3 challenges face Philippines in sustainability goal

MANILA, Philippines — The Philippines needs to address three main challenges to unlock its potential to become a sustainability leader in Southeast Asia, Massachusetts-based global management consultancy Bain & Co. said.

In its report in ‘Southeast Asia’s Green Economy: Opportunities on the road to Net Zero,’ Bain & Co. cited opportunities in the country’s solar energy infrastructure and wind energy space.

Bain & Co. said over 35 percent of the $30 billion renewables market by 2030 would be accounted for by solar power.

“There is opportunity for investors to build out accompanying infrastructure, such as an electric grid to cope with fluctuating production and photovoltaic recycling plants for end-of-life PV waste management to smoothen the transition,” it said.

For wind, the Philippines has 160 gigawatts (GW) of potential in offshore areas within 200 kilometers of its shores – one of only eight global emerging markets.

“Unlike other such economies, it does not have technological transfer limitations. Global proven wind technologies can readily be adapted for the Philippines,” Bain & Co. said.

Moreover, the country’s green businesses are rising to prominence in investment space.

“The share of green investments that the Philippines has increased across all asset categories. Private equity/venture capital activity and corporate investments have grown, although overall infrastructural spending has slowed in 2020, potentially due to the pandemic,” the consultancy firm said.

But to transition into a green economy, the country needs to address three challenges, which include its heavy reliance on fossil fuels as an energy source, Bain & Co.’s Global Sustainability Innovation Center partner and co-director Dale Hardcastle said in an e-mail response.

“To become a sustainability leader, the Philippines needs to make a concerted effort to transition to cleaner sources of energy by making fossil fuels cleaner, e.g., with carbon capture, utilization and storage,” he said.

The country’s energy sector currently accounts for 59 percent of its total emissions and 88 percent of its energy is currently from fossil fuels.

“Installed capacities of renewable energy today is insufficient to replace the energy from fossil fuels; solar and wind power combined only comprise one percent of the Philippines’ total needs as of 2019. If the business-as-usual approach is taken, the Asian Development Bank projects that the Philippines will have the highest share of coal in the power mix (50 percent) in the region in 2030,” Hardcastle said.

The Philippines also needs to balance socioeconomic development and needs along with the climate transition to become the region’s sustainability leader.

“The transition to a green economy must be done with affected communities in mind. Though the renewables sector has the potential to drive significant job potential (350,000 by 2030), workers of today’s fossil fuels industries (e.g., 27,000 working in coal sector today) will need support measures like job training, upskilling, and temporary wage supplements for them to be employable by the green economy,” Hardcastle said.

“More must also be done for wage parity between the fossil fuel and renewable energy industries. For example, today, coal handling field operators earn 70 percent more than their counterparts in solar, although the coal premium is smaller (six percent) for engineers,” he said.

So far, the Philippine government is already making a good start in this aspect with the Green Jobs Act, which supports and incentivizes companies to upskill and train their employees, Hardcastle said.

Finally, the country needs to secure significant amount of capital required to finance the green transition.

Hardcastle said the Philippines would need at least $120 billion of investments in renewable energy from 2020 to 2040 to achieve the Clean Energy Scenario since this cannot be addressed by the public sector alone, especially given the strain on government budgets from COVID-19.

This could be done through public-private partnerships (PPPs) such as blended financing schemes or take-out facilities, which can help to align different stakeholder incentives and to de-risk investments.

Hardcastle said this could include ADB’s Catalytic Green Finance Facility, which supports Southeast Asia governments to finance sustainable infrastructure.

“Beyond PPP, working with multilateral development banks and development finance institutes like the International Finance Corporation can also facilitate cross-border funding and accelerate the Philippines’ transition,” he said.