The issue of whether California even has the right to set its own air quality standards instead of going along with national policies for fuel efficiency has been a hot topic since the Bush Administration denied California the waiver it would need. Shortly after taking office, President Obama urged the EPA to reconsider California's waiver.
If California is granted this right, a large group of states are expected to adopt the legislation as well, which would have the effect of raising fuel efficiency requirements without actually modifying them, as carbon dioxide is one of the byproducts emitted through the burning fossil fuels in our automobiles. Expect to hear plenty more on the issue in the coming weeks.
[Source: The Aspen Institute via Automotive News - sub. req'd]