The Philippines faces significant challenges in reducing carbon emissions, particularly from high-emission sectors like electricity, transport, and industry. In 2023, the country introduced the Low Carbon Economy Investment Act, which establishes a framework to help businesses reduce greenhouse gas (GHG) emissions through mandatory decarbonization plans, a carbon pricing mechanism, and access to carbon markets. This Act emphasizes the importance of encouraging businesses to develop long-term strategies aligned with global climate goals, such as the Paris Agreement. Companies that exceed their emissions limits must contribute to a Decarbonisation Fund, while those who go beyond their targets can earn carbon credits for trade in national and international markets.

In the Philippines, electricity and heat production are the largest sources of CO2 emissions, followed by transport. The transport sector alone emits over 29 million tons of CO2 annually, while aviation and shipping add more than 2 million tons. Reducing emissions in these sectors will be crucial for the Philippines to meet its climate targets. Fuel-efficient technologies, like Aderco 2055G, offer practical solutions by improving fuel consumption and reducing emissions by 5.26%. If applied in the transport and shipping sectors, this technology could reduce emissions by over 1.6 million tons of CO2 annually.

The Low Carbon Economy Act of 2022, introduced in the House of Representatives, is a crucial legislative step toward reducing the Philippines’ greenhouse gas (GHG) emissions. It establishes an emission trading system, aiming to promote sustainable development while addressing the nation’s environmental responsibilities under international agreements like the Paris Agreement. This bill aligns with the country’s Nationally Determined Contribution (NDC) targets, which are designed to reduce GHG emissions by 75% from 2020 to 2030.

Key aspects of the bill include:

– Cap and Trade System: A national cap is set on GHG emissions for high-emission sectors. Companies that emit less than their allowed amount can sell their unused emission credits to others who exceed the cap. This creates a carbon market, providing financial incentives for companies to reduce their emissions.

– Monitoring and Reporting: The Climate Change Commission (CCC) will oversee the management of emissions and ensure compliance with targets. Several government departments will work together to track and report emissions data.

– Just Transition: The bill emphasizes the need to ensure that workers in carbon-intensive industries are supported during the transition to greener alternatives, safeguarding jobs while moving toward sustainable development.

– Local Government and Private Sector Involvement: Local governments, educational institutions, and private industries are key players in implementing the bill, helping to ensure that climate change measures are effective at all levels of society.

Carbon Markets: A Global Perspective

A carbon market is a system where countries or businesses can buy and sell carbon credits. Each credit represents the right to emit a certain amount of carbon dioxide or other GHGs. The concept is based on setting an overall emissions limit (cap) and allowing trading of credits, incentivizing companies to stay under their cap. If they emit less than allowed, they can sell the extra credits, and if they exceed the cap, they must buy credits.

Many countries have adopted carbon trading systems:

European Union: The EU Emissions Trading System (ETS), established in 2005, is the world’s largest carbon market. It covers major sectors like power generation and heavy industry. The EU has seen significant reductions in emissions since its inception.

China: In 2021, China launched its national carbon market, the world’s largest by volume, covering over 2,000 power plants. This market is a central part of China’s goal to achieve carbon neutrality by 2060.

United States: While there is no federal carbon market, states like California and regions like the Northeastern US (through the Regional Greenhouse Gas Initiative) have implemented cap-and-trade systems. These programs have effectively reduced emissions in these areas.

How the Bill Aligns with the Philippines’ Carbon Reduction Goals

The Philippines is committed to reducing its carbon footprint in line with its NDC. However, the country faces unique challenges, including vulnerability to climate-related disasters and its status as a developing economy. The bill’s introduction represents a significant step toward achieving these targets, by creating a market-driven approach that balances economic growth with environmental protection.

The bill builds on existing climate change programs like the National Climate Change Action Plan and emphasizes the importance of cross-sector collaboration. The goal is to ensure that industries can transition to greener practices without negatively impacting their productivity or workers’ livelihoods.

