2006 IEC Philippines Country Paper

8/6/2019 2006 IEC Philippines Country Paper

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MEMBER FIRM OF BAKER & MCKENZIE INTERNATIONAL

Philippine Environmental UpdatesBy: Jocelyn J. Gregorio-Reyes

Quisumbing Torres

Manila, Philippines

June 2006

I. Introduction

The Philippines has one of the more voluminous sets of environmental laws in Asia,

although the laws have not prevented environmental degradation throughout the Philippines.

This is due principally to (1) the insufficiency of technical, human and financial resources at

the national, regional and local government levels, often coupled with resistance to change,

and (2) ineffective environmental governance due to weak institutional capacity, particularly

with regard to enforcement of laws and regulation. Poor understanding and education on the

part of the Philippine population are also barriers to environmental progress.

With environmental problems seeming to abound in the Philippines, the government has

recently begun to step up its legislative action. Major environmental legislation has been

enacted over the past couple of years, specifically legislation addressing the worsening air

pollution and irresponsible dumping of solid waste, particularly in urban centers. Recently,

to prevent, abate and control water pollution for the effective utilization of the water

resources, the Philippines Department of Environment and Natural Resources (DENR)

adopted the National Environmental Users Fee (NEUF) through its wastewater permitting

system by issuing DENR Administrative Order (DAO) No. 2002-16 and its implementing

rules, DAO 2003-39.

To address the lack of enforcement and infrastructure required to improve environmental

management, the DENR also issued DAO 2003-14. DAO 2003-14, signed by the DENR

Secretary on June 2, 2003, created the Philippine Environment Partnership Program

(PEPP). DAO 2003-14 is a product of multi-sectoral policy dialogue in responseto the need and demand of industry for government assistance and incentives to encourage

industries to implement and sustain proactive environmental management tools and improve

environmental compliance.

On March 22, 2004, the Clean Water Act was enacted and signed into law by President

Gloria Macapagal-Arroyo. The Clean Water Act mandates the DENR to implement a

comprehensive water quality management program to guarantee effective water utilization

and conservation. On May 16, 2005, the DENR adopted DAO No. 10-05 as the

Quisumbing Torres is a member of Baker & McKenzie International, a Swiss Verein.


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implementing rules and regulations of the Clean Water Act. Other administrative orders

and issuances have been passed as awareness of environmental problems grows among

the various stakeholders.

This paper will discuss recent developments in legislation, regulation and enforcement

of Philippine environmental laws.

II. Recent Developments

A. Environmental Impact Assessment (EIA)1. Overview of the Philippine Environmental Impact Statement (EIS) System

The EIA implements Presidential Decree (PD) No. 1586, which established the Philippine

EIS System Law, to facilitate the attainment and maintenance of a rational and orderly

balance between socio-economic growth and environmental protection. EIAs are part of

project planning and are conducted to identify and evaluate important environmental

consequences including social factors that may occur if a project is undertaken. Measures

to eliminate or minimize impacts are incorporated into project design and operations.

PD 1586 requires proponents of environmentally critical projects (ECP) and projects

within environmentally critical areas (ECA) to obtain an environmental compliance

certificate (ECC) prior to the commencement of the project. An ECA is an area delineated

as environmentally sensitive because significant environmental impacts are expected ifcertain types of proposed projects or programs are located, developed or implemented in it.

An ECP is a project or program that has high potential for significant negative

environmental impact.

The ECC is a document certifying that the proposed project or undertaking will not cause

significant negative environmental impact. The ECC also certifies that the proponent has

complied with all the requirements of the EIS System and has committed to implement its

approved Environmental Management Plan. The ECC requires the project proponent to

undertake certain measures before and during the operation of a project and, in some cases,

during the projects abandonment phase, to mitigate identified environmental impacts.

