SB 2999

THE SENATE
S.B. NO.
2999
THIRTY-THIRD LEGISLATURE, 2026
S.D. 1
STATE OF HAWAII
H.D. 2
C.D. 1
A BILL FOR AN ACT
RELATING TO A CLEAN FUEL STANDARD.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
���� SECTION 1.� The legislature finds
that by creating a clean fuel standard that rewards environmental performance,
the State will incentivize investment and job creation in various sectors,
including agriculture, construction, energy, forestry, landscape restoration,
transportation, and waste management.� A
clean fuel standard can create new markets for what is usually considered
waste, including but not limited to municipal solid waste, construction and
demolition debris, used cooking oil from food processing, agricultural and
forestry residuals, industrial emissions, invasive species biomass from
landscape restoration projects, and renewable electricity.� Furthermore, the demand created for
alternative fuels and cleaner forms of mobility under a clean fuel standard
will not only help reduce greenhouse gas emissions but may also have a
co-benefit of reducing air pollution, thereby improving the health of citizens
of the State.
���� The legislature further finds that
transportation is the State's largest source of lifecycle greenhouse gas
emissions and that the tourism industry is the State's largest economic driver
and biggest transportation sector consumer.
���� The legislature additionally finds
that better management of waste and resources is critical to environmental
stewardship and a clean fuel standard is central to reducing lifecycle
greenhouse gas emissions while also protecting the State's economic competitiveness,
public health, and the environment.� To
prompt the use of clean fuels and zero-emission vehicles, other states like
California, Oregon, and Washington have successfully implemented programs that
reduce the carbon intensity of their transportation fuels.
���� The legislature also finds that
without policies specific to the transportation sector, emissions will not be
reduced in a timeframe consistent with the State's goals.� Therefore, a clean fuel standard that is
technology-neutral and market-based is an effective policy for reducing
emissions in the transportation sector while also achieving other co-benefits.
���� It is the intent of the legislature
to support the deployment of clean transportation fuel technologies through a
carefully designed program that reduces the carbon intensity of fuel used in
the State to:
���� (1)� Reduce lifecycle
greenhouse gas emissions;
���� (2)� Stimulate the
local, state, and regional economies, thereby providing economic development;
���� (3)� Promote public and
environmental health by increasing sustainability and encouraging a circular
economy and landscape restoration activities; and
���� (4)� Support existing
jobs in the clean fuel industry and create new jobs in new innovative clean
fuel technologies.
���� In 2025, the department of
transportation began an independent analysis of the best estimated range of
probable costs or cost savings attributable to the clean fuels program per
gallon of gasoline, per gallon of diesel, and per kilowatt of electricity, based
on existing programs, covering each year of the program projected through
2045.� The analysis is to be informed by
input from regulated industries and experience in jurisdictions that have
adopted similar clean fuels policies.
���� Accordingly, the purpose of this Act
is to require the department of transportation to adopt rules by January 1,
2028, establishing a clean fuel standard for alternative fuels in the State.
