Across Southeast Asia, the Philippines is still the only country without a net-zero target. This is despite the country being part of the Paris Agreement and having submitted its first carbon emissions target three years ago.
While it has an energy plan to boost the share of renewables to 35 per cent of its total energy mix by 2030, publicly listed companies are asked to submit sustainability reports, and local banks required to declare their energy investments, the Philippines has no formal mandate on what corporates should do to contribute to the nation’s decarbonisation pathway.
Now, a proposed law aimed at getting the private sector to participate in the national climate strategy is gaining ground. Called the low carbon economy bill, the planned legislation will require industry to set decarbonisation targets using an emissions trading system.
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Filipino experts of carbon trading, though generally supportive of the bill, have expressed concerns about the readiness of the government to implement the policy which will follow a “cap and trade scheme” based on the European Union Emissions Trading System (EU ETS).
Companies will be issued credits that allow them to continue to pollute up to a certain “cap” or limit that is periodically reduced. Under the system, companies can trade unneeded credits with each other. They can offset their excess emissions by investing in a decarbonisation activity, either in projects they will carry out themselves or in other certified carbon offset projects.
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There is a lack of manpower to do the monitoring, not just across local government units but in national agencies like the Climate Change Commission, because of the scale of inventory for the whole of Philippines.
Jefferson Chua, campaigner, Greenpeace
But the government does not have the capacity to enforce such a cap and trade scheme, said Greenpeace campaigner Jefferson Chua.
“The greenhouse gas monitoring system set up by local government units is not implemented very well,” said Chua. “There is a lack of manpower to do the monitoring, not just across local government units but in national agencies like the Climate Change Commission, because of the scale of inventory for the whole of Philippines.”
An unreliable greenhouse gas monitoring system means there will not be a sound basis for setting carbon prices, and could lead to misreporting from corporates, he cautioned. Chua is also a member of the technical working group meeting with lawmakers to craft the bill.
Greenhouse gas monitoring is done by local government units for services under their individual jurisdiction like agriculture, health, maintenance of public works and highways, social welfare and tourism.
The Climate Change Commission reports the country’s accounted carbon emissions as part of efforts to implement the country’s nationally determined contributions targetted to reduce harmful greenhouse gases by 75 per cent by 2030.
Chua cited previous experience working in the environmental services of the city government of Makati, the country’s financial hub, where he said there was always a gap among businesses when accounting for greenhouse gas emissions, like in the construction sector. Disagreements would usually arise when companies argue that certain Scope 3 or indirect emissions were not borne out of their business operations, he added.
“This is why there is a need for third party accreditors. One of the key reasons why carbon emissions need to be certified is because you cannot trade outside the Philippines if it’s not certified under such certification protocols,” he said.
A third party accreditor, a measure that is being dicussed by lawmakers, will also determine the carbon price for respective sectors.
Under the EU ETS, which the planned local carbon law is aligned with, polluters are obliged to pay for their greenhouse gas emissions, to help bring emissions down and generate revenues to finance the region’s green transition.
The carbon price, which will be computed by cost associated with removing one metric tonne of carbon dioxide from the atmosphere and the cost of preventive resilience measures, can be seen as too low or high, depending on the perspective of each sector, said John Leo Algo, national coordinator of Aksyon Klima Pilipinas, a nonprofit network of 40 civil society organisations like Greenpeace Philippines, WWF Philippines, and the Manila Observatory.
“For some businesses, they might think it is too high. Others might find it fair and scientific. For some in civil society, it might be too low, given the rising costs inflicted by climate change impacts,” said Algo, also a participant at the technical working group meetings.
Algo believed that should the bill be passed as law, paying for the carbon price would be only one of the ways to mobilise financing for the country’s green transition. The country can still secure financial support under the loss and damage fund, as well as from local disaster risk reduction management funds and climate change adaptation projects at the community level.
A shock to the farming sector?
The Philippines’ largest business organisation pushed back on the low carbon bill, warning of the harmful impact of overly stringent measures on the economy, particularly the food and agriculture sector.
The Philippine Chamber of Commerce and Industry (PCCI) said in a statement that the bill’s requirement for decarbonisation targets in agricultural inputs, food production, and supply chains will ultimately affect food production centres and threaten the country’s already fragile food security situation.
Globally, the largest source of anthropogenic methane emissions is agriculture, responsible for around one quarter of emissions, closely followed by the energy sector, which includes emissions from coal, oil, natural gas and biofuels, according to the International Energy Agency (IEA).
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Businesses that promote the message that decarbonisation is ultimately bad for the economy are indicating that they favour the same carbon-intensive development pathways that rich, industrialised countries took.
John Leo Algo, national coordinator, Aksyon Klima Pilipinas
Methane is a potent greenhouse gas and the primary component of natural gas and the leading cause of current global warming.
The PCCI is suggesting that if farmers produce more emissions than the cap given to them, then they will have to pay the carbon price, interpreted Chua, though he believed that the argument is an “excuse” to delay the bill.
“PCCI wants to cause a lot of noise to delay urgent accountability mechanisms relevant to the market. The reality is we cannot go distances if the market does not change,” he said.
Algo said the PCCI forgot to emphasise the costs of the climate crisis on agriculture, which likely outweigh the costs of decarbonisation on the sector.
He said: “Businesses that promote the message that decarbonisation is ultimately bad for the economy are indicating that they favour the same carbon-intensive development pathways that rich, industrialised countries took. These pathways caused the climate crisis, and all the losses and damages we had to endure.”
