Low Carbon Economy Investment Act

Senate TWENTIETH CONGRESS OF THE me Office of the Secretary REPUBLIC OF THE PHILIPPINES ) Second Regular Session 26 MAY -4 P4:30 SENATE 2088 S. No. _ RECEIVED BY. Introduced by Senator Bam Aquino AN ACT PROMOTING INVESTMENTS IN LOW CARBON ECONOMY, ESTABLISHING FOR THIS PURPOSE A CARBON EMISSION PRICING FRAMEWORK AND IMPLEMENTATION MECHANISM TO ACHIEVE LOW CARBON AND CLIMATE-RESILIENT ECONOMIC DEVELOPMENT EXPLANATORY NOTE The Philippines continues to bear the brunt of the climate crisis. Rising temperatures, stronger typhoons, heavier floods, and sea level rise are already costing Filipino families their homes, livelihoods, and even their lives. These climate impacts strain public services, disrupt food and energy supply, and damage critical infrastructure, setting back development gains and deepening inequality. At the same time, the global economy is rapidly shifting toward low-carbon growth. Countries and markets are increasingly rewarding climate-responsible production while penalizing carbon-intensive goods and services. If the Philippines does not keep pace with this transition, we risk losing investments, trade opportunities, and jobs, especially as our ASEAN neighbors move toward interoperable carbon markets to meet regional decarbonization targets and carbon neutrality strategies. This measure seeks to ensure that the Philippines is ready not only to meet our climate commitments, but also to seize the economic opportunities of the low-carbon transition. This bill establishes a comprehensive carbon emission pricing framework and implementation mechanism to guide the country toward low-carbon and climate- resilient development. It will strengthen coherence across government policies and market instruments, provide clear signals for private investment, and mobilize financing for climate action in line with the country's commitments under the Paris Agreement and our Nationally Determined Contribution (NDC). This measure provides for:

1. Carbon Emission Pricing, to internalize the cost of greenhouse gas emissions, encourage innovation, and incentivize businesses to reduce emissions while fostering investment in green technologies; 2. A National Greenhouse Gas Inventory and Verification System, to ensure transparent, accurate, and reliable emissions reporting and monitoring across key sectors; 3. Sectoral and Enterprise-Level Decarbonization Plans, requiring covered industries and financial institutions to adopt pathways consistent with national climate targets; 4. Climate Finance and Incentives, including the establishment of a Climate Fund and other policy instruments to support emission reduction projects, energy transition programs, and climate resilience initiatives, while encouraging strong private sector participation; and 5. Participation in International Carbon Markets, enabling the Philippines to benefit from cooperative mechanisms under the Paris Agreement and access climate finance that supports national development goals. Ultimately, this measure aims to protect Filipino communities while unlocking green growth-supporting new industries, creating quality jobs, and enhancing national competitiveness in a decarbonizing world. This is climate action that strengthens our economy and safeguards our people. In view of the foregoing, the passage of this bill is earnestly sought. Bam equin

Senate Office of the soccretarp TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES ) First Regular Session 26 MAY -4 P4:30 SENATE 2088 S. No. - RECEIVED BY Introduced by Senator Bam Aquino AN ACT PROMOTING INVESTMENTS IN LOW CARBON ECONOMY, ESTABLISHING FOR THIS PURPOSE A CARBON EMISSION PRICING FRAMEWORK AND IMPLEMENTATION MECHANISM TO ACHIEVE LOW CARBON AND CLIMATE-RESILIENT ECONOMIC DEVELOPMENT Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Low Carbon Economy

2 Investment Act."

Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to

4 promote sustainable development and environmental stewardship by enabling the transition to a low-carbon and resilient economy. This transition is recognized not only as an environmental imperative but as a core strategy for national economic development, designed to enhance competitiveness, create green jobs, and unlock new investment opportunities. This Act aims to achieve the country's national climate 9 targets, particularly its Nationally Determined Contribution (NDC), by instituting a 10 comprehensive carbon emission pricing framework. This framework is intended to catalyze private sector-led investments, attract foreign capital into low-carbon technologies and projects, and implement mechanisms that drive greenhouse gas (GHG) emissions reduction, enhance climate resilience, and foster sustainable and inclusive economic growth. In pursuit of these goals, the State shall:

(a) Institutionalize systems and methodologies for accurate and transparent 2 GHG inventory management and reporting at all levels; (b) Develop and enforce sectoral decarbonization pathways and emission 4 reduction targets in alignment with international climate agreements, particularly the 5 Paris Agreement; (c) Provide financial, technological, and capacity-building support to ensure the 7 effective implementation of national climate action plans; (d) Promote investments and adoption of low-carbon technologies, renewable 9 energy sources, and energy-efficient practices across all sectors of the economy; (e) Integrate climate change adaptation and mitigation measures into national 11 and local development plans and programs; (f) Establish robust compliance mechanisms and incentives to encourage 13 private sector investments in decarbonization and climate resilience efforts; and (g) Facilitate access to international climate finance and carbon markets to 15 support the country's transition to a low-carbon economy. By adhering to these principles, the State commits to fostering a resilient, 17 inclusive, and sustainable future for all Filipinos.

