BOI asks PE2 to share position on EE fiscal incentives under IPP

  • PE2 president Alexander Ablaza (right photo) presents civil society and EE sectors’ position on the need to improve the specific guidelines for energy efficiency projects under BOI’s Investment Priorities Plan during a BOI-GIZ workshop on EE fiscal incentives on 6 November 2019. PE2 officers Theresa Acedillo Lapuz (seated foreground, inset) and Luigi Eusebio (rightmost, group photo) also represented the Alliance in the workshop. (PE2 photos by Luigi Eusebio)
    PE2 president Alexander Ablaza (right photo) presents civil society and EE sectors’ position on the need to improve the specific guidelines for energy efficiency projects under BOI’s Investment Priorities Plan during a BOI-GIZ workshop on EE fiscal incentives on 6 November 2019. PE2 officers Theresa Acedillo Lapuz (seated foreground, inset) and Luigi Eusebio (rightmost, group photo) also represented the Alliance in the workshop. (PE2 photos by Luigi Eusebio)

MAKATI CITY, 6 November 2019 – The Board of Investments (BOI) asked the Philippine Energy Efficiency Alliance (PE2) to present its position on the need to improve the specific guidelines for energy efficiency (EE) projects under the current Investment Priorities Plan (IPP) during a workshop held earlier today at the City Garden Grand Hotel by the BOI, with technical assistance from Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.

Summarizing previous PE2 position papers for BOI, PE2 president Alexander Ablaza forwarded the following recommendations toward enhancing the responsiveness of the specific guidelines for EE projects that were publicly released by BOI on 8 March 2018. These recommendations include: [a] Restrictions to type of sector for EE host entity should be removed. This should incentivize EE investments in other key energy-intensive sectors such as commercial, industrial and government end-users. Through the long term, even hard-to-reach sectors such as residential and MSMEs should be covered; [b] Guidelines should avoid limiting scope of EE technologies, but instead open up to all savings-based EE measures; [c] Fiscal incentives should cover all components of EE project cost of ESCO or 3rd party investor; [d] ESCOs and 3rd party investors take on more investment risk than self-financed host entities and such higher risk should be mitigated by more responsive fiscal incentives; [e] Duty-free importation of capital equipment and a uniform 6-year income tax holiday will certainly help improve the commercial viability of 3rd party equity returns; [f] PE2 recommends a minimum 15-year period for these fiscal incentives to take effect through before they are removed or replaced by a rationalized incentive framework; and, [g] The intent of Republic Act 11285 to remove foreign ownership restrictions in the availment of fiscal incentives should be preserved through this effectivity period.

PE2 expressed surprise on the deletion of a provision in the 16 July 2019 version of the draft EE guidelines shared by BOI with DOE and PE2, which granted all EE projects pioneer status and eligibility for 6-year income tax holiday (ITH) incentives. The deletion of this provision reduces the ITH duration to a maximum of 4 years.

Ablaza also raised concerns on the effect of the anticipated CITIRA law on EE fiscal incentives, and how BOI should also look into possible registration of a long-term portfolio of uncontracted EE projects to ensure certainty of commercial after-tax returns of long-term equity investments, whether local or foreign. PE2 also observed that the current framework requires EE projects to be screened or filtered through at least three evaluating agencies – first by DOE, then by BOI, and lastly by BIR. PE2 is deeply concerned that at any of the three levels, EE projects may be disapproved or disqualified. This, alongside the periodic 3-year review cycles of the EE guidelines, provides so much uncertainty to long-term portfolio investments.

Aside from Ablaza, PE2 was also represented by its treasurer and policy committee member Theresa Acedillo Lapuz and its secretariat manager Luigi G. Eusebio.

BOI was led by Executive Director Ma. Corazon H. Dichosa and Director Nestor P. Arcansalin. DOE was represented by EE&C Division Chief Artemio P. Habitan. GIZ was represented by Kai Hofman and its consultant, Dr. Verena Sreitferdt.

The workshop was organized to review and enhance the specific guidelines for the registration of EE projects under the 2017 IPP of BOI. It also aims to identify the gaps, issues, and concerns in evaluating technically and financially feasible EE projects. 

The Philippine government, through Executive Order (EO) 226, provides fiscal and non-fiscal incentives to promote EE, specifically in industrial production, by creating an enabling environment for industries.

The mechanism intends to reward more efficient businesses such that the higher the efficiency gains, the higher the support that would be provided. Fiscal incentives come in the form of ITH and duty exemption on imported capital equipment exclusively used in EE projects. Pursuant to EO 226, the Board of Investments (BOI) is responsible for the regulation and promotion of investments in the Philippines and the formulation of the annual IPP, which is the overall plan for investment and industry promotion showing specific activities and generic categories of economic activity wherein investments are to be encouraged.

Under the 2017 IPP, which is a 3-year rolling plan, EE projects under a generic category on Environment and Climate Change-related Projects may qualify for incentives. As mandated, the BOI promulgates the general policies and specific guidelines to implement the registration of projects and administration of incentives under the IPP.

Through the Advance Sustainable Consumption and Production (SCP) project of GIZ, BOI requested technical assistance to review and enhance the implementation of the specific guidelines and come up with the most efficient method of evaluating projects that may qualify for the incentives.

The workshop was held purposely to: [a] Review  the BOI’s specific guidelines for evaluating EE projects and identify areas for improvement; [b] Identify the most  applicable method/basis (technology, process, etc) in identifying and evaluating energy-efficiency projects taking into consideration the best practices implemented in other countries; [c] Identify the gaps causing the  low  registration  of  projects  under  environment  and  climate-change related projects; and, [d] Discuss proposals to expand the BOI guidelines.

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R.A. 11285 - An Act Institutionalizing Energy Efficiency and Conservation, Enhancing the Efficient Use of Energy, and Granting Incentives to Energy Efficiency and Conservation Projects

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