Bill Text: MI SB1190 | 2025-2026 | 103rd Legislature | Introduced
Bill Title: Environmental protection: air pollution; low-carbon fuel standard; provide for. Creates new act.
Sponsorship: Partisan Bill (Democrat 1)
Status: (Introduced) 2026-10-01 - Referred To Committee On Energy And Environment [SB1190 Detail]
Download: Michigan-2025-SB1190-Introduced.html
SENATE BILL NO. 1190
A bill to establish standards to reduce the carbon intensity of transportation fuels; to establish a market for trading carbon intensity credits; and to provide for the powers and duties of state and local governmental entities.
the people of the state of michigan enact:
(a) "Aviation fuel" means fuel as that term is defined in section 4 of the aeronautics code of the state of Michigan, 1945 PA 327, MCL 259.4.
(b) "Carbon intensity" means the life-cycle greenhouse gas emissions, expressed in grams of carbon dioxide equivalent per megajoule, associated with a specific transportation fuel, as calculated using the GREET model.
(c) "Competitive fuel" means a transportation fuel that has a carbon intensity that is below the standard in a given year.
(d) "Competitive fuels standard" or, unless the context implies otherwise, "standard" means a standard established under section 5(1).
(e) "Credit" means a unit of measure, in metric tons of carbon dioxide equivalent, of the amount by which the carbon intensity of a competitive fuel provider's transportation fuel volume produced or imported for use in this state is exceeded by the carbon intensity of the standard in the applicable year.
(f) "Credit aggregator" means a person that acts on behalf of 1 or more credit generators to facilitate credit generation and to trade credits.
(g) "Credit generator" means a person that produces or imports a competitive fuel for use in this state, which in the case of electricity used as a transportation fuel could include, but is not limited to, automakers, electric charging providers, electric utilities, and electric vehicle fleet operators.
(h) "Deficit" means a unit of measure, in metric tons of carbon dioxide equivalent, of the degree to which the carbon intensity of a fuel provider's transportation fuel volume produced or imported for use in this state exceeds the carbon intensity of the standard in the applicable year.
(i) "Deficit generator" means a fuel provider that generates deficits and that first produces or imports transportation fuel for use in this state.
(j) "Department" means the department of environment, Great Lakes, and energy.
(k) "Energy economy ratio" means a dimensionless value that represents the efficiency of a fuel used in a powertrain as compared to a reference fuel.
(l) "Fuel pathway" means a detailed description of all stages of a transportation fuel's production and use, including, but not limited to, feedstock cultivation, aggregation, extraction, fuel production, feedstock and fuel processing, fuel transportation and distribution, and combustion or use by an end user.
(m) "Fuel provider" means a person that produces or imports a transportation fuel for use in this state.
(n) "Greenhouse gas" means carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride.
(o) "GREET model" means the most recent version of the Argonne National Laboratory's Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation model and the model's associated modules and tools.
(p) "MDARD" means the Michigan department of agriculture and rural development.
(q) "MDOT" means the state transportation department.
(r) "Motor vehicle" means any vehicle that is self-propelled, such as an automobile, motorcycle, truck, train, light rail vehicle, ship, aircraft, forklift, or other road or nonroad vehicle. However, motor vehicle does not include a motor vehicle owned by the United States Department of Defense or the United States Military, or both, and used in combat, combat support, combat service support, or training for combat or tactical or relief operations.
(s) "Office" means the Michigan economic development corporation's office of future mobility and electrification.
(t) "Person" means an individual, a partnership, corporation, limited liability company, association, governmental entity, or other legal entity.
(u) "Petroleum-only portion of transportation fuel" means the petroleum component of gasoline, diesel fuel, or aviation fuel before blending with ethanol, biodiesel, biofuel, or other low-carbon-intensity fuel.
(v) "Sustainable aviation fuel" means aviation fuel that is approved for use in an aircraft and derived from biomass, used cooking oil, animal fats, or other processes that achieve a life-cycle greenhouse gas emissions reduction in comparison with petroleum-based aviation gasoline and aviation turbine fuel.
