Industry group gives Aquino the benefit of the doubt on energy policy


IN a courteously worded statement over the weekend, the Federation of Philippine Industries (FPI) suggested that the government should “rethink” its energy and climate change policy as announced by President BS Aquino 3rd at last month’s Paris climate summit.

That’s pretty generous on the FPI’s part, because asking the President to “rethink” the ridiculous pledge he made in front of leaders and representatives of 150 or so other countries presumes he gave some thought to what he was saying in the first place

Whereas the Intended National Declarations of Contributions (INDC) of most other countries were fairly modest and scaled to what they believed they could at least come close to achieving given their capabilities and economic concerns, Aquino, with all the subtlety of a jackhammer, attempted to use the Philippines’ INDC as a tool for self-promotion. The Philippines would, he said, cut its carbon emissions by 70 percent by 2030, increase the proportion of renewable sources in its energy mix to one-third, and plant 1.5 billion trees by 2017.

The FPI is concerned, and rightly so, that the bold promises might be a bit too ambitious. For starters, they pointed out, the highest emission-reduction pledges from other countries were in the range of 20 to 30 percent. Second, because electricity from renewable energy is at this point still considerably more expensive than electricity from conventional fossil fuel-based generation sources, the economic burden on a country where a significant part of the population is impoverished and where electric rates are already some of the highest in the world may be completely unmanageable. And finally, while nothing bad can come from planting a billion-and-a-half trees, the FPI wonders whether the government bothered to check first if the estimated 1.5 million hectares of land that will be needed to accommodate them all is actually available (1.5 million hectares, or 15,000 square kilometers, is approximately 5 percent of the total land area of the Philippines).

What the FPI overlooked, however, or perhaps politely omitted, is that Aquino already indicated he has no intention of pursuing any of these lofty ambitions with the caveat he imposed that any work on climate mitigation in the Philippines is contingent on its being funded by the rest of the world. Working out the mechanics and beginning the actual disbursement of the global climate fund—which isn’t even anywhere close to amassing the $100 billion starting amount it is supposed to provide—will take a year or two at best, and thus, developing an actual policy to deploy the funds for the purposes he so cavalierly stated will not be his problem. And just in case anyone did not quite yet understand that he actually does not give a damn about energy policy, Aquino took pains to personally attend the opening of a 300 MW coal-fired power plant in Davao last week. That is one of 23 coal plants that had plans approved during Aquino’s term, and which will ultimately increase the proportion of coal-generated electricity in the Philippines from its current 42 percent to a whopping 70 percent.

The FPI statement strongly implied that the government should back away from Aquino’s casual INDC pledge, or at most use it as a general guide to policy direction, and concentrate instead on developing a detailed energy policy. After all, the organization noted, the Philippines’ contribution to global emissions is comparatively inconsequential, and is likely to continue to be for years to come, so a rush to make deep cuts in emissions is likewise not going to have much of an impact.

The main concern of the FPI seems to be energy costs. That is actually a valid perspective from which to approach the problem. High energy costs are a disincentive to investment and development, and that in turn dampens growth in energy demand. A few years ago, a reduction or slower growth of energy demand might have been an advantage, but it is not now. Over the next few years, it will become increasingly difficult to pursue a program of expanding generation capacity through adding coal plants; investors are fleeing coal at a rapid rate, and even though the technology and the fuel are relatively inexpensive, the government and energy sector developers are going to find it increasingly harder to finance coal and other conventional fossil fuel systems (with the exception of gas, which has not yet fallen out of favor).

Conversely, it is going to become increasingly easier to finance alternative energy development, BUT only if there is demand for it. The cleanest systems (and the ones that are developing the most rapidly), solar and wind, are also the most variable and the least suited to providing baseload power. Since electricity is a “use it or lose it” commodity (systems such as storage batteries are still too primitive to be realistic on a large scale), the developer of a solar or wind installation would naturally want assurance that all its capacity would be taken up by the grid, or in other words, the already natural handicap of downtime imposed by weather conditions or nightfall would not be aggravated by a lack of demand. That’s not really an issue now with the relatively tiny proportion of renewables in the country’s energy mix, but would be if those renewables are expanded to the levels proposed by Aquino’s ill-considered INDC pledges.

As a consequence, that makes energy policy an integral part of an overall policy of industrial development—and the only way that can ever get off the ground, as Aquino has been pointedly told more times than anyone can count, is to lower energy costs. Of course, given that he has only six more months in office, there is probably little hope that he will give the matter any more attention than he plans to direct toward climate change mitigation.


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