By Chuck Baclagon
In the past couple of weeks, Filipino advocates of climate action and clean energy found themselves caught in a tug-of-war over the campaign to increase the coal excise tax under what is now the Tax Reform for Acceleration and Inclusion (TRAIN) law. The tax would increase from its current rate of ten pesos (P10) per metric ton to P50 up to P150 per metric ton over the next three years, challenging the coal industry’s virtually-tax-free status for four decades.
In spite of the pushback from the coal industry, both Houses of Congress approved the coal tax which we believe will hasten the Philippines’ transition to renewable energy and mark the beginning of even more comprehensive energy and industrial policy reforms.
Midnight exemptions and DMCI
Up to the point of the signing of the tax reform law, the coal industry and its allies worked out a ‘midnight exemption’ in order to protect themselves, particularly the only major coal mining company in the country – Semirara Mining and Power Corporation, owned by D.M. Consunji Incorporated (DMCI).
The coal tax seeks to put an end to 40 years of subsidised pollution for the coal industry. It showed the ugly face of an industry that has earned so much but has, in return, only added insult to injury to a country that has, for the past decades, been at the receiving end of climate change-induced weather extremes.
A recently released report has already stated that over a trillion pesos worth of coal plants in the Philippines are looming stranded assets, and that the imposition of the coal tax would accelerate this stranding.
The coal tax sends a clear long-term policy signal to investors to invest in affordable and reliable power infrastructure, building diversified electricity generation and baking in long-term energy sector deflation.
It is important to note that the coal tax is part of the operating cost, not the fuel cost, making coal companies bear the brunt of the costs.
Beyond its technical aspects, however, the coal tax campaign highlights the destructive influence on the government and our economy. It also shows the need to continue to speak truth to power to choke off financing and social capital for fossil fuels and by encouraging investments in community-driven energy solutions.