Republic of the Philippines
HOUSE OF REPRESENTATIVES RECEIVED 2

pare 18 aus

Quezon City, Metro Manila

TWENTIETH CONGRESS
First Regular Session

House Bill No.3820

INTRODUCED BY REPRESENTATIVES RALPH WENDEL P. TULFO.
AND JOCELYN P. TULFO

AN ACT PROMOTING INVESTMENTS IN LOW CARBON ECONOMY,
ESTABLISHING FOR THIS PURPOSE A CARBON EMISSION PRICING
FRAMEWORK AND IMPLEMENTATION MECHANISM TO ACHIEVE LOW
CARBON AND CLIMATE-RESILIENT ECONOMIC DEVELOPMENT

EXPLANATORY NOTE

The primary driver of climate change today is the emission of carbon dioxide
(CO2) and other greenhouse gases (GHGs) resulting from human activities.
Throughout history, there has been a clear and consistent relationship between global
temperatures and GHGs concentration — particularly CO2—in the atmosphere. Since
the pre-industrial era, annual temperature anomalies have been recorded, showing,
that the Earth’s average global temperature has already risen by approximately 1.3°C,
with even higher anomalies in the last few years.!

GHGs are substances that absorb infrared radiation and contribute to the
increase in temperature of the Earth’s surface and the lower atmosphere. To monitor
this phenomenon, GHG emission inventories are prepared following the guidelines
developed by the Intergovernmental Panel on Climate Change. These inventories
assess the contributions of six major sectors to the country’s overall emissions and
removals: (1) Energy; (2) Transport; (3) Agriculture; (4) Forestry and Other Land Use
(FOLU); (5) Industrial Processes and Product Use (IPPU); and (6) Waste.2

According to the Climate Change Commission, the Philippines’ total GHG
emissions reached 204.33 teragrams of carbon dioxide equivalent (Tg CO2) in 2020,
representing a 12.3 percent decline from 232.99 Tg CO2e in 2015. Combined emissions

' Ritchie, Rosado, and Roser, “CO2 and Greenhouse Gas Emmissions”, OUR WORLD IN DATA.
https:/ /ourworldindata.org/co2-and-greenhouse-gas-emissions.

2"The Country's Total Greenhouse Gas Emissions Reached 204.33 Teragrams of Carbon Dioxide
Equivalent in 2020", PHILIPPINE STATISTICS AUTHORITY, 9 Jul 2024,
https://psa.gov.ph/content/countrys-total-greenhouse-gas-emissions-reached-20433-teragrams-
carbon-dioxide-equivalent.


from the energy, transport, agriculture, IPPU, and waste sectors amounted to a total
of 230.26 Tg COvze, while the FOLU sector sequestered 25.94 Tg COze. Among all
sectors, the energy sector consistently posted the highest GHG emissions—74.89 Tg
COxe in both 2015 and 2020— followed by the agriculture sector, which recorded 52.70
Tg COve in 2015 and 54.08 Tg COze in 2020.3

The sources of CO: and other major GHGs, like methane and nitrous oxide, are
diverse. They include the burning of fossil fuels, the manufacture of high-emission
materials such as steel, cement, plastics, as well as agricultural activities that sustain
global food systems. Reducing these emissions requires not only transforming our
energy, industrial, and agricultural systems, but also enacting policies that enable and
accelerate rapid decarbonization*

Therefore, there is a need to institutionalize (1) a Philippine Greenhouse Gas
Inventory System to systematically manage and report GHG inventories across
multiple levels, (2) a National Integrated Climate Change Database and Information
Exchange System to create a robust framework for managing and reducing GHG
emissions, (3) a National Climate Change Action Plan And Monitoring, Reporting, And
Verification System to track GHG mitigation and climate resilience; (4) an International
Transfer of Mitigation Outcomes to establish necessary protocols, procedures, and
systems; (5) a Decarbonization Plan And Investment Roadmap for Covered Enterprises to
limit global temperature rise to below two degrees Celsius (2°C) above pre-industrial
levels, with the goal of achieving net-zero emissions by 2050, (6) a Carbon Pricing And
Decarbonization Fund corresponding to the carbon price for excess emissions which
shall be exclusively used to finance emissions reduction activities, and (7) Compliance
Mechanisms requiring covered enterprises to submit an Annual Compliance Report to
ensure accountability.

This bill aims to achieve the country’s national climate targets by instituting a
comprehensive carbon emission pricing framework and implementing mechanisms
that drive GHG emissions reduction, enhance climate resilience, and foster
sustainable economic growth.

In view of the foregoing, the urgent passing of this bill is earnestly sought.
RALPH WENDEL P. TULFO Ney oy
Representative Rept@etttative
2d District of Quezon City ACT-CIS Partylist

‘Id.
+ Ritchie, Rosado, and Roser, supra note 1


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

TWENTIETH CONGRESS
First Regular Session

House Bill No. 3820

INTRODUCED BY REPRESENTATIVES RALPH WENDEL P. TULFO.
AND JOCELYN P. TULFO

AN ACT PROMOTING INVESTMENTS IN LOW CARBON ECONOMY,
ESTABLISHING FOR THIS PURPOSE A CARBON EMISSION PRICING
FRAMEWORK AND IMPLEMENTATION MECHANISM TO ACHIEVE LOW
CARBON AND CLIMATE-RESILIENT ECONOMIC DEVELOPMENT

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

ARTICLE 1
GENERAL PROVISIONS.

SECTION 1. Short Title. - This Act shall be known as the “Low Carbon
Economy Investment Act”.

SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to
promote sustainable development and environmental stewardship through the
establishment of a low carbon economy. This Act aims to achieve the country’s
national climate targets by instituting a comprehensive carbon emission pricing
framework and implementing mechanisms that drive greenhouse gas (GHG)
emissions reduction, enhance climate resilience, and foster sustainable economic
growth.

