The issue dates back to 2004, when California adopted standards that were then significantly tighter than those of the federal government. Under the Bush administration, California had been denied the permission by the Environmental Protection Agency to enforce the new rules, after a long, intentional delay, but the decision to uphold them has been expected for some time under the Obama administration. In 2007, Congress had proposed a 35-mpg standard by 2020; with the anticipated slow ramp-up of the rule, it would have created more than a decade in which automakers would have to deal with complying with two disparate standards - costing the industry tens of billions of dollars, by some accounts.
The new federal standards will be in step with California's effort to achieve another 30% reduction in tailpipe emissions - effectively avoiding the need for automakers to comply with two different standards, and hopefully keeping vehicle cost down.
As part of the agreement, California retains its rights to develop future emissions standards independent of the federal government, but it won't impose tougher standards on greenhouse gas emissions until 2017; and in return automakers are expected to drop remaining lawsuits against the state.
Although this means that automakers will have to comply with stricter standards in the 14 California-emissions states in the interim, this likely won't have much if any effect on the current market. Most automakers have already been issuing lower-emission PZEV versions of vehicles for these states.
The Alliance of Automobile Manufacturers (AAM) responded to the decision cautiously. "We are hopeful the granting of this waiver will not undermine the enormous efforts put forth to create the national program," said Dave McCurdy, the group's president and CEO.