Current Policy Projections
Neither implemented nor planned policies are sufficient to achieve the Philippines’ NDC target. Emissions growth will be predominantly driven by increased energy consumption from transport and buildings. Current policy projections indicate a rapid and ongoing increase in greenhouse gas emissions which is inconsistent with meeting the country’s NDC and the goals of the Paris Agreement.
Emissions under current policies (excluding LULUCF) were expected to increase to about 271 MtCO2e/year in 2030 before the pandemic. Due to the impact on emissions caused by COVID-19 current policies are expected to reach between 244 and 257 MtCO2e/year in 2030. If the Philippines fully implements its targets, including the coal moratorium, total GHG emissions in 2030 could decrease to between 166 and 241 MtCO2e/year (see “Post-COVID planned policy projections” in the graph). In other words, the implementation of planned policies could put the Philippines’ emissions in a downwards trajectory.
The combination of COVID-19’s impact and the coal moratorium would curb the Philippines’ emissions and bring the country much closer to its NDC target. The moratorium (see more under ‘Energy supply'), announced by Energy Secretary Alfonso Cusi on October 27, puts 8-10 GW of coal power plants into question (Ahmed & Brown, 2020; Climate Home News, 2020). This measure alone could result in emission reductions in the order of 60 MtCO2e in 2030 in comparison to our current policy scenario. These emissions reductions were quantified using independent projections that do not necessarily reflect the government plans regarding the uptake of renewable sources (Ahmed & Brown, 2020). This scenario should be understood as the maximum emissions reductions under the moratorium policy.
As of November 2020, the Philippines government has approved important initiatives and programmes to mitigate the impacts of the pandemic and support the economic recovery:
- ARISE (Accelerated Recovery and Investments Stimulus for the Economy of the Philippines) is an economic stimulus package amounting to PHL 1.3 trillion (USD 26 billion). The package aims to extend the government’s short-term rescue measures, specifically the support for small enterprises and employment protection. Even though some of the budget is expected to fund the ‘build, build, build’ infrastructure programme, the target sectors are healthcare, education and security – no budget from this package has been directly allocated to a green recovery.
- CREATE (Corporate Recovery and Tax Incentives for Enterprises) aims to reduce the income tax rate by 5% to industries that support the goal of reducing reliance on carbon-based energy. The government aims to attract investments on renewable energy infrastructure projects as well as related research and development (de Vera, 2020).
In 2017, the Philippines published its AmBisyon Natin 2040 (Our Ambition 2040) which is a strategic development document providing a compilation of the population collective long-term goals (NEDA, 2017a). The Department of Energy has since strengthened its policy to support this vision, including the full electrification target by 2022 (in comparison to 95% in 2018 (Asian and Pacific Energy Forum, 2020), the improvement of the power supply reliability through a shift to renewable energy, and the promotion of energy efficient use (Ahmed & Brown, 2020; APERC, 2019).
President Duterte recognised the need to “fast-track the development of renewable energy sources and to reduce dependence on traditional energy sources such as coal.” Such goals, in combination with energy efficiency measures to reduce energy demand, would finally put the Philippines on a path towards decarbonisation of the energy system (CCC, 2019).
Security of energy supply is a key issue for the Philippines, with the country experiencing a number of power outages in 2019. Approximately half of the country’s total primary energy supply depends on coal and oil imports (Department of Energy, 2020a). Coal-fired installed capacity, that supplied in 2019 around 48% of the country’s electricity, has not been able to cope with peak demand (Rivera, 2019).
The system has been under stress due to the effects of El Niño, which causes warmer weather, and thus increased electricity demand for air conditioning, and a longer dry season, which in turn lowers hydropower supply (Rivas, 2019b, 2019a). Power outages happened again in 2020 due to the drop in demand caused by the pandemic (Ahmed, 2020a). In addition to the climate imperative to decarbonise, the vulnerability of the system highlights the need to think of restructuring the current system (Ahmed, 2020a; Vemuri et al., 2018).
