Paying to clean up our own mess... taking a look at carbon taxes and plastic pollution taxes

Ben Kritz made a good point about Juan Ponce Enrile's calls for a shift to a compensatory character of funding from The Adaptation Fund, established by the Parties to the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC).

Internationally, official delegations sent by the Philippines to negotiate the international climate treaty have taken strong positions to treat climate finance not as aid or charity but as compensation to be paid by countries responsible for the problem. This, I believe, is the correct stance.

In fact, legally, I would analyze and look at this matter as a "tort". Harm was inflicted on our people, and more injury is expected in the future arising from impacts emanating from the profligate and polluting practices and lifestyle of developed countries. There is a climate debt that needs to be paid and reparations are in order.

Unfortunately, laudable positions taken by the Philippines abroad on climate-related finance are not reflected here at home. We still conduct our business with a beggar's bowl. We accept climate-related concessional loans from countries responsible for this climate crisis.  We accept climate-related grants with conditions that are onerous and injurious to our financial health and ultimately, to our people's welfare.  We have exercised national leadership so poorly, particularly with the agency that is tasked to be leading and coordinating the national climate effort.

Ben had this to say:

When the Philippines decides to clean up its own act and enforce what environmental/anti-pollution laws it already has on the books, it will then be in a position to dare talk about "compensatory funding." This was one of my biggest beefs with GMA last year -- the environmental harm that causes direct human harm in this country does NOT come from across the seas.

Her position, which is what JPE seems to be agreeing with, was that global environmental effects -- of which Ondoy would be an individual example -- are made worse by the countries that are responsible for the greatest amount of pollution that contributes to global warming, and that the countries who do not contribute significantly to that problem should be compensated proportionally in order to withstand the effects.

Okay, so on principle, that is not completely off-base. But what aggravates the effects of a typhoon (or even an ordinary heavy rainstorm) here? It is the LOCAL pollution, poor infrastructure planning and design, poor land management, etc. If all else was equal, i.e., if the Philippines was rationally managing its own environment, then yes, the idea of 'balance in mitigation' might well come into play. But singing the sad song about "we suffer from the effects caused by the rest of the world" just doesn't wash at this point. 

 And just now, I came across Alex Magno's column which talks about the introduction of a carbon taxes:

 http://www.philstar.com/Article.aspx?articleId=603441&publicationSubCategoryId=64

In our own little economy, we will need to quickly build a dozen or so power plants over the next few years to avert a power shortage. Since we have renounced nuclear power, nearly all these plants will use fossil fuels — even as we all know demand will soon outstrip supply of fossil fuels over the next decade.

We can no longer rely on token gestures aimed at mitigating climate change. At the rate we are going, the Antarctic might melt away before we actually begin reversing the greenhouse effects of the carbon we emit.

The “inconvenient truth” now requires taking inconvenient steps to confront it. Nobel laureate Jeffrey Sachs, who now advises the UN secretary-general, has proposed a truly inconvenient tool to wield against the challenge posed by climate change.

We will make no progress in the battle against climate change, says Sachs, if people can freely emit carbon without penalty. He proposes that all governments now introduce a “carbon tax” on all activities that result in carbon emissions. That will create greater market impetus to either shift to renewable energy or to at least reduce the carbon footprint enterprises or private citizens make.

If we charge a road-users tax on people who use the roads, a sin tax on people who consume unhealthy products and every sort of property taxes on people who own land, why not impose a tax on carbon footprints? The revenue from such a tax will provide enough money for really meaningful public investments in reversing climate change. Let’s give this idea some serious thought.

What are carbon taxes?  Here's a definition from the Wikipedia:

A carbon tax is an environmental tax that is levied on the carbon content of fuels.[1] Carbon atoms are present in every fossil fuel (coal, petroleum, and natural gas) and are released as carbon dioxide (CO2) when they are burnt. In contrast, non-combustion energy sources—wind, sunlight, hydropower, and nuclear—do not convert hydrocarbons to carbon dioxide. A carbon tax can be implemented by taxing the burning of fossil fuels—coal, petroleum products such as gasoline and aviation fuel, and natural gas—in proportion to their carbon content. Accordingly, a carbon tax increases the competitiveness of non-carbon technologies compared to the traditional burning of fossil fuels, thus helping to protect the environment while raising revenues.

