In a dramatic New Year's Eve ruling, Hawaii's innovative climate change tax on cruise ship passengers has been temporarily halted, leaving state officials and tourism industry leaders in suspense.

The federal appeals court issued an injunction that prevents Hawaii from implementing its groundbreaking 11% tax on cruise ship passenger fares, a law designed to generate nearly $100 million annually to combat climate-related environmental challenges.

Signed by Governor Josh Green in May, the legislation aimed to fund critical efforts addressing eroding shorelines, wildfire mitigation, and other climate adaptation strategies. The law would have imposed an additional 3% county surcharge, bringing the total potential tax rate to 14% of prorated passenger fares.

Cruise Lines International Association challenged the tax through a legal lawsuit, arguing that the levy violates constitutional principles and would significantly increase cruise vacation costs. U.S. District Judge Jill A. Otake initially upheld the law, but the 9th U.S. Circuit Court of Appeals granted an injunction pending further appeal.

Toni Schwartz, spokesperson for the Hawaii attorney general's office, remained optimistic, stating, "We remain confident that Act 96 is lawful and will be vindicated when the appeal is heard on the merits." The legal challenge specifically targets the cruise ship provisions of the innovative tax legislation.

The temporary halt means the tax will not go into effect as originally planned in 2026, leaving both the cruise industry and Hawaii's climate adaptation efforts in a state of uncertainty. The U.S. government has also intervened in the case, adding another layer of complexity to the ongoing legal battle.

As this unprecedented climate funding strategy awaits its day in court, it represents a critical test of how states might creatively finance environmental protection in an era of increasing climate challenges.