The White House will unveil an auto fuel efficiency proposal on Tuesday to resolve a dispute between California and the U.S. government over emissions and accelerate the timeframe for sharply improving mileage performance, industry and other sources said.

The proposal, if accepted by California and a dozen other states that want to more aggressively target greenhouse gasses, would effectively end legal and political battles with the struggling auto sector over the best way to cut fuel consumption and curtail tailpipe emissions.

It would also put more pressure on struggling U.S. automakers like General Motors Corp, Ford Motor Co and bankrupt Chrysler LLC to accelerate development of more efficient gasoline engines, as well as new gasoline/electric hybrids and all-electric cars.

According to people briefed on the announcement on Monday, the plan in the works for months would harmonize California's preference for curtailing emissions with the federal program that sets fuel economy standards based on vehicle weight and other attributes.

Annual mileage goals would be set from 2012-16 and would top out at 42 miles per gallon (17.9 kilometers per liter) for cars and just over 26 mpg for light trucks, which include pickups, sport utilities and vans. Those targets are more aggressive than the current average goal for the U.S. fleet of 35 mpg by 2020.

Federal fuel efficiency mandates currently run through 2011.

The new policy would give automakers flexibility to meet the standards and would weigh the impact on the environment of carbon-based fuels and other vehicle systems that emit emissions, like air conditioners.

This could be the breakthrough we've been looking for on clean cars, said David Friedman, research director of the clean vehicle program at the Union of Concerned Scientists.

The administration would not discuss the pending announcement other than to note that action on emissions and fuel economy was long overdue.

I think you'll see tomorrow important, groundbreaking steps in that area, White House spokesman Robert Gibbs told reporters.

The administration in April opened the way to regulating emissions by declaring climate-warming pollution a danger to human health and welfare, in a sharp policy shift from the Bush administration.

The Environmental Protection Agency (EPA) declaration was seen as a strong signal to the international community that the United States intends to seriously combat climate change.

Moreover, Congress is considering legislation to cut carbon emissions emitted by cars, coal-fired power plants and oil refineries and other sources. The bill proposes a 17 percent reduction in emissions from 2005 levels by 2020.

The Obama White House in February reversed another Bush administration directive by ordering EPA to reconsider California's request for authority to regulate emissions from new cars and trucks under a law the state passed in 2006.

The agency said the Clean Air Act gives the EPA the authority to allow California to adopt its own emissions standards for motor vehicles due to the seriousness of the state's air pollution challenges.

More than a dozen other states supported California's plan but the auto industry fought it in court, fearing a dual state and federal standards would result in a patchwork of regulations that would make vehicle planning and production more complex and expensive.

(Additional reporting by Tom Doggett and Deborah Zabarenko; editing by Marguerita Choy)

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