Obama ordered the Environmental Protection Agency (EPA) to reconsider whether to grant California a waiver to regulate car emissions blamed for contributing to global warming.

"With this announcement from President Obama less than a week into his administration, it is clear that California and the environment now have a strong ally in the White House," Schwarzenegger said in a statement.

"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."

Obama's move was a significant repudiation of the environmental policies of his predecessor, George W. Bush.

The Bush administration had blocked the efforts of California and a dozen other states to impose their own limits on carbon dioxide gas emissions. The decision was a source of friction between Bush and Schwarzenegger, both Republicans. California had even initiated lawsuits against the EPA.

Obama also signed memoranda to prod the struggling US auto industry to design new fuel-efficient vehicles to lessen US dependence on energy sources which he said bankroll dictators, and to spur the US economy.

California is the most populated and wealthiest US state, but also one of the most polluted. The state's standard would require automakers to reduce their greenhouse gas emissions by 30 percent by 2016.

During the Bush administration the EPA had refused to grant the waiver, required under the Clean Air Act.

Schwarzenegger signed a historic bill in 2006 that made California the first US state to impose limits on global warming gases.

The Bush administration had fiercely opposed any imposition of binding emissions limits on the nation's industry and had refused to ratify the Kyoto Protocol on reducing greenhouse gas blamed for global warming.

Backing a politically bipartisan approach like Obama, Schwarzenegger faces a budget gridlock in his state, with a budget deficit expected to balloon to 42 billion dollars by 2010.

Hard-hit by the recession, California saw its unemployment rate climb to 9.3 percent in December, almost double 2006 levels.

The environment is the only issue upon which Schwarzenegger can hope to have a lasting legacy, according to political science professor Sherry Bebitch Jeffe. According to the latest poll by the Public Policy Institute of California, Schwarzenegger has 42 percent public support.

"At this point in time, the only legacy that he can hope for is the area of the environmental reform," said Jeffe of the University of Southern California.

"The budget problem will override everything. But he can attempt to use this issue to grab the attention and change the subject for a little while. He's got nothing left, quite frankly."

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