WASHINGTON (Reuters) - President Donald Trump’s administration on Tuesday completed a rollback of U.S. vehicle emissions standards adopted under his predecessor Barack Obama and will require 1.5% annual increases in efficiency through 2026 - far weaker than the 5% increases in the discarded rules.

FILE PHOTO: Traffic travels along a highway next to Los Angeles, California, U.S. October 11, 2019. REUTERS/Mike Blake/File Photo

The announcement - condemned by Democrats and environmentalists while being lauded by Republicans and business interests - sets up a legal battle, with California and 22 other states planning to challenge the rewrite of what had been one of most ambitious U.S. policies aimed at combating climate change.

The Trump administration called the move its largest single deregulatory action and said it would will save automakers upwards of $100 billion in compliance costs. The policy reversal marks the latest step by Trump, a Republican, to erase environmental policies pursued by Obama, a Democrat.

James Owens, acting head of the U.S. National Highway Traffic Safety Administration, said the plan “strikes the right balance between environmental considerations, health and safety considerations and economic considerations.”

Writing on Twitter, Trump said his administration was “helping U.S. auto workers by replacing the failed Obama Emissions Rule.” Auto-producing states like Michigan could be pivotal in Trump’s Nov. 3 bid for re-election.

House of Representatives Speaker Nancy Pelosi, a Democrat, said the administration’s decision will harm public health and endanger U.S. economic security.

“The Trump administration’s anti-science decision to gut fuel standards will unleash massive amounts of pollution into the air at the worst possible time,” Pelosi said, alluding to the coronavirus pandemic.

A coalition of states previously challenged the Trump administration’s decision to revoke California’s authority to set its own stiff vehicle tailpipe emissions rules and require automakers under its Zero-Emission Vehicle Program to sell an increasing number of electric cars and trucks in the most populous U.S. state.

Under the Obama-era rules, automakers were to have averaged about 5% per year increases in fuel efficiency through 2026, but the industry lobbied Trump to weaken them. The new requirements mean the U.S. vehicle fleet will average 40.4 miles per gallon rather than 46.7 mpg under the Obama rules.

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The Trump administration said the new rules will result in about 2 billion additional barrels of oil being consumed and 867 to 923 additional million metric tons of carbon dioxide being emitted and boost average consumer fuel costs by more than $1,000 per vehicle over the life of their vehicles.

ENVIRONMENTAL REVERSAL

Obama’s environmental policies were intended to cut carbon emissions that drive climate change, while Trump has ditched numerous environmental regulations that his administration deemed harmful to industry and has aimed to increase the use of fossil fuels. Trump also has pulled the United States out of a global climate accord and moved to reverse clean water regulations and pollution standards for coal-burning power plants.

California Air Resources Board chief Mary Nichols said her agency will move forward with its zero-emissions program.

“This is a watershed moment marking the death of the old view of cars and emissions tied to petroleum use, and another that looks to vehicle technology driven by innovation,” Nichols said.

The Trump administration in August 2018 initially proposed freezing requirements at 2020 levels through 2026. Reuters reported in October automakers expected a 1.5% annual increase after talks with administration officials.

A trade group that represents General Motors Co, Volkswagen AG VOWG_p.DE, Toyota Motor Corp and others said automakers need policies that support "a customer-friendly shift" toward electrified and other highly efficient technologies. "We are carefully reviewing the full breadth of this final rule to determine the extent to which it supports these priorities," it said.

The U.S. Chamber of Commerce, a business group, said the final rule provides a “workable path forward on a unified national program that provides regulatory certainty while strengthening fuel economy standards and continuing emissions reductions.” Auto dealers also praised the revisions.

The administration said the revised rules will cut the future price of new vehicles by around $1,000 and reduce traffic deaths. Environmentalists dispute that the rule will reduce traffic deaths. The administration said drivers will pay more in increased fuel costs than they will save in lower vehicle prices but concluded they will save more in overall vehicle ownership costs.

The administration has battled with California over auto regulations. Last month, the U.S. Justice Department closed an antitrust investigation into a voluntary agreement between four automakers and California on emissions without taking any action.

Ford Motor Co, BMW AG, Honda Motor Co and VW struck the deal last year, prompting the federal investigation. The deal bypassed a White House effort to strip California of the right to fight climate change and drew Trump’s ire. Volvo Cars confirmed on Tuesday it was also in talks to reach a California emissions agreement.

Ford said on Tuesday it remains “committed to meeting emission reductions consistent with the California framework.”