Hawaii’s closely watched “Green Fee,” a new levy on hotels, short-term rentals, and cruise tourism, encountered a legal setback only hours before it was scheduled to take effect. The measure, the first of its kind aimed at visitors to help offset the state’s environmental costs, was partially delayed by a late intervention from the U.S. Court of Appeals for the Ninth Circuit.
On December 31st, two appellate judges granted a last-minute injunction sought by Cruise Lines International Association/CLIA, the trade body representing the cruise industry, which is challenging the legality of the tax. The request had earlier been denied by a lower court, which found that the cruise industry had not demonstrated a sufficient likelihood of success in its case against the State of Hawaii.
That lower court ruling had cleared the way for an 11% tax to be applied to cruise passenger fares beginning January 1st. Enacted in May 2025, the law extended the state’s environmental fee to cruise vessels for the first time, applying it on a per-day basis for time spent in Hawaiian waters, whether alongside or at sea. The statute also authorized counties to add an additional surcharge of up to 3%, potentially raising the total daily assessment on cruise passengers to 14%.
While the appellate court allowed the broader law to proceed, including higher green fees on hotels and short-term rentals from the start of the year, it suspended enforcement of the charge on cruise passengers pending resolution of the legal challenge.
State officials have indicated that the additional revenue could reach approximately US$100 million annually, earmarked for climate-related mitigation and adaptation projects. These include coastal protection measures such as beach nourishment, as well as responses to rising sea levels, erosion, and wildfire risks. The administration has pointed to recent disasters, including the 2023 Lahaina fire and subsequent wildfires on the Big Island and near Hilo, as evidence of mounting environmental pressures.
The cruise industry maintains that the tax oversteps constitutional limits on state authority over interstate commerce and navigable waters. Its position is that only Congress may impose charges related to entry into a state’s waterways, particularly when those charges are not tied to port services or specific benefits provided to vessels. The industry has also warned that the added costs could materially increase cruise fares, affecting affordability, and has objected to provisions requiring cruise lines to promote the program and educate passengers about it. The lower court acknowledged uncertainty in how constitutional principles apply in this context but concluded that the industry had not met the threshold required for preliminary relief. The substantive merits of the case remain to be heard.
Hawaii’s initiative sits within a broader pattern of destinations seeking to manage environmental impacts and visitor volumes linked to cruise tourism. Juneau, Alaska, has agreed to daily limits on cruise calls and passenger numbers, while Bar Harbor, Maine, has restricted access for larger vessels, and Key West, Florida, has imposed its own limits on large cruise ships. The cruise sector, for its part, argues that it has invested heavily in environmental improvements and contends that commercial shipping contributes more significantly to pollution and port-area impacts than passenger cruising.