Climate Taxes Open Debate Regarding Tourism’s Environmental Cost

Hawaii’s landmark climate-linked tourism tax is reshaping how destinations fund environmental protection, sparking global debate and inspiring proposals in Mexico to redirect tourism revenue toward sustainability, ecosystem restoration and climate resilience.

In May 2025, Hawaii took an unprecedented step by enacting the first tourism tax in the United States explicitly linked to climate change. Act 96, also known as the green fee tax, adds an additional 0.75% to existing accommodation taxes, raising the total accommodations tax from 10.25% to 11%.

This new fee is expected to generate US$100 million annually to fund wildfire recovery, reef restoration and climate change adaptation. The measure came into effect on Jan. 1, 2026. Hawaii Governor Josh Green said the new law addresses the growing impact of the 10 million tourists who visit the islands each year and reflects a broader strategy to respond to the increasing frequency of natural disasters.

However, the initiative faced a setback shortly after the start of 2026. The Cruise Lines International Association challenged the fee in a lawsuit, arguing that the new law violates the US Constitution by taxing cruise ships for entering Hawaii’s ports. The group also argued that the measure would make cruises more expensive. The lawsuit notes that, on top of the 11% levy, the law authorizes counties to collect an additional 3% surcharge, bringing the total to 14% of prorated fares.

For now, the tax on cruises has been frozen while the court case continues. Sean Quinlan, House Majority Leader, said that those operating in Hawaii should share responsibility with the state for protecting the environment. “For the cruise lines to say, ‘None of this is our responsibility. We do not want to help out. And oh, by the way, we are taking you to court,’ is a tough pill to swallow,” Quinlan said.

A spokesperson from the Hawaii Attorney General’s Office said they remain confident that Act 96 is lawful and will be upheld when the expedited appeal is heard on the merits. Meanwhile, the tax remains in force for hotels and vacation rentals across Hawaii.

Despite these complications, the precedent set by Hawaii is inspiring other tourist destinations around the world to rethink how tourism revenue is collected and where it is directed. If successful, similar measures are expected to be implemented in popular locations such as the Caribbean, where environmental degradation threatens the region’s economic viability.

In Mexico, the Caribbean is one of the country’s most popular destinations, attracting both domestic and international tourists. At the close of the 2025 summer season, the State MInistry of Tourism (SEDETUR) reported revenue from the lodging tax exceeding MX$2.4 billion (US$135.7 million). 

At the same time, climate and ecological impacts have been evident for several years, with some of the most visible including land-use change, coral reef degradation, and the massive arrival of sargassum along the coasts.

In this context, the Alliance for Fiscal Justice (AJF) is proposing a reorientation of fiscal policy so that tourism contributes directly to protecting the destinations it visits. According to AJF, the lodging tax, with rates ranging from 2% to 6%, is applied nationwide. However, it does not include a defined environmental component.

The initiative proposes “greening” this tax by earmarking a portion of the revenue for sustainable tourism projects, conservation of natural areas and ecosystem restoration within the tourist zones themselves.

Currently, only some municipalities in Quintana Roo and Los Cabos charge an Environmental Sanitation Fee, which is approximately MX$76 pesos per night of accommodation. These resources are used for environmental cleanup and maintenance of the destination. The proposal seeks to expand this fee to other major tourist hubs such as Acapulco, Puerto Vallarta, Huatulco, San Miguel de Allende, and Mazatlan.

In addition to this proposal focused on mass tourism, there is also a plan to charge luxury tourism, specifically targeting the use of private jets and yachts. As reported by MBN, AJF proposes charging higher-net-worth visitors, whose carbon footprint is disproportionately large, a fair fee for the use of these modes of transport.

The alliance notes that Mexico ranks between second and third globally in private aircraft ownership, with close to 2,000 jets. A flight on these aircraft can generate up to 14 times more pollution per passenger than a commercial flight. The proposal is to implement an additional fee for private jets, applicable on high-demand routes such as Toluca, Monterrey, Guadalajara, Cancún and Los Cabos.

In the case of yachts, a mega-yacht can generate an annual carbon footprint equivalent to that of 1,400 people. However, anchoring costs in Mexico are among the lowest in the world. The initiative suggests aligning Mexican fees with international standards, particularly in luxury tourism ports such as Los Cabos or Cancún.

Although some private-sector stakeholders question the validity of these measures, fearing they could reduce visitor numbers and therefore tourism revenues, experts argue that sustainability should not be treated as an add-on, but rather integrated into the standard model of the tourism industry.

“It should not be a luxury or an additional layer of complexity. If sustainability is built in from the start, people will not have to consciously choose it;  it will simply be the obvious option,” said Christopher Imbsen, Vice President of Research and Sustainability, World Travel & Tourism Council.