Read this in The Manila Times digital edition.
FINANCE Secretary Carlos Dominguez 3rd recently shared a novel idea to accelerate the shutdown and repurposing of the Philippines' coal-fired electricity generating plants. It is an interesting, imaginative concept and well worth examining in closer detail. The only problem is that it may turn out to be too imaginative to actually be feasible.
On the sidelines of the recent COP26 climate summit in Glasgow, Scotland, Dominguez, who is also chairman of the country's Climate Change Commission, suggested that foreign governments could buy out the shares of their investors in coal plants here and then, donate those proceeds back to the government or to an institution such as the Asian Development Bank (ADB).
The ADB recently set up an Energy Transition Mechanism (ETM) facility, a public-private finance vehicle designed to mobilize a large amount of funds, including commercial funds, to speed up the decommissioning of coal plants and development of sustainable replacement energy in participating countries. The Philippines and Indonesia are the first two countries signed up under the new initiative, and one coal plant in Mindanao is already part of the program.
The benefit for foreign countries under the Dominguez plan is that they can count the funds spent for share buyouts as part of their pledged contributions to climate mitigation and adaptation financing. The Philippines, on the other hand, would be able to count the contributions against the "conditional" part of its nationally determined contribution (NDC) to global climate targets. It has pledged to reduce its own greenhouse gas emissions by 75 percent by 2030, but about 72 percent is dependent on financial and other material assistance from developed countries.
The astute reader may have already noticed that as Dominguez has described the plan, there is a bit of a disconnect between what a foreign government might "buy out" from a shareholder and what "proceeds" it could subsequently contribute to the government or the ETM facility.
For example, let us suppose that an American firm has a 10-percent stake in a coal-fired plant here, with the remaining 90 percent being held by one (or more) Filipino companies as joint venture partners. The US government buys the 10-percent stake from its national firm, and that firm collects its cash proceeds from the transaction and goes on its merry way, leaving the picture. The supposedly donatable "proceeds" the US government now has, however, are not liquid funds that can be spent, but rather equity; it now essentially owns 10 percent of the plant. In order to contribute funds that can be used, the US government would have to sell off those shares, an idea that is problematic for more reasons than we have space to discuss here.
As an alternative, the US could turn that equity over to the government (or to the ADB), but even then, it would still need to be liquidated at some point in order to be useful for the intended purpose of winding down the coal plant in question. Granted, there are actually a variety of complicated ways in which that could be done, but even if that is achieved, it still leaves a rather large elephant in the room: The need to buy out the stake of the private-sector Filipino owners of the plant.
Thus, thanks to the Philippines' historic lack of foresight in racing to privatize almost all of its energy resources and infrastructure, the task of taking control of coal plants in order to decommission and repurpose them is still a very expensive one, no matter what Dominguez's idea might contribute to solving the problem.
That does not mean that further solutions cannot or will not be worked out, or that the government and financing partners such as the ADB should stop trying to find them, but it does mean that achieving the goal of eliminating coal and other fossil fuel energy is going to be a much longer, complicated process than anyone in the policymaking sphere realizes, or is willing to admit. Until investment in energy alternatives is made more economically attractive to the convention-bound, familiar large-scale players in the Philippines' energy sector, it is unlikely optimistic deadlines like "75 percent by 2030" are going to even come close to being met.