2. Administrative Order No. 42 (AO 42)

AO 42 was signed by the President on 2 November 2002 and streamlined the ECC

application processing and approval procedures by specifying the endorsing official,

approving authority and processing timeframe for ECPs, projects within ECAs and projects

not covered by the EIS System. AO 42 also provides that if no decision is made within the

specified processing timeframe, the ECC application is deemed automatically approved and

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the approving authority is required to issue the ECC within five working days after the

prescribed processing timeframe.

3. Department Administrative Order No. 2003-30 (DAO 2003-30)

Pursuant to AO 42, the DENR issued DAO 2003-30 as implementing rules and regulations

for the EIS System. DAO 2003-30 took effect on 4 August 2003.

DAO 2003-30 clarified the coverage of the EIS System. It provides two criteria to be

considered in determining the scope of the EIS System, namely: (i) the nature of the project

and its potential to cause significant negative environmental impacts, and (ii) the sensitivity

or vulnerability of environmental resources in the project area. The specific criteria fordetermining projects or undertakings to be covered by the EIS System are the characteristics

of the project or undertaking, the location of the project, and nature of the potential impact.

DAO 2003-30 expanded the classification of projects under the EIS System. Under previous

laws, projects were classified as ECPs, those that were located in ECAs, and those that did

not fall under either of the two. Under DAO 2003-30, the following are the categories of

projects/undertakings under the EIS System:

Category A - ECPs with significant potential to cause negative environmentalimpacts;

Category B - Projects that are not categorized as ECPs, but which may causenegative environmental impacts because they are located in ECAs;

Category C - Projects intended to directly enhance environmental quality or addressexisting environmental problems not falling under Category A or B; and

Category D - Projects unlikely to cause adverse environmental impacts.

DAO 2003-30 specifies the applicable requirements for each project category. It provides

that proponents of projects that fall under Category A and B are required to secure an ECC.

Proponents of projects under Category C are required to submit a Project Description.

Projects classified under Category D may secure a Certificate of Non-Coverage (CNC).

A CNC is a certification issued by the EMB that the project is not covered by the EIS

System and is not required to secure an ECC. Projects introducing new technologies or

construction techniques but which may cause significant negative environmental impacts

shall be required to submit a Project Description which will be used as the basis by EMB

for screening the project and determining its category.



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DAO 2003-30 also establishes an Environmental Guarantee Fund (EGF) for all co-located

or single projects that have been determined by DENR to pose a significant public risk or

where the project requires rehabilitation or restoration.

B. Solid Waste1. Overview of Solid Waste Management

The most significant legislation on solid waste management, Republic Act (RA) No. 9003,

or the Ecological Solid Waste Management Act of 2000 (Solid Waste Act) and its

implementing rules, was signed into law on January 26, 2001. The Solid Waste Act calls for

the institutionalization of a national program to manage the transfer, transport, processing,and disposal of solid waste in the country. There have been no recent significant legislative

or regulatory updates regarding the management of solid waste.

Under the Solid Waste Act, the DENR sets guidelines and targets to reduce the volume of

solid waste through various waste reduction measures. These measures include the proper

segregation, collection, transport, storage, treatment, and disposal of solid waste, as well as

composting, recycling and re-using of solid waste. In coordination with local government

units (LGUs), self-regulating waste generators and other private sector groups, the DENR

was designated to be the primary enforcer of the Solid Waste Act.

The Solid Waste Act prohibits the following acts:

Dumping waste materials in public places such as roads, canals or sidewalks;

Open burning of solid waste;

Permitting the collection of non-segregated waste;

Squatting in open dumps and landfills;

Open dumping in flood-prone areas;

Mixing of source-separated recyclable material with other solid waste in anycontainer for solid waste collection;

Operating open dumps outside the provisions of the law;

Manufacturing or distributing non-environmentally acceptable packaging materials;

Importing consumer products in non-environmentally acceptable packagingmaterials;



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Importing toxic wastes misrepresented as recyclable;

Transporting and dumping in bulk of collected domestic, commercial, industrial, andinstitutional wastes outside of designated centers or facilities;

Preparing, expanding, constructing or operating waste management facilities withoutan Environmental Compliance Certificate and without conforming to the land use

plan of the LGU;

Constructing any establishment within 200 meters from open or controlleddumpsites or sanitary landfills; and

Constructing or operating any landfills or waste disposal facility on any area orportion of an aquifer, water reservoir or watershed.

