President Obama has announced a new national automobile fuel standards policy in an agreement likely to end automakers' ongoing legal dispute with the state of California's stricter emissions standards.
This agreement is expected to save 1.8 billion barrels of oil, according to the White House.
But what is good for the environment is not good for the pocketbook. The change will increase the cost of manufacturing a vehicle by $1,300.
The EPA estimates consumers will make the money back in about three years.
The announcement was hailed by state Attorney General Jerry Brown, who has defended the state in lawsuits filed by automakers since California adopted tighter greenhouse gas emissions standards in 2005.
In a prepared statement, Brown called the new policy "an historic agreement" between the Obama administration, the state of California and automakers. He said it would lead to a 30-percent reduction in greenhouse gas emissions by vehicles nationwide.
"This agreement brings an end to a five-year legal battle," Brown said. "It means that automakers finally recognize that their future depends on making cleaner and more efficient vehicles.
Gov. Arnold Schwarzenegger has also defended California's more rigorous emissions standards as a means of reducing greenhouse gases, saving drivers money and reducing dependence on foreign oil. Several others states have since adopted California's standards.
Under the new federal standard, each automaker will be required to maintain an average of 35.5 mpg for their entire fleet of new passenger cars and trucks by 2016, according to Kate Kenealy, an attorney with the Attorney General's office who worked on defending against the lawsuits.
The automakers who filed lawsuits in state and federal court against California and other states will agree to dismiss the suits, and in return, California will agree to allow automakers' compliance with the new federal standard to be deemed to comply with California's standard, Kenealy said.
The previous national standard passed by Congress in 2007 required an average fuel economy of 35 mpg by 2020.
The environmental advocacy group Environment California said the new federal standard "will largely mirror the standard already adopted by California and 13 other states."
According to Kenealy, the main difference is that the federal agreement will allow automakers to phase in the new standards a bit more slowly.
A statement from the White House said automakers "welcomed" the new national policy "because it provides regulatory certainty and predictability and includes flexibilities that will significantly reduce the cost of compliance." It also makes the rules clearer for automakers than having to comply with separate standards from the U.S. Department of Transportation, the Environmental Protection Agency and various states.
"President Obama is proving himself behind the wheel in the race to a clean energy economy," said Environment California's Bernadette Del Chiaro.
"This is what leadership looks like," Del Chiaro said.