Sec. 3. Definition of Terms. - As used in this Act:

(a) Carbon emission pricing framework refers to a system for setting a price on 20 carbon emissions to incentivize reductions in GHG emissions through market-based 21 mechanisms; (b) Carbon offset refers to reduction in GHG emissions or an increase in carbon storage, that is used to compensate for emissions occurring elsewhere, typically measured in metric tonnes of carbon dioxide equivalent (CO2e);

(c) Covered enterprises refer to large and medium-sized enterprises whose 2 emissions materially contribute to the Philippine GHG emissions. These enterprises are 3 required to prepare and implement decarbonization plans in accordance with this Act; (d) Climate fund refers to a fund established by covered enterprises to allocate 5 financial resources for emissions reduction activities, including investments in low- 6 carbon technologies and carbon offset projects; (e) Decarbonization pathway refers to a strategic plan outlining specific, 8 measurable, and time-bound targets and actions for reducing GHG emissions. This 9 pathway includes emissions baselines, reduction strategies, and investment roadmaps 10 aligned with national and sectoral decarbonization targets; (f) Emission reduction targets refer to specific goals for reducing GHG 12 emissions, stated as percentage reductions from a baseline year, aimed at achieving 13 national climate targets in line with international agreements such as the Paris 14 Agreement; (g) Emissions allowance refers to the permitted level of GHG emissions 16 allocated to a covered enterprise for a specific period, based on industry emissions cap and production share of covered enterprises to the total industry production; (h) Greenhouse gas emissions (GHG) refer to emissions of gases that contribute 19 to the greenhouse effect by absorbing infrared radiation, including carbon dioxide 20 (CO2), methane (CH4), nitrous oxide (NO), hydrofluorocarbons (HFCS), 21 perfluorocarbons (PFCs), and sulfur hexafluoride (SF6); (i) Internationally Transferred Mitigation Outcomes (ITMOs) refer to mitigation outcomes that are transferred between countries under Article 6 of the Paris 24 Agreement, used to achieve nationally determined contributions and other 25 international climate commitments; (i) Mitigation refers to actions taken to reduce or prevent the emission of GHG, 27 including strategies to enhance energy efficiency, transition to renewable energy sources, and improve waste management practices;

(k) Nationally Determined Contribution (NDC) refers to the Philippines' long- 2 term roadmap for GHG mitigation and climate resilience, outlining commitments to 3 reducing emissions and adapting to climate impacts as part of the global effort to limit 4 temperature rise under the Paris Agreement; (I) Paris Agreement refers to an international treaty under the United Nations 6 Framework Convention on Climate Change aimed at limiting global warming to well 7 below two degrees Celsius (2°C) above pre-industrial levels, with efforts to limit it to 8 one point five degrees Celsius (1.5°C); and (m) Third-party verifier refers to an independent entity accredited by the CCC 10 to assess and verify the accuracy and reliability of GHG emissions data and the 11 compliance of covered enterprises with the provisions of this Act.

Sec. 4. Institutionalization of the Philippine Greenhouse Gas Inventory System

(PGHGIS). - The PGHGIS is hereby institutionalized to systematically manage and report GHG inventories across multiple levels, including national, community, entity, facility, and project levels. This system is designed to enable the Philippines to transition towards a low-carbon and climate-resilient pathway, promoting the avoidance, reduction, and removal of emissions for sustainable development.

Sec. 5. Lead Implementing Agency. - The Climate Change Commission (CCC)

19 shall serve as the lead agency for the implementation of the PGHGIS. The CCC shall 20 be responsible for the following: (a) Direction and Guidance - Provide overarching direction and guidance in the accounting and reporting of GHG emissions from identified key source sectors. This includes the development and maintenance of centralized, comprehensive, and integrated database on GHGs at all inventory levels, particularly at the community and entity levels; (b) System and Methodology Development - Continuously develop and update 27 the system and methodology for the archiving, reporting, registering, monitoring, and

evaluating of GHG inventories. This ensures that the methodologies used are up-to- 2 date and in line with international best practices; (c) Capacity-Building - Facilitate continuous capacity-building initiatives in the 4 conduct of GHG inventories to ensure the application of the latest methodologies. This 5 includes providing training and support, with assistance from relevant agencies such 6 the Department of Environment and Natural Resources (DENR); and (d) Strategic Measures - Formulate strategic measures in collaboration with national government agencies, local government units (LGUs), academe, the private 9 sector, and other relevant sectors to ensure continuous avoidance, reduction, and removal of GHG emissions. This holistic approach ensures that all stakeholders are engaged and contributing to national goals.

Sec. 6. Sectoral Agencies and Other Relevant Agencies. - To ensure the

effective implementation of the PGHGIS, the following sectoral agencies shall take the lead in their respective areas, with assistance from the Philippine Statistics Authority (PSA): (a) Department of Agriculture (DA) - Responsible for the agriculture sector; (b) Department of Energy (DOE) - Responsible for the energy sector; (c) Department of Environment and Natural Resources (DENR) - Responsible 19 for the waste, industrial processes, and forestry and other land-use sectors; and (d) Department of Transportation (DOTr) - Responsible for the transport sector. Other agencies such as the Department of Science and Technology (DOST), Department of Health (DOH), Department of Public Works and Highways (DPWH), Department of Tourism (DOT), Department of Trade and Industry (DT1), and the Securities and Exchange Commission (SEC) shall also collaborate to ensure the application of transformative options under the NDC.

Sec. 7. Role of Local Government Units. - LGUs shall integrate climate change

adaptation and mitigation measures into their local plans and programs. The following agencies, in coordination with the CCC, shall provide technical and capacity-building support to LGUs for the effective implementation of these measures: (a) DENR; (b) DTI; (c) SEC; (d) DOTr; (e) DA; (f) PSA; (g) DOE; (h) DILG; and (i) NCIP.

Sec. 8. National Integrated Climate Change Database and Information

15 Exchange System (NICCDIES). - The CCC shall institutionalize the NICCDIES as the 16 primary platform for climate change and resilience information. The responsibilities of the CCC regarding NICCDIES include: (a) Issuing Guidelines - Develop and issue guidelines for the improvement, development, and utilization of NICCDIES to ensure it meets national and international standards for climate data management; (b) Engagement - Engage various stakeholders including government agencies, academe, and the private sector to contribute data sets to the NICCDIES. 23 This collaborative approach ensures a comprehensive and inclusive database; and

(c) Feedback Mechanisms - Institute feedback mechanisms to enhance the 2 content, access, and continuous improvement of the NICCDIES. Regular updates and user feedback will ensure the system remains relevant and effective. By institutionalizing these systems and clearly defining the roles and 5 responsibilities of various agencies and stakeholders, the Philippines aims to create a robust framework for managing and reducing GHG emissions, thereby contributing to 7 global climate goals and ensuring sustainable development for future generations.