In pursuit of these goals, the State shall

(a) Institutionalize systems and methodologies for accurate and transparent
GHG inventory management and reporting at all levels;

(b) Develop and enforce sectoral decarbonization pathways and emission
reduction targets in alignment with international climate agreements,
particularly the Paris Agreement;


() Provide financial, technological, and capacity-building support to ensure
the effective implementation of national climate action plans;

(d) Promote investments and adoption of low-carbon technologies, renewable
energy sources, and energy-efficient practices across all sectors of the
economy;

(e) Integrate climate change adaptation and mitigation measures into national
and local development plans and programs;

(f) Establish robust compliance mechanisms and incentives to encourage
private sector participation in decarbonization efforts; and

(g) Facilitate access to international climate finance and carbon markets to
support the country’s transition to a low-carbon economy.

By adhering to these principles, the State commits to fostering a resilient,
inclusive, and sustainable future for all Filipinos.

SEC. 3. Definition of Terms. - As used in this Act:

(a) Carbon emission pricing framework refers to a system for setting a price on
carbon emissions to incentivize reductions in GHG emissions through
market-based mechanisms such as carbon taxes, emissions trading systems,
and carbon offset mechanisms;

(b) Carbon offset refers to reduction in GHG emissions or an increase in carbon
storage, e.g., through reforestation, that is used to compensate for emissions
occurring elsewhere, typically measured in metric tons of carbon dioxide
equivalent (CO2e);

(©) Covered enterprises refers to large and medium-sized enterprises whose
emissions exceed a specific threshold set by the Climate Change
Commission (CCC). These enterprises are required to prepare and
implement decarbonization plans in accordance with this Act;

(d) Decarbonization fund refers to a fund established by covered enterprises to
allocate financial resources for emissions reduction activities, including
investments in low-carbon technologies and carbon offset projects;

(e) Decarbonization pathway refers to a strategic plan outlining. specific,
measurable, and time-bound targets and actions for reducing GHG
emissions. This pathway includes emissions baselines, reduction strategies,
and investment roadmaps aligned with national and sectoral
decarbonization targets;


() Emission reduction targets refer to specific goals for reducing GHG emissions,
stated as percentage reductions from a baseline year, aimed at achieving
national climate targets in line with international agreements such as the
Paris Agreement;

(g) Emissions allowance refers to the permitted level of GHG emissions allocated
toa covered enterprise for a specific period, as determined by the CCC;

(h) Greenhouse gas emissions refer to emissions of gases that contribute to the
greenhouse effect by absorbing infrared radiation, including carbon dioxide
(COz), methane (CHs), nitrous oxide (N20), hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs), and sulfur hexafluoride (SFs);

(

Internationally Transferred Mitigation Outcomes (ITMOs) refer to mitigation
outcomes that are transferred between countries under Article 6 of the Paris
Agreement, used to achieve nationally determined contributions and other
international climate commitments;

Ss

Mitigation refers to actions taken to reduce or prevent the emission of GHG,
including strategies to enhance energy efficiency, transition to renewable
energy sources, and improve waste management practices;

(k) Nationally Determined Contribution (NDC) refers to the Philippines’ long-
term roadmap for GHG mitigation and climate resilience, outlining
commitments to reducing emissions and adapting to climate impacts as part
of the global effort to limit temperature rise under the Paris Agreement;

() Paris Agreement refers to an international treaty under the United Nations
Framework Convention on Climate Change aimed at limiting global
warming to well below two degrees Celsius (2°C) above pre-industrial
levels, with efforts to limit it to one point five degrees Celsius (1.5°C); and

(m) Third-party verifier refers to an independent entity accredited by the CCC to
assess and verify the accuracy and reliability of GHG emissions data and
the compliance of covered enterprises with the provisions of this Act.

ARTICLE 2
NATIONAL GHG EMISSIONS INVENTORY

SEC. 4. Institutionalization of the Philippine Greenhouse Gas Inventory

System. - The Philippine Greenhouse Gas Inventory System (PGHGIS) is hereby
institutionalized to systematically manage and report GHG inventories across
multiple levels, including national, community, entity, facility, and project levels. This
system is designed to enable the Philippines to transition towards a climate-resilient

5


pathway, promoting the avoidance, reduction, and removal of emissions for
sustainable development.

SEC. 5. Lead Implementing Agency. - The CCC shall serve as the lead agency
for the implementation of the PGHGIS. The CCC shall be responsible for the
following

(a) Direction and Guidance. - Provide overarching direction and guidance in the
accounting and reporting of GHG emissions from identified key source
sectors. This includes the development and maintenance of centralized,
comprehensive, and integrated data on GHGs at all inventory levels,
particularly at the community and entity levels;

(b) System and Methodology Development. - Continuously develop and update
the system and methodology for the archiving, reporting, registering,
monitoring, and evaluating of GHG inventories. This ensures that the
methodologies used are up-to-date and in line with international best
practices;

(©) Capacity-Building. ~ Facilitate continuous capacity-building initiatives in the
conduct of GHG inventories to ensure the application of the latest
methodologies. This includes providing training and support, with
assistance from relevant agencies such as the Philippine Atmospheric,
Geophysical and Astronomical Services Administration (PAGASA); and

(A) Strategic Measures. - Formulate strategic measures into collaboration with
national government agencies, local government units (LGUs), academe,
the private sector, and other relevant sectors to ensure continuous
avoidance, reduction, and removal of GHG emissions. This holistic
approach ensures that all stakeholders are engaged and contributing to
national goals.

