CTFP Program and Credit Market Overview
New Mexico’s Clean Transportation Fuel Program (CTFP) is the fourth low carbon fuel (LCF) program adopted in the United States and the first to operate outside the Pacific coast. Governor Michelle Lujan Grisham signed House Bill 41 (HB41) into law on March 5, 2024, adding Section 74-1-18 to the Environmental Improvement Act and directing the New Mexico Environmental Improvement Board (EIB) to promulgate implementing rules no later than July 1, 2026. The EIB voted unanimously to adopt 20.2.92 New Mexico Administrative Code (NMAC) on January 22, 2026. The final rule was published in the New Mexico Register on March 10, 2026, and the program took effect on April 1, 2026. The New Mexico Environment Department (NMED) and its Climate Change Bureau administer the program.
Like the California Low Carbon Fuel Standard (LCFS), the Oregon Clean Fuels Program (CFP), and the Washington Clean Fuel Standard (CFS), the CTFP reduces greenhouse gas (GHG) emissions from transportation by requiring fuel suppliers to lower the average carbon intensity (CI)[1] of the transportation fuel supplied in the state. Fuels with a CI below the applicable annual standard generate credits, fuels with a CI above the standard generate deficits; both are denominated in metric tons (MT) of carbon dioxide equivalent (CO2e). Regulated parties must hold a zero or positive credit balance at the close of each compliance period.[2] Credits are bankable and tradeable, and all reporting and trading occurs inside the CTFP Applications, Reporting, and Compliance System (CTFP-ARCS).
The statute sets two binding milestones: a minimum 20 percent CI reduction below 2018 levels by 2030 and a minimum 30 percent reduction by 2040. The rule translates those milestones into the Clean Transportation Fuel Standard (CTFS), the annual schedule of declining CI benchmarks against which every regulated fuel is measured. New Mexico codifies two separate CTFS tables, one for gasoline and gasoline substitutes and one for diesel and diesel substitutes, on a common percentage path.
Table 1. New Mexico Clean Transportation Fuel Standard
Source: Tables 1 and 2 in Subsections A and B of 20.2.92.701 NMAC
Two features of Table 1 are worth noting. First, the annual percentages are identical for gasoline and diesel, so the only difference between the two CI columns is the difference in baseline. Second, New Mexico’s gasoline and diesel baselines sit within 0.08 g/MJ of one another. The comparable California figures are 99.15 g/MJ for gasoline and 105.76 g/MJ for diesel, a 6.61 g./MJ difference.[3] Because a fuel earns credits on the gap between its own CI and the benchmark it is measured against, a gallon of renewable diesel (RD) supplied into New Mexico earns materially fewer credits than the same gallon supplied into California. Note that alternative jet fuel (AJF), more commonly called sustainable aviation fuel (SAF), is an opt-in fuel measured against a separate crediting benchmark of 88.40 g/MJ. Fossil jet fuel generates no deficits. Figure 1, below, shows the adopted CI-reduction schedule for the CTFP.
Figure 1. New Mexico Clean Transportation Fuel Standard (2026-2040)
Source: Tables 1 and 2 in Subsections A and B of 20.2.92.701 NMAC
What the CTFP Covers
Regulated fuels are gasoline, diesel, fossil natural gas, fossil liquefied petroleum gas (LPG), ethanol, hydrogen, biodiesel (BD), RD, renewable gasoline, renewable naphtha, synthetic fuels, and blends of those fuels. Opt-in fuels, which may generate credits but do not incur deficits, are electricity, biomethane (used interchangeably with renewable natural gas, or RNG), renewable LPG, AJF, and their blends.
Several exemptions narrow the deficit-generating pool relative to the West Coast programs. Fuel for aircraft, railroad locomotives, and military tactical vehicles is exempt from generating deficits. Dyed fuel[4] is exempt through December 31, 2028. Any fuel type whose statewide aggregate volume falls below 42.6 million megajoules (MJ) in a year is exempt. Retailers, defined as parties that exclusively buy fuel already produced in or imported into New Mexico and sell it below the rack, are exempt from the rule entirely.
Credits and deficits are calculated from the difference between the annual CI standard and the fuel’s Energy Economy Ratio (EER) adjusted CI, multiplied by the EER-adjusted energy supplied and converted to metric tons. Default EERs are listed in Table 8 of 20.2.92.701 NMAC and include 3.4 for electricity in light-medium-duty vehicles, 5.0 for electricity in medium-heavy-duty vehicles, and 2.5 for hydrogen fuel cell vehicles.
Expected Sources of Credit and Deficit Generation
NMED’s stated expectation is that credits will come primarily from RD and BD during the program’s first ten years, after which the department expects New Mexico’s New Motor Vehicle Emission Standards (NMVES)[5] and Renewable Portfolio Standard (RPS) to supply sufficient credits from electrification and renewable electricity to satisfy the statutory requirements. NMED will publish its first Quarterly Data Summary no later than December 31, 2026, and its first Monthly Credit Trading Activity Report, for credit trading during the month of December, no later than January 31, 2027. Program participants must submit their first annual compliance reports for 2026-2027 by April 30, 2028.
How the CTFP Differs from the West Coast Programs
The CTFP borrows its basic architecture from the three West Coast programs, but the state’s fuel and vehicle mix and the choices New Mexico made along the way differ in ways that matter to how its credit market will behave. Table 2 compares the four existing U.S. LCF programs across the design features where those choices are most visible, from how quickly each program moved from statute to compliance obligation to how each handles credit banking and electricity credit revenue.
