Reduced Highway Taxes for Alternative Fuels

June 08, 2004


Hawaii's state legislature declared that "there is a need to remove unnecessary disincentives to the use of alternative fuels, by adjusting transportation fuel tax rates to reflect energy content of alternative fuels, and to provide an incentive to the use of these fuels by providing reduced tax rates for several years." Act 143 (HB1345, Relating to Energy Content of Fuels) was signed on May 24, 2001. It encourages the use of alternative fuels by adjusting the fuel tax to reflect the energy content of alternative fuels and reducing the fuel tax rate of alternative fuels for several years. The legislature defined "alternative fuels" as "methanol, denatured ethanol, and other alcohols; mixtures containing eighty-five per cent or more by volume of methanol, denatured ethanol, and other alcohols with gasoline or other fuels; natural gas; liquefied petroleum gas; hydrogen; coal-derived liquid fuels; biodiesel; mixtures containing twenty per cent or more by volume of biodiesel with diesel or other fuels; fuels (other than alcohol) derived from biological materials; and any other fuel that is substantially not a petroleum product and that the governor determines would yield substantial energy security benefits or substantial environmental benefits." Prior to Act 143, most alternative fuels were taxed at a higher effective rate than conventional fuels such as gasoline or diesel. Highway fuel taxes were assessed at the same rate per gallon of fuel, regardless of the energy content of the fuel. Because alternative fuels have less energy per gallon, the effective tax rates were higher for alternative fuels. Call the Hawaii Department of Taxation for more information.

Program Overview

Implementing Sector: State
Category: Financial Incentive
State: Hawaii
Incentive Type: Sales Tax Incentive
Web Site:
Administrator: Hawaii Department of Taxation
Start Date: 1/1/02
Eligible Renewable/Other Technologies:
Incentive Amount: Varies depending on fuel type
Maximum Incentive: Varies depending on fuel type


Name: HRS § 243-1; § 243-4; § 243-5
Date Enacted: 5/24/01
Effective Date: 1/1/02


Name: Information Specialist
Organization: Hawaii Department of Taxation
Address: P.O. Box 259
Honolulu HI 96809
Phone: (808) 587-4242

This information is sourced from DSIRE; the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. Established in 1995, DSIRE is operated by the N.C. Clean Energy Technology Center at N.C. State University.