What is a carbon tax and should Hawai‘i have one?
As the state Legislature’s new session is underway, one of the bills being considered is a state carbon tax. Hawai‘i is part of a larger group of a half-dozen or so more liberal legislatures across the country considering some form of a carbon tax, especially as the federal government fails to provide leadership on climate change.
The State Climate Commission, which includes six members of the Legislature, issued a report at the end of November, which recommended a carbon tax and indicating that it will be an important issue this session.
The basic idea behind a carbon tax is simple. Carbon dioxide is one of the main causes of climate change and is released into the atmosphere every time we burn oil, gas, coal and other fossil fuels. The carbon tax places a dollar value on one ton of carbon and then charges whoever is burning the fossil fuels to pay the tax.
This tax would make gasoline, electricity, airplane tickets and other activities that directly release carbon dioxide more expensive. The idea behind the tax is to use taxes as a way to financially incentivize environmentally responsible behavior, similar to the HI-5 bottle tax that gives money for recycling cans and bottles.
A carbon tax creates a greater incentive for consumers and businesses to switch to more efficient cars, appliances and generally reduce their energy consumption. It can make solar power more financially feasible. In addition, the funds generated can be used to mitigate the effects of climate change and develop environmentally friendly technologies.
For example, some of the money used could help pay for the estimated $19 billion in damages caused by global climate change in Hawai‘i by the year 2100, including things like relocating Kamehameha Hwy and building sea walls around Waikīkī when sea levels rise.
The concepts behind a carbon tax are beautifully simple and create the kinds of incentives that allow people to innovate to solve our climate crisis.
There is the political will in Hawai‘i to provide real solutions to the climate crisis but the challenge will be to create a bill that is fair and effective. As an earlier version from last year, House Bill 1991, illustrates, Hawai‘i legislators may be going about this the wrong way. Here are some potential pitfalls.
First, similar legislation in other states died in the details as different industries negotiated exceptions and legislators couldn’t agree on the best way to implement the tax.
In a small state like Hawai‘i, where industries and unions are often closely connected to politicians, these kinds of political negotiations can heavily undermine the effectiveness of a carbon tax bill. The bill needs to impact all industries equally and can’t favor some over others.
Second, carbon taxes can be regressive. This means that they disproportionately hurt poorer people who spend more of their paycheck on things like gas and electricity. The Yellow Vest riots in Paris recently show the problems with a regressive carbon tax.
A good bill will anticipate this and provide ways for most or all of the tax to go back to poor people to help them reduce their carbon use by providing incentives for solar power, more fuel efficient cars, solar hot water heaters and other ways to help poorer residents reduce their energy and gas bills and save money. Last year’s version of the carbon tax put 80 percent of the money back into the general fund, a proposal that would hurt those already struggling to make ends meet in Hawai‘i.
Third, the bill needs to realistically address cost of living concerns in Hawai‘i. A number of bills meant to incentivize environmentally good behavior have largely failed because the Legislature fails to actually understand the economic reality of the majority of Hawai‘i residents.
For example, a bill that provides a tax break to replace cesspools with septic systems has gone largely unused because even with the incentives, the cost of switching is prohibitive for a majority of homeowners.
While a carbon tax is needed and provides the right kind of economic incentives to reduce carbon dioxide emissions, the devil is in the details. The effectiveness of a carbon tax will depend on the ways it is designed and implemented to reduce our dependence on fossil fuels while protecting and supporting those already struggling to make ends meet in Hawai‘i.
By Christian Palmer, special to Ka ‘Ohana