Table 2. Program Design Features Compared Across Existing U.S. LCF Programs
Sources: program regulations and enabling statutes, Stillwater analysis
Three patterns stand out. New Mexico moved from enabling legislation to an operating program faster than California or Oregon did, and it starts steeper than any of the three, requiring a 1.8 percent reduction in program year one against 0.3 percent for California and Oregon and 0.5 percent for Washington. That early stringency does not carry through, however; New Mexico’s year 20 requirement of 30 percent matches California and trails Oregon’s 37 percent and Washington’s 45 to 55 percent, resulting in the CTFP being the most demanding of the four programs early and currently the least demanding late. It also adopts narrower versions of several West Coast features, with no automatic acceleration mechanism and no compliance cost trigger. And it layers obligations onto familiar mechanisms rather than importing them intact, most notably a credit clearance market with pledging requirements no other program imposes. The remainder of this section takes the most consequential of these differences in turn.
CI Reduction Schedule. New Mexico targets a faster ramp-up in its early years than California or Oregon did at the same stage, reaching a 20 percent reduction in program year five against year fifteen for California and Oregon. Figure 2 compares all four existing U.S. programs by year into program rather than by calendar year, which is the fairer basis given that they started as much as fifteen years apart. Each program measures against its own baseline year and its own baseline CI values, so the percentages are directionally comparable rather than exactly equivalent.
Figure 2. CI reduction requirement by year into program (years 1-20)
Sources: 20.2.92.701 NMAC, CARB, Oregon DEQ, Washington Department of Ecology, Stillwater analysis
Credit banking with pledging triggers. As with West Coast LCF programs, CTFP credits do not expire, but Subsection I of 20.2.92.507 NMAC creates a practical limit that no other LCF program has. If the department opens a credit clearance market (CCM), a party must pledge into it any non-retired credits older than five years, plus any credits above a 10 percent share of its total unretired credits. The intent is to keep a small number of holders from cornering a thin market. An important open question, raised during the rulemaking, is whether the same mechanism discourages deficit generators from building the credit bank they will need for later compliance years.[6]
A backstop aggregator for residential EV charging. NMED designates a single non-profit entity to aggregate and claim residential EV charging credits that would otherwise go unclaimed. Residential credits may also be claimed by electric distribution utilities or, using telematics data submitted per charging session, by vehicle manufacturers. This is a meaningfully different allocation of electricity credits than any of the three West Coast programs uses.
Deficit carry-forward. A regulated party may acquire carryback credits between January 1 and April 30 to satisfy the prior period. A small deficit, defined as 5 percent or less of the deficits generated in the period, may be carried forward without penalty. Anything larger is increased by 5 percent and carried into the next period.
NM-GREET and pathway portability. CI values are calculated with NM-GREET v1.0, customized from the Argonne National Laboratory R&D GREET model. Because the calculators were not ready at launch, regulated parties may report on temporary fuel pathways for the initial compliance period plus a two-quarter grace period ending June 30, 2028. A pathway certified in another jurisdiction can be carried into New Mexico, but certification requires re-running the same inputs through the New Mexico calculator with adjustments for transport distance, indirect land use change, and calculator differences, so the New Mexico CI will generally differ from the originating jurisdiction’s.
A self-funded fee structure. The CTFP draws no money from the general fund. Registration costs $3,000 for credit and deficit generators and $500 for other registered parties. The annual program budget is recovered from participants, with deficit generators covering 95 percent and credit generators 5 percent, prorated within each group by credits or deficits generated. Pathway applications cost $5,500 for Tier 1 and $15,000 for Tier 2. This provision is similar to Washington’s fee structure but differs from the funding mechanism in Oregon and California.
Bottom Line: Of the three existing West Coast programs, we expect the CTFP to operate most like Oregon’s CFP: New Mexico similarly relies on gasoline and diesel refined out of state, and it has no cap-and-invest program layered on top of its LCF program. California and Washington both put an auction-priced allowance obligation on transportation fuels at the rack on top of the LCFS or CFS, while Oregon’s cap allocates compliance instruments for free and New Mexico has no cap at all, so the CTFP will be the primary carbon cost its obligated parties face.
Looking Ahead
The CTFP will likely be closely watched by the seven state legislatures that had LCF bills active in the 2026 session. The near-term questions are practical rather than philosophical: whether NM-GREET and the pathway certification queue keep pace with reporting obligations, whether the pledging provisions help or hinder liquidity in a market with far fewer participants than California’s, and whether New Mexico can attract enough RD away from higher-value markets to cover the step from an 11 percent standard in 2029 to 20 percent in 2030.
That last step change is one to watch. It is the single largest year-over-year increase anywhere in the schedule, lands in the fourth full year of program operation, and occurs less than two years after industry issues their first compliance reports.
Stillwater will expand this article to include credit and deficit generation by fuel, credit bank trends, and credit price history as NMED publishes those data, and we will develop a New Mexico credit price outlook when a full year of program data is available.
For ongoing coverage of the CTFP, including quarterly data analysis as it is released, subscribe to Stillwater’s LCFS Newsletter. For expert views on where credit prices are heading in every North American LCF market, visit Stillwater’s Carbon Market Outlooks Dashboard.