From what I can understand, this will in effect force people to shift to non-carbon or non-combustion energy sources.

Although, certainly a good idea, one would have to consider that non-combustion energy sources are not easy to come by or affordable -- unless, of course, the carbon tax is expressly levied to subsidize the shift to non-combustion energy sources.

Now, if you said that carbon taxes will do just that, you'd have to figure out if we have enough rich people or industries who'll basically pay the higher priced combustion energy sources.  Otherwise, we'll just end up with higher priced fuels and energy whether it is combustion based or non-combustion based.

In any case, I think as far as taxing as a way of curbing the use of products and processes that are harmful to the environment is concerned, we can also look at taxing producers of plastic wastes (companies and consumers of products that come in plastic bags, pouches, sachets, and bottles).

This represents a larger base for taxation.  Just consider, if you will, the amount of revenue you can raise from taxing the use of plastic sachets by figuring it from the volume of plastic sachet products that are produced and marketed on a daily basis.

Here's one estimate:

http://pinoybiz.blogspot.com/2010/08/tax-to-curb-plastic-sachets-and-plastic.html 

Giant consumer goods manufacturer Unilever claims that every day, it sells 160 million products.  Assuming that the sales volume of the other manufacturing giants, Procter & Gamble and Nestle is in the vicinity of Unilever’s, that would be some 500 million products sold daily.

Let’s peg a conservative estimate that 10 percent of all products sold are in plastic sachets, then that’s 50 million.  That’s 50 million plastic sachets and pouches that will eventually find its way to our oceans, waterways, landfills and drainage systems ready to clog the free flow of water and trigger floods or kill marine wildlife.

But it is really reasonable to think that of the 500 million products sold daily by the three giants, only 10 percent of are in tiny plastic sachets?

And here's another way of figuring it.

http://pasigriveravenger.wordpress.com/2010/08/14/saw-dingdong-dantes-and-angel-locsin-endorse-a-product-then-picture-this-people/

According to Unilever’s vice president for corporate planning Chito Macapagal, 70% of Unilever Philippines 2007 sales is from the sachet market. That’s 70% of 30 billion pesos, or 21 billion pesos three years ago. That’s nine zeroes following 21. The company was enjoying double digit growth rate from the previous year, so expect that by now those numbers are now not just big, but big big.

Can you picture how many sachets 21 billion pesos’ worth of Unilever products are? Well, let’s see. Which brands of theirs have sachet variants? Sunsilk, Creamsilk, Rexona, Clear, Knorr, Lady’s Choice, Close-Up, Best Foods, and Vaseline come to mind. 

Moving on, 21 billion pesos in sachets, if say, the average price for any given sachet were 20 pesos conservatively (I say conservatively because first, most of those mentioned cost less than 20 pesos, and second, 21 billion pesos in Unilever’s sales is at supplier-to-distributor prices, which are lower than retail), would be equivalent to 1,050 million sachets. If a given sachet has 10mL of product inside, it’s like they’re producing- no, selling at least one Olympic size swimming pool’s worth of product every 3 months. That doesn’t sound like much, but you could shampoo all 90 million Filipinos 20 times over with that much shampoo, if it were all shampoo.

What’s difficult to imagine is the sheer quantity of packaging material that went into the making of all those sachets. If 1,050 million sachets were sold, then the waste would be 1,050 million multiplied twice to include front and back of the sachet, times 3 inches by 4 inches (I took an estimate of a Clear shampoo sachet), which equals 25,200 million square inches. This is the equivalent of about 16.26 square kilometers worth of sachet or wrapper material. Now, before you do take the initiative to shoot me for driving you nuts with numbers, picture this: 16.26 square kilometers of sachet is enough to cover all of Ilog Pasig.

