"What are we doing to stop a problem that will kill our people and destroy our country?"
"What are we doing to stop a problem that will kill our people and destroy our country?"
In a month’s time, the governments of the world will be meeting once again for its annual conference on climate change. In Watowice, Poland, parties to the United Nations Framework Convention on Climate Change will converge to receive the special report on the implications and feasibility of limiting and exceeding by 1.5 degrees Celsius (since pre-industrial times) the increase in global temperatures. It will be a sobering moment as we will be told that time is running out to stop the rapid acceleration of climate change. It will be disturbing because we will be told that while difficult, it is doable to prevent catastrophe. Still we are moving towards an increase of 3 degrees to 4 degrees.
Every country, some more than others, must do something. It is true that the Philippines emits less than 1 percent of global emissions annually, but that does not make us belong to the lowest emitters as more than 150 countries emit less than we do. We are still number 34 or 35 globally, in the top third. Of course, it goes without saying that the United States and China should take the lead in reducing emissions. The top 100 corporations that produce more than half of the world’s emissions also have a special responsibility.
But there are no free passes on the imperative to reduce carbon emissions, and especially not for the Philippines who is its big victim.
Last month, in the context of the passage of the TRAIN law and the debate now on additional tax reform packages, in a think piece I wrote for Rappler, I argued that carbon emissions should be the next target of tax policy. I also made the case that the revenue from making carbon emitters accountable should be used to support universal health care.
As I observed in that article, energy produced by coal-fired power plants (CFPP) generates a significant amount of greenhouse gases, which in turn contributes to climate change. If the country’s planned CFPP projects all become operational, and the Department of Environment and Natural Resources just issued an Environmental Clearance Certificate for still another plant in La Union, we will have an excess amount of energy generated from coal. But, since you can’t just shut off a coal-fired power plant when you don’t need the energy, they will continue to burn coal and produce greenhouse gasses at maximum capacity. That’s like a smoker continuously lighting up another cigarette before finishing the previous one. It’s unnecessary and wasteful, not to mention it has severe implications on our environment and our health.
Coal, among all the fossil fuels such as gas and diesel, is perceived as cheap and readily available. Its true and actual social and environmental costs, however, are not accounted for. If carbon emitters all over the world were to pay for all the negative externalities, estimates put the global social cost of carbon at $40 per metric ton of CO2 emitted. In contrast, the recently passed TRAIN law levies an excise tax on coal of less than $1 per metric ton of coal in 2018—that’s equivalent to 34 US cents per metric ton of CO2 (MT/CO2)—far less than what it costs us to mitigate the impact of air pollution generated by coal power plants. Furthermore, the excise tax in this case is not at all meant to directly address the externalities caused by burning coal as a fossil fuel.
If we are to truly capture the externality caused by CO2 emissions, we need to address what the Department of Finance’s National Tax Research Center calls a market failure in fossil fuel prices.
Putting the right price on carbon that is specific to the Philippine experience will in effect make polluters accountable and address the risks of climate change. To be fair, this accountability should extend to coal, gas, and diesel for energy generation as well, with the government annually collecting information on actual emissions to measure progress against our commitments to the Paris Agreement. In Paris in 2015, we committed to reduce our emissions by 70 percent of 2010 levels by 2030.
Aside from the environmental dimension of the carbon tax, the government will be able to raise much-needed revenue—around at least P52 billion—which would go in part to offset the inflationary impact of the new tax and in part to fund the estimated P100 billion needed for Universal Health Care. For a country that spends 0.6 percent of GDP ($400 million) on health expenses caused by pollution, taxing carbon to fund health care coverage is not only logical. It is the right thing to do.
In the Rappler article, I pointed out that here is no better time to discuss carbon accountability charges than when Congress is deliberating additional tax reform packages, which can include this proposed tax. House Bill 4739, authored by representative Luis Raymund Villafuerte, proposes an even higher tax of $20 MT/CO2, which is still in line with global carbon tax practice. Between the banking sector’s increasing concern about stranded assets of fossil fuel power plants and our country’s commitment to reduce emissions and limit climate change, the policy window to take action that will benefit society for generations to come is wide open.
In Watowice, we will be asked: what are you doing to stop a problem that will kill your people and destroy your country? I hope we can answer honestly that we are doing everything we can to reduce our carbon emissions. Otherwise, we lose moral high ground in demanding other countries to do the same.
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