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Obama Announces New Fuel Economy Standards

President Obama announced tough new rules Tuesday for fuel efficiency and emissions in the U.S. auto industry, calling for a national standard that all automakers would have to meet.

The president, calling the proposal an "historic agreement," announced new standards that will require all automakers, including Detroit's foreign competitors, to increase fleet fuel efficiency by 5 percent per year starting in 2012.

"The status quo is no longer acceptable," Obama said, warning that the American appetite for oil comes at a "tremendous price."

Flanked by auto executives and officials, the president said the proposal would simultaneously help end U.S. dependence on foreign oil, lead automakers to develop more advanced products and save consumers money in the long-term.

"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. "Yes, it costs money to develop these vehicles. But even as the price to build these cars and trucks goes up, the cost of driving these vehicles will go down, as drivers save money at the pump."

The standards are expected to add $1,300 on average to vehicles. But Obama said drivers would make that back within three years due to savings on gas.

The new rules will require a fleet fuel efficiency standard of 35.5 miles per gallon by model year 2016, a big jump from the 2009 model year requirement of 25 mpg. A senior administration official said the changes (when compared to current pollution and vehicle use totals) will have the effect of removing 900 million metric tons of carbon dioxide from the air, taking 177 million cars off the road and shutting down 194 coal-fired power plants.

A senior administration official called the standards "tough and historic" and predicted it will be achieved with only minor modifications to vehicle and engine design.

"You will see some changes," the official said, adding that "off-the-shelf" technology will allow most automakers to retro-fit their cars, light truck and SUVS "without dramatically changing them."

For 2016 -- the final year new the rules will apply -- the fleet fuel efficiency standard for all domestically sold passenger cars will be 39 mpg. It will be 30 mpg for all domestically sold light trucks and sport utility vehicles. The average of these two equals a passenger car and light truck fuel efficiency standard of 35.5 mpg. The current requirements are 27.5 mpg for cars and 23.1 mpg for trucks. The tighter standards will first affect the 2011 model year for cars and trucks.