TWENTIETH CONGRESS OF THE
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

2481

House Bill No.

Introduced by Hon. Antonio B. Legarda, Jr.

AN ACT
PROMOTING A LOW CARBON ECONOMY, ESTABLISHING FOR THIS
PURPOSE AN EMISSIONS TRADING SYSTEM AND IMPLEMENTATION
MECHANISM TO ACHIEVE NATIONAL CLIMATE TARGETS

EXPLANATORY NOTE

The climate emergency is no longer a distant threat—it is a present and
accelerating crisis. Rising global temperatures, more intense extreme weather events, and
increasing socio-economic vulnerabilities are now part of everyday reality in the
Philippines and across the world.

‘As of 2024, the Intergovernmental Panel on Climate Change (IPCC) confirms that
the Earth’s average surface temperature has risen by 1.1°C above pre-industrial levels,
with warming accelerating. Without deep, rapid, and sustained cuts in greenhouse gas
(GHG) emissions, the world is on track to breach the 1.5°C threshold by the early 2030s—
a tipping point that would exponentially increase risks to human health, food systems,
ecosystems, and national economies.'

‘The scientific consensus is unequivocal: human activities — particularly fossil fuel
combustion and deforestation—are the dominant causes of global warming.

The Philippines, despite contributing minimally to global emissions, is among the
most climate-vulnerable nations. It faces stronger typhoons, prolonged droughts, sea-

' Retrieved June 26, 2025 from: IPCC AR6 Synthesis Report, 2023 -
5 sy

www G/syr



level rise, and coastal displacement. Yet, the Climate Action Tracker currently rates the
country’s climate efforts as “Insufficient”, signaling that existing measures fall short of
the 1.5°C-aligned pathway.?

To fulfill its international commitment under the Paris Agreement, the Philippines
submitted its Nationally Determined Contribution (NDC) in 2021, pledging a 75%
reduction in GHG emissions by 2030, of which only 2.71% is unconditional. This ambition
underscores the urgent need for robust institutional, financial, and regulatory
An enhanced NDC is currently being
,, sector-specific mitigation pathways, particularly in

mechanisms to operationalize climate goals

developed to reflect more realisti
energy and transport.’

‘This bill proposes the establishment of a national emissions trading system (ETS) —
a market-based cap-and-trade mechanism that sets emissions limits for covered entities,
while allowing the buying and selling of emission allowances. Emitters that reduce their
emissions below their cap can trade excess allowances to others, incentivizing cost-
effective decarbonization and low-carbon innovation.

Such mechanisms have already proven effective in jurisdictions like South Korea
and the European Union, demonstrating how carbon markets can drive private-sector
engagement, clean energy investment, and green job creation, while ensuring national
emissions remain within defined limits.

‘This measure also aligns with and supports existing national policy frameworks,
including the:

1, National Climate Change Action Plan (NCCAP);
2. National Climate Risk Management Framework (NCRMF); and
3.  Institutionalized Climate Change Expenditure Tagging (CCET).

The proposed ETS is compatible with both market and non-market approaches
under the UN Framework Convention on Climate Change (UNFCCC), providing
flexibility in climate finance and implementation, especially for developing countries like
the Philippines.

2 Retrieved June 26, 2025 from:Climate Action Tracker, Philippines, 2024, -

hhttos://climateactiontracker.ora/countries/philinpines/
* Retrieved dune 26, 2025 from: UNFCCC NDC Reps, Philippines



A national carbon pricing mechanism is no longer optional — it is essential. It offers
a pathway to meet our climate targets while unlocking co-benefits: climate-resilient
infrastructure, clean energy transitions, and economic inclusion for vulnerable
communities.

In line with the policy espoused by its original proponent, Senator Loren Legarda,
this bill is being introduced as a counterpart measure. In view of the foregoing, the

immediate passage of this measure is earnestly sought.

HON/ANTONIO GAR}

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TWENTIETH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

2481

House Bill No.

Introduced by Hon. Antonio B. Legarda, Jr.

AN ACT
PROMOTING A LOW CARBON ECONOMY, ESTABLISHING FOR THIS
PURPOSE AN EMISSIONS TRADING SYSTEM AND IMPLEMENTATION
MECHANISM TO ACHIEVE NATIONAL CLIMATE TARGETS

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

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

Sec. 2. Declaration of Policy. - Itis the policy of the State to promote sustainable
development and adherence to the internationally agreed frameworks for mitigation
of climate change and decreased vulnerability to its impacts. Towards this end, there
is a need to maximize the contribution of the industrial and commercial sectors in
reducing greenhouse gas emissions (GHG) and minimize the adverse effects of climate
change through the establishment of a policy environment for technological
development and transfer, capacity building, sustainable finance supporting just
transition towards low carbon economy, including the configuration of a nationally-
appropriate market-driven system of tradable GHG allowances, among other options,
to optimize the country’s carbon goal-based transformation. The participation of
LGUs, academe, non-government stakeholders, especially champions in critical
industries for just transition, banking, and financial institutions, civil society, and the
development partners shall be ensured.


State-of-the-art and emerging low carbon technologies suitable for the
Philippine conditions, especially those that will increase the livelihoods and productivity
of the sectors concerned, and support a just transition across all GHG-emitting socio-
economic sectors with an emphasis on the energy and transport sector, including
those that will impact to building resilience and investments at the most vulnerable
communities, shail be supported under the means of implementation under the Paris
Agreement. Bilateral and multilateral approaches shall be optimized in ensuring
accelerated flow of support to the country under this Act.