Taxing plastic containers can easily generate several billions of pesos in additional funds which can fund the acquisition of technologies that will help reduce the amount of plastic trash, clean up our drains and rivers, etcetera...

Moreover, it will also force people to shift to the more ecologically sound practice of using reusable containers for all sorts of products.

Senator Juan Ponce Enrile Privilege Speech on Climate Change funding anomalies

Juan Ponce Enrile on Monday, August 16, 2010 at 4:01pm

Mr. President, ladies and gentlemen of the Senate, I rise on a matter of personal and collective privilege to bring to the attention of this august Chamber and to the entire leadership of the country a matter of serious national concern and urgency.

The typhoon season is here once again. For some time, we, Filipinos, seemed to have been accustomed to typhoons as annually recurring disasters and we took these events year in and year out with nonchalance. That was so until nature shook us up and we saw that things did not follow the usual seasonal pattern, the frequency and magnitude of the winds and torrents increased radically, the usual flood-safe areas were inundated.  We had unusually long dry spells on our fertile lands, our wells and reservoirs were drying up, water levels were going unusually low, and the damage our people and our economy suffered from all these grew worse each time.

The country's vulnerability to natural hazards and extreme weather occurrences has taken a significant toll on the economy. Our people have seen and experienced the damage and loss of lives and property brought about by our repeated encounters with calamities over many years. The massive floods that occurred in Metro Manila due to tropical storm Ondoy, and the prolonged power outage after typhoon Basyang hit the country are just recent examples.

This season of disaster risk reminds us and the leaders of the nation of our urgent duty to put in place enduring measures that can help our country survive the onslaught of the global dilemma which is climate change. Climate change is both a condition and a problem which, though not attributable to small and developing countries such as ours, is nevertheless a reality we can ill-afford to ignore. Its dire effects are even more gravely experienced and felt, in fact, by small nations who are financially the worst or least- capable of coping with and adapting to the harshness of disasters and calamities.

So serious has the problem become that the government has adopted certain initiatives that were designed to develop and implement suitable responses to what now looms as an inevitable global crisis.  These initiatives need urgent funding and at the rate the country's budget deficit has gone up, we must efficiently, wisely, and purposively use public finance as our vital tool to accomplish our adaptation and mitigation measures.

Last July 22, days before the State of the Nation Address of  our new President, I delivered a message before the media on the climate crisis and the threats that global warming posed to our people. In the same message, I called for the urgent crafting of a National Survival Agenda anchored on public finance, which I believe is the most essential, effective and meaningful tool that we can wield to protect the poor and our fragile ecosystems from the disastrous climatic impact of climate change which is projected to worsen in severity and frequency in the days and years to come.

There is no doubt that rich countries are largely to blame for the climate crisis. Wealthy nations bear the historical responsibility for this problem. Great and powerful as they are, it is a fact that just as great is the responsibility they must bear for the global damage they have caused in the name of their own "development", "industrialization" and economic advancement.  They need to cut their greenhouse gas emissions drastically and dramatically, as has been the call from small countries.

But more importantly, we must challenge their financial might and power by pressing for the  rapid dispatch and channeling of funds to developing countries, whose ability to cope with threats not of their making are severely impaired by their economic condition.

While we lay the blame squarely at the doorstep of developed nations and remind them of their responsibilities, we must not spare ourselves from criticism.

Distinguished colleagues, the Philippines is particularly vulnerable to the impacts of climate change. But this is not merely because of her archipelagic nature and economic state. To a great extent, our vulnerability has been exacerbated by the way the government has addressed the climate crisis.

Currently, governance chaos reigns over the administration of climate finance that has already entered the national coffers, and of funds we expect in the future as they are projected or programmed to come from abroad.  More international climate finance has gone to mitigation efforts instead of adaptation activities. Worse, it appears that most of the resources allocated for adaptation programs and projects have come in the form of loans. This is contrary to the position championed by the Philippines abroad, which calls for climate finance to be channeled neither as aid nor charity, but in context and by design as compensatory funding.

