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Senate passes bill to establish a carbon tax on fossil fuels

Measure would use a market-based approach to efficiently adjust

fossil fuel prices to include the social cost of carbon

Honolulu, Hawaiʻi – A bill to establish a tax on emissions of carbon dioxide as means to mitigate climate change passed third reading in the State Senate.

Senate Bill 3150 SD2 will now cross over to the House for consideration.

The overriding purpose of the bill is to assist in mitigating the severity of climate change by significantly reducing the carbon dioxide emissions that occur from combustion of fossil fuels. The committee report filed by Senator Donovan Dela Cruz, Ways and Means Committee Chair, states that “ … climate change is the most critical issue confronting the State. The overwhelming consensus of climate scientists … is that climate change is occurring primarily as a result of the combustion of fossil fuels. The Hawaii Climate Change Mitigation and Adaptation Commission has stated that the most effective single means of reducing greenhouse gas emissions is to ‘put a price on carbon.’”

The bill has two key components. First, it reconfigures the existing barrel tax to set taxes on each fossil fuel, based on the relative amount of carbon dioxide emissions that result from its combustion. Senator Karl Rhoads, who introduced the bill, observes that, “as drafted, the bill would set tax rates equivalent to a uniform tax of $40 per metric ton of carbon dioxide emissions from all fossil fuels. That tax rate would incrementally increase over the next decade to $80 per ton of CO2 emissions -- a level that many experts believe is needed to provide an adequate disincentive to further use of fossil fuels.”

And second, the senator notes that “the proposed carbon tax is intended to raise the prices of fossil fuels to reflect the estimated costs to the people of this State and elsewhere to be incurred from the adverse impacts of climate change. The specific tax rates will be determined in conference with the House of Representatives.

The carbon tax bill received initial approval by the Senate Committees for Agriculture and Environment and Energy, Economic Development, and Tourism at a joint hearing on Wednesday, February 12, 2020. In approving the bill, the committees added an amendment that would establish a tax credit to help alleviate the economic impact of the tax on lower income segments of Hawaii’s population.

Senator Mike Gabbard, Chair of the Agriculture and Environment Committee, explained that “while increasing the price on fossil fuel usage is the most effective way to reduce carbon emissions and to mitigate the impacts of climate change, we recognize the disproportionately greater impacts of such a tax on Hawaii residents with lower incomes. The refundable tax credit added by the amendment to Senate Bill 3150 is a means of reducing the economic impact of the carbon tax on our citizens who are less able to afford it.”

The actions of the State of Hawaii alone will not prevent disaster. But if responsible action is taken now by the state, other states that are considering a carbon tax – and there are many – may be encouraged to enact such taxes as well.

If enough states do so, the collective impact of those actions can largely compensate for the continued inaction of the federal government.

The need for action now is compelling. Last year marked both the highest quantity of carbon dioxide emissions by humankind and the highest carbon dioxide concentration in the atmosphere in history. Every year, that effective action to reduce fossil fuel emission is another year delayed in which even more carbon dioxide accumulates in our atmosphere, further exacerbating the adverse impacts of climate change.


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