The Philippines’ Progress Compared to Global Efforts

While the Philippines has been slower to implement carbon trading systems compared to the EU and China, the Low Carbon Economy Act signals the country’s readiness to adopt more ambitious climate measures. Its cap-and-trade mechanism mirrors the systems seen in more developed markets, but it is tailored to the local context, ensuring that the Philippines’ socio-economic realities are considered.

The bill positions the Philippines as a proactive player in the global effort to mitigate climate change, especially in the ASEAN region, where few countries have implemented similar mechanisms. If successfully implemented, it could serve as a model for other developing nations looking to balance economic growth with environmental sustainability

Expanded Overview of CO2 Emissions in the Philippines

The Philippines, while not one of the world’s largest carbon emitters, faces considerable challenges in reducing its carbon footprint, especially as its economy continues to develop. The country’s emissions are largely driven by high-emission sectors such as electricity generation, transportation, and industry, all of which are critical for economic growth but also major contributors to environmental degradation.

According to Our World in Data, here is a sectoral breakdown of CO2 emissions in the Philippines:

Sectoral Challenges and the Road to Decarbonization

The electricity and heat production sector is the largest emitter, accounting for over 73 million tons of CO2 annually. This is due to the Philippines’ reliance on coal and fossil fuels for energy generation, despite growing investments in renewable energy. The transport sector, which includes cars, buses, and trucks, contributes over 29 million tons annually, and aviation and shipping add another 2 million tons. The rapid urbanization and the demand for more transportation options will continue to put pressure on these sectors unless alternative fuels and technologies are adopted.

Other significant contributors are agriculture, which produces over 61 million tons of CO2 due to methane emissions from livestock and rice paddies, and industry, contributing more than 20 million tons through manufacturing processes that often depend on fossil fuels.

How the Low Carbon Economy Investment Act of 2023 Can Help ?

The Low Carbon Economy Investment Act of 2023 is a response to these environmental challenges, establishing a comprehensive framework to reduce greenhouse gas emissions across the Philippine economy. This Act pushes businesses to develop decarbonization plans, introduces a carbon pricing mechanism, and encourages the use of carbon markets to provide financial incentives for reducing emissions.

Focusing on High-Impact Sectors: Energy and Heat

The energy and heat sectors are responsible for the largest share of CO2 emissions in the Philippines, producing over 73 million tons annually. As the country strives to meet its emissions reduction targets, transforming these sectors is critical. Several innovative technologies and fuel alternatives present viable solutions to transition from coal and fossil fuels to cleaner energy sources. However these technologies were usually more expensives and more complex to deploy. This bill would actually give a chance for these to implemented at scale in the country.

Replacing Coal with Biomass Pellets

One of the most promising alternatives to coal is the use of biomass pellets. These are renewable fuel sources made from organic materials like wood and agricultural waste. Biomass pellets not only have lower carbon emissions than coal but also offer a renewable and locally sourced solution. Shifting from coal to pellets in the Philippines’ power plants could significantly reduce emissions while maintaining energy production levels.

Reducing Oil Consumption with Gasifier Technology

Gasification offers another opportunity to reduce the dependency on oil. Gasifier systems convert solid biomass into a gas that can be used to generate electricity or heat. These systems can be integrated with existing industrial processes or rural energy production, providing a cleaner alternative to oil-based energy solutions. When paired with technologies like Aderco fuel additives, the overall efficiency of fuel consumption increases, further reducing carbon emissions.

Mini-Hydro Potential: Turbulent’s Role

Turbulent, a Belgium-based company, is developing mini-hydro projects in the Philippines, harnessing the power of small rivers and streams to generate clean energy. These small-scale hydropower solutions are ideal for rural and off-grid areas, contributing to the country’s renewable energy portfolio and reducing reliance on fossil fuels.

