Recent moves from the Trump Administration are a mixed bag full of short-term gains for some, long-term risks for others and contradictions that leave every sector facing some level of uncertainty, ambiguity and chaos.
When Donald Trump returned to the White House earlier this year, many in the transport energy sector (me included) expected a huge swing back to fuels and the internal combustion engines (ICE). The expectation was that the new Administration was going to end the whiplash on fuels/vehicle regulation and seek to provide certainty on the issues.
But this summer’s series of policy actions tells a different story. In quick succession and in just one month:
- The President signed into law Congress’ disapproval under the Congressional Review Act (CRA) of California’s waivers under the Clean Air Act (CAA) for its Advanced Clean Cars (ACCII), Advanced Clean Trucks (ACT) and Low NOx programs (June 12). The state is now suing the Administration.
- The U.S. Environmental Protection Agency (EPA) proposed final standards for 2025 and new volumes for 2026-2027 under the Renewable Fuels Standard program (RFS2) (June 13).
- The President signed the One Big Beautiful Bill (OBBB) into law, fundamentally altering Inflation Reduction Act (IRA) clean energy tax credits and zeroing out penalties for noncompliance with federal corporate average fuel economy (CAFE) standards (July 4).
- As expected, EPA proposed to rescind the Endangerment Finding and Biden era-Multipollutant Rule (EF-MPR) (July 29).
The Administration has moved with warp speed to tilt the playing field back toward fuels and away from electrification and to dismantle policy structures and regimes that have been in place for many years. On the surface, it seems the winners (e.g., refining, biofuels, and most OEMs) really won, and the losers (e.g., California, NGOs, EV-only OEMs, advanced/novel fuel producers) really lost. The reality is much more complicated. It’s more a mixed bag full of short-term gains, long-term risks and contradictions that leave every sector facing some level of uncertainty, ambiguity and chaos. Industries like auto and refining require policy frameworks that provide long-term stability and predictability. It’s clear they are not going to get it in this Administration, at least right now.
CRA: California in the Crosshairs
California’s leadership on vehicle emissions is now squarely in the crosshairs. The immediate effect is that California cannot enforce its 2035 ZEV sales mandate or the tighter tailpipe standards embedded in ACC II or ACT. EPA is now barred from issuing any waiver resembling ACC II or ACT unless Congress passes a new law that allows it. That injects uncertainty not just into ACC II and ACT, but into any future waiver California might seek.
In practice, it could freeze the state’s ability to shape vehicle emissions policy for years. What’s more, the litigation surrounding Congress’s CRA actions could become the vehicle (no pun intended!) for a far more sweeping outcome: a court ruling that Section 209(b) is unconstitutional. I think that is the long-term goal of the Administration and the state has taken the litigation bait. In the meantime chaos will reign as the industry tries to figure out what California standards to comply with and how. Certify MY 2026 – to what, exactly??
RFS2: The 50% Haircut
The RFS2 was supposed to be a pillar of certainty for the fuels sector. Instead, the 2025-2027 volumes proposed this summer highlight how fragile the program has become. EPA raised biomass-based diesel (BBD) targets sharply as shown in the figure below, which was welcomed after many years of lower-than-needed targets.
But then EPA pulled the rug from under industry by imposing a 50% reduction on credit values (Renewable Identification Numbers (RINs)) for imported fuels and feedstocks. On paper, the move was meant to privilege North American supply chains and reduce dependence on foreign inputs. The reality though is that U.S. feedstock capacity, particularly for renewable diesel (RD), simply cannot meet the escalating BBD volumes EPA has set.
Even EPA’s own analysis acknowledges that only about 3.7 billion gallons of RD could be supported by domestic supply in 2026, far short of the 6.7 billion gallons required. That shortfall has to be covered by imports, yet those imports are now devalued by half. The upshot is not durability but distortion. The 50% “haircut” turns the RFS2 into a program where compliance is mandatory, but the means of compliance are penalized.
Another issue for refiners is EPA’s clearing of the backlog of small refinery exemptions (SREs). On Aug. 22, 2025, EPA issued decisions on 175 petitions covering 38 refineries for the 2016-2024 compliance years. Roughly 5.3 billion RINs were affected, though only about 1.4 billion remain valid. EPA has signaled those volumes may be reallocated, meaning other refiners could face additional compliance burdens.
OBBB: Congress Gives…and Takes…
The OBBB was sold as the end of uncertainty and the Administration’s reset that would settle the rules in favor of fuels and away from the “Green New Scam.” The figure below shows that with respect to EV and renewable energy tax credits, Congress followed through. Other credits were retained with changes.
We knew the OBBB would repeal consumer and commercial EV tax credits. I thought for sure that Sections 45Z and 45Q would be preserved in some way, and I was right. But the changes to Section 45Z were conditional: only North American feedstocks would qualify for the tax credits hurting domestic biofuels producers who may need to rely on imports (especially for lower carbon feedstocks). In addition, indirect land use change (ILUC) was excluded from Section 45Z, and net negative-carbon fuels were eliminated and capped at zero. That will hurt investments in advanced fuels and renewable natural gas (RNG). The immediate future for sustainable aviation fuel (SAF) appears especially challenging.
Another massive sea change: A provision zeroing out CAFE penalties, which helped some OEMs and hurt others, such as Tesla, Rivian and Lucid. With no penalties, what is the point in a CAFE program at all? No one knows, except there is a rulemaking forthcoming from the National Highway Traffic Safety Administration. And that will do what, exactly?
Endangerment Finding/Multipollutant Rule: Relief, But Really Not
The rollback of the motor vehicle Endangerment Finding (EF) and the Multipollutant Rule (MPR) has been presented as regulatory relief for the auto industry. GHG standards for model years 2027 and beyond are rescinded, and enforcement of 2024-2026 standards is suspended. But the real aim is not stability or even relief for OEMs per se. It is to litigate the continuing validity of the core Supreme Court case that supports the EF: Massachusetts v. EPA (2007) and the federal government’s ability to regulate the area of climate at all. The proposal itself has scant technical analysis and plenty of legal arguments designed to invite a challenge.
The proposal is part of the Administration’s broader regulatory strategy to reorient EPA priorities toward “core pollutants” and away from climate-based vehicle regulations. It also reflects a policy alignment with the Administration’s stated goals of promoting vehicle affordability, consumer choice and energy security, while scaling back federal involvement in climate regulation. These are worthy goals, but it is questionable whether the proposal as written accomplishes this. One reason: The Agency is not touching Tier 4 criteria pollutant standards that are arguably tougher to comply with than the actual vehicle GHG standards the Administration seeks to overturn.
This approach leaves every stakeholder exposed. Automakers appear to get short-term relief but no clear planning horizon. Refiners and fuel suppliers may be subject to intensifying state climate lawsuits. California and allied states are preparing to defend their role, and they may try to step into the gap on climate and challenge the Administration with their own programs, regardless of the Administration’s view on preemption. Instead of clarity, the EF-MPR package ensures that the shape of vehicle and fuels regulation will remain unsettled until the courts decide. But even that does not guarantee certainty. Guess what happens when there is a Democratic trifecta? Guess what they’ll do first? Don’t count that possibility out.
Industries like auto and refining require policy frameworks that provide long-term stability and predictability. It’s clear they are not going to get it in this Administration, at least right now.
The Bigger Picture: What’s the Point?
If there’s a pattern to these actions, it’s not hard to see. The Administration and congressional Republicans are not just swinging the pendulum back toward fuels; they are trying to reset the rules of the game entirely.
First, they are re-centering policy on liquid fuels. By reshaping the 45Z credit to privilege domestic biofuels, raising RFS2 diesel volumes, and repealing EV credits, they are steering U.S. transport energy back toward conventional fuels and biofuels and leveling the playing field.
Second, they are using Congress and the courts to weaken California and EPA. The CRA disapprovals of ACC II and ACT aim to freeze California out of its waiver authority and set up litigation that could topple Section 209(b). The EF–MPR rollback, thin by design, is a vehicle to push Massachusetts v. EPA back to the Supreme Court. Both moves weaken the federal-state regulatory model that has governed vehicles for half a century.
Third, they are trying to lock in direction and to do so before the end of the Trump Administration in 2029. By moving quickly on OBBB, CRA, EF–MPR within weeks of each other, the Administration is setting in motion a legal process that they think courts and Congress will cement before another change in political control.
The messaging is simple: promises made, promises kept. But the reality is far messier. Every “win” comes with conditions and risks, and every “loss” comes with potential for reversal. Instead of durability, the strategy ensures years of litigation and uncertainty that impacts the fuels and vehicles industry. What was promised (or assumed) in this Administration for durability, predictability and stability of policy frameworks is instead producing a system defined by lawsuits, contradictions and compliance chaos for all industries. No one wins.
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