On New Year’s Eve 2025, a federal appeals court delivered a major setback to Hawaii’s environmental funding efforts by issuing an emergency injunction against the state’s controversial 11% climate change tourist tax on cruise ship passengers. The tax, intended to generate $100 million annually for climate impact mitigation, was blocked pending further appeals. This ruling hands a significant victory to the cruise industry, which argued the levy was an unconstitutional port fee, and highlights the escalating tension between state environmental initiatives and federal commerce protections
Story Highlights
- A federal appeals court blocked Hawaii’s 11% climate change tax on cruise fares.
- The tax was intended to fund climate impact mitigation in Hawaii.
- The ruling underscores tensions between state environmental needs and federal commerce protections.
- The cruise industry hailed the decision as a protection against unconstitutional port fees.
Federal Court Blocks Controversial Climate Tax
On New Year’s Eve 2025, the 9th U.S. Circuit Court of Appeals issued an emergency injunction, halting the enforcement of Hawaii’s new 11% climate change tourist tax on cruise ship passengers. This tax, slated to begin on January 1, 2026, was aimed at funding initiatives to combat climate impacts like eroding shorelines and wildfires. Despite an earlier district court ruling upholding the tax, the appeals court’s decision blocks it pending further appeals.
The tax, introduced by Hawaii Governor Josh Green in May 2025 as part of Act 96, was projected to generate $100 million annually for climate resilience efforts. The legislation targeted cruise passengers, expanding the state’s transient accommodations tax to include this sector. However, the Cruise Lines International Association (CLIA) argued that the tax amounted to an unconstitutional port fee, conflicting with federal admiralty law and harming the $1 billion cruise industry in Hawaii.
Federal ruling blocks Hawaii’s climate change tourist tax on cruise shipshttps://t.co/MYvIeGNLG4 pic.twitter.com/7iusz5o1bj
— The Washington Times (@WashTimes) January 2, 2026
Industry Response and Legal Implications
The cruise industry, backed by the U.S. government, celebrated the ruling as a significant legal victory that protects constitutional rights. The U.S. government had intervened, labeling the tax an “extortionate scheme” that violates federal commerce laws. The decision delays the collection of the tax and preserves the economic impact of the cruise industry, which supports thousands of jobs in Hawaii.
Critics of the tax argue that it unfairly targets cruise passengers, while supporters claim it is essential for funding necessary climate resilience projects. The appeals process will continue, with the potential for the case to reach the Supreme Court. This ruling could set a precedent for state-level climate taxes and their conflict with federal commerce protections.
Broader Implications and Future Outlook
The ruling has broader implications for other coastal states considering similar eco-taxes on tourism. If upheld, it could limit states’ ability to impose taxes specifically aimed at funding climate change mitigation. This decision highlights the ongoing tension between state-level environmental initiatives and federal commerce regulations, emphasizing the need for balanced solutions that address both economic and environmental concerns.
The temporary block on the tax provides relief to cruise passengers and operators, avoiding immediate fare increases. However, it also delays much-needed funding for Hawaii’s climate initiatives. As the appeals process unfolds, stakeholders on both sides will closely monitor developments, anticipating potential impacts on tourism, state revenues, and environmental policy.
Watch the report: Hawaii’s Climate Change Tax on Cruise Passengers: What You Need to Know
Sources:
Federal Judge Upholds Hawaii’s New Climate Change Tax on Cruise Passengers
Federal Ruling Blocks Hawaii’s Climate Change Tourist Tax
Federal ruling blocks state’s climate change tax on cruise ships | Hawai’i Public Radio.
