The plan calls for  the most stringent fuel efficiency standard ever attempted in the United States, and the first nationwide regulation of greenhouse gases. The proposal emerged after lengthy negotiations between the White House, the state of California and the auto industry, which previously disagreed about how to regulate fuel economy and transportation emissions.
Major U.S. auto manufacturers have long advocated for federally-imposed mileage standards, but California fought for and won a waiver to hold cars and trucks to a higher standard than the federal government required, sparking a lengthy and expensive legal battle between the state and the industry. Under the compromise plan announced today, the automakers agreed to drop all related lawsuits in order to secure a national standard, while California agreed not to seek stricter emissions standards before 2016.
The proposed change will raise fuel efficiency targets to 35.5 miles per gallon for all new passenger vehicles and light trucks beginning with model year 2016, four years earlier than mandated by the 2007 energy bill.
Announcing the plan, President Obama said that the agreement will “save 1.8 billion barrels of oil over the lifetime of the vehicles sold in the next five years,” which amounts to more oil than the United States imported last year from Saudi Arabia, Venezuela, Libya and Nigeria combined.
The proposed regulation is also expected to slash greenhouse gas emissions approximately 900 million metric tons  over the life of the program.
Under the proposal, the Department of Transportation and the Environmental Protection Agency will adopt the same rule, which Obama said "will avoid an inefficient and ineffective system of regulations that separately govern the fuel economy of autos and the carbon emissions they produce."
The new approach was developed jointly by the Department of Transportation, the Environmental Protection Agency, auto manufacturers, the United Auto Workers union, the State of California and others.
“At a time of historic crisis in our auto industry, this rule provides the clear certainty that will allow these companies to plan for a future in which they are building the cars of the 21st century," Obama said.
President Obama acknowledged that the proposed standard would increase the cost of vehicles by an average of $600, but said that fuel savings would offset much of the increased cost. "Even as the price to build these cars and trucks goes up, the cost of driving these vehicles will go down as drivers save money at the pump. . . . If you buy a car, your investment in a more fuel-efficient vehicle, as a result of this standard, will pay off in just three years," Obama said.
And since the plan requires the auto industry to ramp up production of more fuel-efficient vehicles on a much tighter timeline than originally envisioned, more green jobs will be created sooner than otherwise anticipated.