SEC. 6. Sectoral Agencies and Other Relevant Agencies. - To ensure the
effective implementation of the PGHGIS, the following sectoral agencies shall take the
lead in their respective areas, with assistance from the Philippine Statistics Authority
(PSA):

(a) Department of Agriculture (DA) - Responsible for the agriculture sector;

(b) Department of Energy (DOE) - Responsible for the energy sector;

(©) Department of Environment and Natural Resources (DENR) - Responsible
for the waste, industrial processes, and forestry and other land-use sectors;
and

(d) Department of Transportation (DOTr) - Responsible for the transport
sector.


Other agencies such as the Department of Science and Technology (DOST),
Department of Health (DOH), Department of Public Works and Highways (DPWH),
Department of Tourism (DOT), Department of Trade and Industry (DTI), and the
Securities and Exchange Commission (SEC) shall also collaborate to ensure the
application of transformative options under the NDC.

SEC. 7. Role of Local Government Units. - LGUs shall integrate climate change
adaptation and mitigation measures into their local plans and programs. The
following agencies, in coordination with the CCC, shall provide technical and
capacity-building support to LGUs for the effective implementation of these
measures:

SEC. 8. National Integrated Climate Change Database and Information
Exchange System. - The CCC shall institutionalize the National Integrated Climate
Change Database and Information Exchange System (NICCDIES) as the primary
platform for climate change and resilience information. The responsibilities of the
CCC regarding NICCDIES include:

(a) Issuing Guidelines. - Develop and issue guidelines for the improvement,
development, and utilization of NICCDIES to ensure it meets national and
international standards for climate data management;

(b) Engagement. - Engage various stakeholders including government agencies,
academe, and the private sector to contribute data sets to the NICCDIES.
This collaborative approach ensures a comprehensive and inclusive
database; and

(©) Feedback Mechanisms. - Institute feedback mechanisms to enhance the
content, access, and continuous improvement of the NICCDIES. Regular
updates and user feedback will ensure the system remains relevant and
effective.

By institutionalizing these systems and clearly defining the roles and
responsibilities of various agencies and stakeholders, the Philippines aims to create a
robust framework for managing and reducing GHG emissions, thereby contributing
to global climate goals and ensuring sustainable development for future generations.


ARTICLE 3
NATIONAL CLIMATE CHANGE ACTION PLAN AND MONITORING,
REPORTING, AND VERIFICATION SYSTEM

SEC. 9. Nationally Determined Contribution. - The NDC shall serve as the
Philippines’ long-term roadmap for GHG mitigation and climate resilience, outlining,
the country’s commitments to reducing emissions and adapting to climate impacts.
The NDC shall include the following components:

(a) National and Sectoral Decarbonization Pathways and Emission Reduction Targets.

~ Specific goals for reducing GHG emissions, stated as percentage
reductions from a baseline year. These targets shall be ambitious yet
achievable, reflecting the country’s commitment to international climate
agreements, including the Paris Agreement. The national decarbonization
pathway will provide an overarching strategy for emissions reductions
across all sectors, while sectoral pathways will outline specific strategies
and targets for key sectors such as energy, transportation, industry,
forestry, and agriculture. Each pathway shall include milestones and
timelines to ensure progressive emissions reductions, consistent with the
objective to limit global temperature rise to below 2°C, with efforts to limit
it to 15°C above pre-industrial levels;

(b) Adaptation Measures. ~ Strategies and actions to adapt to the impacts of

climate change. This includes building resilience to extreme weather events,
protecting vulnerable ecosystems, and implementing, climate-resilient
cities, industrial hubs, agriculture, and other key economic aspects of the
country, including, among others, public health, water resources, and
infrastructure to ensure comprehensive resilience;

(©) Mitigation Actions. - Plans for implementing policies, measures, and projects

aimed at reducing GHG emissions across various sector, such as energy,
transportation, industry, forestry, and agriculture. Mitigation actions shall
include transitioning to renewable energy resources, enhancing energy
efficiency promoting sustainable land use practices, and reducing emissions
from waste management; and

(a) Finance, Technology Transfer, and Capacity-Building. - Support from

developed countries in terms of finance, technology transfer, and capacity-
building to effectively implement the NDC. This includes mobilizing
international climate finance, fostering public-private partnerships, and
leveraging technology for low-carbon development. Capacity-building
initiatives shall focus on enhancing the skills and knowledge of
stakeholders involved in climate action.


SEC. 10. Comprehensive Engagement with the Private Sector in NDC. - The
CCC shall actively engage with the private sector and develop comprehensive
national and sectoral decarbonization strategies and roadmaps. This includes working
closely with relevant government agencies, industry stakeholders, and experts to
ensure these strategies align with both national and international climate goals.

The CCC shall integrate the actions and contributions of the private sector into
the NDC. This involves incorporating decarbonization pathways provided by covered
enterprises and regularly updating the NDC to reflect these contributions accurately.

Additionally, the CCC shall continuously review and update these
decarbonization pathways based on data from covered enterprises. This ensures that
the strategies remain aligned with international climate commitments and the latest
advancements in climate science and technology.

SEC. 11. Establishment of Monitoring, Reporting, and Verification System. -
The CC shall establish a comprehensive Monitoring, Reporting, and Verification
(MRV) system to track mitigation outcomes and the accomplishments of the NDC.
This system shall ensure accurate, transparent, and timely reporting of national
climate actions and compliance with international carbon market standards. The
consolidated mitigation outcomes shall be reflected in the NICCDIES and shall be
made available to the public.