���� SECTION 2.� Chapter 279C, Hawaii Revised Statutes, is
amended by adding a new section to be appropriately designated and to read as
follows:
���� "�279C-�� ��Clean fuel standard for alternative fuels.� (a)� No later than January 1, 2028, the department
of transportation shall adopt rules pursuant to chapter 91 governing a clean
fuel standard for alternative fuels in the State.� The rules shall include:
���� (1)� A schedule to
phase in the implementation of the clean fuel standard for alternative fuels in
a manner that reduces the average carbon intensity at a rate to enable the
State to achieve the targets in sections 225P-5, 225P-7, and 225P-8 as quickly
as possible, but beginning with targets no less than ten per cent below 2019
levels by 2035 and no less than fifty per cent below 2019 levels by 2045,
including the establishment of annual carbon intensity standards for
alternative fuels;
���� (2)� An
implementation date for the clean fuel standard for diesel and gasoline
beginning January 1, 2029;
���� (3)� Standards for
measuring lifecycle greenhouse gas emissions using the most recently updated
version of the Argonne National Lab's Greenhouse gases, Regulated Emissions,
and Energy use in Technologies (GREET) model attributable to the production and
use of diesel, gasoline, and other alternative fuels throughout their
lifecycles, including feedstock production or extraction, fuel production, and
the transportation of raw materials and finished fuels;
���� (4)� A mechanism by
which alternative fuel that has a carbon intensity below the annual carbon
intensity standard is used within the State to generate a credit;
���� (5)� A mechanism to
adjust the carbon intensity of alternative fuel when the alternative fuel is
used in a powertrain that is not equal in efficiency to that of the reference
fuel and drivetrain combination;
���� (6)� A mechanism by
which diesel or gasoline that has a carbon intensity above the annual carbon
intensity standard would generate a deficit;
���� (7)� A mechanism by
which an alternative fuel that has a carbon intensity above the annual carbon intensity
standard would generate a deficit;
���� (8)� A mechanism
that requires diesel, gasoline, or other alternative fuel that is sold,
supplied, or dispensed for consumption within the State to retire any
associated credit or debit;
���� (9)� Exemptions for
diesel, gasoline, or other fuels used by aircraft, railroad locomotives,
military vehicles, and interstate waterborne vessels;
��� (10)� Procedures for verifying credits and deficits generated
under the clean fuel standard; and
��� (11)� A requirement
that the department of transportation shall use the most recently updated
version of Argonne National Lab's GREET model, or its successor model, and
shall update its lifecycle analysis methodology at least biennially or
triennially by rule.
���� (b)� The department of transportation shall adopt
rules pursuant to chapter 91 that include:
���� (1)� A cost
containment mechanism designed to allow for sufficient compliance flexibility
and maximum greenhouse gas reductions;
���� (2)� Mechanisms
whereby an electric utility, electric vehicle charging provider, or energy
producer can generate credits for electricity used in transportation; provided
that the department of transportation shall develop these mechanisms based on
best practices in other states and in consultation with industry stakeholders;
���� (3)� Mechanisms
whereby exempt end-uses, such as aviation, marine, rail, and military, can opt
in to the clean fuel standard to generate credits when using alternative fuel;
���� (4)� Mechanisms
whereby alternative fuel users can opt in to the clean fuel standard to
generate credits when it displaces the combustion of gasoline or diesel in off‑road,
heating, cooling, and temporary power generation;
���� (5)� A schedule to
phase in the implementation of the standards for alternative fuels that have
achieved a predominant market share and have an average carbon intensity that
exceeds the annual diesel or gasoline carbon intensity standard;
���� (6)� A mechanism
through which electric utilities and public agencies direct at least fifty per
cent of their overall credit value to electrified transportation programs,
projects, or investments to directly benefit overburdened or underserved
populations.� Electrified transportation
programs, projects, or investments under this paragraph may include rebates for
the purchase of electric vehicles, electric micromobility devices, and related
charging equipment;
���� (7)� Any standards,
specifications, testing requirements, and other measures as needed to ensure
the quality of gasoline, diesel, and alternative fuels used in accordance with
the clean fuel standard;
���� (8)� Consultation
and coordination with other jurisdictions that are also implementing clean fuel
standard programs to promote best practices and administrative efficiency;
provided that the department of transportation may base the State's clean fuel
standard on similar policies in jurisdictions such as California, Oregon, and
Washington;
���� (9)� A method to
utilize the carbon intensity pathways already approved in other states like
California, Oregon, and Washington to reduce the burden of administering and
certifying the carbon intensity of transportation fuels in the clean fuel
standard;
��� (10)� Mechanisms that
allow credits to be traded and to be banked for future compliance periods;
��� (11)� Exemptions for
diesel, gasoline, and alternative fuels that are used in volumes below
thresholds established by the department of transportation; provided that the
department of transportation shall develop these exemptions based on best
practices in other states;
��� (12)� An automatic
acceleration mechanism designed to tighten carbon intensity targets to mitigate
the risk of credit oversupply, such as credit clearance markets, credit price
ceilings and floors, and other mechanisms; provided that the department of
transportation shall develop this mechanism based on best practices in other
states; and
��� (13)� Mechanisms for
electric vehicle charging providers to calculate and generate credits based on
the capacity of public fast charging infrastructure to charge electric
vehicles; provided that the department of transportation shall develop these
mechanisms based on best practices in other states.
