Dec. 3 (Bloomberg) -- Automakers say congressional legislation to boost U.S. fuel-economy standards 40 percent should halt efforts by states to restrict emissions.

The Nov. 30 accord to overhaul fuel rules for the first time in three decades would require cars and light trucks to average 35 miles per gallon by 2020. Automakers and some legislators say the mandate should be taken into account as the Environmental Protection Agency prepares to decide on a California proposal to let states set pollution standards.

``I'd hope California would withdraw their request for a waiver now that we have a very, very challenging national standard,'' said Mike Stanton, president of the Association of International Automobile Manufacturers, whose members include Japan's Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co.

California's greenhouse gas law, passed in 2002, requires a 30 percent reduction in vehicle emissions linked to global warming by 2016. The state is seeking permission from the EPA to implement the law. Massachusetts, Vermont, New York and eight other states have adopted the standards pending EPA approval.

Environmentalists say states should be able to limit emissions. By doing so, they may prescribe stricter fuel-economy regulations than those in the proposal agreed to by House and Senate negotiators late Nov. 30.

However, the accord on mileage, part of a larger energy bill before Congress, leaves the EPA's role ``ambiguous,'' White House economic adviser Allan Hubbard complained in a letter today to House Speaker Nancy Pelosi, a California Democrat.

`Uncertainty and Confusion'

As a result, the new standard, which differs from what President George W. Bush had sought, ``likely creates substantial amounts of regulatory uncertainty and confusion,'' Hubbard wrote.

Michigan Democrat John Dingell, chairman of the House Energy and Commerce Committee, said on a Dec. 1 conference call he will back the energy bill.

``We have a pretty good compromise here, but not everyone is satisfied with everything,'' he said. Still to be determined are standards for renewable fuels, which are opposed by the National Petrochemical and Refiners Association, and potential mandates on use of alternative energy such as solar and wind.

The agreement on car mileage is ``a historic achievement,'' said Deron Lovaas, transportation analyst at the Natural Resources Defense Council in New York. ``But there is more technical potential to increase fuel efficiency than is reflected in this deal.''

In September, Toyota, General Motors Corp., Ford Motor Co. and six other automakers represented by the Alliance of Automobile Manufacturers lost a lawsuit in Vermont challenging the state's right to enact emissions rules. The alliance has appealed.

State Laws

California's law would require new cars to travel an average of 43 mpg once a phase-in that begins next year is complete in 2016, auto industry lawyers told U.S. District Judge William Sessions in Burlington, Vermont. The current federal corporate average fuel-economy standard is 27.5 mpg for cars and 22.2 mpg for light trucks.

California Attorney General Jerry Brown has disputed the automakers' contention. In a Nov. 9 letter to Pelosi posted on his office's Web site, Brown said the state's target is ``roughly equivalent to a fleet-wide average of approximately 36 mpg,'' or close to the new agreed requirement.

Charles Territo, a spokesman for the alliance, said in an interview that equating the California standard with the Nov. 30 compromise is ``disingenuous at best.''

Dingell's Conflict

In negotiations with Pelosi that yielded the new mileage rules, Dingell failed to resolve the conflict between the new standards, to be administered by the National Highway Traffic Safety Administration, and a possible ruling from the EPA.

If EPA's rules are ``not compatible in the substance of their requirement or how they're arrived at and administered, you'll have a terrible mess on your hands and it'll probably stop production of automobiles,'' Dingell said on the call.

He said his committee would ``vigorously'' oversee how the EPA sets the rules and enforces them.

White House adviser Hubbard, writing to Pelosi, argued that Congress should pass legislation that would ``clarify that there should be consultation between'' the EPA and the Transportation Department, ``while clearly establishing a single national fuel economy'' standard.

In April, the U.S. Supreme Court ruled that the EPA could regulate greenhouse-gas emissions under the Clean Air Act and rejected the agency's contention that carbon dioxide isn't an air pollutant.

One Standard

``Ideally industry should have one tough national fuel- economy standard to shoot for,'' GM spokesman Greg Martin said in an interview. ``But potential EPA rulemaking still presents an element of uncertainty.''

In the April trial, GM told Sessions that it would have to spend $15 billion to comply with the states' emissions-reduction rules.

The automakers are also suing California in a separate case to stop the state from implementing its rules starting in 2009.

Environmental advocates, who see the new mileage agreement as a defeat for the automakers, say the industry should cooperate rather than confront state and federal governments.

`Get With the Program'

``The auto industry needs to get with the program,'' Dan Becker, an environmental consultant and former head of the global warming program at the Sierra Club, said in an interview. ``Learning to comply with California's rules will help domestic companies compete better with foreign manufacturers who are already making cleaner cars.''

Lovaas, of the Natural Resources Defense Council, said the EPA may grant California's request or prescribe a carbon- reduction standard that's higher than the new mileage target.

``The EPA has a higher calling: Their mandate is to protect the environment and look at the science and technical potential'' for reducing carbon emissions, he said. The ``scale of climate challenge is so huge that the response needs to be proportional.''

To contact the reporter on this story: Gopal Ratnam in Washington at gratnam1@bloomberg.net

Last Updated: December 3, 2007 15:50 EST