Auto Makers End Challenge to California on Emissions Rules

California has for decades had this authority, giving it outsize influence in setting environmental rules that limit tailpipe pollutants for auto manufacturers. Roughly a dozen other states follow the state’s regulations, giving California immense weight in shaping industry’s production.

The auto makers say they are withdrawing from the legal challenge as a gesture of goodwill toward the new Biden administration, which has vowed to include the state in its efforts to implement tougher auto-emissions standards and hasten the industry’s shift to electrification.

“We are aligned with the Biden administration’s goals,” said the group, called the Coalition for Sustainable Automotive Regulation.

The auto industry has been divided in recent years in how to confront the Trump administration’s efforts to roll back Obama-era auto emissions and fuel-economy rules, with some executives saying the stiffer standards are out of sync with buyer preferences.

Auto executives began lobbying Mr. Trump shortly after he took office to revise rules set by his predecessor that would have required them to limit greenhouse-gas emissions and increase fuel economy by roughly 5% annually through mid-decade.

The Trump White House initially proposed eliminating any annual increases, but sharp opposition from California and other states caused fears in the industry that a prolonged legal fight and uncertainty over the targets in the longer term would complicate their product planning, executives have said.

In 2019, Ford Motor Co. , Honda Motor Co. , Volkswagen AG and BMW AG signed a deal with California in which they agreed not to challenge California’s authority, prompting the Trump administration to open an antitrust investigation against the group and hastening moves to revoke the state’s regulatory power.

A separate bloc of car companies that included Toyota, Stellantis and General Motors Co. GM 1.67% signed on to support the White House against California in a court case on the matter, saying they felt emissions policy should be solely the charge of the federal government.

California railed against those companies, saying it would no longer purchase government vehicles from companies that were challenging its authority.

But with the change in the White House, auto executives have said they realize stricter rules are coming and they would have to compromise with California on new standards.

Weeks after Mr. Biden’s election, GM dropped out of the lawsuit and encouraged other auto makers to follow.

“We are confident that the Biden administration, California, and the U.S. auto industry, which supports 10.3 million jobs, can collaboratively find the pathway that will deliver an all-electric future,” GM Chief Executive Mary Barra wrote in a letter to parties in the lawsuit.

GM last week also said it aims to phase out gasoline- and diesel-powered vehicles from its lineup by 2035.

After the inauguration, Mr. Biden signaled quickly he would begin addressing climate concerns through a series of executive actions, including revisiting the emission targets set by the Trump administration.

The White House has nominated Steve Cliff, one of California’s key negotiators on the state’s deal with Ford and the other companies, as deputy administrator of the National Highway Traffic Safety Administration.

Ann Carlson, an environmental law professor who has sharply criticized Mr. Trump’s efforts to relax standards and the auto makers supporting them, was appointed the agency’s general counsel.

Write to Ben Foldy at [email protected]