Budget Bill Could Prevent Any AV Regulation

By Sam Abuelsamid

Waymo Autonomous Vehicle

The big budget bill that was recently passed by the U.S. House of Representatives and is currently being considered by the Senate is problematic in many ways. If passed as is, the wealthiest Americans would get huge tax cuts while the poorest would get huge cuts to food and health care aid. But the Telemetry market research practice focuses on issues related to transportation and mobility. Even those areas face big changes that are not good for the environment, public health, and potentially for road safety. 

Freezing Emissions and Fuel Economy Standards

The Trump administration has made it clear it is fundamentally opposed to any sort of regulation that would push America away from using fossil fuels and toward cleaner alternatives. In the first administration, Trump attempted to revoke California’s Clean Air Act waiver, which allowed the state to set its own tougher air quality standards, as well as roll back fuel economy and CO2 emissions standards for vehicles. At the time, they attempted to do this through the regulatory process, which requires conducting cost-benefit analyses and other studies to justify the changes. As is often the case with Trump appointees, they were not thorough, and the process was never completed. 

This time, the waivers, fuel economy and emissions standards are being repealed through the legislative process by inserting them in the budget bill. The bill specifically repeals the fuel economy standards set by the National Highway Traffic Safety Administration for model years 2024 through 2032 and the greenhouse gas emissions standards established by the Environmental Protection Agency for the same period. That budget bill was passed on a straight party-line vote in the House and is currently being reviewed by the Senate. 

If this portion of the budget bill is passed as is, corporate average fuel economy (CAFE) standards would be frozen at model year 2023 levels. Those requirements were 43.7 mpg for passenger cars and 31.7 mpg for light trucks. The U.S. light vehicle fleet already has the lowest average fuel efficiency of any major market, and if automakers choose to continue building to those standards, the U.S. market will be much farther behind the rest of the world by 2030. 

A separate resolution was passed by both houses and signed by the president to repeal the California waivers, which have allowed the state to establish a requirement that all new vehicles sold in the state from 2035 onward be zero-emission or partial zero-emission (plug-in hybrids). 

Interestingly, regardless of what Congress, the Trump administration, and courts do, there is one automaker that must continue to adhere to the California ZEV requirements through at least 2030 — Stellantis. For a decade, Stellantis (and its precursor company, Fiat Chrysler Automobiles) has consistently had the worst CAFE numbers in the industry. In 2023, the company was facing massive fines in California for falling short of the standards. Under previous CEO Carlos Tavares, the policy was that the company would no longer purchase ZEV credits (it had been spending billions on ZEV credits purchased from Tesla) or pay fines for non-compliance. In order to achieve that, the company had an aggressive product plan that would roll out a broad range of new EVs over the next several years. 

In mid-2024, Stellantis signed a settlement agreement with the state of California that would allow it to avoid non-compliance fines, but it had to meet its ZEV mandate requirements through 2030. A key part of the settlement was that the agreement would remain in force even if federal regulations and waivers were repealed. Thus, Stellantis will have to move forward with EV sales in at least California, regardless of what happens in Washington. 

No AV Regulations for At Least a Decade

Another budget provision has been widely discussed among technology media in the past week. In the past two years, a number of states have moved to enact legislation related to artificial intelligence (AI) systems. However, Section 43201 of the House budget bill says that for 10 years from the enactment of the law, states cannot enforce laws or regulations on AI models, AI systems, or automated decision systems. 

Automated vehicles (AV) rely heavily on AI to enable the act of driving, including deciding when to accelerate, brake, and steer — making them automated decision systems. There are currently no regulations at either the state or federal level in the U.S. that govern the performance of automated driving systems (ADS). While the bill doesn’t explicitly mention AVs, it appears that if passed, this law would preempt states from regulating AVs in any way except for registering them. 

This is a major problem because at this stage, we still don’t have any reliable independent evidence that AVs are actually safer than human drivers in comparable conditions. Humans who wish to drive are required to take a series of written, visual, and practical tests to demonstrate that they understand how and are capable of operating a vehicle safely. Driver’s tests are regulated at the state level as part of the licensing process. 

Traditionally, the federal government has responsibility for regulating the safety of motor vehicles, including setting standards for braking, lighting, and occupant protection in a crash, among other things. However, after more than a decade of widespread development of ADS, NHTSA has done nothing to regulate such systems. While it seemed possible that some states could move to establish licensing standards for AVs similar to driver’s licenses for humans, this budget bill could well prevent that. 

Dr. Henry Liu, the director of MCity at the University of Michigan and his colleagues have developed a safety testing framework for AVs that they proposed to NHTSA. However, given the animus that the Trump administration has to regulation of any kind, the likelihood of NHTSA imposing any sort of new regulations on AVs seems like zero or less. While ADS developers could voluntarily adopt such evaluation frameworks, that too seems unlikely. The best hope for such an evaluation system would be for a third party like the Insurance Institute for Highway Safety, which already conducts independent crash testing as part of its Top Safety Pick program, to do it. 

The only other likely pathway to ensure that AVs are actually safe enough to be on public roads is product liability law. The problem with that approach is that it only happens after significant safety failures have occurred, and it is costly and time-consuming for the general public to pursue. Unfortunately, courts and juries can often be fickle. With more corporations relying on mandatory arbitration schemes as part of their terms of service, it’s also becoming increasingly difficult for victims to pursue lawsuits. 

While a patchwork of state regulations is never desirable for those hoping to build businesses, in an environment where federal regulators are loath to do anything, states seemed like the best available option. Sadly, politicians who often express public support for state and local rights are usually on the opposing side when those states want to do something they disagree with, and that is the case here.