These regulations impose an unfair burden on consumers outside of the state, who must pay for California-spec'ed emissions equipment that they never wanted or were required to have. Non-Californians have litte power in the voting booth to resist California's impositions. By going after the exemption, the administration is making things more fair for the folks in the other 49 states.
So there is obviously a market solution here. It seems wrong to target the CA regulation layer on this one.
Also, are we sure that it costs more on the margin to manufacture cleaner cars?
Plus, I can't help but think it's not that bad if we accidentally have cleaner cars, but that's not really a principled stance, it just worked out in this case.