���� (c)�
The rules adopted under this section shall establish a credit clearance
market to protect Hawaii consumers from unreasonable fuel price increases
resulting from the clean fuel standard; provided that the rules shall establish
a maximum credit price per compliance period, which shall not exceed $200 in
2026 dollars, adjusted annually for inflation pursuant to the consumer price
index for all urban consumers as published by the United States Bureau of Labor
Statistics; provided further that regulated parties who are unable to retire
sufficient credits by the end of an applicable year shall participate in the
credit clearance market, with any remaining deficit carried forward without
penalty, subject to interest not exceeding five per cent per year.
���� (d)�
The department of transportation shall annually calculate and publish
the per-gallon consumer cost of the clean fuel standard for gasoline and diesel
as follows:� the difference between the
carbon intensity of the applicable fuel and the annual carbon intensity
standard, multiplied by the fuel's energy density in megajoules per gallon,
multiplied by the energy economy ratio of that fuel (which for gasoline and
diesel, as the reference fuels under the program, shall be 1.0), divided by one
million, and multiplied by the volume-weighted average credit price.� Results of this calculation, including all
inputs, shall be submitted to the legislature by March 1 of each year.
���� If the per-gallon compliance cost
calculated under this subsection exceeds fifteen cents for gasoline or diesel
in any compliance year, the department of transportation, within sixty days of
the date on which the calculation is submitted to the legislature, shall
publicly determine whether consumer protection action is warranted.� If the department of transportation
determines that action is warranted, the department shall take one or more of
the following actions:
���� (1)� Reduce the
carbon intensity schedule to the prior compliance period standard;
���� (2)� Activate the
credit clearance market outside the standard calendar; or
���� (3)� Implement
consumer cost containment measures consistent with best practices established
in other states having similar clean fuel standard programs.
If
the department of transportation determines that no action is warranted, it
shall publish its findings and reasoning on its website and submit them to the
legislature within the same sixty-day period.
���� (e)� Within two years following the adoption of a clean fuel standard for alternative
fuels and biennially thereafter, the department of transportation shall
submit a report to the legislature no later than twenty days prior to the
convening of each regular session.� The
report shall include:
���� (1)� The program's implementation
status;
���� (2)� Metrics demonstrating
the program's effectiveness, including emissions reduction data;
���� (3)� The program's market
impacts and credit activity;
���� (4)� Anticipated
program modifications or expansions, if any; and
���� (5)� Any proposed
legislation.
���� (f)� Within one year following the adoption of a clean fuel standard for alternative
fuels and biennially thereafter, the department of transportation shall
conduct public informational sessions in each county to provide updates on the
implementation and performance of the clean fuel standard on alternative fuels;
provided that the department may supplement in-person sessions with virtual
engagement opportunities.
���� (g)� For any substantive rule amendments or
expansion of the clean fuel standard for alternative fuels adopted on or after
January 1, 2028, the department shall conduct at least one public informational
session in each county, including virtual participation options, no less than
one hundred twenty days prior to the effective date of the rule or expansion.
���� (h)� For the purposes of this section:
���� "Alternative fuel"
means any fuel that is not fossil fuel‑based and is used for
transportation purposes.
���� "Carbon intensity"
means the quantity of lifecycle greenhouse gas emissions per unit of fuel
energy, expressed in grams of carbon dioxide equivalent per megajoule.
���� "Clean fuel standard"
means standards for the reduction of greenhouse gas emissions, on average, per
unit of fuel energy.
���� "Greenhouse gas" means
carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons,
sulfur hexafluoride, and other gases designated by the department of
transportation or the Hawaii state energy office by rule, in consultation with
the department of health; provided that consultation with the department of
health shall not limit, transfer, or supersede the rulemaking authority of the
department of transportation or Hawaii state energy office."
���� SECTION 3.� New statutory material is underscored.
���� SECTION 4.� This Act shall take effect on July 1, 2026.
Report Title:
DOT; Clean
Fuel Standard; Alternative Fuels; Administrative Rules; Reports
Description:
Requires
the Department of Transportation to adopt rules by 1/1/2028 governing a clean
fuel standard for alternative fuels in the State.� Requires reports and public information sessions.� (CD1)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.