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Financing Hawaii’s Energy Independence on the Backs of Families

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By Lowell L. Kalapa

The proposal to increase the environmental response tax, that is the tax imposed on each barrel of petroleum products, continues to make its way through the legislative process.

While only the House is still talking about increasing the tax rate, both the Senate and the House or considering expanding the duties and responsibilities of the fund.

Why should taxpayers be concerned if at least one house has determined it does not want to increase the tax? Well, because both bills would expand the duties or programs that the fund would be asked to support. So while the tax may not be increased this year, if the responsibilities of the fund are expanded beyond what the fund was originally designed to underwrite, then you can bet your last tax dollar that public officials will return next year with even more justification to up the tax rate. In other words, lawmakers and taxpayers are being “set up” for the kill next year if the expanded duties are adopted this year.

Unfortunately, this strategy is true to form for the state in its drive for so-called energyself-sufficiency. The attitude is one of “damn the taxpayer/consumer” in the name of achieving this goal, which in this case appears to be achieving energy independence and the reduction of the emissions in Hawaii which contribute to global warming. This latter goal, curiously, has been added to the responsibilities of the environmental response fund. While it seems out of place for a program and fund that was designed to take care of oil spills on the ocean and the shores of our islands, it makes more sense when this proposal is mirrored against a recently issued report concerning energy strategies for the state.

In the Hawaii Energy Strategy 2000 report, the intent is to evaluate and recommend strategies to reduce greenhouse gas emissions in Hawaii that contribute to global warming. And while that sounds really nice, the study seems to ignore that there is no national strategy or plan to reduce greenhouse gas emissions. Again, true to form, it is the pimple on the backside of the globe trying to effect policy and strategy that in the whole scheme of things will have little or no impact.

Where there will be an impact is on the pocketbooks of every person in Hawaii. Under the recommended scenario: 1) 20% of new electricity generation capacity is to be from renewable energy systems such as wind, biomass, or geothermal sources; 2) use of 10% ethanol gasoline; and 3) the assumption that consumers would buy cars that are 10% more energy efficient. In addition, the strategy calls for support of efforts to increase aircraft and ground vehicle fuel efficiency. Efforts would also be directed at maximizing the use of renewable energy and demand side management in future electricity generation and use.

While this all sounds magnanimous, it does not come without a price. In this case, if these goals are accomplished, it will cost nearly $250 million (in 1992 dollars) in lost gross state product, nearly $650 million in lost household income, and the loss of nearly 5,000 full-time jobs.

That in itself is devastating, especially in today’s economy when jobs are already difficult to find. However, it is interesting that the study glossed over, if not ignored, the cost to consumers and producers. There is no doubt that if the preferred recommendation is adopted and implemented, the cost of energy will dramatically increase for island consumers and businesses. This in turn will result in higher prices for goods and services for both consumers as well as businesses. For the latter, this will mean that the cost of goods and services produced in Hawaii will be higher than those same goods and services produced in other jurisdictions. The long and short of it is that Hawaii produced goods and services will not be able to compete in the global marketplace.

As is already true, the higher cost of goods and services will fall differently on distinct socioeconomic groups. For example, the recommendation to increase dependence on renewable energy systems to supply electricity generation in the future will affect neighbor island families and business more than those on Oahu where the economies of scale will be able to spread the cost of such systems over more rate payers.

While we would all like to think that Hawaii should be more energy self-sufficient, we should ask at what cost and should Hawaii be at the forefront when there is no global, let alone national policy to reduce global warming? Bureaucrats and lawmakers seem to forget who pays the bills for their lofty goals. But then again, isn’t this the usual M.O. of government?

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