Carbon pricing could raise $7-B revenues in the Philippines: IMF


The introduction of carbon pricing in the Philippines could raise around $7 billion in revenues by 2030, according to a report released by the International Monetary Fund (IMF).

The IMF said in the report that the Philippines will need to implement carbon pricing to achieve a “substantial reduction in emissions.”

The Philippines has committed to a projected greenhouse gas emissions reduction of 75% by 2030 under the Paris Climate Change agreement.

“The policy could either represent a carbon tax, which would add a charge in proportion to carbon content to existing fuel excises and apply similar carbon charges to other fuels. Or it could represent an ETS (emissions trading system) which is imposed on top of existing fuel taxes, encompassing firms in the power and industry sectors and suppliers of fuels for other sectors,” the IMF said.

Earlier, Finance Secretary Benjamin E. Diokno said his department is considering a carbon tax and working out whether such a measure is feasible.

Ideally, carbon pricing would be the essence of the Philippines’ mitigation strategy, as it encourages reduced energy use and a shift towards cleaner energy sources, the IMF said.

The Philippines could start at $20 per ton in 2023, and increase $4.30 a year to hit $50 per ton by 2030, it added.

“A $50 (around P2,800) carbon price (per ton) could potentially raise revenues of 1.05% of GDP ($7 billion) in 2030. About 44% and 37% of the revenue would come from new charges on road fuels and coal respectively,” it added.

At this carbon price, carbon dioxide emissions would be reduced to 144 million tons or 13% below the baseline levels, with half of the reductions coming from the power sector, the IMF said.

“Indeed, the reform would raise the renewable share in electricity generation to more than 40% in 2030 — well above the authorities’ current target of 30% and the current renewable share of 21%,” it added.

Potentially, the policy could save 10,400 fatalities from exposure to local air pollution between 2023 and 2030. About half of the averted death rate are Filipinos over 65 years old.

“The carbon tax would impose a modest economic cost on the Philippines, equivalent to about 0.2% of GDP in 2030 but half of these costs would be offset by domestic environmental co-benefits,” the IMF said.

“Overall, carbon taxes have significant practical, environmental, and economic advantages due to ease of administration, price certainty which promotes investment, the potential to raise significant revenues, and coverage of broader emissions sources,” it added.

The IMF suggests a balance between carbon pricing and other instruments to help enhance an effective and politically acceptable mitigation strategy.

The government should also use carbon pricing revenues to boost the economy, such as lowering taxes on work effort or funding socially productive investments, and ensure that benefits are distributed across households.

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