Philippines needs transition plan for coal assets, says DOF

MANILA, Philippines — The Philippines is still not ready to implement carbon tax until government works out a transition plan for coal assets to usher in more renewable energy (RE) investments and ensure power supply and cost requirements of the country are met.

There is a need for the country to balance its transition and power capacity needs amid the global push to cut carbon emissions and pursue clean energy, Department of Finance (DOF) Assistant Secretary Paola Alvarez said during the Energy Smart Forum organized by the European Chamber of Commerce of the Philippines (ECCP) on Tuesday.

“From our end, it is a balance so we cannot go ahead with the coal transition mechanism without securing investment towards RE. That is how we want to secure or guarantee that during the transition, our economic progress would still continue,” she said.

Last year, the Department of Energy (DOE) issued a moratorium on new coal plants as it recognized the need for the country to shift to a more flexible power supply mix.

“What we do not want is a scenario that you give a moratorium on coal but you do not provide policies or foundational policies to help the environment become conducive to investments. We want to leverage sustainable finance in the international calls in talks to Glasgow towards green finance,” Alvarez said.

On the coal transition, Alvarez said the DOF is working with the ADB to properly transition coal assets and, at the same time, “ usher in investments first in terms of RE in order for the DOE to be comfortable in terms of energy resources of the country.”

She said the DOF and the DOE have been studying on how to put carbon pricing instruments.

“However, given that they have concerns on the security of energy resources, we cannot put those in place as of the moment,” the DOF official said.

Last March, Energy Secretary Alfonso Cusi said the Philippines is not ready for carbon tax as this will make the country uncompetitive in terms of power rates. Moreover, the country is still building up capacity by developing indigenous resources to establish energy security.

In May, the World Bank said the imposition of a carbon tax in the Philippines would help the cash-strapped government secure additional revenue needed to recover from the pandemic and address long-term risks of climate change.

But the Washington-based multilateral financing institution also said a carbon tax may not always be the best and most preferred choice considering some cases like the Philippines where power rates are among the costliest in the region, thereby reducing the country’s overall competitiveness.

But carbon pricing or carbon tax is inevitable given the global transition away from coal, said Joseph Incalceterra, chief ASEAN economist at British banking giant HSBC.