Committee narrows renewable‑fuels tax credit to in‑state production and distribution, raises per‑taxpayer cap

Lawmakers amended HB1695 (HD2), a proposal to incentivize renewable fuels and sustainable aviation fuel (SAF), to require that production tax credits be claimed only for qualified renewable‑fuel production costs incurred within the state and for SAF distributed in Hawaii. The committee also raised the per‑taxpayer cap from $3.5 million to $7 million, removed multi‑year refundable features, limited the credit to 10 years, and set the effective date to taxable years beginning after Dec. 31, 2026.

The bill prompted contentious testimony. Critics warned that Hawaii lacks sufficient land and water to produce meaningful SAF domestically and argued the state would likely subsidize imported feedstocks—benefiting out‑of‑state agriculture—unless guardrails were adopted. Ted Metros and others cited low biofuel yields (one figure cited in testimony: 63 gallons per acre, translating to roughly 1.6 million gallons per year in some trials) and urged alternatives such as a clean‑fuel standard. Proponents including renewable‑fuels producers and the Hawaii Renewable Fuels Coalition said the credit would support industry growth, lower greenhouse‑gas emissions, and create local economic activity, and the committee inserted explicit language to restrict the credit to in‑state production and in‑state distribution.

Ending: Committee members voted to pass HB1695 with the amendments, emphasizing guardrails to prioritize local production and to limit the subsidy’s scope and duration. The measure advances with the committee’s changes for later review.