HB 41 Clean Fuel Standards is the kind of bill that looks great at first glance but needs further analysis to understand its true implications. Very simply, HB 41 tasks the New Mexico Environment Department with establishing a clean transportation fuel standard. This standard aims to reduce the carbon intensity of fuels in the state. Its first benchmark is a reduction of carbon intensity of 20% below 2018 levels by 2030. The second benchmark is 30% below 2018 levels by 2040.
But to go deeper, we need to understand “carbon intensity,” which HB 41 defines as:
- the quantity of fuel lifecycle greenhouse gas emissions per unit of fuel energy.
Put into simpler terms, it means:
- the amount of greenhouse gasses produced during the entire life cycle of a fuel source (from extraction to refinement, to transportation, to combustion) in relation to the amount of energy it provides.
The other very important aspect of HB 41 is that it is “technology neutral,” meaning that the fuel can come from any source – renewable energy, hydrogen, biofuel – anywhere, as long as it meets the standard of having a lower carbon intensity than “standard fuel”. This is both a challenge and an opportunity. CVNM is committed ensuring that fuel sources like renewables are prioritized over more problematic sources like fossil fuel hydrogen
So this is broadly what HB 41 aims to do, but how will it get done? Very simply, it will do it through credits. More technically, HB 41 will create a transportation fuel credit market, which would include obtaining, trading, selling, and retiring credits among transportation fuel producers/importers and other market participants. The credit levels would be established each year and would be, roughly speaking, based on the amount of carbon intensity reduction of the fuel and the need to meet benchmarks
HB 41 was signed into law by the Governor on March 5th 2024, making New Mexico the fourth state in the nation to adopt this standard. It now needs to go through rulemaking, which is when the “carbon intensity standard” is set. We, as New Mexicans, must be vigilant, engaged and proactive throughout the rulemaking because it is here that HB 41 will succeed or fail in becoming a boon for a just and equitable energy transition or a roadblock.
We must work hard to set a “carbon intensity standard” that works for New Mexico, meaningfully helps reduce emissions, and meets or exceeds the benchmarks. These standards need to be based on data free from political interference. We need to pay attention to – and perhaps collaborate with – other states’ credit programs and any federal credit program to avoid competition that could interfere with New Mexico’s program.
Concerns have been raised about the implications of the “technologically neutral” nature of the bill and how it could be used to encourage the creation of “clean fuels” from biomass. The dangers of these are in the proliferation of forest clearing, dairy farming, and crops being used for fuel rather than as a food source. CVNM will look at the rulemaking process and other policy pathways to identify ways to mitigate negative impacts. For a more technical analysis of these possible pitfalls, click here.
While the potential hazards presented by HB 41 are real, so are the benefits. According to a recent American Lung Association report, nearly 1 in 7 New Mexicans suffers from a respiratory disease such as asthma. HB 41 can potentially lower the greenhouse gas emissions from transportation and its corresponding pollutants. This would mean cleaner air for all New Mexicans, particularly those who reside near high traffic corridors.
HB 41 is also predicted to generate $470 million in economic job investment in New Mexico from more than 1,600 permanent jobs and 2,300 construction jobs by 2030. It will also generate revenue from the sale of credits, 50% of which is to support low-income and underserved communities. The investments will focus on the development of household electrification and renewable energy for these communities.
It will also give consumers access to an alternative fuel source with competitive prices and lower emissions. Transportation is the state’s second-highest source of greenhouse gas emissions. HB 41 is a proactive change in reducing those emissions. But we must work to ensure that we are aware and engaged through its rulemaking process to ensure that the “carbon intensity standard” is one that will work for the future of New Mexico.