Hawaii HB 1695: RELATING TO RENEWABLE FUEL.

Bill Text

HOUSE OF REPRESENTATIVES
THIRTY-THIRD LEGISLATURE, 2026 H .B. N
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO RENEWABLE FUEL.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
1 SECTION 1. The legislature finds that, because of the
2 recent Navahine F. v. Hawai’i Department of Transportation CIV.
3 NO. 1CCV—24—0000631 (Hawai’i Cir. Ct.) settlement, there is a
4 clear need for the State to take meaningful and coordinated
5 action to reduce its greenhouse gas emissions, particularly
6 within the transportation sector. The settlement underscores
7 the State’s constitutional responsibility to ensure a
8 life—sustaining climate for current and future generations. It
9 also calls for the development and implementation of a
10 comprehensive energy security and waste reduction plan to guide
11 decarbonization efforts over the next twenty years, including
12 the adoption of sustainable aviation fuel as a key strategy.
13 The legislature further finds that the transportation
14 sector is the single largest contributor to greenhouse gas
15 emissions in Hawaii, accounting for forty-eight per cent of
16 statewide emissions, well above the national average. Within
17 that sector, aviation plays a critical role, supporting
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1 commerce, tourism, and essential interisland travel, and
2 contributes significantly to overall emissions. Hawaii consumes
3 approximately seventeen million barrels, or seven hundred
4 fourteen million gallons of jet fuel annually. Transitioning
5 this system away from fossil fuels is essential to achieving the
6 State’s climate goals. Even producing a modest portion of that
7 fuel locally, using renewable feedstocks, can yield outsized
8 benefits, stimulating local agriculture, creating economic
9 opportunities, reducing emissions, and building energy
10 resilience. Rather than continuing to grow the State’s annual
11 fossil fuel demand by small increments each year, Hawaii has the
12 opportunity to stop that trajectory and instead take a bold,
13 measurable step toward emissions reduction and local
14 sustainability in a single year.
15 The legislature recognizes that renewable fuel used for
16 sustainable aviation fuel (SAF) offers a near-term and scalable
17 solution to decarbonize aviation without requiring changes to
18 aircraft or infrastructure. However, SAF remains several times
19 more expensive than conventional fuels. Without targeted policy
20 support, including financial incentives, local SAF production
21 and adoption will remain cost-prohibitive. Other states have
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1 enacted policy tools and tax credits to bridge this gap. The
2 State must act similarly to remain competitive, meet its legal
3 obligations, and seize the economic opportunities offered by
4 renewable fuel production.
5 Updating the renewable fuels production tax credit to
6 increase incentives is a critical component of this effort.
7 Revising this tax credit will support local production of SAF
8 and other renewable fuels, enabling investment in energy
9 infrastructure, job creation, and economic development. These
10 fuels benefit a broad spectrum of the State’s residents, from
11 households that rely on propane for cooking to patients who
12 depend on affordable interisland flights for medical care,
13 ensuring that climate action is equitable and far-reaching.
14 The legislature believes that an updated renewable fuels
15 production tax credit also encourages agricultural innovation by
16 supporting energy crops that serve as regenerative cover crops,
17 helping to restore soil health while complementing food
18 production and requiring minimal water. These crops offer
19 farmers an additional source of revenue and generate byproducts
20 that can be used as feed for local livestock and aquaculture,
21 reinforcing both food and energy resilience. Importantly, this
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1 transition creates new jobs in agriculture, a sector that will
2 play a vital role in the State’s renewable fuels future and
3 long-term sustainability. Moreover, local renewable fuel
4 production supports skilled employment, allowing Hawaii’s
5 refinery workforce to adapt and thrive in a clean energy
6 economy. These jobs offer long-term, high-value career pathways
7 for residents and contribute to workforce development aligned
8 with the State’s decarbonization goals.
9 Accordingly, the purpose of this Act is to fulfill the
10 State’s climate commitments by expanding the renewable fuels
11 production tax credit.
12 SECTION 2. Section 235—110.32, Hawaii Revised Statutes, is
13 amended as follows:
14 1. By amending subsection (a) to read:
15 “(a) Each year during the credit period, there shall be
16 allowed to each taxpayer subject to the taxes imposed by this
17 chapter a renewable fuels production tax credit that shall be
18 applied to the taxpayer’s net income tax liability, if any,
19 imposed by this chapter for the tax