It’s Time to Breathe New Energy into New Mexico with a Clean Fuel Standard
Our more than 300 days of sunshine per year hide a silent danger: high ground-level ozone levels. Ground-level ozone is a harmful outdoor air pollutant that harms our lungs – especially on hot sunny days. According to the American Lung Association, 1 out of 7 New Mexicans suffer from a respiratory illness like asthma or COPD. And the annual cost of treating asthma is nearly 10% of the median per capita income for New Mexicans. New Mexicans cannot afford to keep relying on high-carbon fuels.
A clean fuel standard simultaneously addresses one of New Mexico’s greatest health challenges while ensuring our state takes advantage of one of the greatest economic opportunities in generations – the clean energy boom and the economic diversification and workforce opportunities that come with it.
The clean energy boom generated more than a third of a trillion dollars in private investment in the first six months of 2023. Clean energy is the biggest windfall available for New Mexico to take advantage of since oil was discovered here nearly a century ago. The clean fuel standard will bring this private investment here to our state while strengthening and diversifying our energy economy.
Setting a carbon intensity standard for transportation fuels allows New Mexico to create a market that requires producers and vendors of high-carbon fuels to purchase credits from producers of low-carbon fuels. Over time, New Mexico can adjust the carbon intensity standard to allow for gradual adoption of cleaner fuels. A clean fuel standard is a sensible and measurable step to support innovations already underway by many in the oil and gas industry while encouraging investment in low-carbon fuels.
How exactly does a clean fuel standard work?
The clean fuel standard is designed to reduce the carbon intensity of the state’s transportation fuel mix over time. This technology-neutral program allows the state to set a standard for the carbon intensity (i.e. amount of lifecycle greenhouse gas emission per unit of fuel energy) of transportation fuels such as gasoline and jet fuel. Producers or vendors of transportation fuels that produce low carbon fuels (i.e. fuels that are below the standard) generate credits to sell in the clean fuels marketplace. Producers or vendors of transportation fuels that produce high carbon fuels (i.e. fuels that are above the standard) obtain credits in the clean fuels marketplace.
As an example, if an oil producer needs to purchase credits in the marketplace because its fuel falls above the carbon intensity standard, it can turn to a producer of a low carbon fuel such as renewable natural gas from a dairy to purchase clean fuel credits. The oil producer would then pay the dairy for the clean fuel credits and report the transaction to the state.
Historically, these credit prices have ranged from $70-$200 per metric ton, and currently trade at about $170. Sellers of low-carbon fuel credits are not just limited to utility companies.
Any low-carbon energy company or fuel vendor, like renewable natural gas producers, and even school systems that operate fleets running on low-carbon fuels or using electric vehicles, can sell credits to benefit from the clean fuel market.
A clean fuel standard program is not the same as a cap and invest program.
How does this stimulate the economy?
Clean energy in the 2020s is as much of an economic boom as we saw nearly a century ago when oil was first discovered in New Mexico. Scientific research shows that in the coming century the world must move away from high-carbon fuels. And reality and economics also show this won’t happen overnight.
As an energy leader, New Mexico must weather this gradual transition by retaining its leadership position not just in oil and gas – but in all energy sectors during the coming decades. Implementing a clean fuel standard demonstrates that leadership by encouraging low-carbon fuel innovators to come to New Mexico while encouraging our existing high-carbon fuel producers to innovate cleaner production processes while giving them needed innovation time by operating within the status quo.
Won’t this raise gasoline prices?
There is no statistically significant data that ties a clean fuel standard to price increases at the pump in states that have already enacted clean fuel standards. Many oil and gas producers are already innovating to decrease the carbon intensity of their fuels and improve extraction safety methods for environmental considerations.
Why is this program needed now?
With each year, investment in clean fuels development technologies and energy diversification and advancement only increases across the nation. At the same time, the ground-level ozone readings in many communities continue to be too high and neighborhoods along transportation corridors bear the brunt of high-carbon fuels. A clean fuel standard will help improve our state’s health, help diversify our economy and help bring our carbon output levels down.
We are working with numerous stakeholders in advance of the 2024 Legislative Session to introduce a bill to ensure New Mexico receives all the benefits of a Clean Fuel Standard – check back often for more updates!