The US is set to loosen its fuel economy rules, reversing another Biden-era policy that had been expected to lead to increased take-up of electric cars.

US President Donald Trump announced the proposal at the White House, where officials said the prior standards were not realistically achievable and were driving up costs for buyers.

"They were horrible what they were doing to costs – and actually making the cars much worse," Trump said.

Ford chief executive Jim Farley, a car industry leader on hand to celebrate the announcement, called the change a "victory of common sense", while environmental groups criticised it as a step backwards for the industry and public health.

Transportation is the single biggest source of greenhouse gas emissions in the US, accounting for more than 28% of the total in 2022, according to the Department of Energy.

The previous policy required carmakers to reach a fuel efficiency of about 50 miles per gallon across their fleet by model year 2031, compared to the industry average of about 27 miles per gallon today.

For passenger cars, that meant increasing efficiency by about 2% per year.

Instead, the National Highway Traffic Safety Administration said it was proposing less stringent standards that would lead to fuel efficiency of roughly 34.5 miles per gallon by model year 2031.

It is also moving to end a programme that had allowed carmakers to pay rivals with better fuel efficiency, like Tesla, for credits that would bring them into compliance with the rules – a policy that the administration said had "artificially propped up the EV industry".

Sierra Club Clean Transportation for All director Katherine Garcia said the changes would lead to more greenhouse gas emissions and higher fuel costs for families.

"This rollback would move the auto industry backwards, keeping polluting cars on our roads for years to come and threatening the health of millions of Americans, particularly children and the elderly," she said in a statement.

But Mr Farley, of Ford, said the new rules were "aligned with customer demand" and called the change "the right move for a lot of reasons".

When announced last year, the Biden administration had promoted its plan as an effort to reduce the dependence on foreign oil, help car owners save on fuel costs and combat pollution.

It was expected to prevent more than 700 million metric tons of carbon dioxide emissions by 2050.

Carmakers were free to use whatever technology they wanted to meet the new standard.

In practice, however, achieving the target was expected to depend heavily on increased sales of electric cars.

That drew pushback from some carmakers, who were already starting to scale back some investments in electric cars in response to uncertain demand.

The big three US carmakers, Stellantis, General Motors and Ford, which are known for sales of bigger cars like trucks and SUVs, have the least fuel-efficient fleets in the industry, according to the Environmental Protection Agency.

If electric car sales did not increase enough, General Motors feared it would have to shut down factories making less efficient cars to comply with the Biden-era rules, GM chief executive Mary Barra said at a New York Times event on Wednesday.

The plan is still subject to a formal rule-making process.

Trump said his administration expected the change to help save buyers about $1,000 on the price of a car. The Biden administration had estimated that its rules would save car owners roughly $600 on fuel over the life of their vehicles.

Kathy Harris, director of clean vehicles at the Natural Resources Defence Council, said the new plan would only benefit the oil industry.

"Gutting fuel economy under the pretence of safety and affordability is a cruel joke for American drivers," she said.