Misaligned Mandates in EV Trucking

Supply chains are currently faced with a classic ‘chicken and egg’ situation: if you can’t require fleet owners to buy EV class 8s, can you require manufacturers to sell them?

The simple answer would be no, but in the transition from diesel-fuel powered trucking to EV powered trucking, nothing is simple.?

On January 17th, Nebraska Attorney General Michael Hilgers published an op ed in The Wall Street Journal summing up the legal activity his state is leading to prevent the disruption and added costs that may accompany a forced transition to electric fleets.?

As he points out in that editorial, over 70 percent of U.S. freight moves by truck, and 80 percent of communities only receive goods via truck. Looking at his state specifically, Interstate 80 in Nebraska doesn’t have a single EV truck charging station. Not one.

He also lists three “unelected actors” that his state is pushing back on:

1. The California Air Resources Board (CARB)?
2. The Environmental Protection Agency (EPA)
3. Heavy duty truck manufacturers and their industry association

Because supply chain regulatory change has the potential to completely disrupt logistics and lives, it must be approached with a great deal of care and consideration.

California Dreamin’

The California Air Resources Board and the EPA have intertwined roles in the regulation of emissions. The EPA makes rules for the nation, but it also evaluates waivers requested by CARB when they want to implement new rules.

The state of California is in a unique position when it comes to emissions regulation. California is the only state that had emissions standards before the EPA established their own, so they are grandfathered from an independent authority perspective. Other states have the option to work under the Federal standard or to adopt California’s stricter standards. 16 states have opted for the stricter path.?

But… when California sets tougher standards than the federal government has, they can’t enforce them until the EPA grants a waiver. Thanks to their size and the 16 states that have joined them, once a waiver is granted, that block of states has enough influence to drive national change - such as with EV trucking.

Last week, California withdrew a request for a waiver in support of the Advanced Clean Fleets rule. It would have allowed them to force transportation companies to buy EV trucks in order to operate in the state, regardless of where those companies are located.?

The reason given for the withdrawal is that California doesn’t believe they will be granted a waiver under the Trump administration EPA. That said, the waiver sat with the Biden EPA for 14 months, so they didn’t receive a waiver from the Biden administration either.?

As soon as California withdrew the waiver request, the EPA closed the file on the rule change and Nebraska’s and 24-state coalition claimed success.

Clean Air Collusion

Nebraska also has a state-level antitrust lawsuit pending against Daimler, Navistar, Paccar, Volvo, and the Truck and Engine Manufacturers Association.

They signed onto the “Clean Truck Partnership,” which, according to AG Hilgers, serves as a restriction on output, and is therefore a classic antitrust case. The Clean Truck Partnership is an agreement to proceed as though Advanced Clean Fleets is enforceable even if it is ruled as unlawful.?

These manufacturers plan to increase the number of zero emission heavy duty trucks sold in California, and presumably to the 16 states who have signed on to the California standard.?

Because these companies, who would otherwise function as competitors, have agreed to move in lock step, and this decision could significantly reduce the availability of diesel fuel-powered trucks, they are colluding, according to the legal argument. If they were acting independently, some might choose to manufacture more EV class 8s and others might not, providing buyers with a greater range of differentiated buying options.

A Puzzle, Minus a Piece

The current combination of rules, commitments, waivers, withdrawals, and ongoing legal action leaves the country in a really odd place.

California has a rule on the books that is unenforceable: Advanced Clean Fleets. Because they chose to withdraw the EPA waiver request, it wasn’t ruled as being legal or not. And maybe that is semantics, because the manufacturers who have signed on to the Clean Truck Partnership have committed to proceed as though it had passed. Regardless, it can't be enforced.

And there is another piece to this puzzle.

Advanced Clean Fleets was half of a two-part legislative plan. The other half, Advanced Clean Trucks received its EPA waiver in 2023. Advanced Clean Trucks mandates an increase in the zero emissions vehicles sold in California and the states who have opted in to their stricter emissions regulations. But without Advanced Clean Fleets being enforceable, there is no requirement for anyone to buy those vehicles. Mandating sales without mandating purchases is unlikely to lead to change.

Given how important the advancement of EV trucking is for businesses, communities, and the environment, I think this is a story that is going to keep coming up.

On the one hand, California is right: regulation can be an effective way to drive change and spur investment and innovation. Thanks to their unique emissions rights, they are in a position to lead the way.

But Nebraska is also right: the infrastructure and equipment are not ready to support a national transition to EV trucking today, and there are legitimate concerns about whether either will be ready on the proposed timeline. Trying to force change before the system is ready will likely lead to mass disruption and unsustainable added costs.

At some point, the two truths will come close enough together that the scales will tip in the other direction, but with the state of Nebraska’s win on Advanced Clean Fleets, and the pending antitrust suit against the manufacturers, that doesn’t seem likely to happen any time soon.

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