WASHINGTON — Amid a teardown of auto industry environmental rules, Trump administration allies quietly won another victory when a federal court voided an obscure but, at one point, hugely consequential Biden-era rule on electric vehicles.

A panel of judges for the 8th Circuit Court of Appeals in St. Louis nullified a March 2024 change to "petroleum equivalency factor" rules, which determine electric vehicles' miles-per-gallon rating. After a phase-in window ending in 2030, MPG ratings for EVs would have been about 65% lower.

"It obviously hasn't gotten a lot of headlines," said Shea Burns, an automotive regulatory expert for AlixPartners. "But I think it just underlines that they're trying to dismantle a lot of what's been done by previous administrations, which then makes it more difficult for any future administrations to reverse course."

The now-defunct rule change, which altered a decades-old technical calculation revisited under the Biden administration at the urging of two environmental groups, once looked poised to dramatically speed up the United States' EV future by changing how regulators counted electric models in company-wide fuel economy averages.

The underlying policy, now reverted to its previous form, matters little now under a Trump regime that has already scrapped fines for fuel economy violations altogether. But the White House still celebrated the court decision as being consistent with its broader regulatory agenda.

"This is a huge victory for the auto industry in Michigan, which was devastated by Joe Biden’s radical Green New Scam," White House spokesperson Taylor Rodgers said Monday in an email. "President Trump is delivering on his promise to the auto industry to implement commonsense policies that roll back burdensome regulations, allowing American companies to remain competitive, continue investing in US innovation, and offer consumer choice.”

The court decision came down on Sept. 5 from a panel of three Republican-appointed judges who heard oral arguments five days before Biden's presidential term expired. Thirteen states with Republican attorneys general and the American Free Enterprise Chamber of Commerce first filed their case against the federal government on April 5, 2024.

Why PEF used to matter

The rule, administered by a U.S. Department of Energy led by former two-term Democratic Michigan Gov. Jennifer Granholm, was significant under then-President Joe Biden because it weakened how valuable EVs were toward meeting ambitious fuel-economy standards. In other words, companies would have needed to sell more EVs to achieve the same fleetwide MPG averages as before.

The new petroleum equivalency factor, or PEF, calculation was designed to work in tandem with the Environmental Protection Agency and the National Highway Traffic Safety Administration's rules on tailpipe emissions and fuel economy, such that meeting one of the standards meant an automaker would be in compliance with the other.

“I think very few people understand it, and understand the impact and the math behind it,” Burns said in a previous interview shortly after the rules were finalized in 2024. He called the MPG calculation changes “as impactful, if not more impactful” than Biden-era changes to EPA and NHTSA emissions regulations.

“There's probably some debate about exactly what (the calculation) should be, because there's a lot of math that goes into it. But it should be significantly lower than what it is, from a pure scientific standpoint,” Burns added. He noted that the old version “was inflated quite a bit to encourage EVs” while they were a more nascent product offering. The math effectively set a multiplier for EVs to count extra favorably toward environmental targets.

The previous PEF calculation was set in 2000. The Biden-era rule was meant to update the calculation to more accurately capture current and future methods of power generation for the electricity that charges plug-in vehicle batteries. The United States relies more on renewable energy than it did 25 years ago, and cleaner-burning natural gas has increasingly supplanted coal and petroleum.

Most automakers — especially the Detroit Three — vigorously opposed an initial draft version of the PEF rule.

Stellantis NV, in a public comment on the original proposal, said the rule would work against the Biden administration's stated goal of an electrified future by "dramatically reducing EV benefit to compliance — effectively becoming a single 'oar' that is simply rowing backwards on a boat that is otherwise focused in a common forward direction."

The industry's top lobbying group later showed some tempered support for the final rule and Biden-era coordination between agencies while still criticizing federal emissions policy.

"It looks like the left hand knew what the right hand was doing. That’s the kind of coordination we recommended. So that’s good and appreciated," said John Bozzella, president and CEO of the Alliance for Automotive Innovation, in a June 2024 blog post.

He continued: "That said ... At some point we’ll need to talk about whether there’s really a need for (corporate average fuel economy rules) in a world rapidly moving toward electrification."

The lobbying group was an intervenor in the PEF court case, mostly supporting the Biden DOE position, but declined to comment on the outcome. All of the Detroit Three automakers — Stellantis, General Motors Co. and Ford Motor Co. — also declined to comment on the ruling.

The Natural Resources Defense Council and the Sierra Club, the two environmental groups that prompted the Biden administration to change the PEF rules, similarly declined to comment but noted they are awaiting the release of other related Trump emissions rules.

Why PEF could matter again

Recent and pending actions by the Trump administration will make the PEF calculation for electric vehicles trivial — at least for the time being.

Trump's NHTSA is expected to propose new standards in the coming weeks that will be far more lenient on automakers and eliminate consideration of EVs, which do not burn gasoline, in fleetwide MPG averages. Automakers will likely be able to meet targets regardless of how valuable EVs are for compliance.

Even if some companies do struggle to meet new MPG targets, the standards could have little practical effect in the short term after Republican lawmakers moved to end all fuel economy fines via the One Big Beautiful Bill Act in July.

However, the successful legal challenge on PEF brought by red states and the American Free Enterprise Chamber of Commerce could have future implications for the auto industry.

"Long-term, someone's going to come in and jack up NHTSA standards and reintroduce penalties at some point, right?" said Michael Buschbacher, a partner at the law firm Boyden Gray PLLC and AmFree's lead counsel in the case.

He and the conservative petitioners continued pursuing the case even after Trump took office because of those future considerations.

Buschbacher added: "Having a court decision that says, 'No, you can't have this multiplier that boosts ratings for EVs, but you can have a fair comparison,' matters for regulatory stability." He described the past PEF rule as a piece of industrial policy that encouraged EV adoption.

"There was a $10 billion-plus per year regulatory cross-subsidy that existed," he said in a phone interview. "And the court said you can't ever turn that faucet back on. New PEF rules will come out, and the agency is never again going to be able to use them to create a regulatory subsidy for electrification."

Ann Carlson, who was the acting head of the National Highway Traffic Safety Administration for 14 months of the Biden administration, had a different reaction to the ruling.

She pointed out that the auto industry "vociferously" opposed a first draft of the PEF rule that made changes suddenly and supported keeping a version of the calculation that boosted the compliance value of EVs.

In fact, a compromise on Biden's final PEF rule — an agreement intended to alleviate industry concerns — ended up forming part of the complicated legal basis for its nullification. Circuit Judge Duane Benton wrote in his decision that the Energy Department exceeded its statutory authority by allowing a phase-out period for the disputed "fuel content" component of the calculation.

The draft rule had no phase-out and would have been allowed, Benton indicated.

The court decision was a tacit acknowledgment, legal experts said, that the decades-old, EV-boosting version of PEF was unlawful and should be replaced by a calculation that more accurately and immediately captures the modern energy usage of electric vehicle batteries

"The biggest implication," Carlson said of a potential PEF rule along those lines, "is that it makes it harder for auto manufacturers to continue to pump out inefficient (internal combustion) engines and use EVs to balance out their fuel economy averages."

She acknowledged that a Trump administration set on weakening environmental standards would probably work to make it easier — not harder — for automakers to meet emissions targets. But the former regulator did have a warning based on the outcome of the PEF case.

"This could be a 'be careful what you wish for' moment," she said.

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