Internationally, official delegations sent by the Philippines to negotiate the international climate treaty have taken strong positions to treat climate finance not as aid or charity but as compensation to be paid by countries responsible for the problem. This, I believe, is the correct stance.

In fact, legally, I would analyze and look at this matter as a "tort". Harm was inflicted on our people, and more injury is expected in the future arising from impacts emanating from the profligate and polluting practices and lifestyle of developed countries. There is a climate debt that needs to be paid and reparations are in order.

Unfortunately, laudable positions taken by the Philippines abroad on climate-related finance are not reflected here at home. We still conduct our business with a beggar's bowl. We accept climate-related concessional loans from countries responsible for this climate crisis.  We accept climate-related grants with conditions that are onerous and injurious to our financial health and ultimately, to our people's welfare.  We have exercised national leadership so poorly, particularly with the agency that is tasked to be leading and coordinating the national climate effort.

            I have received numerous reports and documents pointing to climate-related funds that our government has accepted in the wrong form and manner and which appear to have been misused or disbursed questionably. I have also received reports that the agency which Congress created and tasked with the responsibility of exercising leadership in handling the issue and the problem—none other than the Climate Change Commission -- has been performing badly, with one commissioner unilaterally usurping the powers and dispensing the duties that the Commission should be exercising as a collegial body.

This afternoon, allow me to raise some very serious concerns about a climate finance-related arrangement that was reported to have been consummated between some government agencies such as the Department of Public Works and Highways and the World Bank, and which, on face value, appears to be extremely disadvantageous to our people's interest.

 Among other efforts that need to be undertaken, I have committed to help our country tap untied finance from abroad from institutions lodged under the auspices of the United Nations such as the Adaptation Fund.

            The Adaptation Fund, established by the Parties to the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC), is mandated to finance concrete adaptation projects and programs in developing countries that are Parties to the Kyoto Protocol.  The resources of the Fund are generated from the shares in the proceeds from the so-called "Clean Development Mechanism" project activities and other sources of funding.  To date, the revenues of the monetization of certified emission reductions (CERs) carried out by the World Bank as the Trustee of the Fund, amount to approximately US$63M.
  
            A unique feature of the Adaptation Fund is to provide developing countries direct access to the Fund without having to pass through multilateral development banks such as the World Bank.  Vulnerable developing countries can nominate local institutions for accreditation as National Implementing Entities (NIEs), which will be responsible for endorsing project and program proposals from their countries, and will be direct recipients of the funding.  These NIEs must meet certain standards set by the Adaptation Fund Board to ensure sound fiduciary management and oversight over the use of the funds.  Money which is provided bilaterally by donor countries to the Adaptation Fund ceases to become bilateral Official Development Assistance (ODA) once it enters the Adaptation Fund.

            I strongly hold the view that it is in the best interest of the Philippines to access the Adaptation Fund, of which we are eligible to avail.

Unfortunately, documents and related information recently acquired by non-government organizations seem to contradict such position taken by the Philippine government, such that the World Bank allegedly is poised to deny the Philippine government the option to directly access resources from the Fund. Instead, it appears that the World Bank is reportedly ready to act as a conduit that will access the Fund on our behalf. There are now allegations that officials from the Department of Public Works and Highways (DPWH) and PAG-ASA have either wittingly colluded with World Bank or unwittingly succumbed to it, for a prospective US$15M Adaptation Fund "grant" which could burden our country with even more loans.

This development raises specific questions. The World Bank should be aware that the Philippines has long championed the Direct Access modality. By inserting itself as an intermediary, thereby pushing the Philippines to use the multilateral modality, it appears that the World Bank is undermining Philippine intentions to promote and operationalize the Direct Access modality in its efforts to gain access to or avail of the Adaptation Fund.