However, recent plans to expand the role of gas in the system do not contribute to the country’s energy independence. The Philippines has given the green light for the construction of terminals to import liquefied natural gas (LNG) (Endo, 2020; Plante et al., 2020). While natural gas would result in less emissions than coal and contribute to flexible electricity, it would again make the Philippine energy mix dependent on endogenous fossil fuels and risk locking in large-scale fossil fuel infrastructure that can become a barrier to moving to zero emissions power (Ahmed, 2020a).
Long-term plans to increase renewables can help address these challenges by decentralising and diversifying the Philippines’ power mix (Ahmed & Logarta, 2017; Bertheau et al., 2019; Domingo, 2019; Vemuri & Bohn, 2018). These measures can enhance the system reliability, and reduce emissions, while supporting the achievement of the country’s 100% electrification by 2022 target, (Cervantes, 2019; Vemuri et al., 2018). If the Philippines couples low carbon development with its energy efficiency goals, it can ensure a more robust power supply for its population.
The Philippines’ electricity mix is projected to remain dependent on coal, but recent developments demonstrate a political shift. The recent coal moratorium puts up to 10 GW of coal power plants into question (Ahmed & Brown, 2020; EndCoal, 2020a). The CAT estimates that, under current policies not including the moratorium, coal will represent up to 62% of the total electricity generation in 2030. Under the moratorium, the coal share in electricity supply could be reduced to 16% - if combined with measures to support renewables (Ahmed & Brown, 2020).
The moratorium on new coal is a major development in the Philippines. Energy Secretary Alfonso Cusi announced, during the Singapore International Energy Week on October 27, that the Philippines will no longer endorse new coal-fired power plants (Department of Energy, 2020b). In other words, new projects will not receive permits from the Department of Energy (Ahmed & Brown, 2020).
The moratorium is a result of the periodic review of the Philippines energy planning (Department of Energy, 2020b). The use of coal has led to inflexible power supply and contributed to the national trade deficit. These problems have become more evident during the pandemic, which triggered a significant drop in demand (Ahmed, 2020b). Additionally, the government has recognised the role renewables can play on energy independence and job creation (Ahmed, 2020a; Ahmed & Brown, 2020; Department of Energy, 2020b). Community resistance also contributed to slower coal development in the past years (Chavez, 2020; EndCoal, 2020b). The government still needs to define which exact coal-fired power plants in the pipeline would come under the moratorium, however analysts expect that between 8 and 10 GW of the coal pipeline could be wiped out (Ahmed & Brown, 2020; Climate Home News, 2020).
Many additional questions about the moratorium still need to be clarified. The draft PEP still includes the full coal pipeline (Department of Energy, 2020a). If it wants to provide security to investors, the Philippines needs to align its long-term planning document with its recent announcements. Adding the moratorium to policy documents, such as the PEP and NDC would show the commitment of the country to push “for the transition from fossil fuel-based technology utilisation to cleaner energy sources” (Department of Energy, 2020b). Making the moratorium legally binding would also ensure future changes in government do not revert the decisions (Chavez, 2020).
Meralco, the Philippines’ largest electricity utility, has included a carveout clause in its power purchase agreements in 2020 (Ahmed & Dalusung, 2020). This clause allows for curtailment of coal power amid lower demand caused by the pandemic. This move reduces the profitability of coal power plants in the Philippines and highlights issues with long-term purchase agreements and inflexible coal generation. These developments, combined, can support a shift away from coal-fired power generation even though major distributors can still pass the higher generation costs on to end consumers (Department of Energy, 2018).
The Philippines’ energy mix relies heavily on coal, which accounted for 34% of the total primary energy supply in 2017. This reliance on coal has caused carbon emissions intensity of primary energy to increase by 10% since 2010, similar to other countries in the region (see chart below).
In 2015, the Department of Energy (DOE) announced that more than 10 GW of coal-fired power plant capacity would be constructed by 2025, and released a Coal Roadmap 2017–2040 (Department of Energy, 2017). When the Philippines joined the Paris Agreement in 2017, the Secretary of Energy, Alfonso Cusi, stated that ratification would have no effect on these plans (Flores, 2017).
Yet if all these power plants were built, it would be difficult for the government to achieve its NDC target (excluding LULUCF). The situation is compounded by the fact that this upswing of development has also increased interest in domestic coal exploration (Department of Energy, 2016). The latest draft of the Philippine Energy Plan indicates that coal will remain a cornerstone of the country’s energy supply (Department of Energy, 2020a).
Since 2015, the Philippines has installed about 4.6 GW of coal-fired power capacity. As of July 2020, another 1.9 GW of new coal plants were under construction, with 10.1 GW in the pipeline (EndCoal, 2020a). If all the power plants in the pipeline were to be constructed, the Philippines coal capacity would increase by about 120% from 2020 levels. A 2017 report states that the coal expansion plans, worth USD 20.8 billion, run the risk of becoming stranded assets due to building up overcapacities of coal, increased coal regulations and taxes, and increased competitiveness of other alternatives, e.g. renewables and natural gas (IEEFA & ICSC, 2017). Coal needs to be phased out in the region by 2040 to keep the goals of the Paris Agreement within reach (Climate Analytics, 2019).
Notwithstanding the significant coal pipeline, there has been some regulation of coal-fired electricity as part of the wider Tax Reform for Acceleration and Inclusion (TRAIN) Act, implemented in 2018. The Act raises taxes on coal from 0.20 USD in 2017 up to 2.85 USD per metric tonne in 2020 (Department of Finance, 2017).
As the Philippine Department of Energy re-evaluates their energy mix, they open the space for a more prominently role for renewable energy in the country (Department of Energy, 2020b). The coal moratorium could attract over 30 billion in renewable energy investments over the next 10 years (Ahmed & Brown, 2020).
Several regulations that support further uptake of renewables are under discussion or have been approved in 2019. For example, the DOE intends to create a competitive environment by ensuring transparent electricity prices (Department of Energy, 2019a) which is expected to instigate real competition between power generators (Ahmed, 2019). The DOE also established a framework for energy storage and off grid power development (Department of Energy, 2019d, 2019e). Finally, the draft circular on Green Energy Tariff Programme (GETP) sets up a technology and location-specific renewable auctions which supports the development of a flexible and cost-efficient power mix (Institute for Energy Economics and Financial Analysis, 2020).
Improvements in the Green Energy Option Programme, that allows users to choose their renewable energy providers, and the Net-Metering Programme aim to add clarity for end-users, RE suppliers, and network service providers facilitating renewable energy choices and to encourage active participation of consumers in power generation (Department of Energy, 2019c, 2019f).
Between 2010 and the end of 2018, 1.9 GW of renewable energy capacity had been installed in the Philippines (IRENA, 2020). This is a modest increase considering that both feed-in-tariffs and net metering result in profitable projects (Farias-Rocha et al., 2019). A feed-in tariff (FiT) applicable to solar, wind, biomass and small hydropower has been in effect since 2010; a net-metering scheme for generators smaller than 100 kW since 2013; and the renewable portfolio standards since 2017. Given this slow progress, it remains unclear whether the planned capacity expansion set out in the NREP for 2030 or in the draft PEP will be met (IRENA, 2017). Even though the installed capacity has increased in recent decades, the share of renewables in power generation has been in a declining trend because the growth rate of fossil fuel, especially coal, has been faster. This trend is incompatible with many other Asian countries (see chart below).
The Renewable Energy Act of 2008 aimed at accelerating the exploration, development and utilisation of renewable energy in the Philippines (Congress of the Philippines, 2008). The National Renewable Energy Program (NREP), established in 2011, is the blueprint for the implementation of the Act and seeks to triple the renewable energy capacity level from 4.8 GW in 2010 to 15.3 GW by 2030 (IRENA, 2017). The draft Philippines Energy Plan (PEP) indicates a target of 30.7 GW renewable installed capacity by 2040 in comparison to 7 GW in 2018 (Department of Energy, 2020a).
The Philippines has begun taking action on energy efficiency; In 2017, the Department of Energy published the Energy Efficiency Roadmap 2017-2040. Overall, the Energy Efficiency Roadmap mandates energy savings equivalent to 24% across energy demand sectors in 2040, compared to the reference energy demand outlook (Lister et al., 2017). The document lists various measures to enhance energy efficiency in the buildings, industry, energy supply, and transport sectors. The Energy Efficiency Action Plan is being implemented by the Energy Efficiency and Conservation Division of the Energy Utilization Management Bureau of the Department of Energy, but the extent and coverage of implementation is unclear. The CAT includes the effects of this policy in our current policy scenario.
In April 2019, the President Rodrigo Duterte signed into law the Energy Efficiency and Conservation (EE&C) Act, establishing the general governance and strategies to improve energy use in the Philippines and aims to reduce final energy demand by 24% below a BAU demand by 2040. It creates an Inter-Agency Energy Efficiency and Conservation Committee (IAEECC) that will develop projects aiming to reduce energy costs in state-owned and leased buildings and facilities (Parrocha, 2019). It also delineates general provisions on energy performance standards, demand-side management, and incentives (Congress of the Philippines, 2018). The draft department circular with the implementing rules and regulations of the EE&C is under preparation by the Department of Energy (Department of Energy, 2019b).
The Philippines’ transport sector is the nation’s third biggest source of greenhouse emissions as a result of a high dependency on road transport and oil as a fuel source (APERC, 2019; Vera-Ruiz, 2020). Climate mitigation is not an explicit priority for the Department of Transport, though some of its policies may have a mitigation benefit. For example, the Biofuels Act from 2006 aimed to reduce reliance on imported fuels (Republic Act No. 9367, 2007). It led to an increase in the share of low emissions fuels (see figure below). However, climate leadership from within the department and a greater focus on mitigation in sectoral plans is needed.
The programme ‘Build, Build, Build’ targets infrastructure development, especially roads and urban mobility. Some noteworthy projects are Bus Rapid Transit (BRT) in Cebu and improvements in the BRT system in Manilla (Republic of the Philippines, 2020). Investments in public transport are nonetheless lacking in many major urban centres (ADB, 2012). The country’s first subway - in Manila - is expected to be ready by 2025 (Railway Technology, 2020). Higher investments in public infrastructure would support a reduction in greenhouse gas emissions in the transport sector and lead to air pollution co-benefits.
The actual emissions and/or removal levels for the Philippine forestry sector is highly uncertain. National inventory data shows nearly zero emissions from the sector in 1994, but a net sink (removal of CO2 from the atmosphere) of 105 MtCO2/year in 2000 (UNFCCC, 2017). This difference is partly attributed to changes in the definition of forests and the correction of methodological errors. The 1994 inventory did not account for millions of hectares of upland farms and presented very low biomass density for grassland (Republic of the Philippines, 2014); a logging ban on old-growth forests in the 1990s may also have contributed to the net removal of GHG emissions during this period (Asia-Pacific Forestry Commission, 2001). In contrast to this inventory data, the FAO estimates the forestry sector was a small net sink of 2.6 MtCO2/year up to the years 2000 and became a larger sink of around 60 MtCO2/year in 2016 (FAOSTAT, 2018).
With the goal of reducing greenhouse emissions from deforestation and forest degradation and conserve biodiversity, the Philippines has implemented the national REDD+ strategy (DENR, 2010). This strategy supported the creation of an institutional framework to monitor and avoid deforestation and development of forestry protection incentive mechanisms. In addition, a ban on cutting and harvesting in natural and residual forests throughout the country has been introduced by executive order in 2011 (Executive Order No. 23 - Declaring a moratorium on the cutting and harvesting of timber in the natural and residual forests and creating the anti-illegal logging task force, 2011). Finally, the Philippine Master Plan for Climate Change Resilient Forestry aims to improve forest management of almost 7 million hectares of existing forests until 2026 (Department of Environmental and Natural Resources (DENR), 2016).
The Philippines Development Plan 2017-2022 (NEDA, 2017b) includes clearer strategies to rehabilitate and restore degraded natural resources and protect the fragile ecosystems while improving the welfare of resource-dependent communities. Some strategies of the implementation are:
- Complete delineation of final forest limits including production and high value conservation areas as protection forest.
- Reverse the loss of forest cover through sustained rehabilitation of degraded forestlands including critical watersheds and strengthened protection of remaining natural forests.
- Enhance management of Protected Areas and strengthen sustainable management through the issuance of appropriate tenure and management arrangement.
- Strengthen research and development on forest, watershed and biodiversity.