Hawaii’s “Green Fee” and the Future of Climate Change Taxes
The urgency of climate change calls for new tax models to limit flash flooding and explosive wildfires. Hawaii shows us a possible path forward.
The Lahaina fire gave Hawaii a glimpse of the future and it came at a perilous time. Federal funding is uncertain and communities lack money to deal with the threats of a changing world. Hawaii is trying to address this problem by implementing a “green fee” to help mitigate the effects of climate change. This fee that passed the Hawaii legislature will add a .75% tax to short-term rentals and hotels, as well as an 11% tax on cruise ship fares while docked in Hawaii. This green fee offers a simple, scalable solution for states seeking to mitigate future disasters. Will this be a national model moving forward? I will break down how it compares to other climate change taxes and how it represents a new path forward for states that want to limit future disasters.
Why Traditional Models Fall Short
Currently, there exists a few different types of state-led climate change or “green taxes” that exist. The classic example is the cap-and-trade model used by many states. These programs cap the amount of carbon that companies are allowed to emit. Corporations that pollute have to purchase allowances to cover their pollution, either through the state or a secondary market. A group of Northeast states participate in a version called the Regional Greenhouse Gas Initiative (RGGI), which caps power sector emissions. Programs like the RGGI are complex to build and implement. The advantage to the cap-and-trade model is that it can generate significant revenue. In Washington State, the multi-sector cap-and-trade program has provided more than 2.3 billion dollars to fund projects like electric school buses and free public transport for children.
Cap and trade has been the dominant climate change finance model since the early 2010s. The downsides are evident. These programs are slow to build and lead to more regressive taxes as companies pass along costs to consumers. The Hawaii “green fee’ is a tax as well but it is targeted at tourists with disposable income. It can also be built quickly. Hawaii can rapidly channel tax revenue into native grasslands, sand replenishment and other mitigation projects.
A different model in Vermont and New York is even less carrot, more stick. Designed like federal Superfund Laws, the Climate Superfund Law in Vermont aims to recover funds from fossil fuel companies for financial damages between 1995 and 2004. This money will be used for climate change adaptation.Perhaps inevitably, the Superfund program has already become a magnet for legal challenges by Republicans. The Trump administration, which mentioned Vermont by name in an executive order, is suing alongside several states. Will it survive legal challenges? How large will the pot of money? Substantial funding might come from the Climate Superfund law, but it could also end up being a drawn-out battle in court.
A Path Forward, Following Spain’s Lead
Hawaii’s green fee is novel in the US, but it has precedent in other countries such as Spain. The Balearic Sustainable Tourist Tax institutes a 1-4 euro fee per night for several islands, including Mallorca, during the busy season. The revenue supports conversation and climate change efforts. This tax was launched in 2016 and has already generated a mind-boggling 860 million euros. This level of funding could drive generational change in many states across the country: elevating bridges, moving homes out of floodplains and restoring wetlands.
Real fear exists about the future of federal climate change funding. If other states follow Hawaii’s lead, they will be able to secure funding without having to rely on the whims of the White House.