Climate Regulation Uncertainty May Delay Hawaii Development Projects and Increase Costs

The recent repeal of federal scientific findings linking greenhouse gas emissions to human health endangerment effectively removes the legal foundation for numerous federal climate regulations. This action, announced by the Trump administration, significantly alters the national environmental policy landscape and introduces considerable long-term uncertainty for industries and development planning across Hawaii.

The Change

The core of this development is the rescission of the finding that greenhouse gas emissions contribute to air pollution which may reasonably be anticipated to endanger public health or welfare. This specific finding served as the scientific and legal bedrock upon which a suite of federal environmental regulations, including those addressing emissions standards, clean energy mandates, and climate resilience planning, were built. The immediate effect is the pruning of authority for federal agencies to enact or enforce such climate-related rules. While this may not result in immediate deregulation of all existing environmental standards, it removes the primary justification for future, more stringent regulations aimed at mitigating climate change and its impacts.

Who's Affected

This policy shift has broad implications for Hawaii's key economic sectors:

• Real Estate Owners: Developers and property owners face increased uncertainty regarding future building codes, environmental review processes, and infrastructure requirements. Projects relying on federal permits or funding, particularly those in vulnerable coastal areas or requiring significant environmental impact assessments, may experience delays as developers await clarity on state-level responses or adapt to a less predictable federal regulatory environment. Construction costs could rise if new standards, even at the state level, are introduced piecemeal without federal guidance.

• Agriculture & Food Producers: Predictable environmental policies are crucial for long-term agricultural planning. The repeal impacts potential future regulations concerning water usage, soil conservation tied to carbon sequestration, and land-use policies that might be influenced by climate adaptation strategies. Farmers and food producers should anticipate potential shifts in state-level agricultural support or land management directives as Hawaii seeks to maintain its sustainability commitments independently.

• Tourism Operators: Hawaii's tourism infrastructure, heavily reliant on coastal areas and natural resources, is particularly susceptible to climate change impacts like sea-level rise and extreme weather. While federal regulations are being dismantled, long-term resilience and sustainability will remain critical for the industry's viability. Operators should prepare for potential future investments in adaptation and consider how evolving state policies might affect tourism development and operations.

• Entrepreneurs & Startups: The innovation landscape for green technology, renewable energy, and climate adaptation solutions may be reshaped. Startups seeking to leverage federal incentives or navigate federal environmental compliance will find this pathway altered. Future funding access or market development might pivot more heavily towards state-level initiatives and private sector demand for sustainable solutions.

• Investors: Investors in Hawaii's real estate, agriculture, and energy sectors will need to re-evaluate climate-related risks and opportunities. Without a federal framework, the regulatory landscape for environmental compliance and climate adaptation finance could become more fragmented. This necessitates closer scrutiny of individual project-level risks and the evolving policy environment at the state and county levels.

Second-Order Effects

The removal of federal climate regulation anchors could trigger a cascade of effects within Hawaii's unique island economy. Without federal mandates driving emissions reductions, state and county governments may need to enact or strengthen their own environmental policies to meet climate goals and protect vulnerable infrastructure. This could lead to increased compliance costs for businesses as they adapt to potentially divergent or more stringent local regulations. For instance, stricter state emission standards for new construction or retrofits could increase development costs, potentially slowing down new real estate projects and impacting housing supply. This, in turn, could exacerbate labor shortages as the cost of living rises, affecting sectors like tourism and agriculture, which are already sensitive to wage pressures. Consequently, the competitiveness of Hawaii's tourism industry could be affected by higher operational and development costs, and local food producers might face challenges in adapting their practices without federal research and support, potentially increasing reliance on imports.

What to Do

Given the considerable uncertainty introduced by the repeal of federal climate regulations, businesses should adopt a proactive monitoring and strategic planning approach.

• Real Estate Owners & Developers: Monitor state and county environmental agencies for any new or revised permitting requirements, environmental impact study guidelines, or building code updates related to climate resilience and emissions. Engage with planning departments early for projects potentially impacted by future regulatory shifts.

• Agriculture & Food Producers: Track state Department of Agriculture and DLNR (Department of Land and Natural Resources) initiatives concerning water management, land use, and sustainable farming practices. Assess current operations for potential vulnerabilities to changing climate conditions and explore state or private grants for climate adaptation measures.

• Tourism Operators: Review long-term business continuity and infrastructure resilience plans. Stay informed about potential state-level policies encouraging sustainable tourism practices or requiring climate adaptation investments. Engage in industry associations to collectively address potential policy gaps.

• Entrepreneurs & Startups: Focus on developing solutions that align with potential state or private sector sustainability goals. Seek opportunities for partnerships with local government or established businesses championing environmental initiatives. Research state-specific grants or innovation programs focused on climate adaptation and resilience.

• Investors: Conduct enhanced due diligence on climate-related risks for all potential investments. Monitor the financial health and strategic direction of companies that are heavily reliant on or exposed to federal environmental policies and climate change impacts. Prioritize investments in companies demonstrating strong adaptive capacity and alignment with evolving state and local sustainability objectives.

Action Details: Monitor announcements from the Hawaiʻi State Department of Health, Department of Land and Natural Resources, and the Office of Planning and Sustainable Development for any new or revised environmental regulations or climate adaptation strategies. Additionally, observe the actions of federal agencies, such as the Environmental Protection Agency, for any indications of revised rulemaking or guidance that may still influence state-level policy, even in the absence of the original endangerment finding. Prepare for potential increases in compliance costs or the need for adaptive infrastructure investments over the next 12-24 months.