2. Developments in Enforcement

The National Solid Waste Management Commission (NSWMC) of the DENR, the major

agency tasked to implement the Solid Waste Act, aims to intensify its campaign on waste

reduction, reuse, recycling, and conversion of open dumpsites into controlled disposal

facilities to further strengthen the gains made under the law. LGUs will continue to head and

supervise all efforts on solid waste management.

In addition, the NSWMC will expand recycling activities with tire manufacturers andintensify its buying of polyethelyne terapthalate (PET). Paper recycling will be intensified,

with used papers from government offices as the main sources. Likewise, the NSWMC will

set up more redemption centers for recyclables like aluminum cans, bottles, tetra packs,

polypropylene, batteries, and others.

C. Hazardous Waste1. Overview of Toxic and Hazardous Waste Management

RA 6969 refers to the Toxic Substances and Hazardous and Nuclear Wastes Control Act.

RA 6969 provides the legal framework for the countrys program to control and manage the

importation, manufacture, processing, distribution, use, transport, treatment, and disposal of

toxic substances and hazardous and nuclear wastes.

The DENR issued DAO 1992-29 as the implementing rules and regulations of RA 6969.

On August 31, 2004, the DENR amended DAO 1992-29 to further strengthen the

implementation of RA 6969. A Procedural Manual was published prescribing the procedures

for the proper handling of hazardous waste as mandated under DAO 2004-36.



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RA 6969 requires all manufacturers and importers of a new chemical to submit a pre-

manufacture and pre-importation notification (PMPIN) to the DENR. A new chemical

substance is defined as any chemical that is not included in the Philippine Inventory of

Chemicals and Chemical Substances (PICCS). The purpose of the PMPIN is to screen

harmful substances before they enter the Philippines. As the name implies, the PICCS is a

list of existing industrial chemicals and chemical substances used, sold, distributed,

imported, processed, manufactured, stored, exported, treated, or transported in the

Philippines.

Manufacturers and importers of new chemicals are required to notify the DENR of their

intent to manufacture or import the new chemical within 90-180 days before commencing

the manufacture or importation of the new chemical. Together with this notification, theproponent must submit the appropriate PMPIN forms.

Once a chemical is listed in PICCS, it may be manufactured or imported with no control,

provided it is not included in the Priority Chemicals List (PCL) or subject to a Chemical

Control Order (CCO).

The PCL is a short list of chemicals that potentially pose unreasonable risks to public health,

workplace and the environment. At present, there are 45 toxic chemicals enumerated in the

revised PCL (DAO 2005-27). Their inclusion in the PCL is based on the selection criteria

used by industrialized countries, such as persistence, toxicity and bioaccumulation. Users,

importers and manufacturers of chemicals listed in the PCL are required to comply with

various registration and reporting requirements.

A CCO is a policy instrument used by the DENR to prohibit, limit or regulate the use,

manufacture, import, export, transport, processing, storage, possession, and sale of priority

chemicals that are determined to be regulated, phased-out or banned because of the serious

risks they pose to public health, the workplace and the environment. The objective of a

CCO is to ensure the proper management of the chemicals so that danger to human health

and the environment is reduced. A CCO specifies requirements for the importation,

manufacturing, use, transport, and disposal of these chemicals. A CCO also requires the

subsequent phase-out of the chemical and its substitution with less harmful chemicals.

Four chemicals have been covered by CCOs in the form of DENR administrative orders.

