The Philippines requires approximately US$72 billion in investment to meet its climate goals under its nationally determined contribution (NDC) – funding to achieve its 2030 emissions-reduction targets – with half of that needed in the energy sector.
Signed by energy secretary Sharon Garin on 23 September, the circular sets out how carbon credits can be generated, verified, owned and traded by energy players.
The circular identified the activities that will be deemed eligible for carbon credits such as the early retirement of coal-fired power plants.
The South Luzon Thermal Energy Corporation (SLTEC) plant in Calaca, Batangas in the Philippines’ central Luzon region was one of the pilots selected by Singapore’s central bank to be retired and replaced with renewables using a new financing mechanism called “transition credits”. The credits are sold on the basis of helping to retire fossil fuel plants early and replacing them with renewable energy.
In August, the Philippines signed a memorandum of understanding with Singapore towards a legally binding implementation agreement for cross-border carbon credit trading.
Transition credits for early coal plant retirement, along with forests and ocean, are some of the sectors set to be tapped for carbon credits trading.
‘Fragmented rules’
But Jojo Josol, a nature-based solutions advocate, believes the new rules could “fragment” the Philippine carbon credit system since they are only for the energy sector, without any overarching cross-sectoral carbon framework.
The government should at least issue a general carbon market policy, setting general principles while allowing sector-specific rules through different agencies, said Josol who also heads the Philippine operations of Kennemer Eco Solutions, a Southeast Asia group developing high-integrity, community-rooted carbon credit projects restoring ecosystems and improving rural livelihoods.
“With the siloed framework, investors will flock to energy projects leaving an unbalanced demand for nature-based solutions, agriculture, blue carbon, among others. It will leave these sectors still in voluntary mode with low investor appetite and become under-funded,” Josol told Eco-Business.
John Leo Algo, national coordinator of Aksyon Klima Pilipinas, a nonprofit network of 40 civil society organisations, shares a similar view.
The approval of the carbon trading rules for the energy sector without a national carbon registry reflects the “uneven pace” across government agencies about being ready to set up the necessary legal and policy frameworks on market and non-market approaches, said Algo, who has also attended muti-stakeholder meetings held by the DOE to consult with civil society for the finalisation of carbon credit rules.
“The Philippine government must prove that their carbon credits policy is not yet another sign of the current administration seemingly favoring the interests of the private sector while mostly overlooking the needs of the Filipino public,” he added.
Status of carbon polciies in Southeast Asia, before the Philippines announced its carbon credit rules. Image: BloombergNEF
Southeast Asian neighbours such as Indonesia, Vietnam and Thailand all follow a national framework to regulate their carbon markets. Singapore introduced a carbon tax in 2019 and is active in carbon pricing mechanisms, focusing on compliance markets, and building cross-border links for carbon trading.
Malaysia is also preparing carbon policies expected to come into force by 2026 while Cambodia, Laos and Myanmar engage primarily in voluntary markets without full regulatory frameworks yet.
