The Trump administration, taking aim at one of former President Barack Obama’s signature environmental achievements, is proposing to freeze vehicle fuel economy requirements at the 2020 level and unwind California’s authority to limit tailpipe emissions in the state.

The Environmental Protection Agency and National Highway Traffic Safety Administration jointly proposed Aug. 2 to cap fuel economy requirements at a fleet average of 37 miles per gallon starting in 2020. Under the Obama plan, the fleetwide fuel economy would...