SEC. 12. Mandates of Other Relevant Agencies on MRV. - The following
agencies are also provided the following mandates relevant to NDC’s MRV system:

(a) The DENR is mandated to work with the CCC to monitor and report
mitigation outcomes in the forestry, waste, and industry sectors. The DENR
shall implement conservation, restoration, and waste management
practices that contribute to GHG emission reductions and ensure these are
accurately accounted for in the national climate action framework;

(b) The DOE is mandated to coordinate with the CCC to monitor and report
mitigation outcomes in the energy sector. The DOE shall implement and
oversee energy efficiency and renewable energy projects that contribute to
GHG emission reductions and ensure these are accurately accounted for in
the national climate action framework;

(c) The DOTr is mandated to collaborate with the CCC to monitor and report
mitigation outcomes in the transport sector. The DOTr shall implement and
oversee transportation initiatives that contribute to GHG emission
reductions and ensure these are accurately accounted for in the national
climate action framework; and


42

(d) The DA is mandated to collaborate with the CCC to monitor and report
mitigation outcomes in the agriculture sector. The DA shall implement and
oversee agricultural practices that contribute to GHG emission reductions
and ensure these are accurately accounted for in the national climate action
framework.

SEC. 13. Climate Change Expenditure Tagging as part of MRV. - The Climate
‘Change Expenditure Tagging (CCET) is hereby institutionalized as an audit tool to
track climate adaptation and mitigation projects and programs. The CCET shall be
jointly administered by the CCC, Department of Budget and Management (DBM),
Department of the Interior and Local Government (DILG), Office of the Civil Defense,
and other relevant agencies, with the Commission on Audit, producing timely audit
reports on climate expenditure. The CCET shall:

(a) Monitor and evaluate the allocation and utilization of funds for climate
projects;

(b) Ensure transparency and accountability in climate finance;

(©) Identify funding gaps and recommend measures to address them;

(d) Facilitate the efficient allocation of resources towards high-impact climate
initiatives; and

(c) Support the integration of climate finance into national and local budgeting
processes.

SEC. 14. Local Climate Change Action Plan Quality Assessment Review
System as part of MRV System. - The CCC, in collaboration with the DILG and
PAGASA, shall formulate and institutionalize the Local Climate Change Action Plan
Quality Assessment Review (LCCAPQAR) system. This system will provide feedback
mechanisms for LGUs to improve their Local Climate Change Action Plans (LCCAPs),
ensuring responsiveness to local hazards and socio-economic transformation towards
low-carbon pathways. The LCCAP QAR shall:

(a) Establish criteria and indicators for assessing, the quality and effectiveness
of LCCAPs;

(b) Provide technical guidance and capacity-building support to LGUs for the
preparation and enhancement of their LCCAPs;

(©) Facilitate peer reviews and knowledge-sharing among LGUs to foster
continuous improvement; and

(d) Ensure alignment of LCCAPs with national and international climate goals.

SEC. 15. NDC Steering Committee. - The CCC shall be the lead agency in the
development, implementation, monitoring, and evaluation of the NDC. The NDC
Steering Committee shall be composed of representatives from the following agencies:

(a) National Economic and Development Authority;
(vb) DA;
10


Committee.
with the NDC and undertake the following responsibilities:

(©) DOE;

(d) DENR;

(e) DOTr;

(Department of Foreign Affairs;
(g) Department of Finance;

(h) DBM;
(i) Department of Labor and Employment;
() DOST;
(k) DILG;
() DOH;
(m) DPWH;
(a) DOT;

(0) Department of Human Settlements and Urban Development;
(p) DTI; Department of Education;

(q) Commission on Higher Education;

(t) Technical Education and Skills Development Authority;
(s)_ National Commission on Indigenous Peoples;

(t) Philippine Commission on Women;

(u) National Youth Commission;

(v) National Anti-Poverty Commission;

(w) Representatives from the academe;

(x) Representatives from each of the covered sectors; and
(y) Representatives from civil society organizations.

SEC. 16. Responsibilities of Government Agencies as members of NDC
The aforementioned agencies shall align their policies and strategies

(a) Alignment with National Development Priorities. - Ensure the alignment of the
NDC with national development priorities and strategies, integrating
climate goals into economic and social planning;

(b) Sector-Specific Mitigation and Adaptation Strategies. - Lead the implementation
of sector-specific mitigation and adaptation strategies. Each agency shall
develop and execute plans tailored to their sector’s unique challenges and
opportunities;

() Coordination for Technical Assistance and Climate Finance. - Facilitate
coordination with development partners for technical assistance and climate
finance. This includes mobilizing resources, securing grants and loans, and
ensuring the efficient use of funds;

(4) Annual Appropriations. - Ensure annual appropriations for the
implementation of unconditional policies and measures related to climate
action. Budgeting should reflect the urgency and scale of climate initiatives;

n


(e) Promotion of Low-Carbon Technologies and Innovations. - Promote the
development and adoption of low-carbon technologies and innovations.
Agencies shall support research, development, and deployment of
sustainable technologies;

(6) Technical and Capacity-Building Support to LGUs. - Provide technical and
capacity-building support to LGUs for integrating the NDC into local plans
and programs. This includes training, workshops, and technical assistance;

(g) Development of Nature-Based Tourism Solutions. - Develop and promote
nature-based tourism solutions that align with climate goals. This includes
sustainable tourism practices that protect natural resources and enhance
local resilience;

(h) Integration with Urban Development Plans. - Ensure the integration of the NDC
with urban development plans, promoting low-carbon and climate-smart
infrastructure projects. Urban planning should prioritize sustainability and
resilience;

(

Inclusion of Indigenous Peoples’ Needs and Rights. - Ensure the needs and rights
of indigenous peoples are addressed, applying a gender lens in the NDC
implementation process. Policies should promote equity and social
inclusion; and

0

Representation of Youth Interests. - Represent youth interests and ensure
intergenerational justice in policies and measures. Youth engagement should
be a cornerstone of climate initiatives.

