New Mexico’s Draft Rules on Clean Transportation Fuel Program: A First Look

Key Takeaways

• In March 2024, New Mexico adopted the Clean Transportation Fuel Program (CTFP) with the aim of bringing the standard into effect by July 2026
• The first discussion draft rules published on 19 December 2024, includes a CI reduction target of 20% by 2030 and 30% by 2040 for the state’s transportation fuels from a 2018 baseline. The state’s transport sector accounted for 29% of the state’s emissions in 2023. The first year of the program, 2026, will see a CI reduction schedule of 1.8%.
• The proposed draft rules largely follow California’s LCFS model but further simplify it.  A few key points of departure from California include the absence of project-based crediting and the introduction of an implementation fee.
• While the rules dedicate a section to crediting for Fuel Supply Equipment (FSE), similar in concept to California’s ZEV refueling capacity crediting provisions, lack of details don’t indicate if they would apply similarly to hydrogen refueling and DC fast charging infrastructure.
• The discussion draft rules would be open for public comments from December 20, 2024 to January 17, 2025 with an in-person workshop on Jan 6th 2025

In March 2024, the state of New Mexico adopted the Clean Transportation Fuel Program as a measure to decarbonize its transportation sector. New Mexico’s Environmental Improvement Board is required to develop rules and standards for the program which is mandated to take effect by 1st July 2026. With the inputs of an advisory committee, the Board has been directed to set an annually decreasing schedule to bring the carbon intensity of the transport sector down to at least 20% below 2018 carbon intensity levels by 2030 and at least 30% by 2040. The first discussion draft of the rules has been released and opened for comments on 19^th December 2024.

New Mexico’s Transport Landscape

In 2022, New Mexico’s vehicles emitted 16.095 MMT (million MT) of CO2e accounting for 29% of the state’s[1] emissions.  In 2023, EVs and PHEVs together made up 15,200 LDVs on New Mexican roads. They accounted for ~0.8% of the share of LDVs in the State as seen in the table below. This share is lower than the United States national average share of EVs in the LDV segment. The state’s LDV population is dominated by Gasoline and gasoline substitute compatible vehicles making up ~89% of the share. In 2022, the emissions from New Mexico’s transport sector stand at less than a tenth of that of California. Correspondingly, New Mexico’s consumption of transportation gasoline amounted to less than 10% of that of California’s[2].

Source: cCarbon calculations on AFDC data

New Mexico Has Set Its Eyes on a 30% Reduction in Carbon Intensity by 2040

The CI compliance schedule for gasoline, diesel and their substitutes, and alternate jet fuel are as listed below. While New Mexico would aim to bring the CI standard down to ~60 gCo2e/MJ, the Californian standard (in the absence of AAMs triggered) would be ~24 g CO2e/MJ by 2040. The lifecycle carbon intensity of fuel pathways would be determined in accordance with the NM GREET model, in line with CA-GREET. The introduction of the New Mexico’s program could mean an extended credit generation lifeline for potential deficit generators under the LCFS in the coming years. However, given the size of New Mexico’s transportation fuel market, significant price incentives would be required to attract fuel producers to the state.

Source: CTFP Discussion Draft Rules, NMED

Source: CTFP Discussion Draft Rules, NMED

Source: CTFP Discussion Draft Rules, NMED

Fuels Under the Ambit of Discussion Draft CTFP

The CTFP considers the transportation fuels either produced in, imported to or dispensed for use in New Mexico to be eligible for regulation under the program to varying degrees.

The regulated fuels in the program would be Gasoline, Diesel, Fossil-based natural gas (compressed, liquefied, and liquefied-compressed), Liquefied petroleum gases, Denatured ethanol, Hydrogen, Biodiesel, Renewable diesel, Renewable naphtha, Renewable gasoline. The opt-in fuels would be Electricity, Bio-based natural gas (compressed, liquefied, and liquefied-compressed), Renewable propane or other liquefied gases not included under bio-based natural gas, Alternative jet fuel, Other bio-based or renewable transportation fuels not included in regulated fuels.

Rail locomotives, jet fuel and military tactical vehicles would be exempt from generating deficits under the Program. The Program would follow a quarterly reporting schedule as in the California LCFS Program.

Departure from CA LCFS

No Inclusion of Project-based Crediting

The rules do not provide for project-based crediting which has been a unique and arguably controversial provision under California’s program which allowed for generating compliance credits by implementing renewable energy or energy efficiency projects in upstream petroleum production. However, the rules do allow for CCS (Carbon Capture and Sequestration) components in fuel pathway applications.

Absence of Automatic Acceleration Mechanism and Feedstock Restrictions

The draft rules do not allude to an automatic acceleration mechanism or feedstock restriction on biofuels as in California’s LCFS. Considering the smaller scale of the New Mexican market and nascent stage of rulemaking, the absence of these components does not go against expectations.

Annual Program Implementation Fee

The CTFP would levy an annual program implementation fee of $5000 for deficit generators, $1000 for credit generators and $500 for all registered parties.

Broadly Defined Fuel Supply Equipment Credits

The eligibility for registration and subsequent credit generation under the fuel supply equipment credits provision would be based on the weighted average CI of the dispensed fuel in comparison to the Diesel CI standard (for Medium-Heavy Duty Vehicle FSE) and Gasoline (for Light-Medium Duty Vehicle FSE).

• Applications prior to June 30, 2028: Weighted average CI less than the standard for 2030
• Applications on or post July 1, 2028: Weighted average CI less than the standard for 2040

Timeline of Rulemaking Process

• December 20, 2024 to January 17, 2025: Public comment period on discussion draft rules
• January 6, 2025 : In-person meeting for public feedback, Albuquerque International Public Library
• January 10, 2025: Virtual meeting for public feedback
• July 2026: Program Commencement

Important Links

New Mexico takes the lead in expanding clean fuels programs beyond the West Coast

Clean Transportation Fuel Program Discussion Draft Rules

cCarbon will closely monitor the rulemaking process and market developments surrounding New Mexico’s CTFP in the coming weeks and months. Stay tuned to get deeper insights and analysis on North American and global clean fuel markets. Check out our Analyst Note for analysis and forecasts on the implications of the latest amendments to the California LCFS Program.

[1] Greenhouse Gas Inventory Data Explorer, US EPA

[2] Motor gasoline consumption, price, and expenditure estimates, 2022