Establishes low-carbon transportation fuel standard program in DEP.

A4739

ASSEMBLY, No. 4739

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED MARCH 16, 2026

Sponsored by:

Assemblyman� CLINTON CALABRESE

District 36 (Bergen and Passaic)

SYNOPSIS

���� Establishes low-carbon transportation fuel standard
program in DEP.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act
concerning greenhouse gas emissions from transportation
fuel and supplementing Title 26 of the Revised Statutes.

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.��� The Legislature finds
and declares that:

���� a.� A low-carbon
transportation fuel standard is central to reducing the State�s greenhouse gas
emissions and that, without policies specific to the transportation sector,
reductions in greenhouse gas emissions will not be achieved in a timeframe
consistent with the goals of the State�s Energy Master Plan;

���� b.� A low-carbon
transportation fuel standard that is technology-neutral and science-based is an
effective policy to reduce greenhouse gas emissions in the transportation
sector, while also achieving other co-benefits such as improving public health
due to a reduction in air pollution emissions;

���� c.� By creating a low-carbon
transportation fuel standard that rewards environmental performance, the State
will incentivize the creation of jobs in a wide variety of sectors;

���� d.� A low-carbon
transportation fuel standard will induce the creation of new competitive and
innovative markets;

���� e.� The demand created for
alternative fuels and cleaner forms of mobility under a low-carbon
transportation fuel standard will not only help reduce greenhouse gas
emissions, but will also have the co-benefit of reducing air pollution, thereby
helping to improve the health of citizens of the State, especially those with
the most exposure or sensitivity to motor vehicle emissions;

���� f.� To help prompt the use of
low-carbon fuels and zero emission vehicles, other states, such as California,
Oregon, New Mexico, and Washington have successfully implemented programs that
reduce the carbon intensity of their transportation fuel while providing lower
cost options and improving the resiliency of their fuel markets; and

���� g.� It is fitting, proper, and
in the public interest to support the deployment of low-carbon transportation
fuel technologies through a carefully designed program that reduces the carbon
intensity of transportation fuel used in the State, and that permits New Jersey
to harmonize its program to those enacted by other states now and in the
future.

���� 2.� As used in this act:

���� �Alternative fuel� means any
fuel that is not gasoline or diesel and is used for transportation purposes,
including, but not limited to, ethanol, biomass-based diesel, renewable diesel,
sustainable aviation fuel, sustainable marine fuel, electricity, biomethane,
biogasoline, renewable natural gas, renewable propane, fuels from carbon
capture and utilization, electrofuels, and hydrogen, provided that the fuel
achieves a lifecycle carbon intensity at least 10 percent lower than
petroleum-derived gasoline or diesel, and at least 20 percent lower than
petroleum-derived gasoline or diesel within 10 years after establishment of the
program, as determined using the most recent Argonne National Laboratory GREET model.

���� �Argonne National Laboratory�
means the science and engineering research laboratory located in Lemont,
Illinois, and operated by the University of Chicago on behalf of the United
States Department of Energy.

���� �ASTM� means ASTM
International, formerly known as the American Society for Testing and
Materials, the international organization that develops and publishes technical
standards.

���� �Carbon intensity� means the
quantity of greenhouse gas emissions associated with the production,
transportation, distribution, and use of a unit of fuel, measured over the
entire life-cycle of the fuel, including both direct and indirect emissions,
and expressed in grams of carbon dioxide equivalent per megajoule of energy
generated by the fuel (gCO2e/MJ), calculated in accordance with the most recent
version of the Argonne National Laboratory GREET model and shall include, for
electricity based pathways, emissions from energy generation, transmission, and
distribution, as determined by the most recent GREET model.

���� �Credit generator� means an
entity that produces or imports a low carbon fuel for use in New Jersey, which,
with respect to electricity used as a transportation fuel, includes, but is not
limited to, electric vehicle charging station providers, electric utilities, automakers,
and electric vehicle fleet operators.

���� �Department� means the
Department of Environmental Protection.

���� �Diesel� means a liquid that,
without further processing or blending, has practical and commercial fitness
for use in the propulsion engine of a diesel-powered vehicle.

���� �Electrofuel� means a
carbon-based fuel that is obtained from carbon dioxide and water, employing a
renewable or low-carbon source of electricity as the primary source of energy.

