HB1999

SECTION 1. The legislature finds that natural climate solutions--or actions to protect, sustainably manage, and restore natural and modified ecosystems in ways that address climate change--are crucial interventions that help governments and companies achieve their net-zero carbon emissions ambitions. Blue carbon ecosystem projects, which include the restoration of marine mangroves, seagrasses, and tidal marshes, have attracted particular attention as natural climate solutions for their ability to sequester and store carbon at densities that far exceed other ecosystems. Although there is substantial interest in blue carbon credits derived from these blue carbon ecosystem projects, particularly from companies and individuals who wish to use the credits to offset greenhouse gas emissions that they cannot otherwise reduce, the demand from stakeholders is significantly outstripping the available supply. Therefore, consistent sources of funds must be identified and engaged to support and create additional robust and verifiable long-term blue carbon ecosystem projects.

Generally, funding sources for blue carbon ecosystem projects can be split into three categories: (1) the private sector, which includes individuals, corporations, and impact investors; (2) the public sector, which includes states and the federal government; and (3) philanthropic, which includes nonprofit organizations and nongovernmental organizations. To increase the blue carbon credit supply, the physical, social, and financial constraints to project delivery for each of the three funding sources must be identified. For example, constraints that each funding source must consider include the higher cost of project implementations in blue carbon ecosystems compared to terrestrial habitats, a shorter blue carbon project track record compared to other natural climate solutions, and the effects of broader governance decisions on blue carbon credit market stability. Failing to address these types of constraints can cause blue carbon ecosystem projects to be viewed as less viable, riskier investments.

Like other coastal ecosystem management interventions, overcoming or adapting to these varied constraints will ultimately require a transdisciplinary approach. Ultimately, a portfolio of private sector, public sector, and philanthropic financial instruments will be needed to generate funding streams that are substantial and reliable enough to realize the true potential of blue carbon ecosystems as a natural climate solution.

Accordingly, the purpose of this Act is to require the department of agriculture to conduct a market analysis study to:

(1) Identify the optimum mix of private sector, public sector, and philanthropic funding sources and mechanisms needed to support blue carbon ecosystem projects in the State and Pacific region; and

(2) Make an appropriation to fund the study.

SECTION 2. (a) The department of agriculture shall conduct a market analysis study to determine the optimum mix of private sector, public sector, and philanthropic funding sources and mechanisms needed to increase the viability and success of blue carbon projects in the State and Pacific region in a socially-just manner, to reduce risk to investors and the risk of greenwashing, and to ultimately encompass the true value of coastal ecosystems beyond their carbon benefits.

(b) The study shall:

(1) Gauge the interest in establishing blue carbon ecosystem projects within the State and Pacific region;

(2) Identify existing private sector, public sector, and philanthropic blue carbon funding sources and mechanisms that are currently available in the market;

(3) Characterize the optimum mix of private sector, public sector, and philanthropic funding sources and mechanisms needed to support long-term blue carbon ecosystem projects in the State and Pacific region;

(4) Identify favorable policies and governance support structures necessary for blue carbon ecosystem project success;

(5) Identify the physical, social, and financial constraints to private sector, public sector, and philanthropic blue carbon funding sources and mechanisms that can hamper blue carbon ecosystem project delivery in the State and Pacific region; and

(6) Consider any relevant factors that the department of agriculture deems appropriate.

(c) The department shall submit a report of its findings and recommendations, including any proposed legislation, relating to the market analysis study to the legislature no later than twenty days prior to the convening of the regular session of 2025.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $300,000 or so much thereof as may be necessary for fiscal year 2024-2025 for the department of agriculture to conduct a market analysis study in accordance with this Act.

The sum appropriated shall be expended by the department of agriculture for the purposes of this Act.

SECTION 4. This Act shall take effect on July 1, 2024.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1999
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII