White House Unveils Plan to Curb Auto Emissions

By STEPHEN POWER and JOSH MITCHELL
WASHINGTON -- The Obama administration rolled out details of its strategy to reduce greenhouse-gas emissions from cars, with the head of the Environmental Protection Agency saying the proposal paves the way for regulating emissions from sources such as power plants.
General Motors Chief Executive Frederick 'Fritz' Henderson, center, was among those on hand when President Barack Obama announced new car fuel-efficiency standards at the White House in May.

The proposal requires that new-vehicle fleets average 35.5 miles per gallon by 2016. The requirements could raise new-vehicle prices by as little as $476 per vehicle in 2012 to as much as $1,091 per vehicle in 2016, according to a Transportation Department analysis. The administration said the new standards would help Americans save an estimated $3,000 over the lifetime of a 2016 model-year car through better gas mileage.
The Obama administration is set to usher in tougher fuel economy standards. WSJ's Steve Power says after years of resisting the changes, U.S. auto makers are getting on board with the move.
Meanwhile, EPA Administrator Lisa Jackson said in an interview that "we must consider the implications of the Clean Air Act and how it might apply to other sources." She said it was "certainly a possibility" that the agency could propose emissions regulations covering other sources within the next year.
Business groups, including the Chamber of Commerce and the National Association of Manufacturers, strongly oppose using the Clean Air Act to limit carbon-dioxide emissions from businesses, and have warned that such an expansion of the EPA's regulatory power would be costly and eliminate jobs.
Earlier this year, the agency declared greenhouse-gas emissions a threat to human health and welfare, the legal trigger for regulating them under the federal Clean Air Act. The agency's declaration was a response to a 2007 ruling by a divided Supreme Court that held that the act authorizes the agency to regulate greenhouse-gas emissions from autos if it determines they cause or contribute to air pollution that may reasonably be anticipated to endanger public health or welfare.
Many legal experts say the Clean Air Act doesn't give the EPA much leeway to pick which sources to regulate. The Obama administration has said it would prefer to tackle climate change through legislation that requires companies to pay for the right to emit greenhouse gases. On Tuesday, Senate Majority Leader Harry Reid (D., Nev.) said the Senate might delay voting on such legislation until next year, though his spokesman said no decision had been made.
The auto industry earlier this year agreed to support the administration's proposal to boost new-vehicle fuel efficiency and set greenhouse-gas-emissions rules. In return, the industry will be allowed to abide by one, nationwide standard rather than a patchwork of state rules, which it fears could be more onerous.
A bipartisan proposal introduced in the Senate last month would create a "feebate" system, in which consumers who buy vehicles that get good mileage would be given a subsidy, funded through a fee levied on less fuel-efficient vehicles.
Transportation Secretary Ray LaHood declined to say Tuesday whether the administration would favor a feebate system or other policies targeting consumers.
The proposal was accompanied by an analysis, prepared by the Transportation Department, that said the proposed standards could result in additional traffic fatalities by encouraging auto makers to reduce the weight of their vehicles in ways that compromise safety.
Still, Ms. Jackson said in the interview that "everything we know indicates that it [additional traffic fatalities] is very unlikely," adding that the DOT is required by law to examine such worst-case scenarios.
Write to Stephen Power at stephen.power@wsj.com and Josh Mitchell at joshua.mitchell@dowjones.com