Make economic case for energy efficiency, bill backers told

Government agencies and private sector organizations backing the passage of proposed legislation on energy efficiency should present hard numbers to justify how its economic impact will offset foregone revenue from the tax incentives offered in the bill.

This is the “contentious issue” that is likely to put the bill under further scrutiny, said Sherwin T. Gatchalian, chairman of the Senate committee on energy, in an interview on the sidelines of a recent hearing.

“We have to see that,” he said, referring to the economic reflow or benefits that could make up for lost revenues. “We have to justify what that reflow is because that’s theoretical.” 

“We have to look at the assumptions, the basis of that reflow,” Mr. Gatchalian said, referring to the benefits that will be reaped by the economy.

The hearing reviewed Senate Bill No. 30, “An Act Institutionalizing Energy Efficiency and Conservation, Enhancing the Efficient Use of Energy, Granting Incentives to Energy Efficiency and Conservation Projects, and for other Purposes.” 

It also matched relevant provisions with the comments and position papers submitted by energy industry stakeholders.

Supporters of the bill, including the Department of Energy (DoE) and private group Philippine Energy Efficiency Alliance, Inc., said the benefits would more than offset the lost revenue from the tax-free importation of energy-efficent equipment, among others.

“Let’s quantify that because philosophically, it’s good to have fiscal incentives but what will be lost, what will be plowed back,” he said.

“Taking note of what the administration wants to do, which is to harmonize, simplify, standardize fiscal incentives, this (proposed legislation) should be consistent to that philosophy. And definitely, one of the cornerstones of this administration is to fix and reform the tax incentives and the tax regime of our country,” he said. 

Asked about how close the bill is to being passed into law, Mr. Gatchalian said: “Maybe, I would say about 20%.”

“This is actually quite comprehensive, very detailed and the reach is very extensive -- local government, private sector -- so implementation will be very extensive. And that’s what we need,” he said, adding that the next step after the hearing would be to “clean up the bill.”

“We will wait for DoE to give us their recommendations and hopefully when the Senate reopens, I will sponsor this right away,” he said.

In a separate interview, Asian Institute of Management (AIM) visiting Professor Vinod Thomas said the country’s passage of the energy efficiency legislation should be a priority.

“The Philippines’ goal could clearly be first reduce the inefficiency or at the same time shift the energy use pattern away from coal and eventually also away from gas and more on renewables,” he said.

Mr. Vinod, who worked as director-general of independent evaluation at the Asian Development Bank and the World Bank, said energy efficiency “is a dream for those who want to do well on the economics and also not do poorly in the environment.”

“It’s a win-win. If you improve efficiency, who would be against that. Twenty percent roughly of losses, leakages, pilferage, all of that combined would be like a bonus that you get. But you have to invest in it and you have to change systems. So it needs action,” he said.

“So in the abstract it’s a win-win, but in practical terms it requires changing of investments and policies at the company level and also at the government level. So in that sense, energy efficiency would be the first, the highest that I would put on the list of things. Because the remaining ones have a little bit more of the win-lose feeling -- renewables versus fossil fuels,” he said. -- Victor V. Saulon