* EPA rules on CO2 "neither arbitrary nor capricious"- court * Court ruling clears path for EPA rules on cars, power plants * Industry warns greenhouse gas regulations will harm economy By Ayesha Rascoe WASHINGTON, June 26 (Reuters) - A U.S. appeals court on Tuesday upheld the first-ever U.S. proposed rules governing heat-trapping greenhouse gases, clearing a path for sweeping regulations affecting vehicles, coal-burning power plants and other industrial facilities. Handing a setback to industry and a victory to the Obama administration, the U.S. Court of Appeals for the District of Columbia unanimously ruled the Environmental Protection Agency's finding that carbon dioxide is a public danger and the decision to set limits for emissions from cars and light trucks were "neither arbitrary nor capricious." The ruling, which addresses four separate lawsuits, upholds the underpinnings of the Obama administration's push to regulate carbon dioxide emissions, and is a rebuke to a major push by heavy industries including electric utilities, coal miners and states like Texas to block the EPA's path. In the 82-page ruling, the three-judge panel also found that the EPA's interpretation of the Clean Air Act to regulate carbon dioxide regulations is "unambiguously correct." The court also said it lacked jurisdiction to review the timing and scope of greenhouse gas rules that affect stationary sources like new coal-burning power plants and other large industrial sources. EPA Administrator Lisa Jackson said the court found the agency "followed both the science and the law in taking common-sense, reasonable actions to address the very real threat of climate change by limiting greenhouse gas pollution from the largest sources." "EPA's massive and complicated regulatory barrage will continue to punish job creators and further undermine our economy," countered Sen. James Inhofe of Oklahoma, a Republican and long-time critic of the EPA's climate change regulations. Though states like Texas said the EPA's rules were a "subjective conviction" because they did not set hard and fast thresholds for unsafe climate change, "EPA is not required to re-prove the existence of the atom every time it approaches a scientific question," the court wrote. The ruling clears the way for the EPA to proceed with first-ever rules limiting carbon dioxide emissions from newly built power plants, and to move forward with new vehicle emission standards this summer. "These rulings clear the way for EPA to keep moving forward under the Clean Air Act to limit carbon pollution from motor vehicles, new power plants, and other big industrial sources," said David Doniger, a senior attorney at the Natural Resources Defense Council, an environmental group. The court in February heard arguments brought by state and industry challenging the EPA's authority to set carbon dioxide limits. Industry groups said the EPA's regulations will impose burdensome regulations that will spur job cuts. "The EPA's decision to move forward with these regulations is one of the most costly, complex and burdensome regulations facing manufacturers," said Jay Timmons, president of the National Association of Manufacturers. "These regulations will harm their ability to hire, invest and grow." The EPA's rules could affect 6 million stationary sources including 200,000 manufacturing facilities and 37,000 farms, Timmons said in a statement. The Supreme Court unleashed a fury of regulation and litigation when it ruled in Massachusetts vs. EPA in 2007 that greenhouse gases are an air pollutant that can be regulated under the Clean Air Act. The EPA in 2009 issued an "endangerment finding" that greenhouse gases "reasonably may be anticipated to endanger public health." The agency followed with the "tailpipe rule" in May 2010 setting limits on greenhouse gas emissions from cars and light trucks. The agency is also preparing to issue first-ever standards for carbon dioxide emissions from new power plants, which are likely to spur utilities to opt for cleaner natural-gas burning plants instead.