���� �Feedstock� means the required
material inputs to the industrial processes for the manufacture of gasoline,
diesel, or alternative fuels.

���� �Gasoline� means all products
commonly or commercially known or sold as gasoline that are suitable for use as
a motor fuel.� �Gasoline� does not include products that have an ASTM octane
number of less than seventy-five as determined by the �motor method,� ASTM
D2700-92.

���� �Greenhouse gas� means carbon
dioxide, methane, nitrous oxide,

hydrofluorocarbons,
perfluorocarbons, sulfur hexafluoride, or any other substance that contributes
to global warming, as designated by the department.

���� �GREET model� means the
Greenhouse gases, Regulated Emissions, and Energy use in Technologies model
developed at the Argonne National Laboratory, which measures the energy use and
greenhouse gas emissions output of various vehicle and fuel combinations.

���� �Low-carbon transportation
fuel standard� means a mandated annual standard for the carbon intensity of a
transportation fuel.

���� �Overburdened community� means
the same as the term is defined in section 2 of P.L.2020, c.92 (C.13:1D-158).

���� �Transportation� means the use
of motorized vehicles or other machinery to move persons, goods, or other
tangible items, including off-road applications.

���� 3.� a.� No later than 18
months after the effective date of this act, the department shall establish an
annual low-carbon transportation fuel standard for gasoline, diesel, and
alternative fuels, and a program to implement and enforce the standards.� Each
refiner, wholesaler, or importer of diesel or gasoline, and each producer of
alternative fuel that opts in to the program, shall ensure that the
transportation fuel refined, sold, imported, or produced by the entity, as
applicable, and supplied for use in the State, meets the low-carbon
transportation fuel standard for that fuel on an annual basis.� The department
shall establish a system of salable and tradable credits, under which
transportation fuel that exceeds the low-carbon transportation fuel standard
shall generate credits, which shall represent one metric ton of avoided
greenhouse gas emissions, as compared with the standard, and under which
transportation fuel that does not meet the low-carbon transportation fuel
standard shall generate deficits.� The department shall develop a system under
which credits generated may be redeemed to offset deficits.� Each refiner,
wholesaler, or importer of diesel or gasoline, and each producer of alternative
fuel that opts in to the program, shall demonstrate compliance with this act by
redeeming sufficient credits to ensure that it generates no net deficits over
each annual reporting period.

���� b.� The low-carbon
transportation fuel standard program shall, at a minimum, include:

���� (1)� a schedule to phase in
the implementation of the low-carbon transportation fuel standard for diesel
and gasoline in a manner that reduces the average carbon intensity of diesel
and gasoline used in the State by five percent below 2019 levels by the year
2030, subject to biennial reviews commencing in 2027, to assess technological
advancements, market readiness, and environmental impacts;

���� (2) �an implementation date
for the low-carbon transportation fuel standard on or before the eighteenth
month after the effective date of this act;

���� (3) �standards for measuring,
using a GREET model, the net greenhouse gas emissions associated with a fuel
over its entire life-cycle, including direct emissions from fuel use and
indirect emissions from electric energy consumption, land use changes, all
stages of feedstock production or extraction, all stages of fuel production and
distribution, the transportation and storage of raw materials and finished
fuels, and any greenhouse gas sequestrations, including, but not limited to,
sequestrations of carbon dioxide as organic compounds in soil and geological
storage;

���� (4) �a mechanism by which a
refiner, wholesaler, or importer of gasoline or diesel that exceeds the
low-carbon transportation fuel standard and is supplied for use within the
State can generate credits for all carbon dioxide and carbon dioxide equivalent
reductions as determined by the GREET model;

���� (5) �a mechanism by which a
producer or importer of an alternative fuel that exceeds the low-carbon
transportation fuel standard and is supplied for use within the State can
generate credits for all carbon dioxide and carbon dioxide equivalent
reductions as determined by the GREET model, and a mechanism by which program
participants can generate credits from activities and projects that result in
the reduction of carbon intensity of transportation fuels;

���� (6) �a mechanism to adjust the
carbon intensity of alternative fuel when the alternative fuel is used in a
powertrain that is more or less efficient than the reference fuel and
drivetrain combination;

