SB2999

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 2040. 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. (a) No later than January 1, 2028, the department of transportation shall adopt rules pursuant to chapter 91, Hawaii Revised Statutes, 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, Hawaii Revised Statutes, 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 Argonne National Lab's 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 credits;

(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 exported from 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 schedule by which the department of transportation shall review and update the lifecycle greenhouse gas modeling every three years based on a review of the best available scientific literature.

(b) The department of transportation may adopt rules pursuant to chapter 91, Hawaii Revised Statutes, 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 or an energy producer can generate credits for electricity for gaseous fuels used in transportation; provided that the department of transportation shall develop these mechanisms based on best practices in use 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 into 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;

(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) Linking the clean fuel standard to similar policies in other jurisdictions, including but not limited to 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; and

(11) Exemptions for diesel, gasoline, and alternative fuels that are used in volumes below thresholds established by the department of transportation.

"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.

SECTION 3. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2999
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII