FOURTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
1 
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
Global warming has reached an alarming stage. It is not an understatement that 
increasing amounts of carbon dioxide and other greenhouse gases are heating up the 
earth's climate and that inaction could be catastrophic. 
Amidst this looming scenario, our economy is growing at a considerable pace. 
The challenge before us then is to accelerate economic growth without compromising 
the state of our environment. 
Thus, this bill introduces the concept of "low carbon economy." The idea is to 
pave the way for a cleaner environment by limiting the release of greenhouse gases by 
the industrial and commercial sector. 
Upon consultation with the industrial sector, the Department of Natural 
Resources in collaboration with the Department of Trade and Industry, shall set a cap 
on the greenhouse gas emissions of companies. 
To cushion the impact of a cap on 
companies, this bill allows them to trade credits with each other. Allowances for 
greenhouse gas emissions will be issued to companies which, in turn, may be freely 
traded by them in a market-driven system. Companies with excess greenhouse gas 
emissions may buy allowances from the market, while companies with less greenhouse 
gas emissions may sell their allowances to the market. This trading mechanism allows 
for a pseudo-financial market that allows for companies to transact with each other but 
with an additional benefit of maintaining the target emissions in the economy. 
The emission cap-and-trade system is a constructive and business-friendly 
approach to countering global warming. Ultimately, a market for companies that emit 
greenhouse gases shall compete to clean up our air. 
Undoubtedly, a low carbon economy would accelerate reduction of greenhouse 
gas emission, encourage use of new climate change-related technologies, and ensure 
benefits to consumers from the trading in allowances. 
In view of the above, passage of this bill is earnestly sought. 
Senator 


FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
S E N A T E  
S. No. 
Introduced by Senator Loren Legarda 
AN ACT 
TO PROMOTE A LOW CARBON ECONOMY ESTABLISHING FOR THIS 
PURPOSE THE EMISSION CAP-AND-TRADE SYSTEM IN THE INDUSTRY 
SECTOR TO REDUCE GREENHOUSE GAS EMISSIONS AND PROTECT THE 
CLIMATE 
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Title.- This Act shall be known as the ”Low Carbon Economy 
Act.” 
SEC. 2. 
Declaration of PoZicy.- It is the policy of the State to promote 
sustainable development. 
Towards this end, this bill seeks to maximize the 
contribution of the industrial and commercial sector in reducing greenhouse gas 
emissions and minimize the adverse effects of climate change on small businesses 
through the establishment of a market-driven system of greenhouse gas tradable 
allowances. 
SEC. 3. Definition of Terns.- For purposes of this Act, the following shall have 
the corresponding meanings: 
A) ”Carbon Dioxide Equivalent” shall refer to the quantity of greenhouse gas that 
makes the same contribution to global warming as one (1) metric ton of 
carbon dioxide, as determined by the Department of Environment and 
Natural Resources (DENR) Secretary, taking into account the global warming 
potentials published by the Intergovernmental Panel on Climate Change; 
B) “Greenhouse Gas” shall refer to the following gases: carbon dioxide, methane, 
nitrous oxide, hydroflourocarbons, perflourocarbons, sulfur hexafluoride, 
perflourocarbons, sulfur hexafluoride, or any other anthropogenically- 
emitted gas that is determined by the DENR Secretary to contribute to global 
warming; and 
C) “Covered Sector” shall refer to the industry and commercial sectors. 
SEC. 4. Emission Reduction Measures/ Targets. - Emission reduction measures 
shall be adopted by the DENR Secretary to achieve maximum technologically feasible 
and cost-effective reductions in greenhouse gas emissions. 


Annual emission reduction targets shall be set for each calendar year by the 
President, through the Department of Natural Resource in collaboration with the 
Department of Trade and Industry, upon consultation with other agencies having 
jurisdiction over sources of greenhouse gases. 
SEC. 5. Cap on Greenhouse Gas Emissions. - To achieve the emission targets set 
pursuant to this Act, a cap shall be imposed on the greenhouse gas emissions of the 
covered sector with - 
(A) the highest greenhouse gas emissions; 
(B) the most cost-effective opportunities to reduce emissions: 
SEC. 6. Allowances. ~ 
The DENR Secretary shall issue each year a quantity of 
greenhouse gas emissions allowances equivalent to the emissions allowed under the 
cap imposed for such year. Each such aliowance shall authorize the emission of one 
metric ton of carbon dioxide, or in the case of a global warming pollutant other than 
carbon dioxide, a carbon dioxide equivalent. Such an allowance does not constitute a 
property right. 
SEC. 7. Distribution of Allowances. - The allowances shall be distributed by the 
DENR Secretary to the covered sector by allocation. 
SEC. 8. Trading System. - There shall be established a trading system under 
which allowances issued under this Act may be sold, exchanged, purchased or traded 
by any person or entity. 
SEC. 9. Monitoring. - The DENR Secretary shall ensure that greenhouse gas 
emissions and the use of allowances issued under this Act are accurately tracked, 
reported and verified, to ensure that the cap-and-trade system established under this 
Act is fully implemented. 
The initial database on greenhouse gas emissions by covered sectors shall be 
established within six months from the effectivity of this Act. 
SEC. 10. Enforcement. - In case of excess greenhouse gas emissions by an entity 
A) submit allowances for such emissions during the following calendar year; 
B) pay a civil penalty. 
during any calendar year, the entity shall: 
and 
. 
Penalties.- For each quantity of excess greenhouse gas emissions 
constituting carbon dioxide or one carbon dioxide equivalent, the amount of civil 
penalty shall be twice the market price for an allowance at the end of the calendar year 
in which the excess emissions occurred. The DENR Secretary shall establish the method 
of determining such market price. 
SEC. 11. 
SEC. 12. Climate Reinvestment Fund.- There is established a fund to be known 
as the Climate Reinvestment Fund, hereafter referred to the Fund. The fund shall 
consist of the amount of civil penalties assessed under Section 11 of this Act. It shall be 
administered by the DENR and to be used exclusively for activities addressing global 
warming. 
SEC. 13. Appropriations.- The amount necessary for the initial implementation 
of this Act shall be taken from existing allocations of the DENR. Thereafter such sums 


as shall be necessary to carry out the provisions of this Act shall be included in the 
annual General 
.
.
 
Appropriations Act. 
SEC. 14. Implementing Rules and Regulations - The Department of Environment 
and Natural Resources and the Department of Trade and Industry are hereby 
empowered to issue implementing rules and regulations necessary, in coordination 
with other relevant and appropriate government agencies within sixty (60)days after its 
approval. Failure to issue rules and regulations shall not in any manner affect the 
executory nature of the provisions of this Act. 
SEC. 15. 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. 16. 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. 17. Effectivity.- This Act shall take effect upon its complete publication in 
the Official Gazette or in at least two (2) national newspapers of general circulation. 
Approved,