On December 19, the New Mexico Environment Department unveiled a draft rule aimed at establishing a carbon credit and demerit system for fuel producers and importers, positioning the state as a leader in clean transportation initiatives. This proposed “clean transportation fuel rule” allows clean-energy producers to earn credits through the production of low-carbon fuels, which could be commercially sold to entities engaged in the production of more carbon-intensive fuels like oil. The initiative arises from legislation enacted during the 2024 session, predominantly supported by Democrats, and follows the earlier adoption of the advanced clean cars rule. If implemented, New Mexico would join California, Washington, and Oregon as the fourth state to introduce such a regulatory framework, signaling a robust state commitment to reducing greenhouse gas emissions.
The proposed rule comes in response to growing concerns regarding transportation’s contribution to the state’s emissions. With transportation currently being the second-largest source of emissions in New Mexico—after the oil and gas sector—the legislation aims to create a system to systematically reduce these emissions over time. Environment Department spokesperson Drew Goretzka emphasized the intention behind the rule: to ensure that all fuel deficits are annually balanced out, thereby achieving the state’s clean fuel standard while simultaneously striving for significant reductions in transportation-related greenhouse gas emissions.
Under the new rule, a clean fuel standard will be established, acting as a benchmark against which the carbon intensity of various fuels will be measured. Fuels such as gasoline, diesel, natural gas, hydrogen, and biodiesel will fall under this regulation, whereas renewable energy sources like solar, wind, geothermal, and hydropower will qualify as zero-emission fuels. Fuel producers who generate or import fuels that surpass this standard will incur “deficits,” while those who remain compliant will earn “credits.” The structure allows for the buying, transferring, and selling of these credits, potentially providing a financial incentive for cleaner fuel production and encouraging compliance with environmental standards.
To finance the implementation and ongoing management of this program, participating registrants, which include both clean fuel producers and those generating deficits, will be subject to registration and annual fees. Organizations producing fuels that exceed the clean fuel standard will pay an upfront fee of $5,000, whereas those creating lower carbon footprints will only be required to pay $1,000. This tiered fee structure reflects the program’s design, as it aims to collect enough resources for administrative purposes while placing a heavier financial burden on higher-polluting entities. Following the initial fee, annual compliance fees will be contingent on the total number of credits or deficits measured in metric tons of carbon dioxide equivalent, which standardizes the climate impact across different greenhouse gases.
The proposal has sparked considerable debate among stakeholders. Proponents, including several environmental organizations and most Democratic legislators, argue that such regulations are crucial for enhancing air quality and significantly curtailing emissions tied to transportation. They assert that a proactive approach to regulatory standards will ultimately yield long-term environmental benefits while fostering innovation in clean energy technologies. Conversely, critics—including Republicans and groups associated with the oil and gas industry—express apprehension that the new rule may lead to increased fuel prices, adversely impacting consumers and the economy.
Ultimately, this draft rule represents New Mexico’s forward-thinking approach in the context of climate policy, aiming to become a pioneer in leveraging market-based mechanisms to mitigate transportation emissions. By enabling clean fuel producers to capitalize on credits and create economic opportunities within the renewable energy market, the state is taking significant steps towards fostering a more sustainable energy landscape. If the rule is finalized as proposed, it will not only enhance New Mexico’s environmental policies but also serve as a model for other states seeking similar clean energy initiatives. As the conversation around climate change intensifies, New Mexico appears poised to play a pivotal role in driving down emissions and promoting cleaner alternatives in the transportation sector.