Sustainable mobilization of financial resources, technological innovation, and
capacitation of both human resources and institutions, both government and non-
government, shall be a primary support mechanism under this Act.

Sec. 3. Definition of Terms. - For the purposes of this Act, the following terms are
defined:

a) “The Paris Agreement” shall refer to a legally binding international treaty
on climate change adopted by 196 Parties at the 21st Session of the
Conference of the Parties (COP 21) in Paris, on 12 December 2015 and
entered into force on 4 November 2016, with a goal to limit global
warming to well below 2, preferably to 1.5 degrees Celsius, compared
to pre-industrial levels;

b) “Low Emission Development Strategy (LEDS)” shall refer to a national,
high-level, comprehensive, long-term strategy, developed by domestic
stakeholders, which aims at decoupling economic growth and social
development from GHG — growth;

©)

“Low Carbon Technology” refers to equipment, infrastructure systems,
processes, methods, innovations, practices, and associated knowledge
that significantly reduce or eliminate GHG emissions compared to
conventional technologies. This includes, but is not limited to, renewable
energy systems, energy efficiency solutions, clean transport
technologies, sustainable agriculture practices, waste-to-energy
systems, carbon capture and storage, and nature-based solutions that
contribute to achieving a low carbon and climate-resilient economy.
Such technologies must be suitable to Philippine conditions and aligned

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qd)

e)

9)

h)

with the country’s NDC, just transition goals, and long-term climate
strategies.;

“Sustainable Development” shall refer to development that meets the
needs of the present without compromising the ability of future
generations to meet their own needs;

“Just Transition” shall refer to maximizing the social and economic
opportunities of climate action, while minimizing and carefully managing
any social disruption, political and social risks — through effective social
dialogue among all groups impacted, and respect for fundamental labor
principles and rights;

“Common but Differentiated Responsibilities and Respective Capabilities
(CBDRRC)” shall refer to the principle recognizing that each country vary
in terms of contributions to global environmental degradation, and
acknowledging that developed countries should bear primary
responsibilities in the international pursuit of sustainable development,
including the pressures put by their societies to the environment, their
command on technologies and financial resources, and their contribution
to the largest proportion of historical and current GHG —_ emissions;
“Climate Justice” shall refer to the allocation of burdens and benefits
among individuals, nations and generations;

“Net Zero Economy” shall refer to the means of cutting greenhouse gas
emissions to as close to zero as possible, with any remaining emissions
re-absorbed from the atmosphere, by oceans and forests for instance;
“Carbon Dioxide Equivalent” shall refer to the quantity of carbon dioxide
that makes the same contribution to global warming as a given amount
of greenhouse gas, taking into account the global warming potentials
published by the Intergovernmental Panel on Climate Change;
“Greenhouse Gas (GHG)” shall refer to the following gases covered
under the 2006 Intergovernmental Panel on Climate Change (IPCC)
guidelines: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons,
perfluorocarbons, sulfur hexafluoride, or any other anthropogenically-
emitted gas that is estimated by the Philippine Greenhouse Gas

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Inventory Management and Reporting System (PGHGIMRS) agencies to
contribute to global warming;

k) “Covered Sector” shall refer to the industry and commercial sectors
and/or, to sectors as may be determined appropriate by the oversight
body;

I) “Levels of GHG Inventory” shall refer to different levels as prescribe by
the DENR-EMB such as global, national, community, sectoral, entity,
product, facility and projects; and

m) “Sector/s” shall refer to the sectors prescribed under the IPCC
guidelines used as basis for the Philippine Nationally Determined
Contribution (NDC), including: agriculture, forestry and other land use,
waste, industrial processes and product use (IPPU), energy, and
transport.

n

“allowance” refers to a government-issued permit under the emissions
trading system established by this Act, authorizing the holder to emit
‘one (1) metric ton of carbon dioxide or its carbon dioxide equivalent
(COze) of greenhouse gases during a specified compliance period.
Allowances may be allocated for free, auctioned, traded, or banked in
accordance with the rules and regulations issued by the implementing
agencies. Each allowance represents a unit of tradable emissions right
under the cap-and-trade system.

0) “Climate Reinvestment Fund” or CRF refers to a special account created
under this Act, into which proceeds from the auction of emissions
allowances, civil penalties for non-compliance, and other related
revenues are deposited. The CRF shall be administered by the DENR in
coordination with the CCC, and shall be used exclusively to finance
programs, projects, and activities related to climate change mitigation,
adaptation, just transition, technology deployment, and capacity
building, as aligned with the Nationally Determined Contribution (NDC)
and subject to transparent governance and audit mechanisms.

ARTICLE II

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Philippine Greenhouse Gas Inventory Management and Reporting System
(PGHGIMRS)

Sec. 4. Institutionalization of the PGHGIMRS. - The PGHGIMRS under Executive
Order (EO) No. 174, s. 2014 is hereby institutionalized, to facilitate the GHG inventory
management and reporting system in relevant government agencies to enable the
country to transition towards a climate-resilient pathway for sustainable development.

