The world's biggest economy and energy consumer has made progress toward a more sustainable energy system but is lagging behind other industrialized countries and even developing countries such as China in some areas, the IEA said in a report.

"To address the multiple challenges that United States energy policy is facing, the price mechanism is the most important tool," said the report "Energy Policies of IEA Countries -- United States 2007 Review."

"The government should use it, by abolishing fossil fuel subsidies and creating taxation or other pricing regimes that internalize environmental costs," it said.

The IEA, which advises the US and 26 other members on international energy policies, acknowledged the challenge of changing the habits of Americans who are used to abundant resources and cheap energy prices.

"Failing to give the right incentives for conservation has removed the strongest reason for energy users to demand more efficient products."

The current US policy for low energy prices "is leading to forecasts of demand that are unsustainable, and creates significant security and environmental risks not just for the United States, but also for the rest of the world," the Paris-based agency warned.

The IEA said the transport sector was key to achieving the country's energy security and sustainabilty.

The IEA welcomed Congress's passage in December of the first tightening of CAFE vehicle fuel-efficiency standards since 1975, which calls for a 40 percent increase in the fuel standard to 35 miles per gallon by 2020.

But it said the standards remain weak, and noted relatively little improvement in fuel economy since 1996.

"In general, in the field of vehicle efficiency, present policy goals in the United States are too timid to lead to the achievement of the cost-effective efficiency potential in the vehicle sector," said the report produced in conjunction with the Organization for Economic Cooperation and Development (OECD).

At a news conference in Washington, IEA executive director Nobuo Tanaka said a "more ambitious program is recommended" for the United States to achieve a 50 percent cut in carbon-dioxide emissions by 2050.

"Stringent fuel standards are what we are recommending," he said.

He cited a number of options to explore as alternatives to traditional gasoline, such as second-generation biofuels, batteries and hydrogen fuel cells.

The report by the IEA, an autonomous agency under the framework of the 30-nation OECD, said that the lag time in the effect of the current proposals for an increase in the vehicle fuel standards would leave US consumers with "vehicles that are far below the fuel efficiency standards in other IEA member countries and even in important non-member countries such as China and India."

Tanaka praised California's efforts to further slash greenhouse gas emissions blamed for global warming.

"If California can, why not other states?" he said.

But the car-clogged state has run into a roadblock: President George W. Bush's administration.

In early January California said it was suing the US federal government for blocking the implementation of the state's tough new standards on greenhouse gases.

The move came after the Environmental Protection Agency in December denied California's request to be allowed to set new vehicle emissions standards which would be stricter than the federal laws.

Fifteen other states or state agencies joined California's suit, including Maine, Maryland, New Jersey, New Mexico and New York.

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