Related to this, more questions come to mind about the said project proposal submitted the World Bank, in behalf of the Philippine government, to the Adaptation Fund Board, which beg for immediate attention and answers.

1.         I am aware that the country is still in the process of formulating its adaptation action plan. On what basis, therefore, was the World Bank proposal made? Did it favor one department over the others? Did it favor one sector over the others?

2.         Why is the World Bank proposing to fund more feasibility studies? Do we not have concrete projects that urgently require resources in order to be implemented? Is it true that the feasibility studies, which will cost US$2.0 million, will be used for priority investments the World Bank will identify under a World Bank-financed flood management plan?

3.         Is the proposal throwing new money on wasted programs? Under the proposal, the World Bank will allocate US$1.514 million to rehabilitate projects that failed due to flawed designs -- projects that  probably should not have been financed in the first place.

4.         The proposal allocates US$1.0 million to pay for "consultancy services". Who will provide these services? Under what criteria will these consultants be chosen? Who will choose these consultants? Who will these consultants be accountable to? How will the one million dollars be used, over what period and under whose workplan?

5.         The total project cost of the World Bank proposal amounts to  US$13.85 million and allocates for the World Bank almost US$2.0 million representing management costs, which brings the total financing proposal to US$15 million. Is this really the rate? Even if the government allows a 10 percent "corruption" cost, which is an absurd proposition, it will still be cheaper than paying a 15 percent World Bank management fee. Mr. President, I posit this question, will management costs be lower if a Philippine government agency be assigned instead to undertake the Direct Access modality route as prescribed by UN Adaptation Fund Board?


Mr. President, having cited all these circumstances, I would like to appeal to my colleagues in this Chamber to support my urgent call for an exhaustive and thorough investigation to address the issues I have presented before you today precisely to shed light on the matter, or to correct any misimpressions that have arisen in our study of this issue.

Personally, this representation has nothing against the World Bank.  What I am after is to make sure that our rights and interests are protected within the limits of both domestic and international laws, given the fact that we are a Party to the Kyoto Protocol.    

A review of existing laws is likewise in order. Is the law which we passed being implemented with the same intent and in the same spirit with which it was enacted? Do we need remedial legislation to address any loopholes or weak points we may have missed? Are we satisfied that the agency which we created and tasked under the present law to address this problem is able to carry out its mandate?

I urge the proper committees of the Senate to urgently look into these complex issues, especially those which bear on the public finance aspect of addressing the reality of climate change. Let us show our people that we, their elected representatives, can do much more and much better than planting or hugging trees. In addressing this global phenomenon and in proposing more effective remedies and means to protect our people, we are called upon to offer more than just the usual pro-environment rhetoric.

Ultimately, the government, through the Department of Finance and the Department of Budget and Management, should take the necessary steps to arrest the mismanagement which is getting in the way of moving speedily and judiciously, and in a direction that is consistent with our national position on the matter of climate change and climate finance.

I am confident that once completely apprised of the urgency of these issues and the gravity of their impact on our people and our nation, President Aquino will heed this call and view it as this humble representation sees it.

This is a matter where the President's leadership is sorely needed--Leadership in seeing to it that the Philippines remains strong in asserting its right to secure compensation for the damage climate change has brought upon our land and people, the worst of which is yet to be seen; Leadership to ensure that we do not allow any undue, unnecessary, and unfair financial burden for our people to bear, using climate change as a mere excuse or cover to divert funds to non-sensical  or dubious projects or ventures.

Most importantly, we need real leadership in correcting the governance chaos and misdirection which is evident in no less than the government agency mandated by law to exercise effective and coordinative leadership over the country's climate action agenda, the Climate Change Commission.

Let us take our stand firmly along with poor nations in the global community as a country that rightly deserves compensation. Let us demonstrate that our government agencies are manned by trustworthy and competent leaders who understand the problem and who will see to it that funds for climate change adaptation are spent judiciously and exactly for that purpose- no more, no less.    

Thank you, Mr. President.