Here are answers to questions we’ve heard about Hawai‘i carbon pricing policy. This page will be updated as new questions are raised. Got a question that is not answered here? Contact us and we’ll get you the answers.

Is local carbon pricing progressive?

(Misconception: Carbon pricing is regressive.)

Answer: A carbon pricing policy with revenue returned to residents is progressive. Low-income households will benefit more than high-income households. Details on how this will impact Hawaii households can be found in this UHERO report to the State of Hawai‘i Tax Review Commission. Additional information on the impact of carbon pricing on U.S. households can be found in this CCL report.

What is the impact of carbon pricing on local businesses?

(Misconception: Carbon cashback will destroy local businesses.)

Answer: The UHERO report for the Tax Review Commission shows that the loss in Hawaii production can be less than 0.5% per year (see pg. 19 of 53 in this UHERO report). That is, if Hawaii’s production were $100 billion, imposing the carbon tax as what was proposed in HB2278 (carbon pricing bill in the 2022 Legislative session) would drop output by no more than $0.5 billion in a year. This drop would be nearly counterbalanced by the gain in household consumption from the return of the tax revenues.

Studies on the impact of carbon pricing on GDP indicate a null to modest impact.

“Policymakers often express concern about the impact of carbon taxes on employment or GDP. Using a new dataset on carbon tax rates, we estimate the macroeconomic impacts of these taxes on GDP and employment growth rates for various specifications and samples. Our point estimates suggest a zero to modest positive impact on GDP and total employment growth rates. More importantly, we find no robust evidence of a negative effect of the tax on employment or GDP growth. For the European experience at least, we find no support for the view that carbon taxes are job or growth killers.” Metcalf and Stock, Measuring the Macroeconomic Impact of Carbon Taxes (2020)

What studies have we done to understand the impact of carbon pricing on Hawaii’s residents?

(Misconception: We don’t know if carbon pricing will work in Hawaii or what its impact will be.)

Answer: The Hawaii State Legislature funded a carbon pricing study in 2019 to better understand the implications of this policy. It published its report in April 2021. Highlights from the report, courtesy of the Hawaii State Energy office:

• If carbon tax revenues are given back to households in equal shares, a carbon tax is progressive – meaning this revenue recycling approach generally benefits lower-income households more than higher-income households. ​

• Visitors would pay the carbon tax through the goods and services they purchase while in Hawaii, and these revenues would be directly transferred to Hawaii’s households if a dividend accompanies the carbon tax. ​

• The lower carbon tax scenario (set at the “social cost of carbon” (SCC) from the U.S. EPA, 2016) results in a 40% reduction of greenhouse gases (GHGs) from 2019 levels, with small impacts on the overall economy. Giving revenues back to households in equal shares makes households economically better off. ​

In August 2020, Citizens’ Climate Education (CCE) and Citizens’ Climate Lobby (CCL) released a working paper that projects how U.S. households will fare financially under the Energy Innovation and Carbon Dividend Act. 

Study Highlights:

• 61 percent of households and 68 percent of individuals in the U.S. end up receiving more than enough in monthly carbon dividends to offset their increased costs.  https://citizensclimatelobby.org/household-impact-study/

• In Hawaii, 74 percent of households get enough in dividends to exceed their increased costs, while 18 percent incur only a minor loss (less than 0.2 percent of income – e.g., for a $50,000 income, less than $100 per year). (Report)

What will the impact of carbon pricing be on local air pollution?

A carbon tax will reduce fossil fuel combustion in our transportation and electricity generation sectors. This will reduce help reduce particulate emissions which are a problem on Hawaii and Maui islands according to the American Lung Association.