Clean Energy Schizophrenia

by Tom Yamachika, President, Tax Foundation Hawaii

This week, I wanted to give some additional context in depth to a commentary by new Civil Beat columnist Olin Lagon entitled “A Subsidy Is a Statement About Who Matters.” 

Our state does a lot of giving and taking when it comes to energy use.

We currently give tax credits for clean energy use and production.  I say “currently” because a bill enacted in this year's legislative session terminates the tax credit for renewable fuels production as of the beginning of 2029, and imposes significant new limits on the renewable energy technologies credit now before doing away with it as of the beginning of 2030.

We also have a program called Hawaii Energy.  That program provides rebates and other incentives for people who are getting rid of old energy-using appliances, from light bulbs to water heaters and air conditioning units, and are replacing them with newer light bulbs or other appliances that are demonstrably more efficient than the old ones.

The rebates in the Hawaii Energy program don’t come from taxes.  Rather, they come from a state-mandated fee, known as the Public Benefits Fund surcharge under HRS section 269-121, that is charged to all electric consumers.  This includes renters, except perhaps for the few renters whose rent includes utilities. 

Also on the taking side, we have special taxes that apply to energy consumption.  These include the fuel tax, which is applied to fuel for vehicles using the highways, and the barrel tax, which started off as a tax on imported petroleum but has since been expanded to include many different kinds of fossil fuels.

We then have a special registration fee surcharge, soon to be replaced with a road usage charge, for electric cars and other vehicles using the highways but don’t use fuel subject to the fuel tax.  Considered by itself, it looks like a penalty for using electric cars or alternative fuel vehicles.

With a new Legislature (well, mostly old but with a few fresh faces) coming in 2027, there are a few policy questions they might want to look at.  Mr. Lagon makes the point that contributions of renters (because they use electricity and are forced to pay in to the Public Benefits Fund) fund the rebates that are then made available to homeowners or property owners.  That sounds like a distribution of wealth away from the poor and to the rich(er).  But that impression isn’t quite right because the rebates reward the replacement of inefficient appliances, and the renters probably don’t own those appliances and so are in no position to effectuate the goal of pushing out old, inefficient appliances in favor of newer ones.

What we hope the Legislature will focus on is defining the vision for the future of our state, one that uses renewable energy or uses any energy efficiently perhaps, and then figuring out how we reach that vision.  Government generally provides infrastructure or services from which we all as a society derive benefits, and then distributes the cost of that infrastructure or services among those who derive the benefits, usually the taxpaying public.  The landscape of laws and regulations in which we find ourselves today is a mishmash of measures thrown together at different times to serve different needs.  When all the giving and taking is considered together, legitimate questions can be asked about who is benefiting and who is paying the price.  We then should be figuring out who matters, or what matters, and adjust our legal landscape accordingly.