UPDATE, May 28, 2020: Five major U.S. cities and 21 states are legally challenging the Safer Affordable Fuel-Efficient (SAFE) fuel efficiency standards rollback finalized in March, the AP reports. The cities and states say the rule violates the Clean Air Act, the Energy Policy and Conservation Act and the Administrative Procedure Act.

The new rule requires automakers achieve 1.5% increases in fuel efficiency standards annually from 2021 to 2016. Under Obama-era rules, those standards were required to increase 5% annually.

The cities involved include Los Angeles, New York, San Francisco, Denver and Washington, DC. The challenge is also joined by states from around the U.S. including Illinois, Massachusetts, New Jersey, Rhode Island and Wisconsin, as well as the California Air Resources Board.

Dive Brief:

• The National Highway Traffic Safety Administration (NHTSA)​ and Environmental Protection Agency (EPA) finalized phase two of its fuel efficiency standards rollback Tuesday morning, requiring fuel economy standards to increase 1.5% annually from 2021 to 2026. Under the Obama-era rules, fuel economy standards were required to rise 5% annually.​

• The finalized Safer Affordable Fuel Efficient (SAFE) Vehicles Rule will "reinvigorate American auto manufacturing by updating costly, increasingly unachievable fuel economy and vehicle CO2 emissions standards," U.S. Secretary of Transportation Elaine Chao said in a statement.

• In September, NHTSA and the EPA issued phase one of its SAFE Vehicles Rule, which prohibits states from issuing their own fuel standards. 

Dive Insight:

Phase one of the rule specifically targeted California's fuel efficiency standards, which have been credited as the largest driver of getting EVs on U.S. roads to date. Several states have set similar standards, including Washington state, Colorado, New Mexico and Minnesota.

"There's no doubt that the single biggest policy driver for the EV market is the ZEV standard," said Stainken. The policy "forces the automakers to make EVs or to buy credits from other automakers who are making these clean cars."

The two-phased rollback threatens to reduce the number of ZEVs sold in 2035 by 8%, according to an October Rhodium Group report. ​That would cut the number of ZEVs on the road by 14 million and add more than a gigaton of greenhouse gas emissions in the atmosphere by that time, the report found.

Automakers are largely split on their support for the Trump administration's policy.

Ford, Honda, BMW and Volkswagen struck a deal with California last July, which lowers the emissions standards those companies have to meet, while giving them more EV credits. But other automakers, including General Motors, sided with the Trump Administration under the Coalition for Sustainably Automobile Regulation​ in a lawsuit filed by several environmental groups in response to the proposed rule changes.

"GM supports the need for one national standard which will provide the certainty the industry needs to continue investments in improving fuel economy and in new technologies," spokesperson Jeannine Ginivan​ told Utility Dive in an email.

"Regardless of the standards, we are committed to a future of zero crashes, zero emissions, and zero congestion," she said. "The pathway to that vision includes continually improving fuel economy year-over-year and our commitment to an all-electric future. An all-electric future cannot be achieved overnight, and GM remains committed to feasible, year-over-year improvements in conventional fuel economy in addition to our leading investments in electrification.​"

President Donald Trump and the automakers on his side argue that lowering efficiency standards and prohibiting states from setting their own will lower consumer costs and make on-road vehicles safer.

"Overly ambitious standards that dramatically increase the price of a new car can be counterproductive and hinder safety by discouraging people from replacing their older cars with cleaner, safer, newer cars," NHTSA Deputy Administrator Heidi King told Congress in June 2019 testimony. NHTSA did not respond to requests for comment.

While the average cost for an electric vehicle is generally higher than a traditional gas-powered vehicle — $55,000 versus $35,000, according to Enel X — charging EVs is becoming cheaper and more efficient, according to the Department of Energy.

Transportation beat out electricity in 2017 as the number one source of greenhouse gas emissions in the U.S., making up 29% of total emissions. And as the power sector continues to cut back on annual GHGs, due largely to coal plant retirements, transportation emissions remained flat in 2019. Because of this, many states see transportation decarbonization as the next step in emissions reductions, particularly as electricity becomes cleaner. 

"Rolling back these green car standards, which is a critical public health protection and saves every driver in the nation money … in the midst of an unprecedented public health and economic crisis, is just truly awful," said Stainken.