New Mexico Legislature Approves Bill to Establish Clean Fuel Standard

The New Mexico legislature on Feb. 13 approved legislation to implement a clean fuel standard aimed to lower the carbon intensity of transportation fuels used in the state by at least 30 percent by 2040, relative to 2018 levels. The bill now awaits Governor Michelle Lujan Grisham’s signature.

New Mexico is set to become the fourth state to create a clean transportation fuel standard. Currently, California, Oregon, and Washington have policies requiring reductions in emissions associated with transportation fuels, as measured against a standard unit of fuel energy. California’s program, launched in 2010, requires reductions of 10 percent by 2020 and 20 percent by 2030 in the carbon intensity of gasoline and diesel. Oregon’s initiative, which began in 2015, requires a 10 percent reduction by 2025. Washington established a standard in 2021 requiring a reduction in the carbon intensity of transportation fuel to 20 percent below 2017 levels by 2035.

New Mexico’s legislation (HB 41) would establish a statewide technology-neutral clean fuel standard based on a schedule for annually decreasing transportation fuel carbon intensity with an interim target of 20 percent by 2030. The legislation would create a credit market to facilitate compliance with the standard.

The American Biogas Council, the national trade association representing the U.S. biogas industry, commended the approval noting that market-based policies have been shown to drastically cut emissions while promoting renewable fuel production. According to the association, New Mexico currently has 16 operational systems in the biogas sector but has the potential for at least 144 new systems, which if built, could result in over $400 million in new investments in the sector.

The program and a market for carbon credits would be established by July 1, 2026, and would be administered by the state’s Department of Environment. The bill calls for technology-neutral mechanisms to generate, obtain, trade, sell, and retire credits among transportation fuel producers, fuel distributors, and other individuals or entities in the transportation fuel market.