Sec. 9. Nationally Determined Contribution. - The NDC shall serve as the

9 Philippines' long-term roadmap for GHG mitigation and climate resilience, outlining the country's commitments to reducing emissions and adapting to climate impacts. The NDC shall include the following components: (a) National and Sectoral Decarbonization Pathways and Emission Reduction 13 Targets - Specific goals for reducing GHG emissions, stated as percentage reductions from a baseline year. These targets shall be ambitious yet achievable, reflecting the 15 country's commitment to international climate agreements, including the Paris Agreement. The national decarbonization pathway will provide an overarching strategy for emissions reductions across all sectors, while sectoral pathways will outline specific strategies and targets for key sectors such as energy, transportation, industry, forestry, and agriculture. Each pathway shall include milestones and timelines to ensure progressive emissions reductions, consistent with the objective to limit global temperature rise to below 2°C, with efforts to limit it to 1.5°C above pre- industrial levels; (b) Adaptation Measures - Strategies and actions to adapt to the impacts of climate change. This includes building resilience to extreme weather events, protecting vulnerable ecosystems, and implementing climate-resilient cities, industrial hubs, agriculture, and other key economic aspects of the country including among others public health, water resources, and infrastructure to ensure comprehensive 28 resilience;

(c) Mitigation Actions - Plans for implementing policies, measures, and projects aimed at reducing GHG emissions across various sectors such as energy, transportation, industry, forestry, and agriculture. Mitigation actions shall include transitioning to renewable energy sources, enhancing energy efficiency, promoting 5 sustainable land use practices, and reducing emissions from waste management; and (d) Finance, Technology Transfer, and Capacity-Building - Support from 7 developed countries in terms of finance, technology transfer, and capacity-building to effectively implement the NDC. This includes mobilizing international climate finance, 9 fostering public-private partnerships, and leveraging technology for low-carbon 10 development. Capacity-building initiatives shall focus on enhancing the skills and 11 knowledge of stakeholders involved in climate action.

Sec. 10. Comprehensive Engagement with the Private Sector in NDC. - The

13 CCC shall actively engage with the private sector and develop comprehensive national and sectoral decarbonization strategies and roadmaps. This includes working closely with relevant government agencies, industry stakeholders, and experts to ensure 16 these strategies align with both national and international climate goals. The CCC shall integrate the actions and contributions of the private sector into 18 the NDC. This involves incorporating decarbonization pathways provided by covered enterprises and regularly updating the NDC every three years to reflect these 20 contributions accurately. Additionally, the CCC shall continuously review and update these decarbonization pathways based on data from covered enterprises. This ensures that the strategies remain aligned with international climate commitments and the latest advancements in climate science and technology.

Sec. 11. Establishment of Monitoring, Reporting, and Verification System. - The

CCC shall establish a comprehensive Monitoring, Reporting, and Verification (MRV) system to track mitigation outcomes and the accomplishments of the NDC. This system shall ensure accurate, transparent, and timely reporting of national climate 29 actions and compliance with international carbon market standards. The consolidated

1 mitigation outcomes shall be reflected in the NICCDIES and shall be made available 2 to the public.

Sec. 12. Mandates of Other Relevant Agencies on MRV. - The following

4 agencies are also provided the following mandates relevant to NDC's MRV system: (a) The DENR is mandated to work with the CCC to monitor and report 6 mitigation outcomes in the forestry, waste, and industry sectors. The DENR shall 7 implement conservation, restoration, and waste management practices that contribute 8 to GHG emission reductions and ensure these are accurately accounted for in the 9 national climate action framework. In support of the DENR's responsibilities in the 10 industry sector, the Department of Trade and Industry shall collaborate with the DENR and the CCC in promoting low-carbon and resource-efficient technologies, cleaner production systems, and sustainable industry standards to reduce emissions from industrial processes and product use; (b) The DOE is mandated to coordinate with the CCC to monitor and report mitigation outcomes in the energy sector. The DOE shall implement and oversee energy efficiency and renewable energy projects that contribute to GHG emission reductions and ensure these are accurately accounted for in the national climate action 18 framework; (c) The DOTr is mandated to collaborate with the CCC to monitor and report 20 mitigation outcomes in the transport sector. The DOTr shall implement and oversee transportation initiatives that contribute to GHG emission reductions and ensure these are accurately accounted for in the national climate action framework; and (d) The DA is mandated to collaborate with the CCC to monitor and report mitigation outcomes in the agriculture sector. The DA shall implement and oversee agricultural practices that contribute to GHG emission reductions and ensure these are accurately accounted for in the national climate action framework.

(e) Banko Sentral ng Pilipinas (BSP) is mandated to collaborate with the CCC to monitor and report financed emissions of financial institutions in the Philippines 3 including emission reduction activities and outcomes.

Sec. 13. Climate Change Expenditure Tagging as part of MRV. - The Climate

5 Change Expenditure Tagging (CCET) is hereby institutionalized as an audit tool to 6 track climate adaptation and mitigation projects and programs. The CCET shall be 7 jointly administered by the CCC, Department of Budget and Management (DBM), 8 Department of the Interior and Local Government (DILG), Office of the Civil Defense, 9 and other relevant agencies, with the Commission on Audit producing timely audit 10 reports on climate expenditure. The CCET shall: (a) Monitor and evaluate the allocation and utilization of funds for climate projects; (b) Ensure transparency and accountability in climate finance; (c) Identify funding gaps and recommend measures to address them; (d) Facilitate the efficient allocation of resources towards high-impact climate initiatives; and (e) Support the integration of climate finance into national and local budgeting 18 processes.

Sec. 14. Local Climate Change Action Plan Quality Assessment Review (LCCAP

QAR) System as part of MRV System. - The CCC, in collaboration with the DILG and PAGASA, shall formulate and institutionalize the LCCAP QAR system. This system will provide feedback mechanisms for LGUs to improve their Local Climate Change Action Plans (LCCAPs), ensuring responsiveness to local hazards and socio-economic transformation towards low-carbon pathways. The LCCAP QAR shall: (a) Establish criteria and indicators for assessing the quality and effectiveness of LCCAPs;

(b) Provide technical guidance and capacity-building support to LGUs for the 2 preparation and enhancement of their LCCAPs; (c) Facilitate peer reviews and knowledge-sharing among LGUs to foster 4 continuous improvement; and (d) Ensure alignment of LCCAPs with national and international climate goals.

Sec. 15. NDC Steering Committee. - The CCC shall be the lead agency in the

7 development, implementation, monitoring, and evaluation of the NDC. The NDC 8 Steering Committee shall be composed of representatives from the following agencies: (a) Department of Economy, Planning and Development (DEPDev); (b) DA; (c) DOE; (d) DENR; (e) DOTr; (f) Department of Foreign Affairs; (g) Department of Finance; (h) DBM; (i) Department of Labor and Employment (DOLE); (j) DOST; (k) DILG; (I) DOH; (m) DPWH; (n) Department of Human Settlements and Urban Development;

(o) DTI; (P) Department of Education, Commission on Higher Education, and Technical 3 Education and Skills Development Authority; (q) National Commission on Indigenous Peoples; (r) Philippine Commission on Women; (s) National Youth Commission; (t) National Anti-Poverty Commission; (u) Representatives from the academe; (v) Representatives from each of the covered sectors; and (w) Representatives from civil society organizations.

Sec. 16. Responsibilities of Government Agencies as members of NDC

Committee. - The aforementioned agencies shall align their policies and strategies 13 with the NDC and undertake the following responsibilities: (a) Alignment with National Development Priorities - Ensure the alignment of 15 the NDC with national development priorities and strategies, integrating climate goals 16 into economic and social planning; (b) Sector-Specific Mitigation and Adaptation Strategies - Lead the implementation of sector-specific mitigation and adaptation strategies. Each agency shall develop and execute plans tailored to their sector's unique challenges and opportunities; (c) Coordination for Technical Assistance and Climate Finance - Facilitate coordination with development partners for technical assistance and climate finance. This includes mobilizing resources, securing grants and loans, and ensuring the 24 efficient use of funds;

(d) Annual Appropriations - Ensure annual appropriations for the implementation of unconditional policies and measures related to climate action. 3 Budgeting should reflect the urgency and scale of climate initiatives; (e) Promotion of Low-Carbon Technologies and Innovations - Promote the 5 development and adoption of low-carbon technologies and innovations. Agencies shall 6 support research, development, and deployment of sustainable technologies; (f) Technical and Capacity-Building Support to LGUs - Provide technical and 8 capacity-building support to LGUs for integrating the NDC into local plans and 9 programs. This includes training, workshops, and technical assistance; (g) Development of Nature-Based Tourism Solutions - Develop and promote 11 nature-based tourism solutions that align with climate goals. This includes sustainable 12 tourism practices that protect natural resources and enhance local resilience; (h) Integration with Urban Development Plans - Ensure the integration of the 14 NDC with urban development plans, promoting low-carbon and climate-smart 15 infrastructure projects. Urban planning should prioritize sustainability and resilience; (i) Inclusion of Indigenous Peoples' Needs and Rights - Ensure the needs and 17 rights of indigenous peoples are addressed in a gender-responsive manner in the NDC 18 implementation process. Policies should promote equity and social inclusion; and (i) Representation of Youth Interests - Represent youth interests and ensure intergenerational justice in policies and measures. Youth engagement should be a 21 cornerstone of climate initiatives.

Sec. 17. Mandate to the Climate Change Commission. - To fulfill the country's

role as a Host Party under the Paris Agreement, the CCC is hereby mandated to establish the necessary national framework, protocols, procedures, and registry systems to participate in international carbon markets through the cooperative approaches under Article 6.2, the mechanisms under Article 6.4, and for "other international mitigation purposes," such as the Carbon Offsetting and Reduction

1 Scheme for International Aviation (CORSIA) Market. This mandate includes the 2 following functions: (a) System for Approval and Authorization of Mitigation Activities. - The CCC 4 shall establish a transparent system for the approval of mitigation activities and the specific authorization for the international transfer of mitigation outcomes. The CCC 6 shall be responsible for issuing a formal Authorization statement or Letter of 7 Authorization (LoA) for any internationally transferred mitigation outcomes (ITMOs). 8 This LoA shall serve as a final official government approval and shall be irrevocable except in cases of fraud, material misrepresentation, or judicial determination that the underlying mitigation activity did not generate the credited emission reductions or removals. The grounds and procedures for revocation shall be established by the CCC and published prior to the issuance of any LoA. (b) System for Tracking and Corresponding Adjustments. - The CCC shall establish and manage a national registry to be integrated within the NICCDIES, to track all mitigation outcomes and facilitate the application of corresponding adjustments. These adjustments shall be applied to the national GHG emissions balance and reported transparently through the Philippines' Biennial Transparency 18 Report (BTR) to prevent any double counting of emission reductions. i. A corresponding adjustment shall be applied for all ITMOs that have been authorized for use towards another country's NDC or for other international mitigation purposes. ii. The government affirms that mitigation outcomes generated from activities on public lands and ancestral domains shall not be used for the achievement of the Philippines' own NDC if they have been authorized for international transfer. This policy ensures that such mitigation outcomes remain available for transfer without double counting and upholds the integrity of private, community, and indigenous peoples' carbon projects. (c) Strategic Management of Mitigation Outcomes. - The CCC shall, in 29 coordination with the NDC Steering Committee and relevant agencies, establish a

national strategy that defines the criteria for authorizing the international transfer of 2 ITMOs. This strategy shall: i. Identify which types of mitigation activities or sectors will be prioritized for 4 domestic NDC achievement versus those that may be considered for international 5 transfer. ii. Ensure that any transfer of ITMOs does not undermine the Philippines' ability 7 to meet its own NDC targets. iii. Optimize the generation of international climate finance while safeguarding 9 national climate goals and promoting sustainable development. (d) Framework for High-Integrity Market Participation. - The CCC shall establish a clear framework to facilitate the participation of the private sector, indigenous peoples, and local communities in generating and transferring high-integrity mitigation 13 outcomes. This framework shall ensure that all mitigation activities authorized under 14 Article 6: i. Represent real, permanent, additional, and verified emission reductions. ii. Contribute to the sustainable development of the Philippines. ili. Have robust environmental and social safeguards in place to prevent 18 negative impacts.

Sec. 18. Enterprises and Sectors Covered in this Act. - Covered sectors are

those that materially contribute to national GHG emissions, as determined by the government. This determination considers both the current and potential future contributions of these sectors to GHG emissions. Materiality assessments will be based on emissions volume, economic significance, and potential for emission avoidance and 24 reduction. The covered sectors include: (a) Sectors with Energy-related emissions:

i. Petroleum refining, electricity generation, combined heat and power 2 generation. ii. Manufacturing and other industries and construction with fuel combustion 4 activities - iron and steel, chemicals, pulp and paper, food processing, beverage, tobacco, mining and quarrying, textile, infrastructure, utilities, among others. iii. Industries with fugitive emissions - oil and natural gas and fuel 7 transformation (b) Transport sector - includes aviation, water-borne, and road transport. (c) Sectors with Industrial Process Emissions and Product use: i. Mineral Industry ii. Chemical Industry (Petrochemical and Carbon Black Production, Fluorochemical production) iii. Metal Industry iv. Electronics Industry v. Product use of Ozone-depleting substances substitutes (Air-Conditioning and Refrigeration, blowing agents, fire protection) (d) Sectors with Agriculture- and Forestry-related emissions: i. Manufacturing companies with supply chain in agriculture and forestry. ii. Companies with land conversion activities that result to loss of carbon stocks. (e) Sectors with Wastes-related emissions: i. Manufacturing and commercial establishments that generate biodegradable wastes that end up in landfills.

ii. Manufacturing and commercial establishments that generate effluents with 2 high Biological Oxygen Demand content. iii. Manufacturing establishments that use packaging that ends up in dumpsites 4 that are subjected to open burning. (f) All other emerging sectors that materially contribute to the countries' GHG 6 emissions as determined by CCC.

Sec. 19. Mandate for Financial Institutions. - All universal and commercial

8 banks as well as other financial institutions supervised by the Bangko Sentral ng 9 Pilipinas (BSP), shall be considered covered enterprises under this Act. Financial institutions shall: 1. Account for and report on their financed emissions, defined as the GHG emissions associated with their portfolio of loans, investments, and other financial services, in accordance with internationally recognized methodologies such as the 14 GHG Protocol. 2. Prepare and submit a decarbonization pathway that outlines a time-bound strategy to align their financing and investment activities with the national goal of achieving net-zero emissions by 2050. This pathway shall include specific targets to progressively reduce exposure to carbon-intensive assets and to increase the portfolio share of financing for renewable energy, energy efficiency, and other low-carbon and 20 climate-resilient projects and enterprises. 3. The BSP, in coordination with the CCC, shall develop and issue specific guidelines for the implementation, monitoring, and reporting of these requirements by financial institutions.

Sec. 20. Mandate for Covered Enterprises. - All covered enterprises shall be

mandated to prepare a decarbonization plan aligned with the objective to limit global temperature rise to below two degrees Celsius (2°C) above pre-industrial levels, with 27 the goal of achieving net-zero emissions by 2050.

The decarbonization plan shall outline specific, measurable, and time-bound 2 carbon reduction pathway with milestones and targets from the effectivity of this law towards 2050. These milestones shall include annual targets to ensure a progressive reduction in GHG emissions. The decarbonization pathway must be consistent with national decarbonization pathways and sector-specific targets established under this 6 Act and shall incorporate the latest climate science and technological advancements 7 to ensure effectiveness and relevance. The decarbonization plan shall include the following components and 9 considerations: (a) Emissions Baseline and Projections - A detailed inventory of current GHG emissions using globally acceptable GHG inventory standards, such as the GHG Protocol Corporate Accounting and Reporting Standard, and future emissions projections under a business-as-usual scenario. The business-as-usual scenario represents the projected emissions trajectory if no additional mitigation measures are implemented beyond those already in place. (b) Inventory Scope - The total GHG emissions account of a covered enterprise shall include scope 1 and scope 2 as defined by the GHG protocol, as well as material Scope 3, with particular focus on emissions from suppliers of goods and services that are not covered enterprises under this Act. The CCC, in coordination with the DENR, shall issue guidelines on the determination of materiality for reporting purposes. (c) Covered Emissions - Covered emissions refer to the portion of a covered enterprise's total greenhouse gas (GHG) emissions that is subject to carbon pricing under this Act. These emissions shall be clearly and exclusively attributed to the enterprise to prevent double counting or multiple charges on the same emission across different entities in the value chain. To ensure comprehensive coverage of material emission sources contributing 27 to national GHG levels, covered emissions shall include the following: i. Scope 1 or direct emissions as defined above.

