Cruise Industry Gets Last-Minute Break From Hawaiʻi’s New Green Fee

Just hours before Hawaiʻi’s landmark “green fee” was set to kick in for the new year, federal appellate judges handed the cruise industry a major, last-minute win. The fee was designed to generate funding for environmental protection and climate resilience projects across the islands. But for now, cruise ships will not have to pay it while the legal fight continues.

The ruling doesn’t erase the green fee entirely. Instead, it pauses one of the most contested parts of the new law: requiring cruise ships that bring passengers into Hawaiʻi ports to contribute the same way other visitors do.

Cruise Ships Temporarily Exempt While Lawsuit Moves Forward

A panel of judges with the U.S. Ninth Circuit Court of Appeals agreed with the cruise industry’s request to block enforcement against cruise ships during the case. That means cruise operators will not have to pay the new fee while their lawsuit plays out. The decision also keeps cruise ships from having to pay other visitor taxes that hotels and vacation rentals already collect, at least for the moment.

As a result, the state is expected to lose about 10% of the projected revenue from what has been described as the nation’s first statewide green fee. If the cruise industry ultimately wins the case, that lost revenue would no longer be temporary. It would become a permanent reduction in funding.

Why the Lost Revenue Matters to Supporters

Supporters of the green fee say a 10% drop in revenue still hits hard because demand for funding is already far greater than the dollars available.

Jeff Mikulina, who chairs the volunteer Green Fee Advisory Council, said the need has been overwhelming from the start. He explained that in the first selection round alone, his group received 621 applications requesting roughly $2 billion in project funding. After reviewing and narrowing those requests, the council ended up recommending about $130 million in projects to Gov. Josh Green.

With cruise ship revenue now on hold, Mikulina said choosing which projects make the cut becomes even more difficult.

He also emphasized what he sees as the fairness problem at the center of the debate. The goal, he said, was to spread responsibility across the tourism economy. In his view, visitors come to enjoy Hawaiʻi’s natural beauty, so they should also help pay to protect it. Without cruise ship contributions, he worries more of the cost shifts back to other travelers, and potentially residents and taxpayers.

Cruise Lines International Association, the industry’s main trade group, did not respond to a request for comment. Gov. Green declined to comment through a spokesperson, citing the ongoing litigation.

How Hawaiʻi’s Green Fee Works

Hawaiʻi funds its new green fee through a 0.75% increase to the state’s existing transient accommodations tax. With that increase, short-term stays in Hawaiʻi now face an 11% state tax, plus an additional 3% charged by counties.

State officials expect the fee to bring in around $100 million per year. Mikulina noted that the $130 million in projects recommended by the advisory council covers roughly a year and several additional months of funding, based on how the program is structured.

The Big Legal Flashpoint: Act 96 and Cruise Ship Taxes

The law that created the fee, Act 96, did something new. For the first time, it required cruise ships that drop off passengers in Hawaiʻi to pay the full transient accommodations tax as well, including the portion that funds the green fee.

That provision immediately drew a lawsuit from the cruise industry, which filed suit in August. The industry argues that applying the tax to cruise ships violates the U.S. Constitution.

The U.S. Department of Justice later joined the case. Both the cruise industry and the DOJ asked the courts to stop Hawaiʻi from enforcing the tax against cruise ships until the legal dispute is fully resolved.

Judges Reverse an Earlier Decision Right Before the Law Took Effect

U.S. District Court Judge Jill Otake denied the request for an injunction on Dec. 23. But just before Act 96 took effect, Ninth Circuit judges Andrew Hurwitz and Daniel Bress reversed that decision and granted the injunction.

The appellate judges also pushed for a faster timeline, calling for the case to be expedited and heard as soon as possible.

In response, the state Attorney General’s Office said it remains confident Act 96 is legal and expects it to be upheld when the expedited appeal is decided on the merits.

What Happens Next for the Projects

Mikulina said the Green Fee Advisory Council has already delivered its recommendations to the governor. Gov. Green’s office is expected to release the project list in the coming weeks, and the Legislature will ultimately decide which projects receive funding.

However, the ongoing lawsuit could complicate those decisions because the total amount of money available may change depending on whether cruise ship revenue remains blocked.

Mikulina described many proposed projects as practical, preventative work that pays off over time. He pointed to examples like removing flammable grasses, restoring native forests, improving habitat, and reducing runoff. Those changes, he said, can help protect reefs and broader ecosystems.

At the heart of his argument is a simple idea: if someone comes to enjoy Hawaiʻi’s natural resources, they should help support what makes the islands special in the first place.

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This article was written by Hunter and edited with AI Assistance