ARTICLE 4
INTERNATIONAL TRANSFER OF MITIGATION OUTCOMES

SEC. 17. Mandate to the Climate Change Commission. - The CCC is hereby
mandated to establish the necessary protocols, procedures, and systems to effectively
implement the mechanisms for ITMOs and other Article 6 transactions, including:

(a) System for Issuance of Letters of Authority (LoA). - The CCC shall be
responsible for issuing LoA to project developers seeking to engage in
ITMOs. This LoA shall serve as official government approval for the
transfer of carbon credits under Article 6 mechanisms, ensuring compliance
with national and international regulations;

(b) System for Corresponding Adjustments. - The CCC shall establish a system for
making corresponding adjustments to the national GHG inventory and
mitigation outcomes to reflect the transfer of ITMOs. This system shall

12


1 prevent double counting of emission reductions and ensure the integrity of
2 the country’s NDC commitments. Carbon credits based on carbon rights
3 granted by the government to tenure holders for lands of the public domain,
4 as well as those generated in public lands and ancestral domain lands, shall
5 not be claimed by the government as part of its NDC accomplishment or
6 must be removed from government accounts. Such credits must be
7 excluded from government accounts to prevent double-counting and
8 ensure they remain available for market transactions. Corresponding

9 adjustments shall be reflected dynamically and in real time into the NDC
10 ITMOs accounts in the NICCDIES and shall be made available to the public.
1 This provision aims to uphold the integrity of private and indigenous
2 carbon projects and their contributions to global climate mitigation efforts;
13
14 (c) Optimizing International Climate Finance and NDC Achievement. - The CCC
15 shall coordinate with relevant agencies to develop a strategy that optimizes
16 both the generation of climate finance through ITMOs and the achievement
17 of the NDC objectives. The CCC shall formulate a comprehensive
18 mitigation strategy to guide government actions in meeting NDC targets;
19 and
20
21 (d) Enabling Private Sector Engagement in Carbon Markets. - The CCC shall
22 facilitate the participation of the private sector in carbon markets by
23 enabling private entities to generate and sell carbon credits from their
24 mitigation activities. The government shall focus its investments on areas
25 outside the opportunities available to the private sector, such as
26 investments in protected areas for Reducing Emissions from Deforestation
7 and Forest Degradation Plus initiatives. This approach ensures that
28 government efforts are complementary to private sector actions, thereby
29 maximizing the overall impact on national mitigation outcomes.

30

31 ARTICLE 5

32 DECARBONIZATION PLAN AND INVESTMENT ROADMAP FOR

33 COVERED ENTERPRISES

34

35 SEC. 18. Enterprises and Sectors Covered in this Act. - Covered sectors are

36 those that materially contribute to national GHG emissions, as determined by the
37 government. This determination considers both the current and potential future
38 contributions of these sectors to GHG emissions. Materiality assessments will be based
39 on emissions volume, economic significance, and potential for emission avoidance
40 and reduction. The covered sectors include:

41

42 (a) Sectors with Energy-Related Emissions:

43 i, Petroleum refining, electricity generation, combined heat, and power
44 generation;


ii, Manufacturing and other industries and construction with fuel
combustion activities - iron and steel, chemicals, pulp and paper,
food processing, beverage, tobacco, mining and quarrying, textile,
infrastructure, utilities, among others; and

iii, Industries with fugitive emissions - oil and natural gas, fuel
transformation (coke production, gasification transformation, etc.);

(b) Transport Sector - includes aviation, water-borne, and road transport;

(0) Sectors with Industrial Process Emissions and Product Use:
i, Mineral industry (Cement, Lime, Glass, etc.);

ii, Chemical industry (Petrochemical and Carbon Black Production,
Fluorochemical Production);

iii, Metal industry;

iv. Electronics industry; and

v. Product use of ozone-depleting substances substitutes (Air-
Conditioning and Refrigeration, Blowing Agents, Fire Protection);

(d) Sectors with Agriculture- and Forestry-related Emissions:
i, Manufacturing companies with supply chain in agriculture and
forestry, e.g., food and beverage, palm oil, etc.; and
ii, Companies with land conversion activities that result to loss of
carbon stocks;

(e) Sectors with Wastes-Related Emissions:
i, Manufacturing and commercial establishments that generate
biodegradable wastes that end up in landfills;
ii, Manufacturing and commercial establishments that generate
effluents with high Biological Oxygen Demand content; and
iii. | Manufacturing establishments that use packaging that ends up in
dumpsites that are subjected to open burning; and

(f) All other emerging sectors that materially contribute to the countries’ GHG
emissions as determined by CCC.

SEC. 19. Mandate for Covered Enterprises. - All covered enterprises shall be

mandated to prepare a decarbonization plan aligned with the objective to limit global
temperature rise to below two degrees Celsius (2°C) above pre-industrial levels, with
the goal of achieving net-zero emissions by 2050.

The decarbonization plan shall outline specific, measurable, and time-bound

carbon reduction pathway with milestones and targets from the effectivity of this law
towards 2050. These milestones shall include annual targets to ensure a progressive
reduction in GHG emissions. The decarbonization pathway must be consistent with
national decarbonization pathways and sector-specific targets established under this

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Act and shall incorporate the latest climate science and technological advancements
to ensure effectiveness and relevance.

The decarbonization plan shall include the following components:

(a) Emissions Baseline and Projections. - A detailed inventory of current GHG
emissions using globally acceptable GHG inventory standards and future
emissions projections under a business-as-usual scenario. The business-as-
usual scenario represents the projected emissions trajectory if no additional
mitigation measures are implemented beyond those already in place.

(b) Emissions Reduction Strategies. - A comprehensive strategy for reducing
direct and indirect emissions, including the implementation of energy
efficiency measures, adoption of renewable energy, and other low-carbon
technologies. This shall include:

i.

ii,

Reduction Strategies within the Value Chain. - Measures and
initiatives to reduce emissions within the enterprise's own
operations and supply chain. This includes implementing energy
efficiency improvements in production processes and facilities,
transitioning to renewable energy sources for power and heating
needs, enhancing waste management practices to minimize methane
emissions, and reducing emissions from logistics and transportation
through fleet optimization and the use of low emission vehicles;

Reduction Strategies beyond the Value Chain. - For emission sources
within its value chain that are not yet financially viable to reduce, the
covered enterprises are given the option to meet their reduction
milestones and targets:

(1) Insetting - Covered enterprises may invest outside their value
chain to drive a corresponding amount of reduction beyond their
value chain that can be more financially viable. This may involve:
(1) establishing and operating a new decarbonization enterprise
that focuses on reducing emissions through innovative projects
and technologies, or (2) investing in existing companies or by
buying equity in firms that are dedicated to decarbonization
investments, ensuring these enterprises contribute to significant
emissions reductions; or

(2) Offsetting - Covered enterprises may also purchase carbon
credits from certified projects developed by other entities that
reduce or remove emissions. This allows covered enterprises to
achieve their emissions reduction targets by supporting external
projects that are verified and credible. Examples include

15


reforestation
iatives; and

purchasing credits from renewable energy proj
projects, or other certified emissions reduction i

(©) Investment Roadmap. - An investment plan detailing the financial resources
and investments required to achieve the emissions reduction targets within
the short-, medium-, and long-term planning horizons.

SEC. 20. Submission and Approval. - Covered enterprises shall submit their
decarbonization pathways to the DENR for review and approval within one year from
the effectivity of this law. The DENR shall assess the pathways for compliance with
the established national and sectoral decarbonization targets and provide feedback for
necessary revisions.

SEC. 21. Periodic Update of Decarbonization Plan. - Decarbonization
pathways shall be reviewed and updated at least every five (5) years to incorporate
new scientific data, technological advancements, and policy changes. Covered
enterprises shall submit updated pathways to the DENR for approval, ensuring
continuous alignment with national climate goals and international commitments.

ARTICLE 6
CARBON PRICING AND DECARBONIZATION FUND

SEC. 22. Emissions Allowance, - The CCC shall be responsible for determining
and allocating the permitted emissions, known as the emissions allowance, for each
sector and for each covered enterprise within that sector. The emissions allowance
shall be established annually based on the sectoral consolidated decarbonization
pathways of covered enterprises as provided in Section 19.

(a) Determination of Sectoral Emissions Allowance. - The CCC shall determine the
annual emissions allowance for each sector by consolidating and analyzing
the decarbonization pathways submitted by all covered enterprises within
the sector. This includes evaluating the sector's overall emissions reduction
targets, considering advancements in climate science and international
commitments, and coordinating with relevant stakeholders to ensure the
allowances are ambitious and achievable.

(b) Allocation of Emissions Allowance to Covered Enterprises. - The CCC shall
allocate the annual emissions allowance to each covered enterprise within
the sector, proportionate to their contribution to the sector's total emissions
and their potential for emissions reduction, ensuring alignment with
sectoral and national decarbonization targets.

(6) Review and Adjustment of Emissions Allowance. - The CCC shall regularly
review and adjust the emissions allowances based on new data,
technological advancements, and changes in climate policy. This involves

16


collecting and analyzing updated emissions data and progress reports from
all covered enterprises, incorporating feedback from stakeholders, and
issuing revised emissions allowances and guidelines to maintain the
effectiveness and relevance of decarbonization strategies

SEC. 23. Determination of Excess Emissions and Pricing. - Any GHG
emissions by a covered enterprise that exceed the annual emissions allowance for a
given year shall be subject to a carbon price set by the CCC. The following provisions
shall apply:

(a) Determination of Excess Emissions. - The excess emissions of a covered
enterprise shall be calculated as the difference between the actual GHG
emissions for the year and the allocated annual emissions allowance of the
same year.

(b) Imposition of Carbon Price. - Covered enterprises with excess emissions shall
be required to allocate funds equivalent to the carbon price for each metric
tonne of COze emitted above the allowed limit. This carbon price shall be
determined by the CCC in consultation with stakeholders and relevant
agencies, based on the methodology provided in Section 24.

SEC. 24. Methodology of Pricing Carbon Emissions. - The methodology for
pricing carbon emissions shall be anchored on objective and reasonable bases. The
total carbon price shall be based on two principal cost components:

(a) Mitigation Cost Component. - The price of caron shall reflect the cost of
mitigating carbon emissions, specifically the cost associated with the
removal of one metric tonne of CO: or its equivalent from the atmosphere.
This component ensures that the carbon price covers the expenses related
to emissions reduction technologies and practices; and

(b) Preventive Resilience Cost Component. - In addition to the mitigation cost, the
carbon price shall also include the cost of preventive resilience measures.
This considers the broader socio-economic costs of carbon emissions,
factoring in the expenses required to effectively adapt to, avoid, and
minimize the adverse impacts of climate change on communities,
industries, ecosystems, society, and the economy.

The carbon price shall be reviewed and adjusted periodically every three (3)
years to reflect changes in mitigation and resilience costs, ensuring that the pricing
mechanism remains effective and aligned with national and international climate
goals. This dynamic approach guarantees that the carbon price accurately represents
the true cost of carbon emissions and drives continuous improvement in emissions
reduction efforts,

v7


SEC. 25. Decarbonization Fund. - Covered enterprises shall establish a
decarbonization fund into which the funds corresponding to the carbon price for
excess emissions shall be allocated. These funds shall be exclusively used to finance
emissions reduction activities.

