New finance chief eyes carbon tax

MANILA, Philippines — Newly installed Finance Secretary Ralph Recto is pursuing the tax reform proposals of his predecessor, starting with the imposition of a carbon tax in a bid to generate additional revenues and address environmental concerns.

Recto has called for the study of carbon pricing instruments and the need to identify an optimal mix as he starts his work at the Department of Finance.

Such a measure is not new as former finance chief Benjamin Diokno proposed that carbon tax be one of the measures the Marcos administration may consider.

“Carbon pricing instruments serve as a powerful fiscal tool, allowing us to incorporate the social and external costs associated with carbon emissions,” Recto said.

The DOF is leading the technical working group on carbon pricing, together with other government agencies, multilateral banks and development partners.

Global efforts to slap taxes on carbon remain small. Many countries, including the Philippines, have yet to approve a carbon tax.

Specifically, Recto noted that the development of a carbon tax and emissions trading system (ETS) is crucial in achieving a low-carbon economy.

Recto said these efforts would incentivize both industries and individuals to actively reduce their carbon footprint, while allowing the government to mobilize financial resources to boost fiscal space.

“There is increased momentum in the establishment of carbon pricing systems in the Asia-Pacific region. This presents an opportunity for the Philippines to not only keep the pace, but to lead with determination,” Recto said.

“Identifying the optimal combination of pricing instruments for the country is crucial to ensuring the long-term success of carbon pricing toward achieving net-zero emissions,” he said.

In a report last year, the International Monetary Fund said the Philippines can initially impose a carbon tax of $20 per ton and eventually add $4 in the succeeding years.

The Asia-Pacific region is both highly exposed to climate risk and a major contributor to greenhouse gas emissions, considering that the region is home to the majority of the world’s population and has been the main driver of global growth for the past decades.

Further, Recto said there is a need to extend the focus beyond mere transformations within industrial sectors, emphasizing research and development for low-carbon technologies, and incentivizing behavioral change.