Trump’s EPA sends California emission waivers to Congress

The Environmental Protection Agency (EPA) is planning to use the Congressional Review Act (CRA) to challenge California’s authority to set its own vehicle emissions standards—a power the state has wielded for decades under the Clean Air Act.

For context—historically, California has been granted waivers to enforce stricter pollution rules than federal standards, citing its severe air quality issues. 

• And over the years, more than a dozen states have followed California’s lead, effectively making its regulations the de facto national “standard” for automakers.

• But now–the Trump administration is moving to strip that authority.

Driving the news: EPA Administrator Lee Zeldin announced late last week that he will submit three California car pollution waivers from the Biden era to Congress for review, including California’s Advanced Clean Cars II program, which requires all new cars sold in the state to be zero-emission by 2035.

Standing alongside President Donald Trump in the Oval Office, Zeldin stated:

Between the lines: This unprecedented move could have nationwide consequences. If Congress overturns California’s waivers, it would prevent the state—and others that follow its rules—from enforcing stricter tailpipe emissions standards, which automakers have already spent billions preparing for.

Yes, but—this isn’t just about regulations. The Trump administration is also setting its sights on federal EV incentives, particularly the $7,500 federal EV tax credit, which has fueled EV sales in recent years.

• The Inflation Reduction Act (IRA) established the $7,500 EV tax credit, but while the president can’t eliminate it outright, he could influence how the IRS applies it.

Why it matters: Currently, leasing companies claim the $7,500 credit under commercial vehicle rules, even for consumer leases. 

• This allows automakers to lower lease payments, making EVs more affordable.

• But if that “loophole” goes away—EV leasing could be disrupted overnight, particularly for luxury brands that rely on lease deals.

The counter argument? Tesla is proof that EVs don’t need subsidies, but its dominance was built on desirability, not just being electric. Now, stronger competition and an aging lineup are cooling demand.

• For the first time—Tesla’s U.S. sales declined in 2024.

• And because Tesla still represents nearly half of EV sales, its slowdown makes the entire segment appear weaker than it is.

The real test? Whether automakers can absorb the shock of changing incentives and regulations without derailing EV momentum entirely. If they can adjust pricing and streamline production, mass-market EVs should remain competitive. But for brands relying on subsidies and premium pricing, 2025 could be a painful adjustment year.

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