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Finance dep’t studying feasibility of carbon tax

The Philippines has committed to reduce its greenhouse gas emissions by 75% by 2030. — PHILIPPINE STAR / MICHAEL VARCAS

By Luisa Maria Jacinta C. Jocson, Reporter

THE FINANCE department is still looking into the feasibility of implementing a carbon tax in the country.

“We’re still studying the feasibility (of the tax). Unlikely that it will become a bill within the year,” Finance Undersecretary Maria Cielo D. Magno said in a text message.

The Finance department earlier said it is considering a carbon tax to encourage businesses that emit carbon dioxide to shift to sustainable practices. The country currently does not have any explicit form of carbon pricing.

A carbon pricing scheme in the Philippines could raise up to $7 billion in revenues by 2030, according to an earlier study by the International Monetary Fund (IMF).

Albay Rep. and House Ways and Means Committee Chair Jose Maria Clemente S. Salceda said that the legislature is waiting for the government’s carbon pricing proposal.

“We will take up any carbon tax proposal that comes from the Department of Finance (DoF). So far, there is not yet an official administration version. So, we will wait for that, and our timeline will depend on that,” he said in a Viber message.

The DoF previously said that the carbon tax is one of its priority measures. Revenues raised from carbon taxes are typically used to fund programs that mitigate greenhouse gases and boost sustainability.

A tax on carbon emissions was included in the fiscal consolidation plan proposed by then-Finance Secretary Carlos G. Dominguez III last year. It was part of package 3, which was to be implemented in 2025.

Mr. Salceda said the Philippines “disproportionately suffers” from the impact of carbon emissions, especially from other countries.

“If anything, more advanced countries and major polluters should pay a carbon tax and compensate countries like us for the damage,” he said.

However, Mr. Salceda said the government should prioritize renewable energy instead of a carbon tax.

“We emit around 1.32 tons of carbon per capita versus 4.4 tons per capita worldwide, so I would say an energy transition to renewables is more urgent for the Philippines than a direct carbon tax,” he said.

“The closest we have to carbon taxes is fuel excise taxes and to some degree, automobile excise taxes and the road users’ tax. I support updating the MVRUT (motor vehicle road user’s tax) and fixing our automobile tax system,” he added.

More than half or 52.4% of greenhouse gas emissions in the Philippines are subjected to a positive Net Effective Carbon Rate in 2021, unchanged since 2018, according to the Organisation for Economic Co-operation and Development. In 2021, fuel excise taxes covered 52.4% of emissions.

Analysts said a carbon tax would not just raise revenues but also promote environmental sustainability.

“Carbon taxes are a vital tool to address carbon emissions and also raise revenue that should be plowed back to environmental and climate investments,” Antonio Gabriel M. La Viña, a lawyer, educator and environmental expert, said in a text message.

Ateneo de Manila University Economics Professor Leonardo A. Lanzona said in an e-mail that carbon taxes would also address the problem of climate change and promote green jobs.

Mr. La Viña said the carbon tax should be designed “not to be regressive” and should not be passed to consumers.

“It must be based on the polluters pay principle and consistent with principles of climate justice and a just transition,” he added.

Mr. Lanzona said the government should also ensure revenues will be used to make the shift to sustainable practices easier.

“All of these benefits will not be achieved unless the government uses the tax revenues to create an environment that will make it easier for firms and industries to shift to more environmentally friendly alternatives,” he said.

Mr. Lanzona cited training and education programs for workers to develop skills in green industries, incentivizing energy efficiency industries such as electric vehicle manufacturing, and increasing public investments in renewable energy sectors like solar and wind power.

“Unless the necessary logistics and policies are in place, the tax can be a source of inflation as the tax can be transferred to the consumers in the form of higher commodity prices,” he added.

The Philippines has committed to reduce its greenhouse gas emissions by 75% by 2030.