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UPDATE 1-California official sees state auto emissions deal as 'template' for Biden

(New throughout, adds details from interview, background, no comment from Biden)

LOS ANGELES/WASHINGTON Nov 12 (Reuters) - California Air Resources Board Chair Mary Nichols, who sources say could be the next federal environment chief, said on Thursday her state’s agreement with manor automakers for fuel efficiency requirements could serve as a “good template” for federal standards through 2025.

The Trump administration in March finalized a rollback of U.S. Corporate Average Fuel Economy (CAFE) standards to require 1.5% annual increases in efficiency through 2026, well below the 5% yearly boosts in Obama administration rules it discarded.

California and other states have filed suit to challenge the rollback. Automakers including Ford Motor Co, Honda Motor and Volkswagen AG struck a compromise deal with the state that falls between the Trump administration and Obama-era requirements.

Many automakers are bracing for a lengthy court or regulatory fights over tougher standards that they say could cost them billions of dollars.

President-elect Joe Biden has vowed to negotiate “ambitious fuel economy standards” with industry, unions and environmental groups.

Nichols said California’s framework deal with automakers on emissions, announced in July 2019 and finalized in August 2020, “is a good template and then we should be moving on to the next generation of regulation.”

Other automakers, including General Motors Co, Toyota Motor Corp, and Fiat Chrysler Automobiles, opted not to join the California emissions pact and sided with President Donald Trump on the emissions fight.

Nichols said fuel efficiency requirements should be increased but added: “I don’t think honestly the future of CAFE is the relevant question ... This is not where the action is.”

She told Reuters CAFE standards, first adopted as part of a 1975 law, are “not the most relevant tool for dealing with the future of transportation in this country or globally” as the industry shifts away from internal combustion vehicles toward electric and other zero emission models. “Our future is not with the internal combustion engine.”

Nichols, 75, is scheduled to retire from CARB this year and is among the top candidates to lead the U.S. Environmental Protection Agency under Biden, according to sources.

Nichols declined to say whether she was being vetted by the Biden team but said if offered she would take the EPA administrator job.

“I have said that I am very interested but I think I also just need to make clear that I am interested in volunteering to do anything that is of service to the new administration,” Nichols said.

A spokesman for Biden did not immediately respond to a request for comment.

In the interview, Nichols described “a huge volume of stuff that needs to be reversed and repudiated” by a Biden administration EPA but said some of Trump’s policies could be undone “informally” through “negotiation and good will.”

She spoke during an interview that will be part of Reuters Events Energy Transition North America.

Nichols noted Biden could not immediately snap back to former President Barack Obama’s CAFE requirements.

The Center for Biological Diversity estimates the California deal will improve fuel economy 3.7% year over year between 2022-2026.

Last month, CARB urged automakers to disclose this year any unapproved hardware or software programs that compromise a vehicle’s emissions control system after Volkswagen’s record-setting diesel emissions scandal.

Nichols said CARB “had a lot of questions informally about what that meant but we’ve not seen any new wave of disclosures.... It was an important message to send.”

In September, California Governor Gavin Newsom directed CARB to draft regulations to ban the sale of new gasoline powered passenger vehicles starting in 2035.

Nichols said “there are a number of unanswered questions including some definitional questions” about the 2035 plan, including whether CARB will adopt “interim milestones.” (Reporting by Nichola Groom in Los Angeles and David Shepardson in Washington; Editing by Chris Reese and David Gregorio)

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