HI-CFS Program Overview

Hawaii is the fifth U.S. state and first island jurisdiction to adopt a low carbon fuel (LCF) program. Both chambers of the Legislature passed SB2999 (Conference Draft 1) on May 6, 2026, and Governor Josh Green signed it into law on July 15, 2026, at which point it became Act 258. The Hawaii Department of Transportation (HDOT) administers the program.

The Clean Fuel Standard (HI-CFS) uses the architecture established by the California Low Carbon Fuel Standard (LCFS) and mostly cloned by the Oregon Clean Fuels Program (CFP), the Washington Clean Fuel Standard (WA-CFS), and most recently the New Mexico Clean Transportation Fuel Program (CTFP). Under the HI-CFS, the average carbon intensity (CI)^[1] of transportation fuel declines on a set schedule with fuels below the standard generating credits and fuels above the standard generating deficits. Credits are bankable and tradeable. The approach is deliberately fuel-neutral on the theory that a market allowed to choose its own compliance mix will deliver the required CI reductions at the lowest cost.

Per Act 258, HDOT must adopt implementing rules by January 1, 2028, and the standard begins applying to gasoline and diesel on January 1, 2029. The schedule must achieve minimum CI reductions of 10 percent below 2019 levels by 2035 and 50 percent below 2019 levels by 2045.

Everything between those milestones is currently open. The statute fixes the two endpoints and leaves the annual benchmarks to rulemaking, so the details of Hawaii’s reduction path do not yet exist as a published schedule.

What the Statute Settles and What Rulemaking Will Decide

Act 258 is unusually prescriptive for enabling legislation, which narrows HDOT’s discretion but also front-loads the design risk. The statute settles the following:

• Rules adopted by January 1, 2028, with the program starting January 1, 2029 for gasoline and diesel.
• Minimum CI reductions of 10 percent below 2019 levels by 2035 and 50 percent below 2019 levels by 2045.
• The schedule must enable Hawaii to meet its existing statewide GHG reduction targets under Hawaii Revised Statutes 225P-5, 225P-7, and 225P-8 as quickly as possible.
• An Automatic Acceleration Mechanism (AAM), which would accelerate the annual CI reduction schedule if certain defined criteria are met, must be included.
• Lifecycle CIs calculated with the current Argonne GREET model, updated biennially or triennially.
• Recognition of CI pathways already approved in other jurisdictions’ programs.
• Credits are bankable and tradeable.
• Aviation, rail, military, interstate marine, and non-road fuels are exempt but may opt in. Low-volume entities may be exempted.
• EERs used to adjust for drivetrain efficiency differences.
• EV charging credits allocated to the utility, the fuel supply equipment (FSE) owner, or others, with credits also available for FSE installation.
• At least 50 percent of electric utility and public agency credit value directed to electrification benefiting overburdened or underserved communities.
• A credit clearance market with a $200 price cap in 2026 dollars, indexed annually.
• An annual compliance cost report to the Legislature, with required action above 15 cents per gallon, plus biennial program reports.
• A verification process, and coordination with other jurisdictions on best practice.

The following are left to HDOT:

• The annual CI reduction benchmarks prior to 2035 and between the 2035 and 2045 milestones.
• The design of the AAM, which the statute establishes but does not specify.
• Rules governing the specific details of credit and deficit generation.
• Rules for the credit trading market and the credit clearance market process.
• Registration, recordkeeping, and reporting mechanisms.
• The pathway registration process.
• Verification and validation processes.
• Community information sessions.

The statute explicitly authorizes HDOT to model the program on California, Oregon, and Washington, and to recognize CI pathways already approved in those states. Portability of that kind widens the pool of fuels that can reach Hawaii with a usable CI and cuts HDOT’s review workload substantially. It also creates work, because pathways certified elsewhere were calculated on different GREET versions and for shorter, mostly overland transport distances. Reconciling those differences is a rulemaking question with real consequences for credit yields.

Consumer Protection and Equity Provisions

A 15 cents-per-gallon compliance cost trigger. HDOT must report annual compliance costs to the Legislature by March 1. If costs exceed 15 cents per gallon (cpg), HDOT must act within 60 days by rolling the CI benchmark back to the prior year, opening an early credit clearance market, adopting a change used in a peer state, or electing to take no action. Because no action is among the permitted responses, the trigger functions as a review-and-report obligation rather than a cost ceiling. The binding ceiling is the credit price cap, applicable when there is a credit clearance market (CCM), of $200 in 2026 dollars, indexed annually. Worth noting for market participants: a mid-year benchmark rollback would penalize parties that had been buying credits ratably, and an early clearance market only helps if credits are being withheld rather than being genuinely scarce.