���� (7) �a mechanism by which a
refiner, wholesaler, or importer of gasoline or diesel that fails to meet the
low-carbon transportation fuel standard and is supplied for use within the
State would generate deficits;

���� (8) �a mechanism by which a
producer of an alternative fuel that fails to meet the low-carbon
transportation fuel standard, including through an carbon intensity adjustment
carried out pursuant to paragraph (6) of this subsection, would generate a
deficit;

���� (9) �mechanisms that allow
credits to be traded and to be banked for future compliance periods;

���� (10) �a requirement that
diesel, gasoline, or alternative fuel that is exported from the State would not
generate any associated credit or debit;

���� (11) �exemptions for diesel,
gasoline, and alternative fuels that are used in volumes below certain
thresholds, as established by the department;

���� (12) �exemptions for gasoline,
diesel, or other fuels used by aircraft, railroad locomotives, military
vehicles and interstate waterborne vessels, or for other non-transportation
uses, with eligibility to generate credits on a voluntary, opt-in basis,
provided that the fuels achieve an initial minimum 10 percent lifecycle carbon
intensity reduction, increasing to 20 percent within 10 years, compared to the
carbon intensity of conventional petroleum-derived gasoline or diesel, as
determined using the most recent Argonne National Laboratory GREET model;

���� (13) �procedures for verifying
the validity of credits and deficits generated under the low-carbon
transportation fuel standard;

���� (14) �requirements that
participants in the program that are electric public utilities, State agencies,
and State authorities direct at least 40 percent of that participant�s overall
credit value to electrified transportation programs, projects, or investments
to directly benefit overburdened communities; and

���� (15) a review and� request for
additional GREET modeling scenarios from Argonne National Laboratory, as
necessary, to reflect New Jersey-specific fuel pathways, after consultation
with industry stakeholders and scientific experts, to ensure consistency with national
best practices.

���� c.� The low-carbon
transportation fuel standard program may contain the following provisions as
needed to implement the standard for gasoline, diesel, or alternative fuels, as
determined by the department:

���� (1) �a cost containment
mechanism that is designed to allow for both sufficient compliance flexibility
and maximum greenhouse gas emissions reductions;

���� (2) �a mechanism by which
greenhouse gas emissions reductions associated with the production of low
carbon electricity or renewable natural gas can be indirectly accounted for
when used as transportation fuel or when used in the production of diesel,
gasoline, or an alternative fuel that is used within the State;

���� (3) �mechanisms whereby a
refiner, wholesaler, importer, or producer of an exempt fuel, including a fuel
exempted pursuant to paragraph (12) of subsection b. of this section, can
voluntarily opt-in to the program to generate credits;

���� (4) �mechanisms whereby
producers of alternative fuel, including a fuel exempted pursuant to paragraph
(12) of subsection b. of this section, can voluntarily opt-in to the program to
generate credits when the fuel is used for transportation; and

���� (5) �any standards,
specifications, testing requirements or other measures as needed to ensure the
quality of gasoline, diesel, and alternative fuels used in accordance with the
provisions of this act.

���� d.� The department shall
consult with fuel and transportation experts while developing the low-carbon
transportation fuel standard program, and may consider linking New Jersey�s
program with similar policies in other jurisdictions.

���� e.� Co-processed fuel, which
is produced by blending biomass-based feedstocks with petroleum in refineries,
shall be considered low-carbon transportation fuel for the purposes of this
act, provided that the co-processed fuel meets a minimum 20 percent reduction
threshold, as compared with the equivalent petroleum-based fuel, as calculated
using the GREET model.

���� f.� No person shall bank more
than 10 percent of its total compliance obligation in low-carbon transportation
fuel credits with the intent to manipulate market supply.�

���� g.� (1)� Whenever the
Commissioner of Environmental Protection finds that a person has violated any
provision of this act, or any rule or regulation adopted pursuant thereto,
including, but not limited to, the sale, import, or production of transportation
fuel without meeting the low-carbon transportation fuel standard or paying an
alternative compliance payment pursuant to section 4 of this act, and
fraudulently receiving a low-carbon transportation fuel program credit, the
commissioner may bring an action for a civil penalty in accordance with
paragraph (2) of this subsection or levy a civil administrative penalty in
accordance with paragraph (3) of this subsection.