Sec. 5. Implementing Agency. - The Climate Change Commission (CCC) shall
be the overall lead in the implementation of the PGHGIMRS. It shall be responsible to:

a) Provide direction and guidance in the accounting and reporting of GHG
emissions from identified key source sectors in order to develop and
maintain centralized, comprehensive, and integrated data on GHGs in all
levels of inventory particularly community-level and entity-level;

b) Develop a system for the archiving, reporting, monitoring, and
evaluating GHG inventories in all key levels; and

c) Provide and facilitate continuous capacity building initiatives in the
conduct of GHG inventories to ensure the application of updated
methodologies.

GHG data analytics generated under this measure shall be a reference for the
successive enhancement of the NDCs, especially in identifying policies and measures
that could be pursued economy-wide, respecting sectoral challenges and opportunities
for transformation, including human resources and cost or capital requirements
appropriate for government and non-government and industry stakeholders.

Sec. 6. Sectoral Agencies. - The following shall be the lead sectoral agencies
for the GHG inventories:

a. Department of Agriculture (DA) and the Philippine Statistics Authority
(PSA) for the agriculture Sector;

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

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

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


The Department of Science and Technology (DOST), Department of Health
(DOH), Department of Public Works and Highways (DPWH), and Department of
Tourism (DOT) shall also be considered in ensuring close collaboration of the sectors
concerned in informing transformative options under the NDC.

The CCC shall invite the concerned local government units (LGUs), academe,
and private and public institutions to participate, complement, and assist in the
implementation of the PGHGIMRS and this Act.

The PSA may assist other lead agencies in the conduct of the sectoral GHG
inventories.

The Department of the Interior and Local Government (DILG), as an oversight
agency for local governments, shall ensure the compliance of local governments
through:

i. Issuance of guidelines for accounting community-scale GHG
emissions, managing community-scale GHG inventories, and
mainstreaming the results and findings thereof in the Comprehensive
Development Plan (CDP) and subsequent programming processes, in
coordination with the CCC;

ii. Provision of continuous capacity building to local governments related
to the foregoing;

ii. Incorporation in the Seal of Good Local Government mechanism of the
compliance of local governments; and
iv. Monitoring of the compliance of local governments

The DENR, Department of Trade and Industry (DTI), and Securities and
Exchange Commission (SEC) shall serve as oversight agencies in ensuring the
compliance of entities in the preparation and management of entity-level greenhouse
gas inventories, the reporting of mitigation measures addressing the results and
findings of the foregoing, and monitoring and reporting thereof through the issuance
of relevant policies and guidelines, and continuous capacity building.

Sec. 7. Responsibilities of the Lead Agencies for National GHG Inventories. The
lead agencies shall be responsible for the following:

a) Conduct, document, archive, and monitor sector-specific GHG

inventories;


b) Report sector-specific GHG inventories/emissions to the CCC based on
the agreed reporting scheme; and

c) Perform such other functions as may be necessary for the
implementation of this Act.

Sec. 8. Reports. - The CCC shall submit to the President and to both Houses of
Congress an annual report on the status of the implementation of the PGHGIMRS. The
PGHGIMRS shall prepare a report or a technical annex to the Biennial Transparency
Report on the National GHG Inventory of certain inventory year/s in accordance with
the timeline identified during the inventory planning stage under the Section 2 of Rule
II of the Adopted Implementing Rules and Regulations of the EO 174 s. 2014.

Sec. 9. National GHG Inventory. - The PGHGIMRS shall endeavor to use the
2019 Refinement of the 2006 IPCC Guidelines for National Greenhouse Gas
Inventories, with consideration to the national circumstances of the country, including
applicable flexibilities accorded to Non-Annex I Country Parties of the Paris
Agreement, which includes the Philippines.

ARTICLE III
Nationally Determined Contribution (NDC)

Sec. 10. Components of the Philippine NDC. - The NDC serves as the long-term,
multi-decadal roadmap on GHG mitigation and climate-resilience of the Philippines,
with a goal _ to achieve a balance between anthropogenic emissions by sources and
removals by sinks of greenhouse gasses in the second half of this century, on the
basis of equity, and in the context of sustainable development and efforts to eradicate
poverty, in observance of the fundamental consideration of climate change adaptation
as the core strategy of the Philippines on climate action.

Pursuant to the Philippines’ commitment under the Paris Agreement, the
Government shall prepare, communicate and maintain successive NDCs. It shall
communicate an NDC to the UNFCCC every five (5) years.

The NDC shall include, but not be limited to, the following components:

a) GHG emissions avoidance measures and mitigation potential;


b) Mitigation co-benefits in adaptation, sustainable development, and
poverty reduction;

¢) Means of implementation such as through finance, capacity building,
technology transfer and development,

d) Gaps and needs; and

e) System for monitoring, evaluation, and reporting to enable participation
of relevant stakeholders to address challenges and meet the objectives
of inclusive just transition.

It must endeavor to indicate the Philippines’ strategic directions and measures
to build resilience and balance the investments and opportunities for just transition,
by leveraging on the capacity of local governance units to transform the socio-
economic conditions of the people, up to the smallest units of governance, through
the means of the implementation espoused under the Paris Agreement.

Sec. 11. The NDC Steering Committee. - The CCC shall be the overall lead in
the development, implementation, and monitoring and evaluation of the NDC, with
the following agencies as members, to comprise the NDC Steering Committee:

a) The Department of Economy, Planning, and Development (DEPDEV) -
lead agency for the economy-wide GHG emissions modelling vis-a-vis
gross domestic product (GDP) projections, integration in the Philippine
Development Pian (PDP) that is spatially articulated through the National
Spatial Strategy, and sectorally articulated through PDP chapters, and
ensuring vertical coherence through Regional Development Plans and
corresponding regional development strategies;

b) Department of Agriculture (DA) - lead agency for the agriculture sector;

©) Department of Energy (DOE) - lead agency for the energy sector;

d) Department of Environment and Natural Resources (DENR) - lead
agency for the waste, industrial processes and product use (IPPU) and
forestry and other land use (FOLU), in coordination with Department of
Human Settlements and Urban Development (DHSUD);

e) Department of Transportation (DOTr) - lead agency for the transport
sector;


Cmraneun

f) Department of Foreign Affairs (DFA) - lead agency to facilitate, along
with the CCC, coordinating with the development partners viable,
country-driven, needs-based technical assistance, as may be
recommended by agencies concerned, consistent with the PDP and
other investment and resilience-related and the multi-decadal climate
action planning and programming framework;

g) Department of Finance (DOF), to coordinate on matters concerning fiscal
policies related to climate change and monitor and report measures on
climate finance, including recommendations on matters related to
receiving donations and/or grants by the CCC under RA 10174;

h) Department of Budget and Management (DBM), to ensure annual
appropriations for implementation;
Department of Labor and Employment (DOLE), to ensure that the
provisions of this Act are aligned with the Green Jobs Act;
Department of Science and Technology (DOST), to facilitate innovation
options through technology development and transfer appropriate to the
conditions of the subnational units and relevant stakeholders, linking
said initiative towards enhancing human capital development in
coordination with industries, higher education institutions, LGUs, among
others;

Department of the Interior and Local Government (DILG), to facilitate

coordination with the various subnational governance units to ensure

they contribute to the continuing enhancement and implementation of
the NDCs, especially on informing transformative options for investment
and resilience building purposes, consistent with local development
opportunities and priorities, as may be incorporated in their respective

CDPs, Annual Investment Plans (AIPs), and Local Climate Change Action

Plan (LCCAPs);

1) Department of Health (DOH), to lead in the determination of low-carbon
investments, efficient transformation of the health sector consistent with
energy just transition and sustainable consumption and production, and
health co-benefits measurement of climate mitigation in other sectors;

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m) Department of Public Works and Highways (DPWh), to integrate the
Policies and measures under the Build-Build-Build Program, and ensure
the mainstreaming of policies and regulations on infrastructure
component of the NDC for implementation industry-wide and by the
LGUs, in coordination with the DILG;

n) Department of Tourism (DOT), to consider nature-based solutions in
developing, promoting, and monitoring tourism enterprises consistent
with whole of ecosystem approaches, creation of green jobs, and
sustainable consumption and production that benefit the various LGUs,
for inclusive and responsible, climate-aligned tourism sector;

0) Department of Human Settlements and Urban Development (DHSUD),
to effectively and efficiently link local investment and transformation
through the NDC alignment with the various local plans under its
jurisdiction, to ensure integrated low carbon development and
sustainable development options under the New Urban Agenda,
especially the vulnerable communities;

p) The Department of Trade and Industry (DTI), together with the Board
of Investments (BOI), to ensure investment opportunities of the local
industries, especially the micro, small, and medium enterprises
(MSMEs), are considered in the just transition mechanism under the
NDC; and

q) The Education Sector, namely the Department of Education (DepEd) and
Commission on Higher Education (CHED), to ensure the proper
information, education, and communication (IEC), contribute to
research development, extension, and innovation and assist in the
implementation of this Act.

The Members of the CCC Advisory Board and the National Panel of Technical
Experts (NPTE) under Republic Act No. 9729, as amended, and other government
agencies and stakeholders in the areas of coastal resources, health, agriculture, water,
forestry, biodiversity, environment, ecosystem, energy, education, tourism, trade,
infrastructure, and settlement, among others, shall participate in the development and
implementation of the NDC.


To ensure alignment among development plans and climate change strategies,
the DEPDEV and CCC shall be responsible for harmonizing and ensuring the
complementation of NDC with national and local development planning instruments.
The DEPDEV shall integrate the NDC into the Philippine Development Plan. The CCC
and DILG shall assist LGUs in the integration of the NDC in the LCCAPs, Local
Development Plans (LDPs), and Comprehensive Land Use Plans (CLUP).

The NDC Steering Committee shall formulate the NDC policies and measures
based on the best available science and in keeping with robust development and
transformative aspirations of the country, consistent with national circumstances.

The CCC, along with the national government agencies (NGAs) concerned, shall
establish a local NDC Steering Committee to jumpstart and sustain local-based
transformative strategies in alignment with the NDC, subject to the issuance of policy
guidance following multi-sectoral consultation, especially with the Regional
Development Councils (RDCs) under the supervision of the DEPDEV.

Specifically, the RDCs shall be considered points of convergence for low carbon
development at the regional or subnational levels that inform pathways for
transformation, including optimization of investment options, as may be aligned with
physical and socio-economic challenges due to climate change impacts.

Parallel effort shall be the formation of local counterparts for scientific and
technological advice to said Sub-National Steering Committees to be comprised of the
members of the NPTE and field units of the DOST, subject to the issuance of policy
guidance by the CCC and DOST, especially with regard to engaging the Higher
Education Institutions (HEIs) /State Universities and Colleges (SUCs) through
CHED.

The CCC should formulate and implement robust communication and advocacy
strategies, in coordination with relevant government and non-government
stakeholders, across levels of governance, to ensure that the low carbon development
directions are communicated effectively to inspire convergence at the broadest scope
possible, up to the smallest unit of governance.

Sec. 12. Allocation of funds. - The aforementioned agencies shall allocate from
their annual appropriations adequate funds for the implementation of their mandates,


including training and capacity building, under this Act, subject to support under the
mechanism of the means of implementation of the Paris Agreement.

Sec. 13. Annual Report on the NDC Implementation. - The CCC and NDC
Steering Committee shall submit to the President and to both Houses of Congress, not
later than 30 March of every year following the effectivity of this Act, a progress report
‘on the implementation of the NDC, and recommend legislation, where applicable and

necessary.
ARTICLE IV
Local Climate Change Action Plan (LCCAP) Quality Assessment Review
System

Sec. 14. LCCAP., - Pursuant to Section 14 of RA 9729, the LGUs are the frontline
agencies in the formulation, planning, and implementation of LCCAPs in their
respective areas consistent with the Local Government Code, the National Strategic
Framework on Climate Change (NSFCC), and the National Climate Change Action Plan
(NCCAP).

The LCCAP shall describe strategic policy measures of the LGUs to reduce/avoid
greenhouse gas emission (mitigation actions) and increase the community's resilience
(adaptation actions) to the negative impacts of climate change.

Further, the LCCAP shall indicate the transformative opportunities present in
LGUs towards green or low emission technological capacity building innovations that
will support long-term low emission industrial development, livelihoods, ecosystems.
and environment, and well-being of the people, especially those most exposed to
climate hazards. The modification of baseline information consistent with the best
available science shall be pursued to inform the investment planning and programming
aligned with the multi-decadal climate considerations, especially the location of human
settlements and vital infrastructure programs of the government, including those
pursued through public-private partnerships (PPP) approach.

The LGUs and HEIs concerned shall be supported in the development and
review of the LCCAPs, as priority impacts under this Act are those attributed to holistic
and inclusive mobilization of resources and opportunities of the LGUs, with

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concomitant connection to building resilience for sustainable development up to the
‘smallest units of governance.

Sec. 15. Establishment of a LCCAP Quality Assessment Review System (QAR).
- The CCC together with the DILG shall formulate and institutionalize the-CCAP QAR
and establish a means of implementation and institutionalization for both agencies.

The LCCAP QAR process would provide an opportunity to provide a feedback
mechanism to LGUs to improve on their LCCAP ensuring its responsiveness to local
hazards and risks, and be able to shift towards resilience, and socio-economic
‘transformation through low carbon and sustainable pathways.

The CCC together with DILG, shail formulate and disseminate a mechanism or
instrument of quality assurance, after due consultation with relevant stakeholders.
Further, the CCC and DILG shall identify relevant NGAs, ‘SUCs and HEIs, and other
stakeholders, which shall conduct and implement the quality assurance mechanism
that may be established.

Sec. 16. Local Government Accountability - Performance on LCCAPs, including
verified emissions reporting, shall be integrated into the criteria of the Seal of Good
Local Governance (SGLG). Access to climate finance and technical assistance may be
linked to measurable progress on GHG reduction and climate resilience, as determined
by the DILG, in coordination with the CCC.

ARTICLE V
Climate Change Expenditure Tagging (CCET)

Sec. 17. Institutionalization of the CCET as an audit too! to track climate change
adaptation and mitigation projects and programs. - The CCET jointly administered by
the CCC and the DBM pursuant to Joint Memorandum Circular 2015-01 at the national
level, and with the DILG pursuant to Joint Memorandum Circular 2015-01 at the local
level, is hereby institutionalized. All annual expenditure programs of the government
related to low carbon development, including those designed to increase climate and
disaster resilience, shall be tagged and reported to determine the allocative efficiency
of domestic funds towards those ends. A mechanism for reporting allocation and
expenditure shall be issued jointly by the CCC, DBM, the DILG, Office of Civil Defense

12


(OCD), and other relevant agencies. The Commission on Audit (COA), subject to audit
rules and regulations, shall produce timely reports on findings of climate expenditure
audit.

Such allocation and expenses tagged shall be part of the assessment for the
country's low carbon needs that are aligned to the NDC. Any funding gaps should be
addressed using the climate finance mechanisms under the Paris Agreement, as may
be pursued bilaterally or multilaterally, in coordination with the CCC, DFA, DOF,
DEPDEV, DBM and other agencies concerned.

The progress of the CCET, both at the national and focal levels, shall be
reported to the Office of the President, the Senate and the House of Representatives
by the CCC in accordance with the reportorial requirement under RA 9729, as
amended.

The continuing capacity building for CCET shall be pursued through convergent
approaches of all the stakeholders, especially of the non-government stakeholders, to
contribute to identifying critical climate programs and projects that need to be funded,
including monitoring and evaluating institutional and support mechanisms under the
CET.

ARTICLE VI
National Integrated Climate Change Database and Information Exchange
System (NICCDIES)

Sec. 18. Jnstitutionalization of the NICCDIES as a Primary platform on Climate
Change Information. - Notwithstanding existing and related mandates of other
agencies, the CCC shall issue guidelines to accelerate its utilization, including engaging
agencies, academia, and the private sector to populate the data sets therein, and
instituting a feedback mechanism to enhance content, access, and continuous
improvement to support long-term, national driven, people and planet-centric climate
governance in the country.

ARTICLE VIT
Cap and Trade System

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Sec. 19. Emission Reduction Measures/Targets. - Emission avoidance/reduction
measures shall be geared towards equitable implementation of just transition using
nationally-appropriate carbon market and non-market approaches. This shall be
adopted upon the recommendation of the NDC Steering Committee, after careful
study and consultation, to achieve maximum technologically-feasible and cost-
effective avoidance/reduction strategies, programs, and projects to meet the carbon
goal considered in this Act, with direct impact to low carbon industrial productivity and
‘sustainable development.

Annual emission avoidance/reduction targets, including the sector/s and levels
to be covered, shall be set for each calendar year by the President, through the
recommendation of the NDC Steering Committee, with supporting investment and
social safeguards roadmap, and upon consultation through multi-stakeholder, whole
of government, and whole of society approaches.

Sec. 20. Sectoral Decarbonization Roadmaps. - Each covered sector shall
develop and submit a five-year decarbonization roadmap that outlines sector-specific
emission reduction targets, technology adoption pathways, and financing strategies
aligned with the Philippines’ NDC.

These roadmaps shall be submitted to the CCC for review and consolidation,
and shail serve as inputs to the setting of sectoral caps under this Act, the
development of allowance allocation strategies, and the monitoring and reporting
frameworks of the national government. The CCC shall ensure that the preparation
and review of these roadmaps follow a participatory, science-based, and gender-
responsive approach.

Sec. 21. Cap on Greenhouse Gas Emissions. - To achieve the emission targets
set pursuant to this Act, Caps on greenhouse gas emissions shall be applied to covered
sectors based on criteria including: (a) total emissions volume, (b) cost-effectiveness
of emissions reduction opportunities, and (c) potential co-benefits and social
safeguards, as determined by the NDC Steering Committee.

Sec. 22. Allowances. - The DENR, upon the recommendation of the NDC
Steering Committee and further upon appropriate consuttation, shall issue annually a
quantity of GHG emissions allowances equivalent to the emissions allowed under the
cap imposed for such year. Each allowance shall authorize the emission of one (1)

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metric ton of carbon dioxide equivalent (CO2e), covering all greenhouse gases as
defined under this Act.

Sec. 23. Distribution of Allowances. - The allowance shall be distributed by the
DENR to the covered sector by allocation.

At least thirty percent (30%) of the total annual GHG emissions allowances
shall be auctioned beginning in the third year of implementation of the emissions
trading system. The percentage of auctioned allowances shall increase annually and
shall reach one hundred percent (100%) auctioning by the tenth year.

During the transition period, the remaining allowances may be allocated for
free based on transparent benchmarking criteria, taking into account emissions
intensity, best available technology, and sectoral competitiveness to ensure a just and
equitable transition.

All revenues generated from the auctioning of allowances shall be deposited
into the Climate Reinvestment Fund, and shall be used exclusively for climate
mitigation, adaptation, and just transition programs in accordance with this Act.

Sec. 24. Carbon Trading System. - There shall be an established and
interoperable central registry, trading and reporting system under the DENR, which
allowances issued under this Act may be sold, exchanged, purchased, or traded by
any person or entity, subject to policy guidelines to be issued upon due consultation.
Notwithstanding the foregoing, non-market approaches consistent with just transition
strategies needed to accelerate the attainment of low carbon economy, shall be
pursued, subject to further review and consultation process, along with the
mechanisms concerning carbon market activities in this Act.

Sec. 25. Creation or Engagement of a Carbon Market Operator. — The DENR,
shall serve as the primary technical and enforcement agency for the operational
aspects of the emissions trading system. This shall include the administration of
emissions allowances, oversight of carbon trading activities, enforcement of
compliance obligations, and implementation of market integrity safeguards in
accordance with this Act and its implementing rules and regulations.

For the purpose of administering the registry, auction system, and trading
platform under this Act, the DENR may either:


(a) establish, pursuant to this Act, a dedicated office within the DENR that
shall function as the Carbon Market Operator (CMO); or

(b) engage the services of an independent Carbon Market Operator through
concession agreement, public bidding, other procurement methods, or
other means allowed by law, subject to applicable rules and standards
‘on performance, transparency, and accountability.

The CMO shall be responsible for designing, operating, and maintaining the
central registry, trading platform, and auction system established under this Act, in
accordance with policy guidelines and technical standards to be issued by the DENR.

Should the services of an external CMO be engaged, it shall be subject to
regulatory oversight by the DENR and the CCC, and shall comply with all requirements
on data integrity, system security, market transparency, and fair access. A portion of
the auction revenues, not exceeding a percentage jointly determined by the DENR
and the DOF, may be allocated for the compensation of the CMO, provided that the
majority of such revenues shall accrue to the Climate Reinvestment Fund.

To promote transparency, integrity, and public accountability in the
administration of the emissions trading system, the Carbon Market Operator shall
develop and maintain a publicly accessible online portal that discloses information on
allowance allocations, auction results, trading volumes and prices, and compliance
status of covered entities. The DENR, in coordination with the CCC, shall ensure that
the CMO’s operations are subject to annual independent audits, the results of which
shall be submitted to Congress and published on the portal. A multi-stakeholder
oversight panel composed of representatives from government, industry, academe,
and civil society shall be convened by the CCC to provide advisory input and monitor
the integrity and equity of market operations. All personnel and entities involved in
the CMO shall be required to disclose potential conflicts of interest and adhere to strict
rules against insider trading and market manipulation, as provided in the implementing
rules and regulations.

Sec. 26. Consumer Protection in Market Operations. — In implementing the
emissions trading system under this Act, the DENR, in coordination with the
Department of Trade and Industry (DTI), the Department of Energy (DOE), and the
Department of Social Welfare and Development (DSWD), shall ensure that cost pass-

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through to consumers, particularly low-income and vulnerable households, does not
result in undue or unjust financial burden.

To this end, appropriate social safeguards, transitional support measures, or
sectoral interventions may be developed and integrated into market operations or the
implementing rules and regulations, to protect consumer welfare during the transition
to a low-carbon economy.

ARTICLE VIII
‘Transparency and Reporting

Sec. 27. Submission of national reports to the UNFCCC. - The Philippines, as a
Non-Annex I Party to the UNFCCC, shall submit national reports mandated under the
Convention and its Paris Agreement, especially the National Communications and
Biennial Transparency Reports, in accordance with capacities and provision of timely
and appropriate means of implementation. These reports shall incorporate those
outputs and reports mentioned in the previous sections, as appropriate.

Sec. 28. Role of the CCC. - The CCC shall develop systems for transparency
and reporting, including measurement, reporting, and verification, and enhance
existing institutional arrangements to ensure continued and timely preparation of
national reports, in coordination with relevant government agencies, observing whole-
of-society and participatory processes.

In the implementation of this Act, the CCC shall serve as the overall policy lead
and integrator for climate transparency systems and climate governance, including
the development of MRV standards and methodologies, the formulation and updating
of the NDC, the conduct of national greenhouse gas inventories, and the coordination
of climate monitoring and reporting frameworks across sectors. The CCC shall also
lead in ensuring the alignment of national and local development plans with the
objectives of this Act and the Paris Agreement.

Sec. 29. Means of Implementation for Transparency and Reporting. - The
necessary means of implementation for transparency and reporting, especially
provisions for hardware, software, and human resource requirements, shall be


accessed and provided in accordance with resources made available to Parties to the
UNFCCC and reasonable domestic resources.

Sec. 30. MRV Enforcement and Oversight. - The DENR shall serve as the lead
implementing agency for enforcing the Measurement, Reporting, and Verification
(MRV) processes required under this Act. It shall coordinate with covered entities in
receiving annual emissions reports, conducting third-party verification, and issuing
compliance notices. The CCC shall provide oversight by developing the MRV standards
and methodologies in line with UNFCCC guidance and IPCC protocols.

The DENR shall accredit third-party verifiers based on technical competence,
independence, and adherence to internationally recognized standards for greenhouse
gas validation and verification. The list of accredited verifiers shall be made publicly
available and subject to regular performance reviews. The CCC and DENR shall jointly
develop guidelines for accreditation, renewal, suspension, or revocation of verification
authority, including mechanisms for complaints, conflict of interest declarations, and
quality control audits.

ARTICLE IX
The Role of LGUs, DepEd, HEIs and SUCs in the implementation of this Act

Sec. 31. Devolution of Role to LGUs and JP Communities. - Pursuant to
Executive Order No. 138 otherwise known as the Mandanas-Garcia Ruling which fully
transfers the delivery of basic services to LGUs, LGUs should integrate climate change
adaptation and mitigation measures in their local plans and programs.

Sec. 32. Role of DepEd, HEIs, and SUCS. - Pursuant to RA 9729, the DepEd
shall integrate climate change into the primary and secondary education curricula
and/or subjects, such as but not limited to, science, biology, sibika, history, including
textbooks, primers, and other educational materials, basic climate change principles
and concepts.

HEIs and SUCs should integrate climate change as part of the curricula for all
college courses in order to provide tertiary level students with sufficient grounding on
said subject.


ARTICLE X
The Role of the Private Sector and Non-Government Stakeholders

Sec. 33. Role of the Private Sector, Non-Government Stakeholders, and
Indigenous Cultural Communities. - To ensure inclusive and consultative nature of the
processes and systems towards low carbon economy, just transition, multi-
stakeholder, whole of government and whole of society approaches to build
consensus on nationally-appropriate just transition arrangements shail be considered.

In this regard, representatives of critical industries, groups of innovators,
academics, civil society, people’s organizations, financial institutions and
intermediaries, and other related entities shall be enjoined to participate in the
deliberations and decision-making activities under this Act, subject to appropriate
guidelines to be formulated by the NDC Steering Committee, through the endorsement
of the CCC.

Special consideration shall be given to the participation of Indigenous Cultural
Communities and local communities located in or managing natural carbon sinks.
Mechanisms for inclusive consultation, equitable benefit-sharing, and respect for
customary governance structures shall be incorporated in the implementation of this
Act and its implementing rules and regulations, in accordance with Republic Act No.
8371.

ARTICLE XI
Polluters-Pays Principle for GHG Emi:

Sec. 34. Enforcement. - The DENR, in coordination with the agencies
concerned, shall formulate immediately upon approval of this Act a system of
enforcement and indemnification or appropriate sanctions consistent with the
“polluters pay principle.” The DENR shall establish the method of determining such
market price, in coordination with the CCC, DOF, DTI/BOI, and DEPDEV.