SEC. 26. Options for Allocation of Decarbonization Fund, ~ Covered
enterprises shall be given the option to allocate its own decarbonization fund into the
following options:

(a) Reduction of Emissions with the Value Chain. - Covered enterprises shall
allocate decarbonization fund to reduce emissions within their value chain
where viable. This includes implementing energy efficiency improvements,
transitioning to renewable energy sources, and enhancing waste
management practices;

(b) Investment in Viable Business Models Beyond the Value Chain. - Covered
enterprises may allocate decarbonization fund to invest in decarbonization
activities beyond their value chain through the following options:

i.

ii

Investment and Operation of Own Decarbonization Enterprise.
establishment and operation of their own enterprise focused on
decarbonization technologies and practices;

. Collective Investment. - pooling of resources with other covered

enterprises to invest in and operate a decarbonization business
model or technology, thereby achieving economies of scale and
greater impact; and

i. Equity Investment. - purchase of equity in an enterprise solely

dedicated to investing in and operating decarbonization projects and
technologies; and

(©) Transfer of Decarbonization Fund and Obligations. ~ Covered enterprises may
transfer their decarbonization fund and obligations to third parties,
including:

i,

Government Allocation. - Transfer of funds to the national
government for allocation for decarbonization and climate resilience
programs, projects, and activities such as those financed by the
People’s Survival Fund; and

ii. Purchase of Allowance or Carbon Offsets. - Purchase of excess allowance

from obliged enterprises with emissions falling below their
emissions allowances or purchase of carbon offsets from certified
projects implemented in the Philippines that meet internationally

18


recognized carbon credits certification standards and
methodologies, ensuring that the offsets represent real, measurable,
and additional emissions reductions.

SEC. 27. Decarbonization Taxonomy. ~ The CCC shall, in coordination with
relevant government agencies and private sector stakeholders, develop a
decarbonization taxonomy, as guidance for companies to allocate their
decarbonization fund towards sustainable investments. This taxonomy will categorize
various decarbonization technologies and projects, including nature-based solutions,
providing standardized definitions and criteria that align private sector investments
with national and global decarbonization goals.

ARTICLE7
COMPLIANCE MECHANISM

SEC. 28. Annual Compliance Report. - All covered enterprises are required to
submit an Annual Compliance Report to the DENR. The Annual Compliance Report
shall contain the following:

(a) Emissions Baseline and Reduction Progress. - A detailed inventory of the
current GHG emissions, including any reductions achieved during the
reporting period, measured against the enterprise’s decarbonization
pathway;

(b) Reduction Activities and Outcomes. - A comprehensive description of specific
emissions reduction activities undertaken, their outcomes, and the impact
on the enterprise’s overall GHG emissions. This shall include the following:

i. Implementation of energy efficiency improvements;

ii, Transition to renewable energy sources;

Enhancements in waste management practices;

iv. Other measures and initiatives undertaken within the value chain to
reduce emissions; and

v. Quantitative and qualitative outcomes of these activities and their
contributions to the enterprise's emissions reduction targets;

(0) Emissions Allowance and Excess Emissions. - Documentation of the allocated
emissions allowance for the year and any excess emissions, including the
calculation of funds allocated to the decarbonization fund;

(A) Allocation of Decarbonization Fund. - A comprehensive account of how the

decarbonization fund was allocated, detailing investments in emissions
reduction activities, both within and beyond the value chain;

19


(e) Future Plans. - Outline of planned emissions reduction activities and
investments for the upcoming year, aligned with the enterprise's
decarbonization pathway.

SEC. 29. Third-Party Audit Report. - Covered enterprises are required to
secure a third-party audit report to accompany their Annual Compliance Report. The
third-party audit shall include:

(a) Verification and Compliance Assessment. - Verify the accuracy of the emissions
data, reductions achieved, allocation of decarbonization fund reported by
the covered enterprise, and assess the enterprise's compliance with the
emissions allowance; and

(b) Audit Findings. - Include detailed findings and recommendations to
enhance the enterprise's compliance with its decarbonization pathway.

SEC. 30. Role of DENR in Compliance Monitoring. - The DENR shall be
responsible for monitoring the compliance of covered enterprises for their submission
of Annual Compliance Report and third-party audit report as specified in this Act.

SEC. 31. Development and Implementation of Verification Standards and
Methodologies for Emissions Reporting and Compliance. - The CCC shall develop
and implement comprehensive standards, procedures, and methodologies for the
verification of emissions reporting and compliance with the provisions of this law by
covered enterprises. These standards will guide third-party verifiers in their
verification processes and in the issuance of statements of attestation.

The established standards and methodologies shall:

(a) Guarantee the integrity, accuracy, and reliability of reported emissions data
and the compliance verification process; and

(b) Include specific criteria and practical approaches for both verifying
emissions data and assessing compliance with this Act.

SEC. 32, Development and Administration of Accreditation Process for Third-
Party Verifiers. - The CCC is hereby vested with the authority to develop procedures
and administer the accreditation of independent verifiers. The CCC shall:

(a) Develop Accreditation Procedures. - Establish clear and comprehensive
procedures for the accreditation of third-party verifiers. These procedures
shall be designed to ensure that third-party verifiers meet the stringent
standards required for the verification of emissions reporting and
compliance assessments;


(b) Administer the Accreditation Process. - Implement the entire accreditation
process from application to approval, ensuring that all third-party verifiers
undergo a rigorous evaluation based on the established procedures and
standards; and

(©) Ensure Compliance with Accreditation Standards. - Regularly review the
performance of accredited third-party verifiers and ensure they are
compliant to the latest version of the accreditation standards.

