Low Carbon Economy Act

TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES JJ. -7 A9:36 First Regular Session SENATE S. No. 166 Introduced by Senator Loren Legarda 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 crisis continues to deepen, with more severe and frequent extreme weather events, accelerated sea-level rise, and growing socio-economic vulnerabilities observed globally and in the Philippines. Scientific consensus affirms that human activity is the dominant cause of global warming, primarily through greenhouse gas (GHG) emissions from fossil fuel combustion and deforestation. As of 2024, the Intergovernmental Panel on Climate Change (IPCC) reports that global surface temperature has already risen by 1.1°C above pre-industrial levels (1850- 1900), with the rate of warming continuing to increase. Without deep, rapid, and sustained reductions in emissions, global warming is likely to reach or exceed 1.5°C in the early 2030s—a threshold beyond which climate-related risks will escalate significantly for health, agriculture, ecosystems, and economies. 1 In the Philippines, the Climate Action Tracker rates the country's climate policies and action as "Insufficient," meaning current measures are not aligned with the 1.5°C ' Retrieved June 26, 2025 from: IPCC AR6 Synthesis Report, 2023 - https://www.ipcc.ch/report/ar6/syr/downloads/report/IPCC AR6 SYR LongerReport.pdf

pathway. The country remains highly vulnerable to climate impacts, experiencing stronger typhoons, worsening droughts, and significant coastal risks.? To fulfill its commitment under the Paris Agreement, the Philippines submitted its first Nationally Determined Contribution (NDC) in 2021, pledging a 75% reduction in GHG emissions from 2020 to 2030, of which only 2.71% is unconditional. This ambitious target underscores the need for strong institutional, financial, and policy support mechanisms to operationalize climate goals. As of 2024, efforts are underway to update and enhance the NDC to reflect more realistic mitigation pathways, particularly in energy and transport sectors.3 The transformation toward a low carbon and climate-resilient economy is a national imperative and an opportunity. This bill establishes a cap-and-trade mechanism, allowing entities that emit less than their allocated GHG cap to sell allowances, while those exceeding their caps may purchase additional allowances. Such a market-based system has been successfully implemented in countries like South Korea and the European Union, creating incentives for decarbonization, low carbon innovation, and efficient emission reduction. This bill complements other key national frameworks such as the National Climate Change Action Plan (NCCAP), the National Climate Risk Management Framework (NCRMF), and the institutionalized Climate Change Expenditure Tagging (CCET). The emissions trading system (ETS) supports both market and non-market approaches under the United Nations Framework Convention on Climate Change (UNFCCC), providing financial flexibility for climate action while ensuring national emission limits are met. The implementation of a nationally appropriate carbon pricing mechanism will not only contribute to achieving our NDC targets but also promote clean energy investments, climate-resilient infrastructure, and green jobs, especially among vulnerable communities. In view of the foregoing, the passage of this measure is earnestly sought. LOREN LEGARDA 2 Retrieved June 26, 2025 from:Climate Action Tracker, Philippines, 2024, - https://climateactiontracker.org/countries/philippines/ 3 Retrieved June 26, 2025 from: UNFCCC NDC Registry, Philippines - https://unfccc.int/sites/default/files/NDC/2022-06/Philippines%20-%20NDC.pdf

TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES ) JUL -7 A9:36 First Regular Session ) SENATE S. No. 166 Introduced by Senator Loren B. Legarda 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. - It is 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 7 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

1 of the sectors concerned, and support a just transition across all GHG-emitting socio- 2 economic sectors with an emphasis on the energy and transport sector, including 3 those that will impact to building resilience and investments at the most vulnerable 4 communities, shall be supported under the means of implementation under the Paris 5 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; c) "Low Carbon Technology" refers to equipment, infrastructure systems, processes, methods, innovations, practices, and associated knowiedge 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 with the country's NDC, just transition goals, and long-term climate strategies.;

d) "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; e) "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; f) "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; = g) "Climate Justice" shall refer to the allocation of burdens and benefits among individuals, nations and generations; h) "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; i) "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; j) "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 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; 1) "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. o) "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 Philippine Greenhouse Gas Inventory Management and Reporting System (PGHGIMRS)

Sec. 4. Institutionalization of the PGHGIMRS. - The PGHGIMRS under Executive

2 Order (EO) No. 174, s. 2014 is hereby institutionalized, to facilitate the GHG inventory 3 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

1 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: = 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; ill. 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 (DTT), 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

4 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;

c) 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 Plan (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; c) 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; 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; i) Department of Labor and Empioyment (DOLE), to ensure that the provisions of this Act are aligned with the Green Jobs Act; j) 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; k) Department of the Interior and Locai 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; 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 (BOL), 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.

1 The DEPDEV shall integrate the NDC into the Philippine Development Plan. The CCC 2 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 10 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 impiementation 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 settiements 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 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 LCCAP 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, shall 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 tool 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 28 disaster resilience, shall be tagged and reported to determine the allocative efficiency 29 of domestic funds towards those ends. A mechanism for reporting allocation and 30 expenditure shall be issued jointly by the CCC, DBM, the DILG, Office of Civil Defense (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 local levels, shall be reported to the Office of the President, the Senate and the House of Representatives 10 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 CCET. ARTICLE VI National Integrated Climate Change Database and Information Exchange System (NICCDIES)

Sec. 18. Institutionalization of the NICCDIES as a Primary platform on Climate

Change Information. - Notwithstanding existing and related mandates of other 24 agencies, the CCC shall issue guidelines to accelerate its utilization, including engaging 25 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 VII Cap and Trade System

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 shall 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 27 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 consultation, 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)

metric ton of carbon dioxide equivalent (COze), 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-

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 internationaily 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 IP 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

5 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 shall 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 Emissions

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 penalties under relevant laws, including possible suspension or revocation of permits or trading rights. 22 All penalties collected under this section shall accrue to the Climate Reinvestment 23 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;

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. 23 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

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), 6 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 shall 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 19 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.

Sec. 41. Separability Clause. - If for any reason any section or provision of this

2 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

5 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,