Sec. 35. Monitoring. - The DENR shall ensure that greenhouse gas emissions
‘and the use of allowances issued under this Act are accurately tracked, reported, and


verified, aligned with the provisions of this Act, to ensure that the cap-and-trade
system established under this Act is fully implemented.

Sec. 36. Penalties. - Any covered entity that emits greenhouse gases in excess
of its allowable emissions under this Act shall be liable to pay a civil penalty equivalent
to twice the prevailing market price of one emissions allowance per metric ton of
‘excess emissions,

For the purposes of this section, the “market price” shall be determined based
‘on the average clearing price of the most recent auctions conducted under this Act or
‘such other pricing reference as may be set in the implementing rules and regulations,
subject to periodic review by the DENR and DOF.

Moreover, any person or entity engaged in market manipulation, insider
trading, or fraudulent allowance transactions under the emissions trading system shall
be subject to fines, imprisonment, or trading bans, pursuant to applicable penal laws,
securities regulations, and the implementing rules and regulations of this Act.

The DENR and DOF, in consultation with the CCC, may establish appropriate
minimum or maximum penalty rates through the IRR to ensure equity, predictability,
and market stability.

If the excess emissions result from willful misrepresentation, fraudulent
reporting, or deliberate non-compliance, the responsible entity shall be subject to
additional administrative and criminal penaities under relevant laws, including possible
suspension or revocation of permits or trading rights.

All penalties collected under this section shall accrue to the Climate Reinvestment
Fund.

Sec. 37. Climate Reinvestment Fund. - There is an established fund to be known
as the Climate Reinvestment Fund (CRF). The CRF shall consist of the amount of civil
penalties assessed under Section 36 of this Act.

The CRF shall be administered by the DENR, in coordination with the CCC and
the DOF, and shall be used exclusively for programs and projects that:

a. Implement renewable energy and energy efficiency solutions in off-grid
and underserved areas, including solar microgrids, solar-powered water
systems, and climate-smart agriculture applications;

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b. Deploy nature-based solutions such as reforestation, mangrove
restoration, sustainable watershed management, and coastal ecosystem
Protection in areas with high climate vulnerability;

c. Support just transition measures for displaced or transitioning workers
and communities in carbon-intensive sectors, including skills retraining,
green job placement programs, and small enterprise incubation;

d. Rehabilitate and climate-proof critical infrastructure in disaster-prone
and climate-impacted areas, including community evacuation centers,
water supply systems, and resilient housing for low-income or displaced
groups;

e. Provide direct financial assistance to local communities and Indigenous
Peoples (IPs) who are verified victims of climate-related disasters or
slow-onset climate impacts, subject to reasonable criteria, monitoring
plans, and performance-based evaluation under the IRR;

f. Strengthen community-based early warning systems and localized
climate risk information services, including hazard mapping,
Preparedness tools, and emergency response capability building;

g. Support the development and deployment of national and local GHG
emissions tracking systems, carbon accounting tools, and digital
infrastructure for monitoring and verification; and

Fund innovation, and pilot projects on low-emission technologies, climate-resilient
livelihoods, and circular economy models aligned with the Philippines’ NDC.

At least ten percent (10%) of the Climate Reinvestment Fund shall be allocated
annually for targeted social protection measures to address price shocks and livelihood
disruptions experienced by low-income households as a result of emissions pricing or
transition policies.

The IRR shall include a mandatory, time-bound framework for mitigating
consumer cost burdens, including, but not limited to, rebates, socialized utility rates,
or direct cash transfers, particularly for low-income and climate-vulnerable
households.

All disbursements from the CRF shall be subject to the regular audit processes
of the Commission on Audit (COA) and to a results-based monitoring and evaluation

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system, to be developed in coordination with the CCC, to ensure transparency,
accountability, and effectiveness in the use of funds. The CCC shall include a summary
of CRF utilization and outcomes in its annual report to Congress under Section 39 of
this Act.

The CRF may accept contributions from Official Development Assistance (ODA),
private sector corporate social responsibility (CSR) programs, and other climate-
related funding sources, provided such contributions are consistent with the objectives
of this Act.

ARTICLE XII
Miscellaneous Provisions

Sec. 38. Appropriations. - The amount necessary for the initial implementation
of this Act shall be taken from existing allocations of the agencies concerned.
Thereafter, such sums as shall be necessary to carry out the provisions of this Act
shalt be included in the annual General Appropriations Act.

Sec, 39. Annual Report to Congress. - The DENR, in coordination with the CCC
and the DOF, shall submit to Congress an annual report on the implementation of this
Act.

The report shall include:

a. GHG emissions data and trends;

b. Sectoral compliance with emissions caps and allowances;

c. Performance of the carbon trading system, including revenues
generated and utilization of the Climate Reinvestment Fund;

d. Progress on implementation of the Sectoral Decarbonization
Roadmaps and LCCAPs;

e. Any proposed amendments to improve the implementation of this Act
based on evolving science, technology, and global standards.

Sec. 40. Implementing Rules and Regulations. - The CCC, in coordination with
the NDC Steering Committee agencies, shall draft and issue implementing rules and
regulations necessary, in coordination with other relevant and appropriate government
agencies within sixty (60) days after its approval.

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Sec. 41, 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. 42. 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. 43. Effectivity. - This Act shall take effect fifteen (15) days after its
complete publication in the Official Gazette or in two (2) newspapers of general
circulation.

Approved,

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