The plan creates the first-ever national emissions limits for vehicles and sets the overall or industry average fuel efficiency standard at 35.5 miles per gallon, an increase of more than 8 miles per gallon per vehicle. It is aimed at saving billions of barrels of oil, although it also is expected to cost consumers an additional $1,300 per vehicle by 2016.
"We will save 1.8 billion barrels of oil over the lifetime of the vehicles sold in the next five years," the president said. "Just to give you a sense of magnitude, that's more oil than we imported last year from Saudi Arabia, Venezuela, Libya, and Nigeria combined."
Mr. Obama argued that "everyone wins" with the plan, which has been heralded both by automakers and environmentalists, despite the increase cost per vehicle. He said consumers benefit because "the cost of driving these vehicles will go down as drivers save money at the pump."
"In fact, over the life of a vehicle, the typical driver would save about $2,800 by getting better gas mileage," he said.
The plan also would effectively end a feud between automakers and statehouses over emission standards - with the states coming out on top but the automakers getting the single national standard they've been seeking and more time to make the changes.
"This is truly historic," Carol Browner, Mr. Obama's top aide on energy and climate matters, told CBS' The Early Show Tuesday.
Obama's proposed change in rules would for the first time combine pollution reduction from vehicle tailpipes with increased efficiency on the road. It would be the equivalent of "taking 58 million cars off the road for an entire year," the president said.
New vehicles would be 30 percent cleaner and more fuel-efficient by the end of the program.
The plan, to be proposed in the Federal Register of pending rules and regulations, must still clear procedural hurdles at the Environmental Protection Agency and the Transportation Department. Automakers expressed their support for the plan. "We're all agreeing to work together on a national program," said Dave McCurdy, president and CEO of the Alliance of Automobile Manufacturers.
Administration officials said consumers were going to pay an extra $700, anyway, for mileage standards that had already been approved. The Obama plan adds another $600 to the price of a vehicle, a senior administration official said, bringing the total cost to $1,300 by 2016.
Under the changes, the overall fleet average would have to be 35.5 mpg by 2016, with passenger cars reaching 39 mpg and light trucks hitting 30 mpg under a system that develops standards for each vehicle class size. Manufacturers would also be required to hit individual mileage targets.
Browner, who headed the EPA during the Clinton administration, said the industry told the administration "they wanted to make cleaner cars and what they needed was the government to give them predictability and certainty so that they could make the investments toward cleaner cars."
In a battle over emission standards, California, 13 other states and the District of Columbia have urged the federal government to let them enact more stringent standards than the federal government's requirements. The states' regulations would cut greenhouse gas emissions by 30 percent in new cars and trucks by 2016 - the benchmark Obama planned to unveil for vehicles built in model years 2012 and beyond.
The Obama plan gives the states essentially what they sought and more, although the buildup is slower than the states sought. In exchange, though, cash-strapped states such as California would not have to develop their own standards and enforcement plan. Instead, they can rely on federal tax dollars to monitor the environment.
The auto industry will be required to ramp up production of more fuel-efficient vehicles on a much tighter timeline than originally envisioned. It will be costly; the Transportation Department last year estimated that requiring the industry to meet 31.6 mpg by 2015 would cost nearly $47 billion.
But industry officials - many of whom are running companies on emergency taxpayer dollars - said Obama's plan would help them because they would not face multiple emissions requirements and would have more certainty as they develop their vehicles for the next decade.
Auto executives, including General Motors Corp. CEO Fritz Henderson, and executives from Ford Motor Co., Toyota Motor Corp., Honda Motor Co., Daimler AG and others planned to attend the White House event along with United Auto Workers President Ron Gettelfinger, Michigan Gov. Jennifer Granholm and California Gov. Arnold Schwarzenegger.
"Ending our dependence on oil, indeed, ending our dependence on fossil fuels, represents perhaps the most difficult challenge that we have ever faced, not as a party, not as a set of separate interests, but as a people," the president said in announcing the plan.