Introduction

In June 2025, California and a coalition of 10 other states in State of California et al. v. United States et al., No. 4:25-cv-04966-HSG (N.D. Cal.) filed a lawsuit challenging the authority of congressional Republicans and President Trump to revoke a waiver granted by the Environmental Protection Agency (EPA) in the waning days of the Biden administration permitting California to adopt more stringent emissions standards than those imposed under the federal Clean Air Act (CAA). Now auto industry participants will have to wait until at least early 2026 to learn whether they will need to comply with these emissions standards, after California and the other states in October 2025 filed an amended complaint mooting a pending motion to dismiss.

The Regulatory Backdrop: California’s Unique Clean Air Act Waiver Authority

Under the CAA, states typically are preempted from setting their own vehicle emissions standards. The CAA authorizes California to request from the EPA a special preemption “waiver,” however, which if granted, permits that state to adopt stricter emissions standards given historic air-quality challenges there. Moreover, although other states may not request such a waiver, Section 177 of the CAA permits states to follow California’s lead and adopt the emissions requirements imposed by California regulators (the “Section 177 States”).

In the closing days of the Biden administration in December 2024, the EPA granted three preemption waivers allowing the California Air Resources Board (CARB) to implement its Advanced Clean Cars II (ACC II), Advanced Clean Trucks (ACT), and Omnibus Low NOx (Low NOx) rules. These rules and the EPA waivers would have allowed California and the Section 177 States to, among other things, require the complete phase out of the sale of new gas-powered passenger vehicles in those states by 2035 and require more heavy-duty trucks to be zero-emission vehicles.

Congressional Review Act Challenge to California’s EPA Waivers

In January 2025, congressional Republicans formally challenged the EPA’s grant of these waivers by invoking the Congressional Review Act (CRA). The CRA is an oversight tool that allows Congress to revisit and revoke federal agency rulemaking actions by requiring all final rules to be submitted to Congress and allowing any member of Congress to introduce a joint resolution disapproving an agency’s final rule. A CRA resolution passed by Congress and signed by the President has the force and effect of federal law and prevents the rule in question from going into effect. Moreover, no agency rule revoked under the CRA can be reissued by a federal agency in the same or “substantially similar” fashion.

On June 12, 2025, President Trump signed three joint resolutions under the CRA that revoked the three California CAA waivers. As a result, California and the Section 177 States no longer had the authority to implement and enforce the ACC II, ACT, and Low NOx rules in their states. If these CRA resolutions are upheld, those waivers arguably could not be granted by the EPA again in the future, effectively curbing California’s regulatory power in this area.

California and Affected States Bring Lawsuit Challenging CRA Authority

The same day the CRA resolutions were signed into law, California and a coalition of 10 other states filed a lawsuit in federal court in California against the EPA, the federal government, and related entities alleging that the use of the CRA to revoke the waivers was improper. Their argument focus largely on the EPA’s historical treatment of preemption waivers as case-specific adjudicatory orders, not rules. That distinction is critical, because the CRA is only available to Congress to review “final rules,” a term with a specific meaning under Administrative Procedure Act (APA) and for the purposes of the CRA.

Even before the federal government responded to the complaint, numerous industry participants sought to intervene, voicing serious concerns about both the technological feasibility of ACC II, ACT, and Low NOx emission standards and the consumer demand necessary to make them commercially viable. This included a motion to intervene filed on September 5, 2025 by the Alliance for Automotive Innovation (“Auto Innovators”) and the National Automobile Dealers Association (“NADA”), trade associations representing the interests of U.S. automobile manufacturers and dealers, respectively. These associations argued their members would suffer direct and substantial economic harm if the EPA’s preemption waiver were reinstated, particularly “in light of California’s threat that it will retroactively enforce the ACC II regulations as to vehicles already sold and as to model years already past, should it be successful in this litigation.”

Motion to Dismiss Met with Amended Complaint

For automakers, suppliers, dealers, and ancillary sectors, the stakes are high. Regardless of its outcome, the case is likely to heavily impact the future of U.S. vehicle-emissions policy, including vehicle design, manufacturing investments, supply chains, and market roll-out strategies. On September 19, 2025, the United States moved to dismiss the complaint filed by California and the other states, arguing that Congress and the President had acted within their authority under the CRA. Rather than oppose this motion, California and the other states on October 10, 2025 filed an amended complaint, mooting the federal government’s motion to dismiss and the multiple motions filed by potential intervenors—including Auto Innovators and NADA—seeking to file amicus briefs in support of the federal government’s motion.

On October 23, 2025, the court entered an order requiring that the United States file its renewed motion to dismiss by November 23, 2025; responses from California and the other states be filed by December 23, 2025; replies be filed by January 19, 2026, with a motion hearing set for January 29, 2026. It appears auto industry participants will have to wait until at least early 2026 to learn whether they will be required to comply with these stringent new California emissions standards. Longer term, it remains to be seen whether these developments will curb the ability of California to adopt regulations requiring manufacturers and dealers to phase out the sale of new gas-powered passenger vehicles in that state, and by extension, the Section 177 States.