Increasing Biofuel Standards

The Philippines is also advancing biofuel standards. The blend of biodiesel has already increased from B2 to B3 this year, with plans to reach B5 by 2026. Similarly, the country’s ethanol blend for gasoline is projected to increase from E10 to E15. These initiatives reduce the use of traditional fossil fuels, cutting emissions and promoting local agriculture through biofuel production.

Waste-to-Energy Technologies

Waste-to-energy (WTE) technologies offer a dual solution by addressing both waste management and energy production. These systems convert municipal solid waste into electricity, reducing landfill use and providing a renewable energy source. As cities in the Philippines continue to grow, WTE projects could play a significant role in generating clean energy from urban waste.

Bio-Methane from Organic Waste

Bio-methane production from organic waste or manure presents another opportunity for sustainable energy. This process not only produces biogas for electricity and heating but also creates organic fertilizer as a by-product, supporting sustainable agriculture. By capturing methane, a potent greenhouse gas, and converting it into energy, the Philippines can further reduce its carbon footprint.

Focusing on High-Impact Sectors: Transport and Shipping

The transport and shipping sectors are two of the largest CO2 contributors in the Philippines, emitting over 31 million tons annually. Reducing emissions in these sectors will be critical if the country is to meet its climate targets.

Potential Solutions for Decarbonizing Transport:

One promising solution is the adoption of fuel treatments such as Aderco 2055G, a vegetal-organic additive that enhances fuel efficiency. For instance, Aderco 2055G has shown a 5.26% reduction in fuel consumption, which directly correlates to lower CO2 emissions (simulator).

By applying this reduction rate to the transport sector, which currently emits 29.21 million tons of CO2 annually, the potential reduction in emissions would be approximately 1.54 million tons. Similarly, in the shipping sector, which emits 2.04 million tons, a 5.26% reduction translates to 107,304 tons less CO2.

Total CO2 reduction potential from these sectors: Over 1.6 million tons annually.

These reductions may seem small compared to total national emissions, but they represent a vital step forward, especially when combined with other initiatives, such as the electrification of public transport or the adoption of hybrid and electric vehicles.

Flexibility in the Act: Encouraging Innovation

The Low Carbon Economy Investment Act promotes innovation by giving businesses the flexibility to decide how to meet their emissions targets. Whether through investing in fuel-efficient technologies like Aderco or participating in collaborative projects with industry peers, businesses can tailor their strategies to fit their unique needs and resources.

This flexibility ensures that companies can reduce their carbon footprint without hindering economic growth, making the Act both environmentally and business-friendly.

Carbon Credits: Financial Incentives for Emission Reductions

In addition to environmental benefits, companies that reduce emissions beyond their targets can earn carbon credits, which can be sold in global markets, providing a financial incentive for sustainable practices.

For example, a company in the transport sector that adopts Aderco’s fuel treatment could not only reduce emissions but also generate carbon credits from the reduction, which could be sold or traded, providing additional revenue streams.

Steps Toward a Sustainable Future

To maximize the benefits of the Low Carbon Economy Investment Act, businesses in the Philippines should:

Develop comprehensive decarbonization plans that align with their operations and future growth.

Invest in fuel-efficient technologies to reduce fuel consumption and emissions.

Leverage carbon credits to create new financial opportunities by exceeding emissions reduction targets.

Collaborate with industry partners to fund larger low-carbon initiatives, such as renewable energy or carbon capture projects.

Conclusion: A Sustainable Path for the Philippines

The Low Carbon Economy Investment Act is a transformative opportunity for the Philippines to align its development with global climate goals. By focusing on high-emission sectors like energy, heat, transport and shipping, and embracing flexible, innovative solutions such as fuel treatments and carbon trading, the country can significantly reduce its carbon footprint.

If businesses act now, they can lead the way toward a greener, more sustainable future while also reaping financial rewards from their efforts. With the right combination of technology, collaboration, and regulatory support, the Philippines has the potential to become a leader in the global transition to a low-carbon economy.

This press release has also been published on VRITIMES