So where are we on CAFE standards? Late last month, recall, the Obama administration finally tightened federal fuel-economy rules—a combined average of 27.3 miles per gallon for new cars and light trucks in 2011 and 35 miles per gallon by 2020. That's far looser than the standards in Europe and Japan, and, in fact, it's slightly less than what the Bush administration had initially proposed, but most environmentalists praised it as an encouraging first step. It's the first increase in CAFE standards since the mid-1980s, after all.

The big question, though, is whether the EPA will grant California a waiver to set its own, stricter fuel-economy rules, as it's allowed to do under the Clean Air Act. The state has proposed rules that could rev up standards to as high as 42 mpg by 2020 (that's about what the Prius and hybrid Honda Civic get now). The Bush EPA denied California a waiver for no good reason, but everyone is expecting the current administration to grant approval. If California is allowed to set those stricter rules, some 17 other states would likely follow. Automakers hate this idea, arguing that they'd have to meet two different standards—the federal one and the California one.

But now InsideEPA is reporting that a compromise between California and the EPA may be in the works—the Obama administration would issue a single federal standard that had California's more-aggressive targets, but that was structured like a federal CAFE standard. On th latter point, California wants to issue a fleet-wide standard for all automakers, whereas the federal Department of Transportation under Bush proposed a new "attribute-based" system that lets different companies adopt different standards depending on their size of their vehicles. (In essence, Detroit's Big Three, which makes larger vehicles, would face less-stringent standards under the federal approach than, say, Toyota or Honda.) The compromise would likely adopt the latter approach.

Now, this attribute-based system always struck me as a little goofy, an overly complicated way to perpetuate America's love affair with big honking vehicles (here's an analysis by the University of Michigan's Walter McManus). Still, the plan seems to placate the automakers, while early reporting suggests environmentalists would be appeased by the stricter standards. Now we'll see whether California officials agree to the deal.

--Bradford Plumer