DETROIT – A top-ranking Environmental Protection Agency official is urging the auto industry to call a truce over ongoing horsepower wars and refocus its efforts on a contest to determine the world’s greenest manufacturer.

The EPA recently received the go-ahead from Congress to regulate greenhouse-gas emissions from vehicles.

Margo Oge, EPA director-office of transportation and air quality, says in her appeal that auto makers have proven themselves technology leaders in the past and suggests they now should turn to a rising wave of young, green-thinking leaders to meet the challenge of higher corporate fuel economy standards.

“We must bring about an end to the horsepower arms race among auto makers and replace it with another different kind of a race, a race to produce the most affordable and desirable, low carbon-vehicle each year,” Oge says during an address to the Automotive News World Congress here, an annual gathering of auto industry leaders.

Auto makers likely would find it difficult to deny their ongoing horsepower rivalry. Despite the environmentally friendly theme of last week’s North American International Auto Show in Detroit, there was a plethora of passenger cars, pickups and SUVs boasting increased power.

For example, General Motors Corp. unveiled the Cadillac Provoq, an electrically driven concept vehicle that leverages an emissions-free hydrogen fuel cell to extend its range. Sharing the same stage was the ’09 Cadillac CTS-V production car, a sports sedan that boasts a 550-hp V-8 gasoline engine.

GM also showed the ’09 Chevrolet Corvette ZR-1, a 620-hp fuel gulper that trumped the 600-hp ’08 Dodge Viper on display at Chrysler LLC’s exhibit.

Chrysler also unveiled the redesigned ’09 Dodge Ram fullsize pickup that includes an upgraded 380-hp Hemi V-8. Ford Motor Co. revealed its ’09 Ford F-150, which it promises will make more horsepower than its predecessor.

Nevertheless, both Ford and Chrysler pledge better fuel economy from their new pickups, and nearly every auto maker on the floor exhibited some form of fuel-saving technology.

That fact wasn’t lost on Oge, a native of Greece and an engineer by trade, who says she saw many examples of current and green powertrain technologies at the show.

“Smog-producing emissions from new vehicles are almost practically zero,” she admits. However, “I believe the one set of product plans automotive engineers must (include) with every new model is, ‘How can I make this produce fewer greenhouse-gas emissions?’”

Oge goes so far as to suggest a green race among auto makers could create another industrial revolution.

“Technological innovation has always led to the transformation and growth of our economy,” she says. “Go back to the second industrial revolution in the mid-19th Century, (which) brought forth clusters of innovation in the U.S. In those days, the mantle of innovation in startups in the U.S. was in the Great Lakes and Ohio River Valley.”

Innovations in power generation, such as the steam engine and internal combustion engine, sped development of the steel and chemical industries, which in turn spurred economic growth.

“These innovations helped transform the U.S. from a country where the per capita was only $600 in the 1900s to a country where by the 1950s the per capita increased to $8,000,” Oge says.

She cites a similar circumstance during the nation’s third industrial revolution, when Silicon Valley’s microchip boom helped transform and grow related industries such as telecommunications, biotechnology and clean-energy technology. It pushed annual per capita income to more than $35,000 annually.

“In each of these revolutions, our country’s brightest talent was drawn to those industries, and as result our nation’s economy grew significantly,” Oge says. “Transportation could reclaim the mantle of the country’s economic growth over the next decade if the right investments are made.”

That means investment in green-thinking leaders, Oge suggests. She sees an intense environmental movement under way among younger, college-educated Americans, and the auto industry should take advantage of their passion.

“(They) want to create an energy technology revolution,” Oge tells the conference. “But it’s up to you to make those investments and push the technologies to create this kind of revolution.

“If there’s any doubt in this fact, we only need to look at the direction the capital markets are taking and where they are placing their bets,” Oge adds, noting a recent study from the National Venture Capital Assn. that finds 20% of global investors plan to focus on environmental and green- energy sectors over the next five years.

“Today, the fastest growing area of venture capital in Silicon Valley is no longer in software,” she says. “It’s in clean-energy technology. So it can be done. We know a great deal of progress can be made in the near term.”

Oge also reminds that the energy bill signed into law by President Bush late last year not only challenges the auto industry to improve fuel economy 40% over the next 12 years, but also makes available $25 billion in funding to retool plants for more fuel-efficient vehicles and to research diesel and hybrid technologies.

There is growing demand by car buyers seeking more-efficient vehicles, she adds, pointing to a recent Consumer Reports study that finds 70% of respondents would pay extra for a vehicle with greater fuel economy.

However, another CR survey from 2007 said that although American car buyers want more fuel-efficient vehicles, their desire waned when asked if they would sacrifice attributes such as performance and vehicle size for better fuel economy.

Oge believes the scene is set for the auto industry to recapture its former glory through the new fuel rules and perhaps even save the planet, which faces the darkest effects of climate change if CO2 emissions are not trimmed 50%-80% by 2050.

“The resolve has been that we Americans enjoy the greatest freedom of mobility in the world, and now the best science is telling us we humans must change,” she says, noting the transportation sector accounts for two-thirds of oil consumption and about one-third of greenhouse-gas emissions.

“Carbon emissions must be reduced, and we must begin now. It can be done, and this country and Detroit can become the epicenter for the next great industrial revolution and engine for economic growth.”

The veteran environmental advisor also reports the EPA recently completed the first draft of a plan to reduce greenhouse-gas emissions in the transportation industry.

Adhering to a request last year from Bush to find ways to improve fuel economy by 4% annually beginning in 2001, the EPA worked with the National Highway Traffic Safety Admin. and the U.S. Department of Energy to draw up a detailed technical and cost analysis of various emissions-reduction scenarios.

Using what Oge calls “the best and most recent data on technologies and cost,” the analysis found opportunities in the near and mid-term to save oil, as well as achieve CAFE of close to 35 mpg (6.7 L/100 km) by 2018, plus trim emissions without removing weight or performance from existing vehicles.

Oge concedes the EPA’s analysis allows for some modifications to vehicle air-conditioning systems and notes the study addresses low-carbon fuels in addition to transportation emissions.

Among automotive regulations, it proposes separate emissions standards for passenger cars and light trucks that would be averaged to achieve a single fleet number.

Oge declines to offer a timetable for the DOE to review the EPA findings, or when they might be released for public comment. She additionally characterizes ethanol biofuels as a “bridge” to hybrids and thinks diesel engines will compete “very well” in the U.S. in the future.