Diokno champions PHL fiscal and economic policies to address climate change at COP28

DUBAI, UAE – Finance Secretary Benjamin E. Diokno has championed the Philippines’ fiscal and economic policies to address climate change in a fireside chat as part of the 2023 United Nations Climate Change Conference (COP28) events in Dubai on December 1, 2023.

Organized by the World Bank Group (WBG), the Session on Fiscal Policies to Address Climate Change discussed three key issues: explicit carbon pricing; fossil fuel subsidy reform as a critical form of implicit carbon pricing; and reducing fiscal risks as well as supporting climate adaptation.

Recognizing the need for large-scale climate-smart investments to accelerate the shift towards a low-carbon economy, Secretary Diokno shared with WBG Vice President for Equitable Growth, Finance, and Institutions (EFI) Global Practice Pablo Saavedra that the Philippine government has passed a series of game-changing reforms to attract sustainable investments into the country.

In 2022, the Philippines launched its Sustainable Finance Framework to support its sustainability commitments. The Framework sets out how the Philippines intends to raise Green, Social or Sustainability Bonds, Loans, and other debt instruments in the international capital markets.

Through the Inter-Agency Task Force on Sustainable Finance (ITSF) or “Green Force”, the Department of Finance (DOF) is building a sustainable finance ecosystem to synergize public and private sector investments.

In line with this, the Bangko Sentral ng Pilipinas (BSP) and other financial regulatory agencies are developing a principles-based Sustainable Finance Taxonomy Guidelines (SFTG).

The SFTG will serve as a tool to determine whether an economic activity is environmentally or socially sustainable. This directs private sector investments towards climate change adaptation and mitigation (CCAM) initiatives.

To reduce pollution, Secretary Diokno shared that the DOF is advocating for the passage of the excise tax on single-use plastics (SUP) bill, which imposes a PHP 100.00 per kilogram excise tax on SUPs with a four percent annual indexation beginning January 1, 2026.

Moreover, he said that the Philippine government seeks to rationalize tax on mining in order to capture the reasonable share of mining revenues without restricting mining investments.

“While the mining sector contributes to global emissions, the industry is also seen as critical in reducing the same as it is expected to supply the critical minerals needed for low carbon energy technology and the transition to a net-zero economy,” Secretary Diokno said.

“Now given that the Philippines is currently the largest exporter of nickel, and will become one of the largest producers of copper in the world, we are committed to implement the new mining fiscal regime by early next year,” he added.

The bill that seeks to enhance the Philippines’ mining fiscal regime has been approved by the House of Representatives on third reading on September 25, 2023 and is now pending in the Senate.

To pursue decarbonization, the Philippines is also studying the possibility of establishing an emission trading system (ETS) or carbon tax, to mitigate the impact of climate change.

According to initial studies, these can be effective measures to achieve the Philippines’ Nationally Determined Contribution (NDC) under the Paris Agreement.

To this end, the Philippines is considering proceeding with a technical assistance agreement with the WB and the United Nations office for project services on carbon pricing instruments.

Secretary Diokno also shared that the Philippines has been pursuing green activities and technologies under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, the Energy Efficiency and Conservation Act, the Renewable Energy Act, and the Philippine Green Jobs Act.

To ensure the country’s smooth transition from unsustainable practices, Secretary Diokno highlighted the government’s strategy of implementing targeted cash transfer programs to efficiently help vulnerable sectors.

The Finance Chief also noted that the DOF exercised careful judgment in its decision to retain fuel taxes amidst calls to suspend value-added tax (VAT) and excise taxes on fuel due to the sharp price increase in the second and third quarters of 2023.

Instead, the DOF proposed to provide more subsidies to vulnerable sectors such as the agriculture and transport sectors, among others.

According to Secretary Diokno, targeted subsidies are effective in ensuring that only the most vulnerable sectors receive assistance, thereby reducing unwarranted subsidies.

“These activities should not be seen as cost––they are investments. You save a lot by being proactive,” he said.

Earlier that day, Secretary Diokno attended the opening of the Philippine Pavilion––the first-ever national pavilion on climate where the country showcases its best practices, solutions, and actions in addressing the impacts of climate change.

Department of Environment and Natural Resources (DENR) Secretary Maria Antonia Yulo-Loyzaga and head of the Philippine delegation to COP28 gave her remarks during the event.

“The Pavilion manifests the Philippines’ commitment to climate action and to resilience. It was designed to convey our country’s contributions to local, national, and global climate challenges,” she said.

Special Assistant to the President (SAP) Secretary Antonio Lagdameo Jr. delivered President Ferdinand R. Marcos, Jr.’s message to COP28 expressing the Philippines’ intent to host the loss and damage fund and calling for its immediate operationalization to assist developing and vulnerable countries to respond to droughts, floods, and rising sea levels, exacerbated by climate change.

COP28 is the 28th annual climate meeting under the United Nations Framework Convention on Climate Change (UNFCCC). The Parties are composed of the countries that signed up to the original UN climate agreement in 1992.

The Philippine delegation will be in Dubai from December 1 to 12, 2023 for the COP 28 to champion the country’s climate needs and pave the way towards meeting the Philippines’ NDC target.