TBILISI – The possibility of a carbon tax has potential in the Philippines, but such a measure must be market-driven and appropriate for the needs of a country still heavily reliant on fossil fuels.
In an interview with The STAR here, Asian Development Bank (ADB) country director for the Philippines Pavit Ramachandran said the planned imposition of a carbon tax has to be done in a way that is inclusive and just.
The Department of Finance (DOF) is studying carbon pricing instruments and the need to identify an optimal mix not only to generate additional revenues, but also address environmental concerns.
“I think there is potential, but it needs to be looked at much more closely and studied further,” Ramachandran said.
“Carbon taxation or if it’s carbon pricing, whatever is the right solution, it has to be market-driven. It has to be just, inclusive and appropriate for the Philippine context,” he said.
Global efforts to slap taxes on carbon remain small. Many countries, including the Philippines, have yet to ride on the carbon tax.
As economies feel the impacts of climate change, calls for measures that will put a price on emissions from the burning of fossil fuels are heightened now more than ever.
Apart from addressing climate change, a carbon tax is also seen to encourage the adoption of clean energy and generate revenues that could fund green initiatives.
However, oppositions argue that imposing a carbon tax may not always be the best and most preferred choice considering every country’s circumstances just like in the Philippines, where power rates are among the costliest in the region.
For now, only developed countries like Finland, Sweden, Norway, Canada, UK and Singapore have made strides in imposing carbon tax.
Ramachandran said ADB is supporting such a plan through its domestic resource mobilization (DRM) program for the Philippines.
“We have an ongoing program of support where we have been discussing various policy reforms, including potentially carbon taxation,” Ramachandran said.
“In terms of what are the key sectors that are driving the climate transition here, obviously, energy would be a key sector so I think that’s the context in which we are looking at,” he said.
The DRM aims to help the Philippines modernize tax administration through digital transformation and strengthen international tax cooperation.
It also targets to address poverty and inequalities, accelerate progress in gender equality, tackle climate change, build climate and disaster resilience and enhance environmental sustainability.
“I think the Philippines will have to do what’s appropriate in the Philippine context. It has to come out of the analytical work as well,” Ramachandran said.