The legislation imposes a carbon tax on fossil fuels, calculated per barrel for crude oil and per million British thermal units for coal and natural gas. The resulting increased prices on fossil fuels would reflect their unsubsidized true costs, which include negative externalities related to environmental degradation and public health. The bill also sets aside a substantial portion of the tax revenues to provide refundable tax credits to qualifying taxpayers, ensuring that the financial burden of the tax does not disproportionately affect lower-income households.
Senate Bill 2732 introduces a carbon tax in Hawaii aimed at reducing fossil fuel consumption and promoting environmental sustainability. The bill recognizes successful global practices for taxing fossil fuel producers and importers, which have contributed to significant decreases in greenhouse gas emissions. The legislation draws from a prior study by the University of Hawaii Economic Research Organization (UHERO) that concluded a carbon tax would benefit most households in Hawaii, particularly low-income families, by financially compensating them for any increased energy costs associated with the tax through a rebate program.
Although the bill is intended to create a progressive taxation model that alleviates financial strain for less affluent households, there are concerns that the carbon tax could still present challenges. Critics argue that rising fuel costs could impact overall living expenses, particularly in Hawaii where residents rely heavily on transportation and fuel for everyday activities. Additionally, the bill's effectiveness in achieving its environmental goals remains under scrutiny, with opponents calling for assurances that revenue collected will lead directly to tangible climate action rather than general revenue generation.