Michigan would set carbon limits for transportation fuels

The department would set yearly limits to lower greenhouse gas emissions from transportation fuels. The limits cover transportation fuel produced or imported for use in Michigan. The department may make the 2035 target stricter. When setting yearly limits, the department must consider available technology, fuel quality and supply, and the state’s climate plan. The overall reduction target applies by the end of 2035. The department must set targets for 2040 and 2050 at least two years in advance.

The department would run a system for tracking and trading credits and deficits; providers with deficits would have to cover them with lower-emissions fuel, credits, or both. The system covers providers that produce or import transportation fuel for use in Michigan, as well as people or organizations that generate or combine credits for trading. Fees must cover program costs, with deficit generators paying more than half of the fee revenue. A provider that fails to cover a deficit may face a fine equal to 200% of the value of the credits needed to offset it. Aviation fuel is exempt, but sustainable aviation fuel may earn credits if its provider opts in. Marine fuel is exempt, but lower-emissions marine fuel may earn credits if its provider opts in. The department must allow credits for fuel made through infrastructure that existed before the act takes effect or before program requirements begin.

The department would set rules for reviewing fuel emissions and awarding credits, including credits for home electric vehicle charging and optional emissions scores for some biofuels. The rules cover fuel emissions pathways submitted by credit generators, home charging credits, and emissions scores for biofuels made from crops grown on farmland. The rules must include safeguards for biodiversity, land use, privacy, and fairness, and cost controls the department considers needed. Biofuel producers could use an alternative emissions score for crops grown on farmland if the rules provide a method that includes monitoring and yearly outside audits. The department must post yearly audit reports; collected and verified farm data would be confidential. The department must issue implementing rules within 18 months after the act takes effect. Audit reports on farm practices would be posted yearly.