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U.S. President Barack Obama ordered the EPA to review the Bush administration's denial of higher fuel standards in states.

Mr. Obama's decision will let California and other states set their own auto emission standards in their drive to slash greenhouse gases, an official familiar with the decision said Sunday.

The move is significant on two fronts: It could empower states to set tougher standards in targeting emissions, which are blamed for contributing to global climate change; and it would be another swift reversal by Mr. Obama of Bush administration policy, this time on energy.

Plunging into his first full week at president, Mr. Obama is expected to reveal the auto-emissions policy Monday morning in the East Room of the White House. The official familiar with the details spoke on condition of anonymity because the plan had not yet been announced.

Mr. Obama is also expected to direct the Transportation Department to get moving on rules for auto makers to improve fuel economy. A 2007 law requires that by 2020 new cars and trucks meet 35 miles per gallon, a 40 per cent increase over current standards. The Bush administration ended its tenure before putting the new fuel-economy rules in place.

On tailpipe emissions from cars and trucks, California and at least 13 other states have sought permission to enact tough standards by getting waivers under the Clean Air Act.

The Bush administration's Environmental Protection Agency denied that permission, arguing it was more effective to have a national strategy in curbing greenhouse gases. California Governor Arnold Schwarzenegger has lobbied Mr. Obama to step in and reverse the decision.

As a candidate for president, Mr. Obama pledged to overturn the EPA's denial of a waiver to California — a denial that affects several other states that have followed California's lead in emissions standards.

On Monday, Mr. Obama will order the EPA to reconsider the California decision, a process that could take time but is expected to end up in the states' favour.

The New York Times first reported Mr. Obama's planned moves on its website Sunday night.

The president on Monday is also expected to tout proposals that he says would boost clean energy supplies while also producing badly needed jobs in so-called “green” industries.

Already, Mr. Obama has used his executive power to reverse President George W. Bush's policies on interrogation policies of suspected terrorists, the Guantanamo Bay detention centre, and funding for international groups that perform abortions or provide abortion information.