Could the low-carbon economy bill re-write the Philippines’ future?

House Bill 7705, the low carbon economy bill, could help the climate-vulnerable nation seize the economic opportunities that come with decarbonisation.

Burgos solar and wind farm
A solar and wind farm in Burgos, Ilocos Norte, Philippines. The Philippines ranks 4th among developing economies for renewable energy progress, according to BloombergNEF. Image: Energy Development Corporation

Recently, I was made privy to the draft text of House Bill 7705, or the Philippines’ Low Carbon Economy bill. As someone who has been following the intersection of climate change, society, and business, reading the draft felt like dialling in to the future with its myriad of possibilities.

Pictures of an entire society transformed played in my mind - Filipino families not sweating in the heat - and the high cost of electricity - as their homes are plugged in to solar panels. Streets lined with native tree species in a biophilic business and manufacturing district that help absorb urban heat.

Consumers living a low-carbon lifestyle, walking or cycling to work, taking public transport and only when necessary, driving their personal electric vehicles manufactured and powered using clean energy. The working class employed in exciting and meaningful green jobs.

Ahead of the bill becoming law, we are already seeing signs of a low-carbon transformation happening in the Philippines. Having regulations in place will accelerate this transformation and unlock opportunities for business and society. HB 7705 presents us with a chance to rewrite our future.

Here are three ways.

From victim to empowered actor

HB 7705 changes the narrative of the Philippines from a victim to an empowered actor in the climate discourse.

Climate change is exacting a heavy toll on Filipinos’ lives and livelihoods although the Philippines contributed very little to its cause. Demanding historical responsibility especially for losses and damages is justified. 

This bill will give us the chance to go beyond demanding climate justice and instead put our own skin in the game.

Beyond this, the Philippines is uniquely placed to lead the world in advancing climate action especially as it addresses the growing emissions from its own backyard. The country currently ranks 37th out of 200 nations surveyed for national GHG emissions, higher than Ukraine and Qatar, both oil-producing states. 

As one of the fastest-growing developing countries, the Philippines’ energy demand is also expected to rise in the next decades. This demand is currently met, mainly by fossil fuels accounting for 78 per cent of power generation in 2022. Under business-as-usual scenarios, emissions from the energy sector is projected to quadruple by 2030, and twice the growth in emissions is expected from the transport sector. We are likely to miss out on the national target of meeting our energy demands with up to 35 per cent renewables by 2030.

2020 Total GHG Emission Contribution By Country

The Philippines ranked 37th out of 200 countries surveyed for total GHG emissions contribution, higher than Ukraine and Qatar. Source: Emissions Database for Global Atmospheric Research

HB 7705, which proposes transitioning to a low-carbon economy by capping emissions from critical sectors, including energy, waste, agriculture, and transportation, will enable the Philippines to grow its economy while meeting its contribution to solving its own and humankind’s biggest challenge - climate change.

This bill will give us the chance to go beyond demanding climate justice and instead put our own skin in the game.

By embracing a low-carbon transformation, we can become part of the solution to the climate crisis and seize the economic opportunities it presents.

From fossil fuels dependence to a clean energy future

HB 7705 calls for an appreciation of the role of the State to protect and advance the Filipinos’ right to a stable climate and a balanced and healthful ecology.

To achieve this, the bill proposes pathways for industries to decarbonise their value chains through an emissions trading system and the introduction of a carbon price mechanism. 

The bill proposes to set caps and allowances among critical industries, with any excess or unused allowance to be traded based on said carbon price. The bill has yet to determine the price per tonne of carbon. In this situation, however, low-carbon emitting companies stand to gain from the trade.

There are a few possible pathways to implement the ETS. One of which proposes setting an internal carbon pricing where the government can allow companies to reinvest the money they should have paid on emissions above their allowance, into their own low-carbon investments, instead of having to purchase carbon credits to offset this excess.

Note that the current draft of the bill suggests imposing the carbon tax as a last resort. While a direct carbon tax, where the government levies a tax per tonne of direct emissions, may promise higher decarbonisation outcomes, the debate on the draft of the bill lies on whether this could result in costs being passed on to consumers, and also how the revenue from this carbon tax should be allocated. 

In any case, having a carbon pricing and emissions trading mechanism in place creates market opportunities for the lower emitting industries, and this is an incentive in the decarbonisation journey.

But with decarbonisation being incentivised, the question is whether the Philippine economy can decouple its growth from fossil fuels dependence.

From climate disaster to climate opportunity

The answer is yes. A study by Climate Analytics shows that it is feasible for the Philippines to phase out coal-fired power by 2035, and almost all gas-fired plants by 2040. This transition will create more than a million green jobs by 2050.

The Philippines has enough cost-effective renewable sources to both replace fossil fuels in its energy mix and meet future energy demands. The country’s renewable energy potential, currently estimated at around 1,200 gigawatts, will be generated mainly from solar rooftop, solar farms, and onshore and offshore wind energy. 

The Philippines power sector aligned with a 1.5C emissions pathway

The Philippine Energy Plan 2023 will not meet the Paris Agreement goals. Source: ClimateAnalytics

The study shows a clear route for Philippines’ power sector to attain a pathway compatible with the 1.5C temperature threshold. This without having to retrofit existing coal plants for so-called “cleaner” coal, or purchase expensive and unproven carbon capture technology, or even build nuclear capacity.

With more renewables being developed and deployed, the levelised cost of electricitity (LCOE) decreases by 12 per cent between 2019 and 2030, and is projected to return to 2019 levels only by 2050. 

Batteries and storage capacity also play a critical role in determining the overall LCOE in a 1.5C pathway for the Philippines. Thus, attracting foreign investments through government subsidies or sustainability financing sources is imperative, making the Philippines’ energy transition more attractive to foreign investments, the study says. 

BloombergNEF’s latest ClimateScope report ranked the Philippines fourth among 110 developing economies with the highest progress for clean energy investment. The report also showed that global funding for renewable energy reached a record US$560 billion in 2022, and concluded that the share of zero-carbon electricity has now reached 46 per cent of global installed power capacity, up from 33 per cent in 2012. 

BloombergNEF Report on Developing Economies RE progress

The Philippines ranked 4th among 110 developing economies surveyed for renewable energy progress. Source: BloombergNEF 2023 Climatescope report.

 A compelling case for decarbonisation 

In conclusion, the Philippines presents a compelling case for decarbonisation. With abundant sources of renewable energy, a climate fight that we cannot stand to lose, and the biggest opportunity of a lifetime from which we stand to gain, decarbonisation becomes an economic imperative. What’s left is for us to have the policy push to strengthen the ambition to a low-carbon future, attract and incentivise investment, and protect our biodiversity. 

HB 7705 might be our one chance to unlock a future of opportunities in a sustainable, low-carbon society where businesses, people, and nature co-exist in a restored balance. 

Ping Manongdo is the country director for Philippines and associate director for partnerships at Eco-Business. 


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