Half of utility and public agency credit value to underserved communities. Electric utilities and public agencies must direct at least 50 percent of their credit value to EV programs benefiting overburdened or underserved populations. The provision is consistent with the other four programs. It interacts differently in Hawaii, though, because the compliance value of an EV credit depends on the CI of the power charging the vehicle, and Hawaii’s grid is one of the most carbon-intensive in the country. The state’s Renewable Portfolio Standard sets an aggressive schedule for decarbonizing power generation, reaching 100 percent renewable by 2045,^[2] but in the near term an EV charging on grid-average power in Hawaii will generate fewer credits than the same vehicle in a lower-CI state.

Comparison to the Existing LCF Programs

Figure 1 places Hawaii’s two statutory minimums against the four operating U.S. programs, each plotted by year since program inception rather than by calendar year. The dotted line between Hawaii’s two points is drawn straight for legibility and should not be read as a schedule, since HDOT has not set the annual benchmarks.

Figure 1. CI Reduction Requirement by Year into Program (Years 1-20) Sources: Act 258 (SB2999), program regulations and enabling statutes, Stillwater analysis

As illustrated by the dashed slope between Hawaii’s two fixed points, the HI-CFS must move 40 percentage points between program years seven and 17. Over the same stretch of their own operating lives, California’s schedule moves 22 points, Oregon’s moves 22, Washington moves ~28, and New Mexico moves eight. No operating U.S. program has tightened as fast as Hawaii intends to over a ten-year window, and Hawaii would be doing it with a smaller diesel pool, no natural gas vehicle fleet, and the most carbon-intensive grid of any LCF jurisdiction.

Two caveats apply, both to the later years. Each program measures against its own baseline year, from 2010 in California to 2019 in Hawaii, so the percentages are directionally comparable rather than exactly equivalent. And Washington’s path is not fully settled: HB 1409 set the 2026, 2027 reductions, and the 45% target for 2038, but the annual steps in between are left to the Washington Department of Ecology rulemaking within a band of 3.0 to 4.0 percentage points per year, and from 2032 Ecology may raise the 2038 target to 55 percent. The shaded area in Figure 1 spans the two paths.

Table 1. Program Design Features Compared Across LCF ProgramsSources: program regulations and enabling statutes, Stillwater analysis

 Expected Sources of Credit and Deficit Generation

While Hawaii uses the same fuels as the mainland states, the mix is significantly different, and this has implications for how the mandated decarbonization is most likely to be achieved.

Ethanol, if it moves past E10. Ethanol is already in the gasoline pool, but at E10 it is close to fully subscribed as a credit source. A move to E15 would add incremental credits, subject to retail infrastructure and vehicle compatibility.

BD and RD, within a small pool. Both will contribute, but even high blend rates into a diesel pool this small cannot approach the credit volumes seen in California or Oregon.

Electricity, depending on the crediting rules. EV charging is a major credit source in mainland LCF markets, but Hawaii’s grid CI is 317 gCO2e/MJ, compared with roughly 72 in California, 68 in Oregon, and 38 in Washington,^[3] because a large share of in-state generation still comes from petroleum-fueled units. EV charging will therefore generate credits at a lower yield per kilowatt-hour than elsewhere until the RPS build-out shifts the grid mix. Rules that allow renewable matching rather than grid-average CI would change the picture materially, so how the implementing regulations match renewable generation with EV charging will be critical.

SAF, which is strategically important and supply-constrained. Hawaii’s jet fuel share is the highest of any LCF jurisdiction, which makes SAF the largest theoretical credit opportunity in the state. Because petroleum jet generates no deficits, SAF only earns credits when it is used voluntarily, and supply remains limited and expensive. Additional incentives outside the HI-CFS, such as the federal 45Z tax credit and the state’s proposed SAF tax credit,^[4] will likely be needed for SAF to play the role the fuel mix suggests it could.

RNG, which cannot play its usual role. Without an NGV fleet, the compliance tool that carries a quarter of California’s credit generation is unavailable.

Looking Ahead

HDOT is preparing a first draft of proposed regulations intended to combine best practice from the existing programs with the specifics of the Hawaii market, and we expect stakeholder engagement to begin once that draft is complete, likely in the fall of 2026, to stay on track for the January 1, 2028 deadline for adoption of final regulations. The design choices with the most influence on feasibility are the annual benchmark schedule, the EV charging crediting rules, the treatment of E15 and SAF, and how pathway portability is reconciled across GREET versions and transport distances.

Stillwater will expand this article as the rulemaking proceeds. Credit generation, credit bank, and credit price sections will be added once the program is operating, and we will develop a Hawaii credit price outlook after a full year of data.

For ongoing coverage of the Hawaii CFS rulemaking and LCF program development across North America, subscribe to Stillwater’s LCFS Newsletter. For expert views on where credit prices are heading in every operating LCF market, visit Stillwater’s Carbon Market Outlooks Dashboard.