Committee advances aviation fuel tax credit aimed at spurring local SAF production

The House Committee on Energy and Environmental Protection on Feb. 19 moved forward HB1694 HD1, a bill establishing a tax credit for sustainable aviation fuel distribution in Hawaii. The credit starts at $1 per gallon and increases by set increments tied to emissions reductions, with a statutory cap of $20,000,000 per year and carryover provisions; the measure applies to taxable years beginning Dec. 31, 2026, and sunsets on Dec. 31, 2035.

Airline and industry witnesses said the credit would be paid to distributors and is intended to close the price gap between SAF and conventional jet fuel to spur local production. "The credit would go to the distributors and not to the airlines," Jacob Aki testified on behalf of Alaska and Hawaiian Airlines, and he said incentives are needed to attract production investment into the state.

Opponents questioned whether the program could generate meaningful local supply. Ted Metros said an initial credit might support roughly 13 million gallons and contrasted that with Hawaii’s approximately 600 million gallons of annual aviation fuel use, calling the measure a “bridge to nowhere” if it does not prioritize inter-island aviation and local feedstocks. Environmental and watchdog witnesses also raised concerns about double-dipping with other credits and about taxpayer subsidies for fuels used largely by nonresidents.

The committee adopted the Renewable Fuels Coalition’s suggested amendment prohibiting double-dipping between tax credits and passed HB1694 HD1 with amendments. Committee members noted concerns about the overall program impact and left implementation details to subsequent drafting and hearings.