(w) "Transportation fuel" means fuel, including, but not limited to, electricity, gasoline, diesel, ethanol, biodiesel, renewable diesel, propane, renewable propane, natural gas, renewable natural gas, hydrogen, aviation fuel, and biomethane, that is both of the following:
(i) Produced or imported and ultimately used to operate or propel a motor vehicle in this state.
(ii) Compliant with applicable standards, specifications, and testing requirements under this act and rules promulgated under this act.
Sec. 3. The department shall calculate the baseline carbon intensity of the petroleum-only portion of transportation fuel produced or imported in 2019 for use in this state by doing both of the following:
(a) Reviewing and considering the best available applicable scientific data and calculations.
(b) Using a life-cycle emissions performance-based approach that is technology and feedstock neutral.
Sec. 5. (1) As an overall competitive fuels standard, the aggregate carbon intensity of all transportation fuel produced or imported for use in this state must be reduced to at least 35% below the 2019 baseline level, as determined under section 3, by the end of 2035. The department may increase the stringency of the 2035 carbon intensity reduction target. The department shall establish carbon intensity reduction targets for 2040 and 2050 at least 2 years in advance and in accordance with air quality targets of this state and the federal government. The department, in consultation with MDOT and the office, shall establish a schedule of annual competitive fuels standards to progressively meet the overall competitive fuels standard. In exercising its authority under this section, the department shall consider all of the following:
(a) Advances in technology available to fuel providers to achieve the further reduction.
(b) The need to maintain fuel quality and availability.
(c) The goals of the department's MI healthy climate plan.
(2) The department shall develop a mechanism that automatically adjusts the stringency of the schedule of annual standards if there is a sustained oversupply or undersupply of credits for 2 years.
Sec. 7. (1) The department shall establish a process to review fuel pathways submitted by credit generators. Fuel pathways must be calculated using the GREET model. The fuel pathway review process must meet both of the following requirements:
(a) Be consistent for all fuel types.
(b) Be science- and engineering-based.
(2) The department shall consult with MDOT and MDARD to determine fuel pathways and may coordinate with third-party entities or other states to review and approve pathways.
Sec. 9. (1) The department shall establish a fair and reasonable program for tradable credits and deficits. The generation of credits must use a life-cycle emissions performance-based approach that is technology and feedstock neutral to achieve fuel decarbonization. Credits must be provided for all carbon dioxide and carbon dioxide equivalent reductions as determined by the GREET model. The program must include all of the following:
(a) The registration of credit aggregators and of credit generators that have not designated a credit aggregator.
(b) A market mechanism that allows credits to be traded or banked for future use, including an exchange-based credit trading mechanism.
(c) Credit market transaction fees, established in the first year of the program, to cover the administrative costs of the program. The transaction fee schedule must be designed to generate more than 50% of the revenue from deficit generators. The department shall disclose the fee schedule before the deadline for registration under subdivision (a).
(d) Procedures to verify the validity of credits and deficits.
(e) The ability to carry over up to 5% of deficits each year if credits are unavailable under section 11.
(2) Beginning on the effective date of this act, the department shall allow the generation of credits associated with fuel produced through infrastructure that existed before the effective date of this act or the start date of program requirements.
(3) Aviation fuel is exempt from the standard, but sustainable aviation fuel is eligible to generate credits on an opt-in basis.
(4) Fuel used to power a marine vessel is exempt from the standard, but competitive fuel used to power a marine vessel is eligible to generate credits on an opt-in basis.
Sec. 11. (1) A fuel provider that is a deficit generator during a year shall eliminate the deficit by doing either or both of the following:
(a) Producing or importing transportation fuels whose carbon intensity is at or below the level of that year's annual standard.
(b) Purchasing credits to offset the deficit.
(2) A fuel provider that violates subsection (1) may be ordered to pay a civil fine of 200% of the value of the credits needed to offset the violation. The civil violation may be prosecuted by the prosecutor of the county in which the violation occurred or by the attorney general.
