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California officials said Monday they expect the U.S. Environmental Protection Agency to act quickly to reverse a Bush administration decision that blocks the state's tailpipe emissions law, following an order from President Barack Obama.

Obama on Monday ordered the EPA to consider allowing California to regulate greenhouse-gas emissions from automobiles, a policy that could spur the development of new vehicles.

"Allowing California and other states to aggressively reduce their own harmful vehicle tailpipe emissions would be a historic win for clean air and for millions of Americans who want more fuel-efficient, environmentally-friendly cars," California Gov. Arnold Schwarzenegger said in a statement. "It is clear that California and the environment now have a strong ally in the White House."

In March last year, the EPA denied California's request for a waiver that would have allowed it to proceed with a tailpipe emissions law established in 2003. Under current law, California may make its own auto-emissions rules as long as it receives a waiver from the EPA. Other states may then adopt California's standards or choose the federal standards.

California officials last week asked the Obama administration to reverse the decision, over which the state has filed multiple lawsuits.

California Attorney General Jerry Brown said he thinks the EPA will act quickly to grant California's waiver.

"They may put some conditions on it, but it means the tough standards of California will eventually be the rule for more than 40% of the cars sold in America," Brown said.

He noted that California would withdraw its legal complaints after the waiver is granted.

Vermont adopted California's tailpipe emissions standard and successfully defended the standards in federal court last year against legal challenges by auto makers. Vermont Gov. Jim Douglas said Monday he was grateful to see progress on California's waiver request.

"President Obama has seized an extraordinary opportunity to take concrete and speedy action on his pledge to address climate change," Gov. Douglas said in a statement.

It was unclear whether auto manufacturers that have sued California over its vehicle emissions law would continue with those complaints.

General Motors Corp. (GM) said it "is working aggressively on the products and the advanced technologies that match the nation's and consumers' priorities to save energy and reduce emissions," although the company declined to provide details.

Brown of California said that he hoped the Obama administration and Democratic members of Congress would require U.S. auto makers to abandon the lawsuits as part of the government's rescue package for Detroit.

"I'm confident that the president and Congress will rein in the auto companies as part of the bailout," Brown said.

But auto industry allies in Washington warned that the emissions regulations would exacerbate the auto industry crisis.

Rep. Mike Rogers, R-Mich., said the policy would "destroy" jobs in Michigan, although he acknowledged there was no way to know how the regulations would affect taxpayers and workers.

Rep. Sander Levin, D-Mich., called for a bipartisan effort to develop national standards on tailpipe emissions and fuel economy. "This consistency as well as certainty going forward is important as our domestic industry accelerates necessary efforts to restructure and re-tool to meet increasing fuel standards," Levin said in a statement.

Fourteen states, including California and Vermont, plan to implement California's tailpipe emissions standard as soon as the waiver is granted. The standards are designed to cut greenhouse gas emissions from cars by 30% by 2016, according to the California Air Resources Board.

By rejecting California's request for a waiver under the Clean Air Act - the first time the agency has ever refused to grant such a waiver - the EPA effectively blocked any state from regulating vehicle greenhouse-gas emissions.

Earlier this year, Democratic senators asked the U.S. Justice Department to investigate whether former EPA administrator Stephen Johnson made false statements to Congress when he testified that his decision to deny the wavier was made independently. A former EPA official said Johnson had planned to grant California's waiver, but changed his mind under pressure from the Bush administration.

Other states that plan to adopt the vehicle emissions standards include New York, New Jersey, Connecticut, Maine, Maryland, Massachusetts, Pennsylvania, Rhode Island, Arizona, New Mexico, Oregon, Washington State and the District of Columbia.

-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468; cassandra.sweet@dowjones.com

(Siobhan Hughes and Josh Mitchell in Washington contributed to this story.)

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