Hawaii’s effort to reshape its tourism model through a new climate-focused visitor tax has hit a legal roadblock, but the policy debate behind it reflects a much broader struggle facing island destinations worldwide: how to curb overtourism, protect fragile environments, and attract higher-spending, lower-impact visitors.
The so-called “Green Fee,” enacted as Act 96, was signed into law by Governor Josh Green in 2025. The legislation increases Hawaii’s Transient Accommodations Tax (TAT) on hotels and short-term rentals and, for the first time in the United States, extends a similar tax to cruise ship passengers, treating cruise cabins as temporary accommodations while ships are docked in Hawaiian ports.
State officials estimate the measure could raise around $100 million annually, earmarked for climate resilience, environmental protection, and infrastructure projects such as shoreline preservation, wildfire mitigation, and ecosystem restoration.
A Legal Pause, Not a Policy Retreat
Last week, a federal appeals court temporarily blocked the cruise-related portion of the tax, siding with cruise industry groups that argue the levy violates constitutional and maritime commerce protections. The hotel and vacation-rental tax increases, however, remain in effect.
Hawaii officials say they remain confident the law will ultimately withstand legal scrutiny, framing the Green Fee as a necessary response to climate pressures that threaten both residents and the long-term viability of tourism.
Overtourism at the Core of the Debate
Hawaii’s move is rooted in years of tension between tourism growth and local capacity. With tourism accounting for roughly a quarter of the state’s economy, visitor numbers have rebounded strongly since the pandemic—but so have concerns over overcrowding, infrastructure strain, housing shortages, and damage to fragile ecosystems.
Wildfires, beach erosion, coral reef stress, and water scarcity have sharpened the sense of urgency. Policymakers argue that traditional funding sources are insufficient to meet rising climate adaptation costs, and that visitors—who benefit directly from Hawaii’s natural assets—should share more of the financial responsibility.
Targeting “Value Over Volume”
While the Green Fee is not explicitly a visitor-segmentation policy, its structure aligns with a growing strategy among global destinations: shifting from high-volume, low-yield tourism to fewer, higher-spending visitors.
Tourism economists note that modest tax increases tend to have limited impact on affluent, long-haul travelers, who are less price-sensitive and often more receptive to sustainability-linked fees. By contrast, cruise tourism—often associated with lower per-capita onshore spending—has long been criticized for its environmental footprint and infrastructure demands.
By aligning cruise visitors with land-based accommodation taxes, Hawaii aims to level the playing field and internalize costs that were previously absorbed by local communities.
A Global Precedent in the Making
Hawaii’s Green Fee is being closely watched by destinations worldwide grappling with similar challenges, from Venice and Barcelona to the Galápagos and Bali. If upheld, it could become a template for climate-linked tourism taxation in other environmentally sensitive regions.
For now, the court injunction has delayed one part of the plan. But the broader question remains unresolved: how destinations dependent on tourism can fund resilience, protect communities, and redefine success—not by how many visitors arrive, but by how responsibly they travel.