Sec. 13. The department shall collaborate with MDOT and the office to develop a compliance reporting process, including forms, for credit generators and deficit generators. The department shall regularly post on the department's website data on deficit and credit generation and credit prices.
Sec. 15. By 2 years after the effective date of the rules promulgated under section 17, the department shall submit a report detailing program implementation to the senate and house of representatives committees responsible for transportation, energy, and natural resources legislation. The department shall make summary information on the program available to the public.
Sec. 17. (1) By 18 months after the effective date of this section, the department shall promulgate rules to implement this act under the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328.
(2) In developing the rules, the department shall do all of the following:
(a) Consult with MDOT and the office.
(b) Solicit input from stakeholders, including, but not limited to, fuel providers, consumers, agricultural organizations, environmental and environmental justice organizations, technology providers, and rural, urban, and tribal communities, through a task force, working groups, public meetings, and other means.
(c) Endeavor to do all of the following:
(i) Support the growth and creation of high-paying jobs in the fuels and automotive industries in this state.
(ii) Ensure transparency and fair competition.
(iii) Complement and further both of the following:
(A) Existing state and federal fuel, transit and mobility, transportation decarbonization, infrastructure, and greenhouse gas emissions policies and programs.
(B) Existing efforts by the agricultural sector to increase the adoption of practices that improve soil health and water quality.
(3) The rules promulgated in accordance with this act must do at least all of the following:
(a) Establish energy economy ratios.
(b) Identify safeguards and incentives to protect biodiversity, reduce potential land use impacts, consider unintended consequences at scale, safeguard customer and farmer privacy, and promote equity.
(c) Provide credit price caps or other cost containment measures that the department considers necessary to harmonize market credit costs and ensure that credit prices do not significantly exceed credit prices in other jurisdictions with similar programs to reduce the carbon intensity of transportation fuels. The department shall design any cost containment measure to provide financial disincentives for regulated persons to rely on the measures for purposes of program compliance instead of seeking to generate or acquire sufficient credits.
(d) Establish procedures to allow credit generators to generate credits for electric vehicle charging that occurs in residences. The department shall set a goal for the percentage of the credit revenue generated under this subdivision to be spent to support transportation electrification and transportation emission reduction programs for the primary benefit of disadvantaged communities, low-income communities, or rural communities. The department shall develop projects and identify goals under this subdivision in consultation with credit generators, communities, community leaders, and environmental justice advocates, including members of the Michigan advisory council on environmental justice.
(e) Establish a process to create procedures for biofuel producers to calculate a unique carbon intensity score for biofuel feedstocks from cropland-derived biofuels. A biofuel producer may use the unique carbon intensity as an alternative to the statewide average carbon intensity scores. The procedures must use the GREET model and other models and must take into account the impacts on farm-related emissions and sequestration of greenhouse gases. The procedures must include a methodology for calculation, monitoring, and annual third-party auditing and verification, including the all of the following:
(i) Soil-healthy farming practices and fertilizer best-management practices that meet United States Department of Agriculture standards in effect on the effective date of this act or subsequent standards approved by the department and MDARD as reasonable and consistent with the purposes of this subdivision. The practices may include, but are not limited to, reduced tillage farming and no-till farming.
(ii) Reduced carbon inputs through practices including, but not limited to, reduced on-farm fuel use, reduced use of fertilizers and other inputs, and use of low-carbon-intensity fertilizer.
(iii) Practices that capture more carbon than traditional cropping methods, as established by the best available research and verified by the department or a land grant university. The practices include, but are not limited to, use of cover crops, use of continuous living cover cropping, and application of biochar.
(4) The department shall prepare and post on its publicly accessible website an annual report summarizing the results of third-party auditing and verification of on-farm practices under subsection (3)(e). Data collected and verified under subsection (3)(e) and this subsection is confidential and exempt from disclosure under the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246.