These CCOs are for: mercury (DAO 97-38), cyanide (DAO 97-39), asbestos (DAO 2000-

02), and ozone-depleting substances (DAO 2000-18). Recently, the DENR added six

chemicals to be covered by CCOs, namely: cadmium compounds, lead compounds, arsenic

compounds, vinyl chloride, benzene, and chromium (DAO 2005-05).

The list of ozone-depleting substance specified under DAO 2000-18 has also been

subsequently modified by the revised CCO for ozone-depleting substances (DAO-2004-08).

The new rule (R502) totally bans the importation of CFC-11, CFC-12 and CFC-115 by



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2010. In 2007, the importation of ozone-depleting substances will be limited to 15% of the

average annual amount imported during calendar years 1995-1997. Importers of ozone-

depleting substances regardless of the source as allowed under the Montreal Protocol are

required to register with the DENR. The Certificate of Registration is only valid for one

year.

2. Regulatory Developments

The DENR Secretary recently issued DAO 2004-01, promulgating the CCO for

polychlorinated biphenyls (PCBs). The CCO aims to reduce and eliminate importation,

manufacture sale, transfer, distribution, and use of PCBs and PCB-containing equipment.

It also aims to reduce the hazards and unreasonable risks posed to human health and theenvironment from the improper use and management of PCBs, including the transport,

treatment and disposal of PCB wastes.

3. Importation of Materials Containing Hazardous Substances

As a general rule, the importation of hazardous wastes as defined in RA 6969 is not allowed.

However, the importation of hazardous substances for recovery, recycling and reprocessing

is allowed only upon prior written approval from the Secretary of the DENR. Importation of

recyclable hazardous materials is governed by DAO 1994-28 and said administrative order

contains a list of recyclable materials containing hazardous substances which may be

imported upon prior registration. The exporter is liable to retrieve the waste when denied

entry by the Philippine government. The applicants are also responsible for clean-upoperations in case of spills and emergencies and damages to human health and property

arising out of such waste management activities. As of November 26, 2004, Coal-Fired

Power Plant Fly-Ash in concentrations specified under Annex III of DAO 1994-28 can

no longer be imported. Any residual fly ash which could no longer be used in cement

production as of that date was mandated to be shipped back to the country of origin.

(DAO 2004-66).

4. Disposal of Health Care Wastes

Health Care Wastes are among the hazardous wastes being closely monitored by the Philippine

Government. Pursuant to RA 6969 and other applicable laws, such as the RA 9003, PD 856

(Refuse Disposal of the Sanitation Code of the Philippines) and RA 4226 (Hospital Licensure

Act), the DENR and the Department of Health (DOH) issued a joint administrative order

establishing the proper guidelines and policies for the treatment, storage and disposal (TSD)

of health care wastes. (Joint DENR-DOH Administrative Order 2005-02).

The administrative order, issued in 2005, recommends the following treatment methods for

Health Care Wastes: (1) thermal, (2) chemical, (3) irradiation, (4) biological processes, (5)

encapsulation, and (6) inertization, as outlined in the DOH Health Care Waste Management



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Manual. Health Care Waste generators and TSD facilities are required to meet specified

treatment standards. Treated wastes and inert residues from TSD facilities can only be

disposed in controlled disposal or sanitary landfill facilities duly licensed by the DENR.

D. Air1. Overview of Air Quality Management

On June 23, 1999, the Philippine Clean Air Act of 1999 (the Clean Air Act) or RA 8749

was signed into law. The Clean Air Act took effect on July 19, 1999.

Under the Clean Air Act, the DENR is mandated to (1) formulate a national program on howto prevent, manage, control, and reverse air pollution using regulatory and market based

instruments, and (2) set-up a mechanism for the proper identification and indemnification

of victims of any damage or injury resulting from the adverse environmental impact of any

project, activity or undertaking. The implementing rules and regulations of the Clean Air

Act (DAO 2000-18) took effect on November 25, 2000.

The Clean Air Act was enacted to address the problem of air pollution. Under the Clean Air

Act and its implementing rules, the DENR has divided the Philippines into geopolitical

regions known as airsheds, which are designated areas designed to assist policymakers

in establishing effective air quality management programs.

