FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
S.B. No. 1364 
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
'( ,\ 
, J' 
Global warming has reached an alarming stage. It is a scientific certainty that increasing 
amounts of carbon dioxide and other greenhouse gases are heating up the earth's 
climate and is melting the polar ice caps that in turn is already leading to an alarming 
rise in sea levels. 
A World Bank Study on Climate Change in the Philippines states that this rise in sea 
levels will be catastrophic for the Philippines, given that seventy per cent (70%) of its 
towns and cities are classified as coastal areas. A mere one (1) meter rise in sea level is 
estimated to submerge 129,000 hectares of land in twenty-eight (2S) of our eighty (SO) 
provinces, including Cavite, Metro Manila and Bulacan, as per the RP First National 
Communication on Climate Change and the Climate Research Journal. This could spell 
disaster to many sectors of the country such as our agriculture, infrastructure, and 
economic sector. 
Amidst this looming scenario, our economy is growing at a considerable pace. The 
National Statistical Coordination Board reports a substantial growth of 9.5% of the 
Gross Domestic Product from 2009 to 2010 while our Gross National Product has a 
growth rate of 11.5% over the same period. With increasing economic growth, influx of 
investments, both local and foreign, 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. 
The Department of Environment and Natural Resources (DENR), in collaboration with 
the Department of Trade and Industry (DTI), shall set a cap on the greenhouse gas 
emissions of companies, upon consultation with the industrial sector. 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 fraely traded by them in a market-driven system, Companies with excess 
gree.nhouse 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. 
2 
~LE;RDA3> 
Senator 


FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
S.B. No. 1364 
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 III 
Congress assembled: 
SECTION 1. Title.- This Act shall be known as the "Low Carbon Economy Act." 
SEC. 2. Declaration of Policy.- 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 Terms.- 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. 
1 


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; and 
b) the most cost-effective opportunities to reduce emissions. 
SEC. 6. Allowances. - The DENR Secretary shall annually issue an allowance for 
greenhouse gas emissions equivalent to the emissions allowed under the cap imposed 
for such year. Such allowance shall authorize the emission of one (1) 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. 
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 (6) months from the effectivity of this Act. 
SEC. 10. Enforcement. - In case of excess. greenhouse gas emissions by an entity 
during any calendar year, the entity shall: 
A) submit allowances for such emissions during the following calendar year; and 
B) pay a civil penalty. 
SEC. 11 Penalties.- For each quantity of excess greenhouse gas emISSIOns 
constituting carbon dioxide or a 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 upon consultation with DTr'and experts on the field. 
SEC. 12. Climate Reinvestment Fund.- There is established a fund to be known as 
the Climate Reinvestment Fund, hereafter referred to as 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 shall 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. 
2 


SEC. J4. 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, 
3