���� (2)� Any person who violates
the provisions of subsection f. of this section shall be subject to a civil
penalty of up to $75,000 for a first offense, a civil penalty of up to $250,000
and a one-year suspension from the low-carbon transportation fuel standard
program for a second offense, and permanent disqualification from the
low-carbon transportation fuel standard program for a third offense.� Any
person who engages in collusion, price-fixing, or insider trading of low-carbon
transportation fuel credits shall be subject to a civil penalty of up to
$500,000 for each offense, as well as permanent disqualification from the
low-carbon transportation fuel standard program.� Any person who submits false
or misleading information to the department regarding fuel types, carbon
intensity, or credit transactions shall be liable to a civil administrative
penalty of up to $250,000 for each offense, as well as the forfeiture of any
improperly obtained low-carbon transportation fuel credits and suspension from
the low-carbon transportation fuel standard program for up to two years.� Civil
penalties shall be collected by the Commissioner of Environmental Protection in
a civil action by summary proceeding under the �Penalty Enforcement Law of
1999,� P.L.1999, c.274 (C.2A:58-10 et seq.).� The Superior Court and the
municipal court shall have jurisdiction over proceedings for the enforcement of
the penalty established by this section.

���� (3)� The commissioner may
assess a civil administrative penalty of not more than $75,000 for a first
offense, and not more than $250,000 for the second and every subsequent
offense. Each day that a violation continues shall constitute an additional,
separate, and distinct offense.� No assessment may be levied pursuant to this
paragraph until after the violator has been notified by certified mail or
personal service.� The notice shall include a reference to the section of the
statute, rule, regulation, or order violated, a concise statement of the facts
alleged to constitute a violation, a statement of the amount of the civil
administrative penalties to be imposed, and a statement of the person�s right
to a hearing.� The ordered person shall have 20 calendar days from receipt of
the notice within which to deliver to the commissioner a written request for a
hearing.� After the hearing and upon finding that a violation has occurred, the
commissioner may issue a final order after assessing the amount of the fine
specified in the notice.� If no hearing is requested, the notice shall become a
final order after the expiration of the 20-day period.� Payment of the
assessment is due when a final order is issued or the notice becomes a final
order.� The authority to levy a civil administrative penalty is in addition to
all other enforcement provisions in this act, and the payment of any assessment
shall not be deemed to affect the availability of any other enforcement
provisions in connection with the violation for which the assessment is
levied.� The commissioner may compromise any civil administrative penalty
assessed under this section in an amount the commissioner determines
appropriate.

���� h.� Based on the department�s
review of technological advancements, market readiness, and environmental
impacts pursuant to section 6 of this act, the department may recommend
adjustments to the carbon intensity reduction targets to the Legislature to
ensure alignment with the State�s long-term decarbonization goals.�

���� 4.� a.� The department shall
establish an alternative compliance payment system, under which a refiner,
wholesaler, or importer of diesel or gasoline may pay an alternative compliance
payment to the department, for each metric ton of greenhouse gas emissions
associated with the transportation fuel refined, sold, imported, or produced by
the entity, as applicable, in lieu of satisfying the low-carbon transportation
fuel standard established by section 3 of this act.� The alternative compliance
payment shall be structured as follows:� if the low-carbon transportation fuel
credit price is below $100 per metric ton, the alternative compliance payment
rate shall be set at $75 per metric ton; if the low-carbon transportation fuel
credit price is between $100 and $150 per metric ton, the alternative
compliance payment rate shall be set at $90 per metric ton; and if the
low-carbon transportation fuel credit price exceeds $150 per metric ton, the
alternative compliance payment rate shall be set at $125 per metric ton.� The
department shall adjust the rate of the alternative compliance payment annually
based on the Consumer Price Index, provided that annual increases do not exceed
five percent, to prevent excessive compliance costs.� The department shall
conduct a triennial review of the alternative compliance payment pricing
structure to ensure it remains competitive and reflective of credit market
trends.� At least 90 days before the implementation of a modification to the
alternative compliance payment rates, the department shall publish the proposed
rate change in the New Jersey Register.� The department shall provide at least
30 days for the public to submit comments, and shall publish a response to the
comments at least 30 days prior to the rate change being implemented.

