U.S. President Barack Obama took aim at climate-warming greenhouse gases on Tuesday and obliged the struggling auto industry to make more efficient cars by imposing tough national standards to cut emissions and increase gas mileage.

Obama said the new standards, announced at a White House ceremony attended by auto industry and union leaders, would reduce U.S. dependence on foreign oil and give five years of cost certainty to an auto industry battling to survive.

The status quo is no longer acceptable, Obama said in an announcement that raised pressure on carmakers to transform and modernize the industry to produce more efficient vehicles.

We have done little to increase fuel efficiency of America's cars and trucks for decades, he said, calling the standards the start of a transition to a clean energy economy.

Obama has made fighting climate change a priority for his administration, and lawmakers from his Democratic party are this week wrangling over a historic bill many hope will provide much broader guidelines for controlling greenhouse gas emissions.

Under the new vehicle standards, U.S. passenger vehicles and light trucks must average 35.5 miles per gallon (6.62 litres/100km) by 2016, which Obama said would save 1.8 billion barrels of oil over the lifetime of the program.

The Environmental Protection Agency would regulate tailpipe emissions for the first time under the standards.

The U.S. Congress does not have to approve the standards, which will be implemented through federal rules.

HIGHER PRICETAGS FOR CONSUMERS

The plan was praised by automakers and environmentalists but means higher price tags for consumers. Officials said they would recoup the money with lower fuel costs.

The new program, the administration said, will add about $600 to the price of producing a vehicle compared to current law. This requires automakers to achieve a fleet average of 35 mpg by 2020, a 40 percent increase over today's performance.

The plan could cut deeply into voracious U.S. gasoline demand, dealing another blow to a refining sector hard hit by recession and bracing for more climate legislation.

The White House announcement came as U.S. gasoline prices soared for the second week in a row, with the latest pump cost up 7 cents over the previous week to $2.31 a gallon amid signs of an easing of the recession.

Obama was flanked at the ceremony by executives from 10 automakers, labor leaders and Michigan Gov. Jennifer Granholm, who embraced the plan for giving the struggling industry cost certainty by setting a uniform national standard.

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.

The compromise also resolves a long-running dispute between the government and California, which had been seeking a waiver from federal law to impose its own tough standards on emissions.

Obama said a series of lawsuits tied to California's efforts would be dropped. California Gov. Arnold Schwarzenegger attended the White House announcement in a show of support.

The proposal is aimed at cutting climate-warming carbon emissions, which would fall by 900 million metric tons or more than 30 percent over the life of the program, officials said.

(Additional reporting by John Crawley, writing by John Whitesides; Editing by David Storey)

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