Villafuerte bats anew for Piso para sa Kalikasan tax
To boost state funds, support climate action agenda
WITH the government scouring for fresh revenue streams this year to help close its budget gap and ease the national debt burden, Camarines Sur Rep. LRay Villafuerte has put forward a congressional push for the country’s first-ever carbon tax on electricity (CTE) to augment state coffers while keeping the Marcos administration on track for its ambitious goal of a low-carbon economy.
Villafuerte, National Unity Party (NUP) president, said, “One win-win revenue measure that the government can consider is a CTE or Piso para sa Kalikasan tax to help it raise extra funds beginning this year for higher public spending and for debt servicing and at the same time keep the Philippines on track to fighting climate change by reducing its GHG (greenhouse gas) emissions by 75% by the year 2030.”
An advocate of green initiatives in the Congress, the lawmaker and former governor of CamSur proposed to Malacañan Palace to endorse urgent action on House Bill (HB) No. 2894 that seeks a CTE or Piso para sa Kalikasan tax on the consumption of electricity.
HB 2894, which Villafuerte had authored with CamSur Reps. Miguel Luis Villafuerte and Tsuyoshi Anthony Horibata along with the Bicol Saro partylist, proposes a CTE on the use of electricity, equivalent to P1 for every kilogram (kg) of CO2 emission per kilowatt hour (kWh).
“Collections from this proposed Piso para sa Kalikasan tax are to be used for programs on climate-change mitigation and adaptation,” Villafuerte said.
Villafuerte made this proposal as Finance Secretary Ralph Recto said the government will pursue the legislative passage this year of its remaining pririty tax measures to offset the impact of a slower rate-cutting cycle on the national debt service burden.
The International Monetary Fund (IMF) projects the Philippine fiscal deficit to drop from 6.1% in 2023 to 5.6% in 2024 and 2025, with IMF Mission chief Elif Arbatli Saxegaard saying that the Philippines has to weigh different considerations in thinking about a carbon tax.
“It is one option (carbon tax) for their consideration that can support the transition to a green economy to promote renewable energy, to shift consumption patterns away from polluting energy to more green energy sources,” she said. “We understand that there’s also different tradeoffs playing out here. The cost of power and electricity in the Philippines is quite high.”
Saxegaard said the government has room to raise taxes to generate additional revenues, and that there exists a “significant scope to improve” on tax administration.
Interviewed on the sidelines of the then-ongoing Jan. 20-24 World Economic Forum (WEF) in Davos, Switzerland, Recto said the Marcos administration was banking on the congressional passage of several measures to raise at least P300 billion in additional revenues.
With the approval of the value-added tax (VAT) on digital service providers (DSP), Recto said the Palace’s remaining revenue bills include the tax on single-use plastics (SUPs), Package 4 of the Comprehensive Tax Reform Program (CTRP) on simplifying the tax structure on passive income and other financial instruments, and rationalization of the Mining Fiscal Regime that could give the government an additional P300 billion to help cut both the budget deficit and debt servicing.
“We do have a few revenue measures in Congress right now. We expect to pass them before the end of the year. Maybe during the end of session—May to June—after the elections,” Recto was quoted as saying in a Bloomberg report. “It’s also preparing for higher interest rates just in case so that we have additional revenues.”
A co-author of the bill rationalizing the mining fiscal regime, Villafuerte said that although the revenue measures listed by Recto remain doable, the CTE or Piso para sa Kalikasan tax is a good alternative for the outgoing 19th Congress, “given the urgency for the Philippines and the Marcos administration to make a significant contribution to the global effort to stabilize GHG concentrations in the atmosphere.”
“This tax for decarbonization has greater urgency for us as the Philippines is considered as ground zero for climate disaster,” he said.
“A Piso para sa Kalikasan tax will help our country meet its ambitious target of cutting our GHG emissions by 75% come 2030,” Villafuerte said.
However, he said, HB 2894 seeks to exempt from the payment of this proposed CTE: (1) households that each consume 60 kWh or below per month, and (2) those that use electricity generated from renewable energy (RE) sources.
Villafuerte said that for RE consumers to avail of the CTE exemption or refund, they are required under HB 2894 to each secure a certificate from the Department of Energy (DOE) confirming their use of RE power in lieu of electricity from the grid.
Under HB 4739, collections from the proposed climate tax shall be used exclusively for programs that:
Explore and promote the use of alternative and clean power sources like RE;
Assist communities in adapting to climate change and managing disaster risks;
Improve the resiliency of critical infrastructure;
Provide better public transportation;
Disseminate climate change awareness;
Protect environmental quality and wildlife; and
Meet international commitment made by the Philippines to assist with climate change adaptation and disaster risk reduction and management.
Villafuerte had filed a similar climate-tax bill in the previous Congress.
Under its climate action agenda, the Philippines’ grand objective is to reduce our GHG emissions by 75% by 2023, under its National Determined Contribution (NDC) to the Paris Climate Accords of 2015.
Better known as the Paris Agreement, this pact was adopted by 196 parties at the 2015 United Nations (UN) Climate Change Conference (COP21) in Paris, with the goal of keeping the rise in global temperature this century to below 2 degrees Celsius—or even further to 1.5 degrees—above the pre-industrial levels in the mid-1900s.
“Given the government’s tight fiscal space arising from its past enormous spending on Covid-19 response, the enactment into law of this tax on electric power consumption, to be included in the monthly electricity bills of consumers—is of urgent importance,” Villafuerte said.
Villafuerte recalled that Recto, in a recent Technical Working Group (TWG) Meeting for Preparing Carbon Pricing Instruments for the Philippines, said that carbon pricing instruments make up a “powerful fiscal tool” as they let the government “incorporate the social and external costs associated with carbon emissions.”
Considering that the Philippines is an archipelagic state, it is among the world’s most vulnerable economies to global warming even though it contributes just 0.48% to global carbon emissions.
Despite this, the government has committed to cut GHG emissions by 75% by 2030 under its NDC, hence leading to the current Administration’s “firm resolve,” according to Recto, “to become a world leader in confronting climate change head-on.”
Villafuerte said that, “Congressional action on the pending CTE tax plan will send a strong message to the global community of our country’s steadfast commitment to international climate action policy and the 19th Congress’ affirmation of the people’s right to a balanced and healthy ecology as well as the State’s paramount duty to safeguard such right for the present and future generations.”
“Proceeds from this climate or carbon tax plan are to be used solely for programs designed to help the most vulnerable Philippine communities better adapt to erratic weather patterns responsible for the worsening natural calamities,” Villafuerte said.
“This measure, once approved, will be the first of its kind in the country. It recognizes the unfortunate status quo of the environment and encourages every Filipino to act now,” Villafuerte said.
“The CTE proceeds shall be used to explore alternative and clean sources of energy, provide green public transportation and disseminate climate change awareness, among other objectives.”
Carbon dioxide (CO2) is one GHG linked to global warming, and a major source of CO2 emissions in the Philippines via the burning of fossil fuel for electricity, heat and transportation, he said.
The Philippines is a member of the Climate Vulnerable Forum (CVF), which groups together 68 nations accounting for 20% of the global population but generating just 5% of global GHG emissions, and that are the most vulnerable to climate-induced calamities.