ii. Scope 2 and material Scope 3 emissions relevant to transactions with suppliers of goods and services that are not designated as covered enterprises under this Act, provided these emissions are material to the enterprise's operations and 4 emissions profile. In instances where an enterprise's total GHG emissions inventory differs from 6 its covered emissions, both figures shall be disclosed in its submitted decarbonization 7 plan. This ensures transparency and enables proper accounting for emissions both 8 within and beyond the scope of pricing under this framework. (d) Emissions Reduction Strategies - A comprehensive strategy for reducing 10 direct and indirect emissions, including the implementation of energy efficiency measures, adoption of renewable energy, and other low-carbon technologies. This 12 shall include: i. Reduction Strategies within the Value Chain - Measures and initiatives to 14 reduce emissions within the enterprise's own operations and supply chain. This includes implementing energy efficiency improvements in production processes and facilities, transitioning to renewable energy sources for power and heating needs, enhancing waste management practices to minimize methane emissions, and reducing emissions from logistics and transportation through fleet optimization and the use of low-emission vehicles. ii. Reduction Strategies beyond the Value Chain - For emission sources within its value chain that are not yet financially viable to reduce, the covered enterprises 22 are given the following options to meet their reduction milestones and targets: (1) Insetting - Covered enterprises may invest outside their value chain to drive a corresponding amount of reduction beyond their value chain that can be more financially viable. This may involve 1) establishing and operating a new decarbonization enterprise that focuses on reducing emissions through innovative projects and technologies; or 2) investing in existing companies or by buying equity in firms that are dedicated to decarbonization investments, ensuring these enterprises 29 contribute to significant emissions reductions.

(2) Offsetting - Covered enterprises may also purchase carbon credits from 2 certified projects developed by other entities that reduce or remove emissions. This allows covered enterprises to achieve their emissions reduction targets by supporting external projects that are verified and credible. Examples include purchasing credits 5 from renewable energy projects, reforestation projects, or other certified emissions reduction initiatives. (e) Investment Roadmap - An investment plan detailing the financial resources 8 and investments required to achieve the emissions reduction targets within short-, 9 medium-, and long-term planning horizons.

Sec. 21. Submission and Approval. - Covered enterprises shall submit their

decarbonization pathways to the DENR for review and approval within one year from the effectivity of this law. The DENR shall assess the pathways for compliance with the established national and sectoral decarbonization targets and provide feedback for necessary revisions.

Sec. 22. Periodic Update of Decarbonization Pathways, - Decarbonization

pathways shall be reviewed and updated at least every five (5) years to incorporate new scientific data, technological advancements, and policy changes. Covered enterprises shall submit updated pathways to the DENR for approval, ensuring 19 continuous alignment with national climate goals and international commitments.

Sec. 23. Industry or Sector Emissions Cap and Emissions Allowance for Covered

21 Enterprises. - The CCC shall be responsible for establishing science-based emissions caps for each covered sector and allocating emissions allowances to covered 23 enterprises within those sectors, in accordance with the following principles: (a) Establishment of an Industry Emissions Cap. The CCC, in consultation with relevant agencies and stakeholders, shall set a long-term annual, mandatory emissions cap for each covered sector, sub-sector, or industry. These caps shall be based on sectoral decarbonization approach aligned with the Paris Agreement's below 2°C pathway. In setting these annual emissions caps, the CCC shall account for each sector's unique context, including the availability of low-carbon technologies and

challenges faced by hard-to-abate sectors. The CCC shall adopt globally recognized, science-based methodologies-such as those from the Science Based Targets initiative (SBTi)-to inform the sectoral pathways. The base year emissions shall be the total 4 verified emissions of all covered enterprises in each sector during the Act's first year 5 of implementation. (b) Allocation of Emissions Allowance to Covered Enterprises - Each covered 7 enterprise shall receive an annual emissions allowance based on its share of the industry-wide cap. This share shall be proportional to the enterprise's production 9 output relative to the total industry output in the preceding year. The CCC, in coordination with the Department of Trade and Industry (DTI) and the Philippine Statistics Authority (PSA), shall establish the necessary methodologies for collecting and verifying production data. (c) Review and Adjustment. - The industry emissions caps and the underlying decarbonization pathways shall be reviewed and adjusted by the CCC at least every five (5) years to incorporate new scientific data, technological advancements, and policy changes. This ensures the continued alignment of the caps with national climate goals and international commitments.

Sec. 24. Determination of Excess Emissions and Pricing. - Any GHG emissions

19 by a covered enterprise that exceed the annual emissions allowance for a given year 20 shall be subject to a carbon price set by the CCC in consultation with the DOF and other relevant agencies. The following provisions shall apply: (a) Determination of Excess Emissions - The excess emissions of a covered enterprise shall be calculated as the difference between the actual third-party verified GHG emissions for the year and the allocated annual emissions allowance of the same 25 year. (b) Imposition of Carbon Price - Covered enterprises with excess emissions shall be required to allocate funds equivalent to the carbon price for each metric tonne of CO2e emitted above the allowed limit. This carbon price shall be determined by the

1 CCC in consultation with stakeholders and relevant agencies, based on the 2 methodology provided in Section 24.

Sec. 25. Methodology of Pricing Carbon Emissions. - The methodology for

4 pricing carbon emissions shall be anchored on objective and reasonable bases. The 5 total carbon price shall be based on two principal cost components: (a) Mitigation Cost Component - The price of carbon shall reflect the cost of mitigating carbon emissions, specifically the cost associated with the removal of one metric tonne of CO2 or its equivalent from the atmosphere. This component ensures 9 that the carbon price covers the expenses related to emissions reduction technologies 10 and practices. (b) Preventative Resilience Cost Component - In addition to the mitigation cost, the carbon price shall also include the cost of preventive resilience measures. This considers the broader socio-economic costs of carbon emissions, factoring in the expenses required to effectively adapt to, avoid, and minimize the adverse impacts of 15 climate change on communities, industries, ecosystems, society, and the economy. The carbon price shall be reviewed and adjusted periodically every three (3) 17 years to reflect changes in mitigation and resilience costs, ensuring that the pricing mechanism remains effective and aligned with national and international climate goals. This dynamic approach guarantees that the carbon price accurately represents the true cost of carbon emissions and drives continuous improvement in emissions reduction efforts.

Sec. 26. Climate Fund. - Covered enterprises shall establish a climate fund into

which the funds corresponding to the carbon price for excess emissions shall be allocated. These funds shall be exclusively used to finance emissions reduction and resilience activities.