Emissions trading is allowed among pollution sources within an airshed. Facilities locatedin different airsheds may conduct emissions trading if approved by the Environmental

Management Bureau (EMB) of the DENR. Currently, there are 16 administrative orders

related to the establishment of airsheds

2. Developments in Enforcement

a. Mobile Sources

The Clean Air Act was mainly envisioned to fight air pollution from mobile sources which

account for eighty percent (80%) of the countrys air pollution. The DENRs EMB started its

evaluation of newly manufactured, assembled or imported vehicles for conformity with

emission standards in 2000. By 2002, it had already issued 300 Certificates of Conformity(COC) to manufacturers, assemblers, or importers of new motor vehicles.

As vehicles are registered, they are required to undergo annual emission testing to monitor

compliance with emission standards. The EMB also issues certificates to emission test

equipment for vehicles that Private Emission Testing Centers (PETC) use. The certificate

for the operation and maintenance of Opacimeters and Gas Analyzers may be automatically

revoked if the PETC improperly uses the equipment, issues test results without actually



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conducting the vehicle test, or tampers with the test result. (DAO 2005-03). This

certification process was developed after widespread complaints and irregularities in PETC

operation were discovered and became the subject of congressional inquiries. There are

currently 76 accredited PETCs in the whole country.

The Department of Transportation and Communication (DOTC) now requires a valid

certificate of emission compliance with emission standards before the registration of a

vehicle can be renewed. Originally, motor vehicles were not to exceed 0.5% carbon dioxide

emission to pass the emission test. This passing mark is based on Euro 1 Levels of 1991.

This is also considered as the globally accepted emission standards that are based on the fuel

injection catalytic converter systems of new cars. Euro 1 is now being implemented in

Europe and most countries in the world, including Asian countries like Malaysia, Singapore,Thailand, Vietnam, and Hong Kong (China).

While the initial implementation of the Clean Air Act mandated Euro 1 standards for

vehicles registered for the first time, the DENR issued DAO 2003-51 which lowered the

allowable carbon monoxide emission from the Euro 1 Standard of 0.35 percent to 0.50

percent by volume. This new standard is the same level prescribed under the old Presidential

Decree 1081 of 1972 and, as referenced above, is substantially below the commonly

accepted standards of most countries.

b. The Renewable Energy Program

The Philippines is developing its renewable energy program, primarily as a reaction tofinancial pressures arising out of the recent rapid increase in demand for petroleum products.

The renewable energy program is also a result of a recognized concern for the care of the

environment. As of May 2006, the Philippine Congress had developed a Renewable Energy

Bill which is currently the subject of Congressional review and deliberation.

In addition to these legislative efforts, steps have also been taken by the government to

mandate the use of alternative energy sources and cleaner fuels. Memorandum Circular 55

directs all departments, bureaus and instrumentalities of the government, including

government-owned and controlled corporations, to incorporate the use of one percent (1%)

by volume coconut methyl ester (CME) in their diesel fuel requirements. The DOE issued

Department Circular 2004-04-003 as implementing rules and regulations for MC 55.

Resorting to CME will not only decrease the emission of carbon dioxide, which is a

greenhouse gas, but will also benefit millions of Filipino coconut farmers. The Philippines is

considered one of the worlds top exporters (ranks second) of coconut products and, thus,

has vast coconut resources. Currently, there are already three major corporations engaged in

the production and export of CME - Senbel Fine Chemicals, Inc., Chemrez, Inc., and R.I.

Chemicals.



