Dec. 19—The New Mexico Environment Department has released a draft of a rule that would create a carbon credit and demerit system for fuel producers and importers.
If the clean transportation fuel rule is adopted, clean-energy producers would earn credits, which could then be sold to those making carbon-intensive fuels such as oil. The rule stems from a law passed largely along party lines during the 2024 session and follows in the footsteps of the advanced clean cars rule, which was adopted last year.
If finalized, New Mexico would be the fourth state in the country to enact such a program after California, Washington and Oregon. The bill’s opponents, including Republicans and oil and gas industry groups, expressed concerns it could drive up gas prices, while supporters, including some environmental groups and most legislative Democrats, said it will improve air quality and drive down emissions caused by transportation.
“The goal is for all the fuel deficits to be offset annually, so that the annual clean fuel standard is met, and greenhouse gas from transportation fuels are reduced,” Environment Department spokesperson Drew Goretzka wrote in an email to The New Mexican.
Transportation is the second-highest contributor to the state’s emissions, behind the oil and gas industry, according to a state Environment Department news release Thursday. Gasoline, diesel, natural gas from fossil fuels, hydrogen and biodiesel are among the fuels that would be regulated by the rule; clean fuel producers can opt in to the program so they can earn and sell credits.
The program is based on a clean fuel standard — a benchmark for how carbon intensive a fuel type is. Solar, wind, geothermal and hydropower are considered zero under the proposed rule.
If a producer makes or imports a fuel that is below the clean fuel standard, the group gets a credit. If the fuel is higher than the clean fuel standard, the group gets a deficit. Those credits can be bought, transferred and sold, and they carry over from year to year.
To cover the cost of the program, all registrants — including clean fuel producers opting in to the program — will be required to pay an initial fee and a yearly fee assessed every compliance period.
Organizations generating deficits will pay $5,000 up front while credit generators will pay $1,000.
The fee for clean fuel producers that opt in helps pay the program administrative costs, but they will pay significantly less than those who generate deficits, Goretzka wrote.
After initial registration, the yearly compliance fee will be determined based on their total number of credits or deficits, measured in metric tons of carbon dioxide equivalent, a figure that standardizes the climate impact of a variety of greenhouse gases. If a registrant has a net deficit, not only will they need to pay a fee but they will also have to buy credits to offset that deficit.
“Opt-in clean fuel producers will be able to sell their clean fuel credits in the market to those parties with fuel deficits.”