Sec. 27. Options for Allocation of Climate Fund. - Covered enterprises shall be

27 given the option to allocate its own climate fund into the following options:

(a) Reduction of Emissions within the Value Chain - Covered enterprises shall allocate climate fund to reduce emissions within their value chain where viable. This includes implementing energy and process efficiency improvements, transitioning to renewable energy sources, and enhancing waste management practices, among other similar activities. (b) Investment in Viable Business Models Beyond the Value Chain - Covered 7 enterprises may allocate climate fund to invest in decarbonization activities beyond 8 their value chain through the following options: i. Investment and Operation of Own Decarbonization Enterprise - 10 Establishment and operation of their own enterprise focused on decarbonization 11 technologies and practices. ii. Collective Investment - Pooling of resources with other covered enterprises 13 to invest in and operate a decarbonization business model or technology, thereby 14 achieving economies of scale and greater impact. iii. Equity Investment - Purchase of equity in an enterprise solely dedicated to 16 investing in and operating decarbonization projects and technologies. (c) Transfer of Climate fund and Obligations - Covered enterprises may transfer 18 their climate fund and obligations to third parties, including: i. Government Allocation - Transfer of funds to the national government for allocation for decarbonization and climate resilience programs, projects, and activities such as those financed by the People's Survival Fund. ii. Purchase of Allowance or Carbon Offsets - Purchase of excess allowance from covered enterprises with emissions falling below their emissions allowances or purchase of carbon offsets from certified projects implemented in the Philippines that meet internationally recognized carbon credits certification standards and methodologies, ensuring that the offsets represent real, measurable, and additional emissions reductions.

Sec. 28. Decarbonization Taxonomy. - The CCC shall, in coordination with

relevant government agencies and private sector stakeholders, develop a decarbonization taxonomy, as guidance for companies to allocate their climate fund towards sustainable investments. This taxonomy will categorize various decarbonization technologies and projects, including nature-based solutions, providing standardized definitions and criteria that align private sector investments with national 7 and global decarbonization goals.

Sec. 29. Annual Compliance Report. - All covered enterprises are required to

9 submit an Annual Compliance Report to the DENR. The Annual Compliance Report shall contain the following: (a) Emissions Baseline and Reduction Progress - A detailed inventory of the 12 current GHG emissions, including any reductions achieved during the reporting period, 13 measured against the enterprise's decarbonization pathway. (b) Reduction Activities and Outcomes - A comprehensive description of 15 specific emissions reduction activities undertaken, their outcomes, and the impact on 16 the enterprise's overall GHG emissions. This shall include the following: i. Implementation of energy efficiency improvements; ii. Transition to renewable energy sources; iii. Enhancements in waste management practices; iv. Other measures and initiatives undertaken within the value chain to reduce emissions; and v. Quantitative and qualitative outcomes of these activities and their contributions to the enterprise's emissions reduction targets. (c) Emissions Allowance and Excess Emissions - Documentation of the allocated emissions allowance for the year and any excess emissions, including the calculation of funds allocated to the climate fund.

(d) Allocation of Climate fund - A comprehensive account of how the climate 2 fund was allocated, detailing investments in emissions reduction activities, both within 3 and beyond the value chain. (e) Future Plans - Outline of planned emissions reduction activities and 5 investments for the upcoming year, aligned with the enterprise's decarbonization 6 pathway.

Sec. 30. Third-Party Audit Report. - Covered enterprises are required to secure

8 a third-party audit report to accompany their Annual Compliance Report. The third- 9 party audit shall include: (a) Verification and Compliance Assessment - Verify the accuracy of the 11 emissions data, reductions achieved, allocation of climate fund reported by the covered enterprise, and assess the enterprise's compliance with the emissions allowance. (b) Audit Findings - Include detailed findings and recommendations to enhance 15 the enterprise's compliance with its decarbonization pathway.

Sec. 31. Role of DENR in Compliance Monitoring. - The DENR shall be

responsible for monitoring the compliance of covered enterprises for their submission 18 of Annual Compliance Report and third-party audit report as specified in this Act. DENR 19 shall also be responsible for imposing penalties on non-compliant covered enterprises.

Sec. 32. Development and Implementation of Verification Standards and

Methodologies for Emissions Reporting and Compliance. - The CCC shall develop and implement comprehensive standards, procedures, and methodologies for the verification of emissions reporting and compliance with the provisions of this law by covered enterprises. These standards will guide third-party verifiers in their verification 25 processes and in the issuance of statements of attestation. The established standards and methodologies shall:

(a) Guarantee the integrity, accuracy, and reliability of reported emissions data 2 and the compliance verification process. (b) Include specific criteria and practical approaches for both verifying 4 emissions data and assessing compliance with this Act.

Sec. 33. Development and Administration of Accreditation Process for Third-

6 Party Verifiers. - The CCC is hereby vested with the authority to develop procedures 7 and administer the accreditation of independent verifiers. The CCC shall: (a) Develop Accreditation Procedures - Establish clear and comprehensive procedures for the accreditation of third-party verifiers. These procedures shall be designed to ensure that third-party verifiers meet the stringent standards required for the verification of emissions reporting and compliance assessments. (b) Administer the Accreditation Process - Implement the entire accreditation process from application to approval, ensuring that all third-party verifiers undergo a rigorous evaluation based on the established procedures and standards. (c) Ensure Compliance with Accreditation Standards - Regularly review the performance of accredited third-party verifiers and ensure they are compliant to the latest version of the accreditation standards.

Sec. 34. Penalties for Non-Compliance. - Covered enterprises that fail to comply

19 with the provisions of this Act shall be subject to the following penalties: (a) Payment of Penalties - Covered enterprises that exceed their emissions allowance and fail to allocate the required funds to their climate fund shall pay a penalty amounting to twice the estimated amount of the climate fund that should have been allocated. (b) Failure to Submit Reports - Covered enterprises that fail to submit their Annual Compliance Report or third-party audit report by the designated deadlines shall 26 be subject to a penalty determined by the DENR.

