The U.S. Environmental Protection Agency rejected California's request for a waiver that would have allowed the state to impose greenhouse gas limits on cars, trucks and SUVs, but Gov. Schwarzenegger said he isn't giving up.

The agency said the just-passed federal energy legislation offers a better regulatory framework for cutting vehicle emissions (see U.S. solar & wind incentives on the way?).

"The Bush administration is moving forward with a clear national solution – not a confusing patchwork of state rules – to reduce America's climate footprint from vehicles," said EPA administrator Stephen Johnson.

California adopted tailpipe standards in 2004 that would have forced car companies to reduce greenhouse gas emissions by 30 percent in new cars and light trucks by 2016, with the cutbacks starting in the 2009 model year.

Sixteen other states had either adopted the California regulations or said they planned to adopt them, but California needed a federal waiver to implement the rules.

The new energy legislation requires automakers to achieve a fleet average of 35 miles per gallon by 2020, the first boost in vehicle fuel efficiency in over 30 years.

Gov. Schwarzenegger, who sued the EPA after he claimed the agency dragged its feet on a ruling (see California slaps suit on U.S. EPA over car emissions), said his office and the state would sue to overturn the decision.

"The energy bill does not reflect a vision, beyond 2020, to address climate change, while California's vehicle greenhouse gas standards are part of a carefully designed, comprehensive program to fight climate change through 2050," said the governor.

"We will continue to fight this battle," he said.