ADB frowns on delayed implementation of CAA

The Philippine government should consider importing clean fuels instead of delaying the implementation of the Clean Air Act (CAA), an Asian Development Bank (ADB) official said.

"It is possible as an alternative to import fuels, for the meantime. But this is not necessarily the best situation for the Philippines. But this is an option that is available," Charles M. Melhuish, ADB lead transport sector specialist, said.

At the same time, Melhuish said the ADB has formally rejected the Philippine government’s request for a grant to finance the study to assess the impact of the compliance to the CAA and the possibility of postponing the implementation of the said law.

"To be honest, the bank is not interested to carry out such a study for the very simple reason that the CAA, as you know, is part of our Metro Manila clean air program," he said.

Melhuish said providing such a grant would run counter to the bank’s policy to adhere to a cleaner environment. "In a way that additional studies are being requested to defer implementation of the Act does not go down very well with us since we have the policy to broadly support the clear air program of Metro Manila," the ADB official said.

According to him, the government should have requested more important studies than this. "There are really studies which should have been done well before the CAA was put together. In fact, these should have been studies that would have been done to help the CAA," he said.

He, however, acknowledged that the country might be facing problems in complying with the Act. "There might be problems in implementing some of the provisions in time, particularly finished diesel fuel specifications. I presumed that the oil industry, itself, has not done any investment and has not been making any investment. But further delays in the implementation will not do them good either because the effect of their investments will also take long," he said

In the absence of an ADB-sponsored study, the Department of Energy has taken the initiative to conduct its own study on the CAA impact. Results of the study would be submitted to Malacañang and the Congress for assessment.

Initial DOE studies have shown that in the next couple of years, the country is likely bear higher prices for petroleum products due to the impact of the implementation of the CAA.

Based on DOE simulations, the price of diesel may go up by at least 61 centavos per liter while gasoline products will increase by P2 per liter. Power rates, on the other hand, are also expected to rise by 50 to 90 centavos per kilowatt hour.

These simulations, the DOE said, are based on anticipated investment costs to retrofit power plants and refineries and costs to meet the monitoring and reportorial requirements.

The first stage of the CAA became effective last Dec. 23 with the total phaseout of leaded gasoline in the country.

The implementing rules and regulations (IRR) of the CAA took effect last Jan. 1, 2001 but the proponents of the law are allowed an 18-month grace period or until March 2002 to fully comply with the IRRs.

The oil companies are lobbying for the deferment of the compliance of the CAA due to their continuing lackluster economic performance.

According to local oil firms, they would spend about $100 million to $150 million each for the retooling of their refineries to comply with the CAA.

The oil firms will have to put up their respective isomerization and hydrotreater plants to be able to comply with CAA specifications. By 2004, they are expected to bring down the sulfur content of their diesel to 0.05 percent from the present level of 0.2 percent.