(c) Revocation of Business Permit - Covered enterprises that commit violations of the provisions of this Act, for three (3) consecutive years, including failure to submit required reports and failure to meet emissions reduction targets, shall be subject to 4 the revocation of their business permit. (d) Authority to Impose Penalties - The DENR shall have the authority to 6 impose the penalties specified in this section on covered enterprises found to be non- 7 compliant with the provisions of this Act.

Sec. 35. Access to Carbon Markets. - The CCC shall provide technical assistance

9 to covered enterprises to facilitate access to carbon markets. This assistance shall 10 include: (a) Linkage to Potential Buyers - The CCC shall facilitate connections between 12 covered enterprises and potential buyers of carbon credits to support the sale and 13 trading of carbon credits. (b) Technical Support for Registration - The CCC shall provide technical support for the registration of carbon projects in recognized carbon certification programs, ensuring that enterprises meet the necessary standards and requirements to participate in carbon markets. (c) Tax Deductibility of Certification Expenses - Carbon certification expenses 19 shall be considered allowable deductions from gross income in accordance with 20 Section 34 of the National Internal Revenue Code of 1997, as amended.

Sec. 36. Tax Incentives. - Investments in emerging low-carbon technologies

by covered enterprises shall be eligible for income tax holidays and enhanced deductions on research and development expense in accordance with Title XIII of the National Internal Revenue Code of 1997, as amended by Republic Act No. 12066, otherwise known as the "Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act". To maximize the flow of climate fund into decarbonization and resilience activities, revenues derived from the sale of excess emissions allowances and carbon credits

1 originating from projects located within the Philippines shall be exempt from all 2 national and local taxes, fees, and duties, including but not limited to income tax, 3 value-added tax, documentary stamp tax, and capital gains tax.

Sec. 37. Facilitation of Access to International Climate Finance. - The CCC shall

5 facilitate access to international climate finance to support the implementation of 6 decarbonization pathways and related initiatives by covered enterprises. This includes 7 identifying funding opportunities, assisting in the preparation of funding proposals, 8 and ensuring compliance with international funding requirements.

Sec. 38. Other Support Function of CCC. - The CCC shall be responsible for

10 consolidating the reduction strategies and roadmaps of covered enterprises, developing and maintaining an online registry, creating standardized templates for GHG emissions accounting and reporting, facilitating national and sectoral decarbonization strategies, and facilitating access to international climate finance and mechanisms for trading ITMOs under the Paris Agreement. The mandates and responsibilities of the CCC shall include the following: (a) Creation of Templates for GHG Emissions Accounting and Reporting - The CCC shall develop and provide standardized templates for the accounting and reporting of GHG emissions baselines, adopting globally acceptable methodologies. These templates shall ensure consistency, accuracy, and transparency in the reporting 20 process and shall be mandatory for all covered enterprises. (b) Consolidation of Reduction Strategies and Roadmaps - The CCC shall be responsible for collecting and consolidating the decarbonization pathways submitted by all covered enterprises. This includes assessing and validating the individual pathways to ensure alignment with national decarbonization targets and sector- specific goals. (c) Development and Maintenance of an Online Registry - The CCC shall establish and maintain a comprehensive online registry to be integrated in NICCDIES, that serves as a centralized database for all decarbonization pathways and related 29 information. The online registry shall:

i. Contain detailed information on the decarbonization pathways of all covered 2 enterprises, including emissions baselines, reduction strategies, investment roadmaps, 3 monitoring and reporting mechanisms, and risk management plans. ii. Ensure transparency and accessibility, allowing public access to relevant data 5 while protecting confidential business information, and include features for 6 stakeholder engagement, public feedback, and knowledge sharing. iii. Enable real-time tracking and reporting of progress in achieving emissions 8 reduction targets, integrating third-party verification reports and compliance audits for data accuracy and reliability. iv. Support the analysis and reporting of aggregated data to inform national climate policy, facilitate international reporting, and continuously improve decarbonization strategies at national and sectoral levels. v. Establish protocols for data security, user access, and protection of sensitive information, ensuring the registry is regularly updated with the latest data from covered enterprises.

Sec. 39. Support Function of LGUs. - LGUs should integrate climate change

adaptation and mitigation measures in their local plans and programs. LGUs shall support and facilitate the activities of covered enterprises as regards their decarbonization investments within the respective jurisdiction of LGUs.

Sec. 40. Appropriations. - The amount necessary for the initial implementation

of this Act shall be charged against the current year's appropriations of the department or agencies concerned. Thereafter, such sums as may be necessary for the continued implementation of this Act shall be included in the annual General Appropriations Act. The LGUs concerned, in consultation with the CCC, may provide the necessary funds for the implementation of this Act.

Sec. 41. Annual Report to Congress. - The implementing agencies shall report

27 to Congress on their progress in carrying out the provisions of this Act for each fiscal

1 year. The reports shall be consolidated by the CCC for presentation to the appropriate 2 committee in Congress at a meeting called for the purpose.

Sec. 42. Staffing Complement of the CCC. - The CCC shall determine the

4 additional positions required for purposes of this Act consistent with its organizational 5 structure and staffing pattern, subject to evaluation and approval of the DBM.

Sec. 43. Implementing Rules and Regulations. - The CCC shall, in coordination

7 with the NDC Steering Committee, 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. 44. Separability Clause. - If for any reason any section or provision of this

11 Act is declared by the court as unconstitutional or invalid, the other sections or 12 provisions thereof shall not be affected thereby.

Sec. 45. Repealing Clause. - All laws, ordinances, rules, and regulations, and

14 other issuances or parts thereof, which are inconsistent with this Act, are hereby 15 repealed or modified accordingly.

Sec. 46. Effectivity. - This Act shall take effect fifteen (15) days after its

17 publication in the Official Gazette or in a newspaper of general circulation. Approved,