ARTICLE 8
PENALTIES FOR NON-COMPLIANCE

SEC. 33. Penalties for Non-Compliance. - Covered enterprises that fail to
comply with the provisions of this Act shall be subject to the following, penalties:

(a) Payment of Penalties. - Covered enterprises that exceed their emissions
allowance and fail to allocate the required funds to their decarbonization
fund shall pay a penalty amounting to twice the estimated amount of the
decarbonization fund that should have been allocated;

(b) Failure to Submit Reports. - Covered enterprises that fail to submit their
Annual Compliance Report or third-party audit report by the designated
deadlines shall be subject to a penalty determined by the DENR; and

(©) Authority to Impose Penalties. - The DENR shall have the authority to impose
the penalties specified in this section on covered enterprises found to be
non-compliant with the provisions of this Act.

ARTICLE9
ENABLING MECHANISMS

SEC. 34. Access to Carbon Markets. - The CCC shall provide technical
assistance to covered enterprises to facilitate access to carbon markets. This assistance
shall include:

(a) Linkage to Potential Buyers. - The CCC shall facilitate connections between
covered enterprises and potential buyers of carbon credits to support the
sale and trading of carbon credits;

(b) Technical Support for Registration. - The CCC shall provide technical support
for the registration of carbon projects in recognized carbon certification
programs, ensuring that enterprises meet the necessary standards and
requirements to participate in carbon markets; and

2


(©) Tax Deductibility of Certification Expenses. ~ Carbon certification expenses
shall be considered allowable deductions from gross income in accordance
with Section 34 of the National Internal Revenue Code of 1997, as amended.

SEC. 35. Tax Incentives. ~ Investments in emerging low-carbon technologies
by covered enterprises shall be eligible for income tax holidays and enhanced
deductions on research and development expense in accordance with Title XIII of the
National Internal Revenue Code of 1997, as amended by Republic Act No. 12066,
otherwise known as the “Corporate Recovery and Tax Incentives for Enterprises to
Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act”.

SEC. 36. Facilitation of Access to International Climate Finance. - The CCC
shall facilitate access to international climate finance to support the implementation
of decarbonization pathways and related initiatives by covered enterprises. This
includes identifying funding opportunities, assisting in the preparation of funding
proposals, and ensuring compliance with international funding requirements.

SEC. 37. Other Support Function of CCC. - The CCC shall be responsible for
consolidating the reduction strategies and roadmaps of covered enterprises,
developing and maintaining an online registry, creating standardized templates for
GHG emissions accounting and reporting, facilitating national and sectoral
decarbonization strategies, and facilitating access to international climate finance and
mechanisms for trading ITMOs under the Paris Agreement. The mandates and
responsibilities of the CCC shall include:

(a) Creation of Templates for GHG Emissions Accounting and Reporting. - The CCC
shall develop and provide standardized templates for the accounting and
reporting of GHG emissions baselines, adopting globally acceptable
methodologies. These templates shall ensure consistency, accuracy, and
transparency in the reporting process and shall be mandatory for all
covered enterprises;

(b) Consolidation of Reduction Strategies and Roadmaps. - The CCC shall be
responsible for collecting and consolidating the decarbonization pathways
submitted by all covered enterprises. This includes assessing and validating
the individual pathways to ensure alignment with national decarbonization
targets and sector-specific goals; and

(6) Development and Maintenance of an Online Registry. - The CCC shall establish
and maintain a comprehensive online registry to be integrated in
NICCDIES, that serves as a centralized database for all decarbonization
pathways and related information. The online registry shall:

i. Contain detailed information on the decarbonization pathways of all
covered enterprises, including emissions baselines, reduction

2


strategies, investment roadmaps, monitoring and reporting
mechanisms, and risk management;

Ensure transparency and accessibility, allowing public access to
relevant data while protecting confidential business information,
and include features for stakeholder engagement, public feedback,
and knowledge sharing;

ii

i. Enable real-time tracking and reporting of progress in achieving
emissions reduction targets, integrating third-party verification
reports, and compliance audits for data accuracy and reliability;

iv. Support the analysis and reporting of aggregated data to inform
national climate policy, facilitate international reporting, and
continuously improve decarbonization strategies at national and
sectoral levels; and

v. Establish protocols for data security, user access, and protection of
sensitive information, ensuring the registry is regularly updated
with the latest data from covered enterprises.

SEC. 38. Support Function of LGUs. - LGUs should integrate climate change
adaptation and mitigation measures in their local plans and programs. LGUs shall
support and facilitate the activities of covered enterprises as regards their
decarbonization investments within the respective jurisdiction of LGUs.

ARTICLE 10
MISCELLANEOUS PROVISIONS

SEC. 39. Appropriations. - The amount necessary for the initial
implementation of this Act shall be charged against the current year’s appropriations
of the department or agencies concerned. Thereafter, such sums as may be necessary
for the continued implementation of this Act shall be included in the annual General
Appropriations Act.

The LGUs concerned, in consultation with the CCC, may provide the necessary
funds for the implementation of this Act.

SEC. 40. Annual Report to Congress. - The implementing agencies shall report
to Congress on their progress in carrying out the provisions of this Act for each fiscal
year. The reports shalll be consolidated by the CCC for presentation to the appropriate
committee in Congress at a meeting called for the purpose.

SEC. 41. Staffing Complement of the CCC. - The CCC shall determine the
additional positions required for purposes of this Act consistent with its

2B


organizational structure and staffing pattern, subject to evaluation and approval of

the DBM.

SEC. 42. Implementing Rules and Regulations. - The CCC shall, in
coordination with the NDC Steering Committee, draft and issue implementing rules
and regulations necessary, in coordination with other relevant and appropriate
government agencies within sixty (60) days after its approval.

SEC. 43. Separability Clause. - If for any reason any section or provision of this
Act is declared by the court as unconstitutional or invalid, the other sections or
provisions thereof shall not be affected thereby.

SEC. 44. Repealing Clause. - All laws, ordinances, rules, and regulations, and
other issuances or parts thereof, which are inconsistent with this Act, are hereby
repealed or modified accordingly.

SEC. 45. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation,

Approved,

m