REPUBLIC OF THE PHILIPPINES 10 OCT 2012

HOUSE OF REPRESENTATIVES 2.0 PA

QUEZON CITY

FIFTEENTH CONGRESS
Third Regular Session

HOUSE BILL NO.

Introduced by the Honorable Representative Ronald M. Cosalan

EXPLANATORY NOTE

The Philippines is a country rich with biological resources, recognized as one
of the world’s mega-diversity countries, with more than 50,000 species of flora and
fauna and is host to one of the world’s richest concentration of marine life with more
than 500 coral reef species, 2,000 marine fish species, 40 mangrove species and 16 sea
grass species. However, these biological resources are under threat because the eco-
systems that support them are continually being severely degraded and
compromised. The country has lost much of its original forest cover with only less
than 18% or about 5 million hectares of the 21 million original hectares remaining.
The marine environment is likewise suffering from extreme degradation with only
4% of its coral reefs in excellent condition. The fast pace of population growth,
urbanization and industrialization in the country have resulted in the conversion of
the natural ecosystems to other uses to make way for the ever increasing needs of a
growing population for food, shelter, clothing and the demands of growth and
development. Air pollution has worsened, rising living standards have contributed
to the accumulation of wastes and unabated industrial and agricultural activities
have caused extensive pollution of water bodies.

To add to this dismal state, the effects of climate change have taken its toll on
the country’s environment and natural resources, the Philippines being one of the
most vulnerable countries to the effects and impact of climate change in Asia.
Extreme weather conditions, more severe typhoons, landslides, erosions, flooding,
and drought have been experienced in the recent past and these have led to food and
water scarcity, health problems and infrastructure damages costing billions of pesos.

The once pristine and rich Philippine archipelago is fast becoming a spectre of
environmental degradation and natural resource depletion.

To address and combat this situation, the Philippine government has, through
the years, enacted a plethora of laws and established institutions to regulate the
country’s environment and natural resources. Command and control measures in
the form of laws and regulations on environmental protection, pollution emissions,
human health, land use, among others have been introduced. Still, such



environmental regimes failed to abate the destruction of the natural resources and of
the environment.

Nonetheless, random initiatives from the private sector and a handful of Local
Government Units (LGUs) have shown that caring for the environment and the
natural resources may be a promising “industry” or enterprise through the creation
of markets/incentives, by developing markets for environmental services and by
introducing improved and environment friendly livelihood. It has been proven that
as a community/organization/LGU CARES for the environment and natural
resources, it may CLAIM equitable shares from the economic benefits generated
from the use or exploitation of the natural resources that they have been caring for
(benefits to a supplier). Likewise, as stewards of the environment and its natural
resources, it may be given the opportunity to CRI economic wealth without
compromising the long term viability of its ecosystems.

Similarly, it has been shown from isolated cases in the country that people,
institutions or corporations are willing to reward, compensate or pay the caretakers
of the resources as an assurance for the availability of the resource (e.g. water,
plants/trees for pharmaceutical purposes or scenery) they require, In a way, some
refer to it as an investment, much the same way as a corporation, through its
Corporate Social Responsibility, would willingly support a community for the
damage that is has brought about to the community in the pursuit of its business
objectives

These snippets of successful endeavors are just a few of the forms or models
of the concept “Payment for Environmental Services”, which, if institutionalize in
the country promises to address environmental degradation and natural resource
depletion. Environmental services refer to those provided by forests and forestry
plantations that have an impact on environmental protection and improvement
‘They are the following: mitigation of greenhouse gas emissions (fixing, reduction,
sequestration, warehousing and absorption); protection of water for urban, rural or
hydroelectric use; biodiversity protection to conserve it and for sustainable scientific
and pharmaceutical use; genetics research and improvement; protection of
ecosystems, life forms and natural scenic beauty for tourism and scientific ends.
Payment for Environmental Services or PES is a voluntary transaction in which a
well-defined environmental service, or land use likely to provide that service is
‘bought’ by a buyer from a provider/seller if and only if provider ensures the
continuous provision of that service (SVEN Wunder, 2005).

International interest in PES has been growing in recent years due to a
number of factors, including the increasing value of ecosystem services due to their
growing economic demand, the need to tap into new sources of finance for
conservation, growing corporate interest in making environmentally responsible
investments, and supportive changes in the governance of natural resources (Scherr
et al. 2006). Likewise, international and local events and concerns such as climate
change resulting in extreme weather conditions and severe calamities, increasing


levels of greenhouse gases that cause global warming, water scarcity, and the ever
pervasive poverty and inequality issues that have led to agreements in the
Millennium Development Goals, the United Nations Framework Convention on
Climate Change, Rio de Janeiro +20, the Philippine Agenda 21, the National Climate
Change Action Plan, Carbon Trading and the REDD plus, all the more make PES
implementation in the Philippines a MUST.

PES is one of the new approaches seeking to support positive environmental
externalities through the transfer of financial resources from beneficiaries of certain
environmental services to those who provide these services or as fiduciaries of
environmental resources, thus internalizing the benefits and creating the missing
incentives for the provision of environmental services. PES can lead to more
sustainable outcomes by generating a continuous flow of payments. PES is
considered as a means of attaining environmental protection and justice, social
justice and inter-generational justice,

This, no less, is the command of the Constitution when it mandates in Article
IL, Section 9 that “The State shall promote a just and dynamic social order that will
ensure the prosperity and independence of the nation and free the people from
poverty through policies that provide adequate social services, promote full
employment, a rising standard of living, and an improved quality of life for all”; in
Section 10 that “The State shall promote social justice in all phases of national
development”; and in Section 16 that “The State shall protect and advance the right
of the people to a balanced and healthful ecology in accord with the rhythm and
harmony of nature.”

Upon the above constitutional mandate, the passage of this bill is urgently
proposed.

, wack. M. Li —


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

FIFTEENTH CONGRESS
Third Regular Session

5628
House Bill No. YU OFS

Introduced by: HON. RONALD M. COSALAN

AN ACT INSTITUTIONALIZING AND MAINSTREAMING
PAYMENT FOR ENVIRONMENTAL SERVICES (PES) IN POLICY
AND INVESTMENT PROGRAMS

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

Section 1. Short Title. This Act shall be known and cited by the short title “Payment
for Environmental Services Act”.

Section 2. Definition of Terms. As used in this act, the following terms shall be
defined as follows:

1. Ancestral domains refer to all areas generally belonging to indigenous cultural
communities/indigenous peoples (ICCs/IPs) comprising lands, inland water,
coastal waters and resources therein, held under a claim of ownership, occupied or
possessed by ICCs/IPs, by themselves or by their ancestors, communally or
individually.

2. Biological diversity or biodiversity refers to the variability and variety among
living organisms including terrestrial, marine and other aquatic ecosystems and the
ecological complexes of which they are a part. This includes diversity within the
species (species diversity) and among ecosystems (ecosystem diversity)

3, Carbon sequestration refers to the process when trees and other vegetation absorb
carbon into the atmosphere during their growth. It may involve active absorption
through reforestation or avoided emissions of carbon through conservation of
forests


4, Climate change refers to a change in climate that can be identified by changes in
the mean and/or variability of its properties and that persist for an extended period
of time typically decades or longer, whether due to natural variability or as a result
of human activity.

5. Community-based forest management strategy refers to the strategy to improve
the well-being of forest dependent communities and at the same time ensure
sustainable management, rehabilitation and protection of forestlands and the
resources therein, through the active participation of various stakeholders.

6. Conservation refers to the planned protection and management of forests, wildlife
and other forest resources so as to prevent waste and ensure future use.

7, Departmet

refers to the Department of Environment and Natural Resources.

8, Environmental externalities refer to unintended benefits (positive) and/or costs
(negative) which are not incorporated into the price of products or services that are
sold in the market

9, Environmental services refer to those provided by forests and forestry plantations
that have an impact on environmental protection and improvement.

They are the following: mitigation of greenhouse gas emissions (fixing, reduction,
sequestration, warehousing and absorption); protection of water for urban, rural or
hydroelectric use; biodiversity protection to conserve it and for sustainable scientific
and pharmaceutical use; genetics research and improvement; protection of
ecosystems, life forms and natural scenic beauty for tourism and scientific ends.

10, Indigenous cultural communities/indigenous peoples or ICCs/IPs refers to a
group of people or homogenous societies identified by self-ascription and ascription
of others, who have continuously lived as organized community on bounded and
defined territory, and who have under claims of ownership immemorial, occupied,
possessed and utilized such territories, sharing common bonds of language,
customs, traditions and other distinctive cultural traits, or who have, through
resistance to political, social and cultural inroads of colonization, non-indigenous
religions and cultures, became historically differentiated from the majority of the

11. Landscape beauty services refer to the aesthetic and/or cultural value given to
specific sites. It may involve the protection of natural heritage sites, coral reefs,
cultural sanctuaries, or even traditional livelihoods as part of a combined
cultural/environmental landscape protection approach.

12, Non-government organization or NGO refers to a non-stock, non-profit and
voluntary organization.


13. Payment for environmental services or PES is a voluntary transaction in which a
well-defined environmental service, or land use likely to provide that service is
‘bought’ by a buyer from a provider/seller if and only if the provider ensures the
continuous provision of that service (SVEN Wunder, 2005)

14, Compensation and incentives refers to direct cash payments or payments in
kind such as provision of infrastructure, livelihood support, market preferences,
health and educational services, skills training, scholarship programs, technical
assistance or land tenure security given to provider/supplier of service to ensure its
continuous provision

15, Sellers refer to providers/suppliers of an environmental service in a PES scheme

16, Buyers refer to the users or beneficiaries of the environmental services in a PES
scheme

17. Broker refers to an intermediary in a PES scheme which facilitates the transaction
between seller and buyer and usually undertaken by the government or an NGO

18, Water services refer to water flow regulation, water quality maintenance, erosion
and sedimentation control, land salinization reduction/water table regulation and
maintenance of aquatic habitats.

Section 3. Basic Policies. Pursuant to the provisions of the Constitution to promote a
just and dynamic social order that will ensure the prosperity and independence of
the nation and free the people from poverty through policies that provide adequate
social services, promote full employment, a rising standard of living, and an
improved quality of life for all; to promote social justice in all phases of national
development; and to protect and advance the right of the people to a balanced and
healthful ecology in accord with the rhythm and harmony of nature, the State hereby
adopts the following policies relative to the institutionalization of Payment for
Environmental Services

a) Sustainable use of the country’s environment and natural resources, ~ In line with the
spirit of sustainable development, extraction/harvest/utilization of the natural
resources must not exceed the rate of the renewal of these natural resources, In the
same manner, the use of the environment as waste sink and for other services must
not threaten its natural carrying capacity.

b) Common rights but differentiated responsibilities and accountabilities of environment and
natural resource (ENR) suppliers/providers and users/beneficiaries. - The ENR providers
must assure continuing provision and increasing value of services at minimal cost
and the buyers must be willing to pay the maximal amount that captures the value
of the environmental service. Fairness must always be observed in all PES
agreements (voluntary -



PES systems will work best when the value of environmental services for
beneficiaries is high and the cost of providing services is low. Therefore the benefits
of environmental services cannot be set arbitrarily but must result from studies on
demand and economic valuation of the resource to capture full benefit. The design of
a PES scheme must be based on clear and consensual scientific evidence linking land
uses to provision of services which must be clearly defined. The valuation process
must involve economic analysis and extensive consultations —_ with
suppliers/ providers and users/beneficiaries in order to set up contributions that are
both acceptable to both parties and sufficient to fund the PES system and the
provision of needed services

Capability-building must always be done to allow participants (suppliers/ providers
and users/beneficiaries) to be flexible enough to allow adjustments to improve their
effectiveness and efficiency and adapt to changing conditions,

©) Climate Change Mitigation and Adaptation. - PES implementation must always lead
to climate change mitigation and adaptation, the latter being the supreme/over-
arching objective as it is recognized that climate change represents an urgent and
potentially irreversible threat to societies and the planet, and thus requires to be
urgently addressed by all.

Section 4. Objectives. The objectives of this law shall be the following:

1, Create awareness and appreciation of PES as a strategy in attaining sustainable
development and the realization that PES may bring about business and livelihood
opportunities to the stakeholders;

2. Provide a platform/entry point/legal/institutional framework for use and
management of resources aside from energy and mining under a PES scheme. PES
schemes for energy and mining are already embedded in the Electric Power Industry
Reform Act (EPIRA) or Republic Act 9136 and Executive Order 79, Series 2012:
Institutionalizing and Implementing Reforms in the Philippine Mining Sector,
Providing Policies and Guidelines to Ensure Environmental Protection and
Responsible Mining in the Utilization of Mineral Resources, respectively.

3. Develop capacity of major stakeholders regarding PES implementation to enable
the country to participate fully in, and to implement effectively, the country’s
commitment to attain sustainable development under the Philippine Agenda 21 and
United Nations Framework Convention on Climate Change;

4. Conduct environmental and natural resources accounting in every
community/LGU as a preparatory activity for PES implementation; and

5. Mainstream a PES mechanism in policy and investment programs of the
Philippine Council for Sustainable Development and other relevant institutions.


Section 5. Forms or Modes of PES. Different forms and modes of PES are encouraged
such as, but not limited to, the following:

1. Rewarding Upland Peoples for Ecosystem Services (RUPES) given to Indigenous
Communities who serve as stewards of watersheds.

2, Carbon Trading where firms or countries buy and sell carbon to reduce carbon
emissions. Carbon trade is intended to be an attempt to reduce overall carbon
emissions while still allowing companies or countries that may have difficulty doing
so to have an outlet for transition. It is also called emissions trading. In the
international arena, carbon is now traded and monitored like any other commodity.
The Philippines, a country rich in forests and as such a “carbon sink”, will benefit
from this PES scheme. Carbon trading is a better approach than direct taxation or
regulation. It can be cheaper and more politically acceptable for existing industries
since the initial allocation often considers rights issued in proportion to historical
emissions. Most of the income generated goes to environmental activities and helps
developing countries.

3. Reduction of Emissions from Deforestation and Degradation (REDD+) describes a
range of actions to reduce emissions from deforestation and forest degradation and
the role of conservation of carbons stocks, sustainable management of forests and
enhancement of forest carbon stocks in developing countries, supported by financing
from industrialized nations. As the global initiative on REDD+ has come to the
forefront of international climate change mitigation policy, opportunities for pilot
projects have emerged across Southeast Asia, including in the Philippines. In early
2009, several NGOs noted the potential of REDD+ in the Philippines and the need
for domestic climate change mitigation actions. Initial estimates suggest that the
Philippines has a total emissions mitigation potential of approximately 38,540,000
tons of CO2 between 2011-2030 (CIF, 2010). In addition, REDD-plus in the
Philippines could generate multiple social and biodiversity co-benefits (Phelps et al.,
2010a) in alignment with broader national goals. Such co-benefits are especially
relevant to the Philippines, as most remaining forests are under community
management, notably within the lands of Indigenous Peoples.

4, Conditional Cash Transfer for environmental protection and management, a social
development strategy that provides conditional cash grants to extremely poor
households on the condition that these households work for the protection and
management of the environment and natural resources.

5. Green Corporate Social Responsibility (CSR) is the corporate initiative to
and take responsibility for the company’s effects on the environment and
welfare by providing the affected communities livelihood projects, scholars
grants, schools, hospitals and other support systems or services.



6. Ecological Fees also known as User Fees for landscape beauty, natural and cultural
heritage, recreation and tourism services.

7. Polluter fees following the polluter pays principle.

Section 6. Role of the Government. Government acts as regulator and enabler to ensure
an adequate and sustainable supply of public goods. In many cases, government
acts as the intermediary or broker between sellers and buyers of environmental
services, The government likewise provides the necessary funds for capacity-
building, monitoring, and negotiations for international transactions such as the
REDD+

This role of the government shall be mainstreamed with the Philippine Council for
Sustainable Development. Specifically, a sub-unit for PES concerns shall be created
in the Committee on Social and Economie Dimensions (CSED). The sub-unit for PES
shall closely coordinate with the Committee on the Conservation and Management
of Resources for Development (CCMRD), Committee on Strengthening the Role of
Major Groups (CSRMG) to synchronize such other activities as environmental and
natural resource accounting and capacity building through massive information and
education ventures,

‘The sub-unit on PES shall have the following functions:

1, Identify areas covering locations from areas from one or several regions in which
‘hemes along the principle of “payments for environmental services” can be
established with the following features

a) Communities which are instrumental in producing or
maintaining the quality of an environmental resource are able to
acquire a share from the payments of users of the environmental
resource;

b) Users of an environmental resource are made to pay
communities which produce or have the potential to maintain the
quality of environmental resource; and

©) Practical user's fee and sharing schemes that capture the full
benefit of the resource and adequate in enhancing the quality of
environmental resources from source communities

2. Identify areas covering one or several regions in which schemes and arrangements
can be developed for protecting environmental resource quality in a manner that
communities are given adequate, efficient, and workable incentives to genuinely
protect the environment and preserve the quality of environmental goods.

3. Actas the lead agency for developing schemes and arrangements along the line of
payments for environmental services in select areas.


4, Related to the preceding section, the following authority is hereby vested in the
PESA Sub-Unit

a) Convene multi-agency and inter-LGU meetings:

b) Develop memoranda of agreement among several agencies and
among, several LGUs for the purpose of identifying, developing,
and implementing schemes along the line of payments for
environmental services;

©) Accept bids and proposals along the line of payments of
environmental services consistent with the authority vested into the
sub-unit by participating agencies wherein schemes on payments
for environmental services are being developed;

d) Lead multi-agency meetings to secure the concurrence of
participating agencies; and

e) Assist single LGU units on developing schemes for environment
services.

‘This Act shall take effect after its publication in a newspaper of general circulation.

Approved,