for the things that people want. But
at the same time, there's a very strong history of
local communities fighting back against specific facilities that were subject
to NEPA, and also of a desire on the part
(35:42):
of many people to see governments think more holistically before
actions are taken. NEPA is not such a perfect tool
in that regard, and what the Supreme Court did was
to say you know, all that the federal government has
(36:02):
to do when they're evaluating a project is to look
at the specific project and its implication. That they can't
be required to also look at all the other related
things that might happen as a result. So, if for example,
a new pipeline is built, the pipeline itself is going
(36:22):
to cross land, it may touch on sites that are
sacred to Native Americans, it may go near a public park,
It may have potential to impact on the water quality.
You know, those are direct impacts of the pipeline. You
can't require them you being a citizen group that's opposed
(36:43):
to this pipeline, but it's really opposed to what that
pipeline represents in terms of future and rely supplies. You
can't force the agency that's looking to build the pipeline
to also do a full analysis of what the implications
of that might be for future production of oil or gas,
whatever the pipeline is built for, and use it as
(37:06):
a tool to really force a thoughtful evaluation of the
entire system that that project is a part of. I
think that's a decision that most people can accept as reasonable.
It does, however, open up the question of where and
when are we ever going to consider what the impacts
(37:29):
of facilitating and constructing and putting in place to you know,
have to amortize new infrastructure to deal with a system
of energy production and delivery that is in fact causing
us all kinds of major environmental problems. Nobody has Nobody
(37:54):
thinks that NEPA is the answer, but that is, you know,
the basic premise of but was you need a system
that forces agencies, government itself to think before they take
actions that are going to have long term or irreversible
effects on the environment. If we're not going to do
(38:14):
it at the level of a specific infrastructure project, where
are we going to do it? And you know, I
might have some ideas about that, but that wasn't the
question anybody was asking.
Speaker 1 (38:27):
Another big change from the Supreme Court was related to
the Chevron doctrine, which you can probably explain better than I,
but has to do with whether or not courts defer
to federal agencies. And kind of in line with Rob's
question on potentially backfiring, do you think that's pretent that
change might actually make it harder for the Trump administration
(38:50):
to reverse some of the climate rules that have been
put in place.
Speaker 3 (38:55):
Well, the Chevron decision says that an agent and see
that is interpreting the statutes that govern its activities is
entitled to some difference in terms of how they evaluate
what their legal authority is. That as they should be
treated as the experts on the meaning of a statute
(39:17):
that they're trying to implement that they're supposed to implement.
And that decision was effectively overturned by the US Supreme Court,
So it had been subject to some erosion over the
years in any case, because difference is one of those
concepts that's pretty elastic depending on who's actually interpreting it.
(39:42):
But it's now no longer required that they give as
much difference as the Court seemed to have said should
have been the case in the past. So that definitely
will help those who are challenging regulationtions that come out
of the current administration or interpretations, including decisions to deregulate
(40:08):
or overturn previous regulation. That again, depending to some degree
on the judges and their attitude about what the agency
has done and how much they've made the case that
what they're doing makes sense, they will they will get
less of a less less of a deferential view than
(40:31):
they would have before the latest Supreme Court action. It's
a it's kind of a moving target. There's not a bright,
clear statutory definition of what difference actually means. But it's
definitely a tilt in the direction of saying that ACCORD
is entitled to read the statute itself and decide whether
(40:55):
what the agency did is a correct reading of the statute.
Speaker 2 (41:00):
Just want to circle back to your priorents are about
taking more holistic approach to regulation and what ideas you
might have, you know, around how governments should think about
kind of the longer term implications, as you said, to
long term decisions. You know, is there what ideas you
have and is there anything proactive or preemptive states can
(41:21):
do or even at the local level, you know, to
alleviate some of these issues, or to preserve environmental regulations
that maybe the federal government is currently trying to tear up.
Speaker 3 (41:32):
Quite a number of states, not necessarily the exactly same
group of states that follow California's vehicle regulations, have rules
in place or are working on regulations that are designed
to require businesses and others that operate in their states
(41:55):
to disclose their emissions of greenhouse gases, and that would
include not only the direct emissions from facilities that are
in the state, but also from the supply chain and
from the energy that goes into making those products. And
(42:16):
the reason for that is a belief that a better
approach to showing what the relative impacts of different products,
different activities are, that kind of information is going to
lead industries to look for ways to be more efficient
(42:38):
and to waste less energy, because that will also help
THED with their overall emissions and ultimately will lead to
some sort of more life cycle oriented approach on how
we manufacture and use all kinds of goods, uh, you know,
(43:01):
in our in our society. It sounds very high level
and abstract, but when you sort of get down to
the immediate implications of it, there's already situations in which cities, counties, states,
various agencies are making decisions, for example, on procurement based
(43:25):
on relative UH emissions per unit of product of things
that they buy, whether it's office furniture or paper or whatever,
and this actually is having an impact. It's already having
an impact on many different economic sectors. So that whole
(43:50):
area of looking at kind of how we as a
society can go about doing things that we would like,
buying things we would like in ways that are more efficient,
less wasteful of energy, and thereby produce fewer emissions. Is
already a kind of thinking that's underway, and there's different
(44:14):
ways to go about it. Disclosure certainly is you know,
step number one. But going back to ideas that we're
being talked about. You know, when al Gore was running
for president, the idea of having attacks on carbon or
a cap and trade program, which is what we have
(44:35):
in California. It's now called cap and invest, and Washington
and Oregon already have it, and other states are looking
at it. You know, these are regulatory ways to go
after the big picture, the big the big problem, which
is emissions that we don't want, but leave it up
to the affected companies, affected sectors of the economy to
(45:01):
figure out how to go about reducing their emissions. And
so this kind of thinking is already out there and
to some extent is being used, and I think it's
going to be more important in the future.
Speaker 2 (45:16):
Great, I think that's an excellent time to leave this
on a happy note like that that there is there
is hope. So Mary, thank you again. So much for
your time and for our listeners. You can find more
information on topics like environmental regulation by going to BI
space ESG go on the Bloomberg terminal. If you have
(45:36):
an ESG quandary or a burning question you would like
to ask bi's expert analysts, send us an email at
ESG currents at bloomberg dot net. Thanks again, Mary,
Host
Eric Kane
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