I find it difficult to understand how failing a car with clean emissions levels, thereby forcing it out of the state, contributes to cleaning up smog.

The point is that California had an exceptionally bad problem, which is why the response was so stringent.

If it's forced out of the state the smog isn't California's problem. California's emission regulations aren't meant to clean up other states.

In this case they do end up helping the other states...

You are willfully ignoring the vastly more significant average/mode case to focus on the effect of edge cases.