HOUSE OF REPRESENTATIVES
THIRTIETH LEGISLATURE, 2019
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO CARBON EMISSIONS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that decisive action is needed to avoid the worst impacts that climate change will have on Hawaii's environment, economy, and quality of life. The State has committed to transitioning away from fossil fuels toward a clean energy economy that is powered by one hundred per cent renewable energy. The legislature has passed ambitious carbon reduction goals, including the goals of reaching net carbon neutrality by 2045, pursuant to Act 15, Session Laws of Hawaii 2018, and achieving the climate change objectives of the Paris Agreement, pursuant to Act 32, Session Laws of Hawaii 2017. Setting these bold targets is important, but bold targets alone are insufficient.
The legislature also finds that pricing carbon emissions via a tax on fossil fuels has emerged as a broadly supported, economically efficient, and effective policy tool to reduce emissions. Economists and leaders from across the political spectrum, including Nobel prize-winning economists, four former chairs of the United States Federal Reserve, and fifteen former chairs of the United States Council of Economic Advisers, have endorsed a carbon tax as a necessary, market-based solution to our climate challenge. Hawaii's own climate change mitigation and adaptation commission has endorsed the adoption of a carbon tax in Hawaii as "the most effective single action that will achieve Hawaii's ambitious and necessary emissions reduction goals".
The legislature further finds that, currently, the prices of electricity, gasoline, and other fuels do not accurately reflect the cost to society from the negative environmental and health impacts of burning fossil fuels. This market failure suppresses incentives for developing and deploying carbon-reducing measures, such as energy efficiency, renewable energy, and low-carbon fuels. It also discourages individuals from engaging in behavior and making choices that reduce fuel and energy consumption. Taxing fuels according to their carbon content will align the market with desired policy outcomes, from an individual's choice of vehicles, appliances, and housing to a business' choices of product design, capital investment, and facilities.
The legislature also finds that, if not designed correctly, a carbon tax could disproportionately impact low- to moderate-income residents. Therefore, it is necessary to consider ways to implement a carbon tax that offsets its regressive nature. A variety of mechanisms exist to reduce the regressive nature of a carbon tax, including increasing the amount of the state earned income tax credit and making the credit refundable; reducing existing taxes, particularly those that are disproportionately paid by lower income residents, such as the general excise tax; or providing a direct dividend to residents. In endorsing the adoption of a carbon tax, the Hawaii climate change mitigation and adaptation commission emphasized the need for the tax to be equitable and appropriate for the people of Hawaii and to successfully change behavior of industry and individuals in a way that meaningfully reduces carbon emissions.
Recognizing the urgent need for an accelerated transition away from fossil fuels, the legislature seeks to better understand if and how pricing carbon can accelerate Hawaii's cost-effective transformation to a one hundred per cent clean energy future, while ensuring that the transition is fair, equitable, and beneficial for all.
The purpose of this Act is to appropriate funds for a comprehensive study of a carbon tax to help policymakers better understand the opportunities, impacts, and options that a carbon price policy could bring to Hawaii.
SECTION 2. (a) The office of planning shall conduct a study, and may contract with a third party to assist in conducting the study, regarding the implementation of a statewide carbon tax; provided that the study shall include the following:
(1) An examination of carbon pricing and options for adopting a statewide carbon tax in Hawaii for the purposes of affecting market and consumer behavior to reduce carbon emissions and their negative impacts on the environment and on human health;
(2) A determination on what level the carbon price would need to be set at in order to bring about the desired outcomes as stated in paragraph (1);
(3) Revenue projections for a recommended carbon tax and the source of the projected revenues, such as amounts paid by the industry, residents generally, low-income residents, and tourists;
(4) The threshold at which a carbon tax would result in behavior change;
(5) Whether a carbon tax should be implemented through a graduated increase over time;
(6) Recommendations for how to implement a carbon tax in a manner that is equitable, particularly for low- to moderate-income families and individuals, including consideration of the impacts and implications of the following options, either used alone or in combination:
(A) Direct dividend to residents;
(B) Reduction of other regressive taxes, such as the general excise tax on food and basic necessities;
(C) Increasing the state earned income tax credit;
(D) Revenue reinvestment in programs that reduce carbon emissions, address climate adaptation needs, or other appropriate programs; or
(E) Any other viable options;
(7) Consideration of any comparative advantages or disadvantages of increasing or decreasing existing taxes either alone or in combination, such as the environmental response, energy, and food security tax under section 243-3.5, Hawaii Revised Statutes, the state fuel tax, or any other related tax, instead of implementing a new and separate carbon tax, or in combination with implementing a new carbon tax;
(8) Consideration of how to include air travel in a carbon tax;
(9) Examples of other jurisdictions within or outside the United States that have implemented a carbon tax and any lessons that Hawaii may learn from those examples; and
(10) Other criteria identified as necessary and relevant.
The office of planning shall engage with stakeholders, such as any relevant state agencies, including the department of taxation, business and industry groups, non-governmental organizations with an interest in energy and climate issues, non-governmental organizations with an interest in economic justice issues, researchers at the University of Hawaii, legislators, the Hawaii climate change mitigation and adaptation commission, and any other relevant parties, to develop the appropriate scope of the study.
(b) The office of planning shall submit an interim report to the legislature of its progress, findings, and recommendations, including any proposed legislation, no later than December 31, 2019, and status reports at the Hawaii climate change mitigation and adaptation commission's quarterly meetings, until a final report is submitted to the legislature. Feedback shall be solicited from the commission and any of its permitted interaction groups and working groups and incorporated into the study where appropriate, relevant, and within the scope of the report.
(c) The office of planning shall submit a final report to the legislature of its progress, findings, and recommendations, including any proposed legislation, no later than October 31, 2020.
SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2019-2020 and the same sum or so much thereof as may be necessary for fiscal year 2020-2021 for a study conducted by the office of planning relating to the implementation of a statewide carbon tax pursuant to this Act.
The sums appropriated shall be expended by the office of planning for the purposes of this Act.
SECTION 4. This Act shall take effect on July 1, 2100.
Office of Planning; Carbon Emissions; Carbon Price; Study; Appropriation
Appropriates funds to the Office of Planning to conduct a comprehensive study of a statewide carbon tax. Effective 7/1/2100. (SD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.