The Senate passed a bill Thursday evening that could raise vehicle fuel economy for the first time in more than 30 years. But the automobile industry and environmentalists are awaiting a decision from the U.S. Environmental Protection Agency that could end up boosting the miles-per-gallon requirements still higher in the Golden State.

In a decision environmentalists praised, U.S. District Court Judge Anthony W. Ishii on Wednesday upheld a ruling that California has the right to set its own vehicle-emissions standards.

"Today's decision brings us closer to [greener cars]," said Robert Wilder, CEO of WilderShares, which manages clean-energy indices. "We saw automakers resist seatbelts in just this way, and airbags. Each time, they lost in the end and their cars were better for them having to do what was required. This removes another brick in the wall of traditional auto industries' [resistance] to reducing emissions."

Auto manufacturers oppose the law and have argued that California's policy regulating emissions essentially sets fuel-economy standards, an ability allowed only by the federal government. They have said the industry needs a consistent national fuel-economy policy, not different regulations for different states.

But the national fuel-economy policy also is becoming stricter. On Thursday, the U.S. Senate approved a bill that, if passed by the House next week and signed by President Bush, will require car manufacturers' fleets to average 35 miles per gallon by 2020.

That's up 27.3 percent from a requirement of 27.5 miles per gallon today, but still is seemingly lower than the 30-percent emissions reduction that California wants to achieve by 2016, four years earlier.

One difference is that automakers can potentially meet California's standards by adding technologies that capture emissions from cars, such as catalytic converters, while the national standards require more miles per gallon, said Thilo Koslowski, a vice president and lead automotive analyst with Gartner.

"In California, you can add things to the vehicle, but for CAFE standards, it seems like you have to do a little bit of reinventing," he said. "California raises the bar a little higher, but I think the CAFE standards are actually a bigger deal for car manufacturers."

The Ishii ruling comes after the Golden State last month sued the EPA for taking too long to respond to a request to reduce emissions from vehicles (see California Sues EPA for Greener Vehicles). It also comes after the U.S. Supreme Court ruled in April that the EPA could regulate carbon-dioxide emissions, countering the agency's stance that is couldn't.

The state, which passed a law in 2002 to reduce vehicle emissions by 30 percent in 2016, in 2005 asked the EPA for a waiver that would allow it to adopt the standards, which are stricter than the federal standards.

Because it had emissions-control regulations before March of 1966, when the Clean Air Act took effect, California is the one state allowed to set its own standards. Other states can either adopt California's standards or the federal standards, and sixteen other states have decided to adopt, or are considering adopting, California's standards, according to Gov. Arnold Schwarzenegger's office.

The government of Quebec on Wednesday also announced it would adopt California's greenhouse-gas standards for passenger cars, with four other Canadian provinces considering following suit.

If automakers end up having to increase fuel economy to meet California's standards, they most likely will not create separate cars for the state, meaning that California's standards will become the de facto U.S. standards, Wilder said.

Automakers sued California, along with other states trying to tighten transportation emissions laws, in 2004. The state then sued six automakers after passing the Global Warming Solutions Act last year, but the lawsuit was dismissed in September.

In spite of this week's court support, California's law still can't be enforced unless the state gets approval from the EPA.

The agency is expected to make a decision by the end of the year.

Wilder said it is disconcerting that the agency that is supposed to protect the environment is actually a roadblock to stricter standards.

"One would think the EPA would be a supporter of better standards," he said. "American car companies have been building big cars, and consumers don't want those kinds of cars any more. Car companies are being dragged, kicking and screaming, into building the cars Americans want."

The same week as the court decision and the Senate approval of new fuel-economy standards, Honda Motor Co. said it planned to launch a small car with a new "affordable" hybrid engine by 2009, along with diesel-powered versions of larger vehicles, according to The Wall Street Journal. The company said the moves were part of its strategy to improve the fuel efficiency of its U.S. vehicles.

Koslowski said the new policies could push innovation in the automobile industry and help open the door for startup partnerships and acquisitions.

"I don't think the manufacturers can do it themselves, to be honest," he said. "Despite the fact that they have vast resources and bigger [research and development] budgets than startups have, they need innovation -- and that's not just about money."

Still, even a favorable EPA decision is unlikely to have an immediate impact, Wilder said.

"This will be something car companies will have to deal with in a few years, and I think by then, the issue will have moved forward beyond this. Car companies don't argue about seatbelts and airbags anymore, now that they realize people want those things. And this is more of the same."