���� b.� There is established in
the Department of Environmental Protection, a dedicated, non-lapsing, revolving
fund to be known as the �Low-Carbon Transportation Fuel Alternative Compliance
Fund.�� Moneys in the �Low-Carbon Transportation Fuel Alternative Compliance
Fund� shall be used only to provide grants to transportation infrastructure
projects that reduce greenhouse gas emissions from the transportation sector
pursuant to subsection d. of this section.

���� c.���� The �Low-Carbon
Transportation Fuel Alternative Compliance Fund� shall be credited with:

���� (1)� alternative compliance
payments imposed pursuant to subsection a. of this section;

���� (2)� moneys as are
appropriated by the Legislature;

���� (3)� any return on investment
of moneys deposited in the fund; and

���� (4)� moneys made available to
the department for the purposes of the fund.�

���� d.� The department shall
establish a program to award grants from� moneys in the �Low-Carbon
Transportation Fuel Alternative Compliance Fund.� The department shall
establish guidelines and procedures for the submission of applications,
eligibility and ranking criteria, and acceptable uses of grant moneys.� Transit
agencies and municipalities shall be eligible for grants from the program, and
priority shall be given to projects that demonstrate the highest greenhouse gas
emissions reductions per dollar spent.

���� e.� The department, in
consultation with the Department of Transportation, shall develop and adopt a
strategic funding plan to guide the distribution of moneys from the �Low-Carbon
Transportation Fuel Alternative Compliance Fund.�� The plan shall prioritize:

���� (1)� the electrification of
public transit systems, including the purchase of electric buses and rail
vehicles;

���� (2)� the expansion of charging
and fueling infrastructure for zero-emission transit fleets;

���� (3)� other low-carbon
transportation initiatives, such as hydrogen fueling stations and fleet
conversion programs; and

���� (4)� projects in overburdened
communities, such that at least 50 percent of grant moneys shall be directed to
transit electrification projects in underserved and overburdened communities to
advance environmental justice.

���� f.� The department, in
cooperation with the Department of Transportation, shall review the grant
program at least every three years, to assess is effectiveness in reducing
greenhouse gas emissions from the transportation sector.

���� g.� The department shall
annually issue a report to the Governor and to the Legislature, pursuant to
section 2 of P.L.1991, c.164 (C.52:14-19.1), on the grant program.� The report
shall provide details about grants provided, the greenhouse gas emissions impact
of the program, and the community benefits provided by funded projects.� The
department shall also publish a copy of the strategic funding plan adopted
pursuant to subsection e. of this section, and the report issued pursuant to
this subsection on its Internet website.

���� 5.� a.� The department shall
establish a secure, anonymous reporting system for individuals to submit
evidence of fraud, credit hoarding, or market manipulation related to the
low-carbon transportation fuel program established pursuant to this act.� Under
the system, the identity of a whistleblower shall remain confidential, unless
the whistleblower voluntarily waives anonymity.

���� b. �The department shall
conduct a preliminary investigation of all reports received under the system
within 30 days of receipt.� If credible evidence of wrongdoing is found during
the preliminary investigation, the department shall launch a formal investigation
and suspend credit trading privileges for any entity under investigation.� The
department may refer cases of severe fraud to the Attorney General for criminal
prosecution.

���� c.� A person who provides
substantial evidence leading to an enforcement action pursuant this act shall
be eligible for financial compensation from the penalties collected.� The
amount of the compensation shall be determined by the department, in consultation
with the Attorney General, and shall range from 10 percent to 30 percent of the
penalty collected, depending on the severity of the violation, the amount of
financial harm prevented, and the extent of the evidence provided by the
whistleblower.

���� d.� The department shall
annually issue a report to the Governor and to the Legislature, pursuant to
section 2 of P.L.1991, c.164 (C.52:14-19.1), on the anonymous reporting program
established pursuant to this section.� The report shall provide details about
reported violations of the provisions of this act, the amount of penalties
collected, and the amount of rewards distributed to whistleblowers.� The
department shall publish a copy of the report on its Internet website.�

���� 6.� The Department of
Environmental Protection shall conduct a fuel price impact study every three
years to evaluate the program�s effect on fuel prices, credit market stability,
and economic feasibility.� The study shall analyze fuel price fluctuations
attributable to the program�s credit market dynamics, the program�s impacts on
costs of gasoline, diesel, and alternative fuels, projected credit price trends
and the influence on compliance costs for fuel providers, and competitiveness
of alternative fuel markets and investment incentives.� If the study identifies
significant market disruptions or price volatility, the department shall
propose regulatory adjustments to mitigate adverse economic effects while
maintaining the program�s emissions reduction goals. The study shall be
submitted to the Governor and to the Legislature, pursuant to section 2 of
P.L.1991, c.164 (C.52:14-19.1) and shall be posted on the department�s Internet
website.

���� 7.� The department shall
adopt, pursuant to the �Administrative Procedure Act,� P.L.1968, c.410
(C.52:14B-1 et seq.), rules and regulations as necessary to implement the
provisions of this act.

���� 8.� This act shall take effect
immediately.

STATEMENT

���� This bill would establish a
low-carbon transportation fuel standard program in the Department of
Environmental Protection (DEP).

���� Under the program, each
refiner, wholesaler, or importer of diesel or gasoline, and each producer of
alternative fuel, would be required to ensure that the fuel refined, sold,
imported, or produced by the entity, as applicable, and supplied for use in the
State, meets the low-carbon transportation fuel standard, on an annual basis.�
The low-carbon transportation fuel standard would be a maximum level of
greenhouse gas emissions associated with the entire life-cycle of a given unit
of fuel, including its production, transportation, storage, and consumption.�
An alternative fuel, under the bill, is any fuel used for transportation other
than gasoline or diesel.� Such fuels could include hydrogen, biodiesel, or
electricity.

���� In implementing the program,
the DEP would be required to establish a system of salable and tradable credits
and deficits, under which a given unit fuel that exceeds the low-carbon
transportation fuel standard would generate a credit and a given unit of fuel
that does not meet the standard would generate a deficit.� Entities regulated
under the program would be required to ensure that they do not generate any net
deficits in a given year, after offsetting their deficits with credits they
generate or purchase from third parties.

���� The bill would establish
certain requirements for the low-carbon transportation fuel standard program,
as enumerated in subsection b. of section 3 of the bill, including the
requirement that the program reduce the greenhouse gas emissions associated
with the diesel and gasoline used in the State by five percent below 2019
levels by the year 2030 subject to biennial reviews commencing in 2027, to
assess technological advancements, market readiness, and environmental
impacts.� The bill would also enumerate certain optional requirements for the
program, in subsection c. of section 3 of the bill, including a cost
containment mechanism that is designed to allow for both sufficient compliance
flexibility and maximum greenhouse gas emissions reductions.� The bill would
establish penalties for persons who violate the bill�s provisions, including by
selling fuel that does not meet the low-carbon standard and by fraudulently
obtaining credits under the program.� Maximum civil penalties would range
between $75,000 and $500,000 for each offense, depending on the nature of the
violation, and maximum civil administrative penalties would be set at $75,000
for a first violation and $250,000 for a second and each subsequent violation.

���� The bill would direct the DEP
to establish an alternative compliance payment (ACP), which fuel suppliers and
producers could pay in lieu of satisfying the low-carbon transportation fuel
standard.� The amount of the ACP would range between $75 and $125 per metric
ton of greenhouse gas emissions, depending on the price of a low-carbon
transportation fuel credit.� The ACP would be collected by the DEP and used to
provide grants to transportation infrastructure projects that reduce greenhouse
gas emissions from the transportation sector.� Section 5 of the bill would also
establish the �Low-Carbon Transportation Fuel Alternative Compliance Fund�
(fund) in the DEP and direct the DEP to establish a program to award grants
from the moneys in the fund.

���� The bill would also direct the
DEP to establish an anonymous reporting system whereby whistleblowers could
report potential violations of the bill�s provisions.� The bill would direct
the DEP to begin investigating reports within 30 days of receipt.� The bill
would provide that, in cases where the whistleblower�s report led to the
collection of monetary penalties, the whistleblower would receive between 10
percent and 30 percent of the penalties collected.� Finally, the bill would
require the DEP to conduct a fuel impact study every three years to evaluate
the program�s effect on fuel prices, credit market stability, and economic
feasibility.