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c. Phase Out or Lowering of Pollutant Contents

Leaded gasoline has been phased out nationwide. The lowering of aromatics in unleaded

gasoline to 35 percent took effect in January 2003. The lowering of benzene in unleaded

gasoline from 4 percent to 2 percent also took effect in January 2003. The introduction of

pure diesel (with 0.05 percent S) as the first Clean Air Act compliant diesel fuel was initially

made available by five new oil companies (City Oil, Eastern Petroleum, Jetty, Seaoil and

Unioil) starting in September 2003. The current sulfur content of industrial and automotive

diesel has already been lowered from 0.5 percent to 0.3 percent and from 0.2 percent to 0.05

percent, respectively.

While progress has been made on fuel standards for automobiles and trucks, the governmenthas yet to implement an emission standard for motorized tricycles. In the Philippines, 2.8

million tricycles produce a serious threat to the quality of the air. Tricycles produce a highly

polluting hydrocarbon that can be seen as white smoke, a product of inefficient burning.

This problem could be reduced with the proper use of 2 cycle transmission (2T) oil.

Another setback in the implementation of the Clean Air Act is the tolerance of the

government for unleaded gasoline to contain 1000 ppm of sulfur, which is even higher than

the 500 ppm of sulfur in diesel. It is reported that catalytic converters do not function with

1000 ppm of sulfur. The Clean Air Act originally envisioned a reduction of sulfur content to

500 ppm by 2004 the standard adopted by most countries today.

d. Stationary Sources

It has been reported that almost 20% of the countrys air pollution comes from stationary

sources. The DENR has recently allowed stationary or source emission tests to be conducted

by third parties. DAO 2006-03 was issued as guidelines for the accreditation of third parties

applying to conduct source emission tests. The accreditation of third party source emission

testing aims to provide assurance to stakeholders, regulators, and the general public on the

reliability of source emission test results. It ensures that the accredited firms are fully

capable of conducting source emission tests in accordance with the Clean Air Act.

DAO 2004-26 requires companies to obtain a Permit to Operate for sources that emit various

air pollutants. In order to obtain such a permit, an applicant must complete an engineering

report that provides a description of plant operations, the types and quantities of wastematerials generated, and the design of any air pollution control equipment to be utilized at

the facility. Proponents are encouraged to consult with the EMB regarding their plans and

specifications for their pollution control equipment before construction or installation.

According to the EMB, permits are valid for a period of five years, unless suspended or

revoked.



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The EMB has institutionalized a system for submitting self-monitoring reports. The reports

monitor compliance with emission standards and are submitted quarterly to the regional

offices of the EMB. The self-monitoring reports initially covered major industries, such as

power and cement plants.

Continuous Emission Monitoring Systems (CEMS) for particulates, sulfur and nitrogen

oxide emissions are required to be installed in industrial plants in compliance with DAO

2000-81. As of September 2003, eight power plants, two petroleum/petrochemical and two

cement plans had installed CEMS. Unfortunately, there does not appear to be wide-scale

compliance with the CEMS on the part of most industry sectors. A 2006 figure indicated

that there are only six (6) industries of more than 700 factories which have stacks fitted with

CEMS.

Incinerators were banned effective as of July 2003. In the health sector, the focus of the

DOH is the promotion of alternative (non-burn) technologies such as microwave disinfection

facilities and autoclave systems. The DOH has ordered conversion of DOH incinerators to

crematoria, subject to EMB evaluation. The DOH has also been successful in reducing

hospital incinerators by limiting their use to limbs and tissues only under strict monitoring.

Currently, about 36 hospitals have been instructed to use non-burn microwave technologies.

This practice may however result in additional problems since microwave technology does

not reduce the wastes to ashes. Microwave treated hospital wastes are still disposed in

municipal waste landfills, thus potentially posing different environmental hazards and public

health risks.

e. Tax Incentives Under the Clean Air Act.

The Clean Air Act includes a tax incentive provision for industries which install pollution

control devices or retrofit their existing facilities with mechanisms that reduce pollution to

comply with the air quality standards set forth in the Clean Air Act and its implementing

rules and regulations. The DENR issued DAO 2004-53 for the implementation of these tax

incentives. Qualified industries may claim accelerated depreciation, deductibility of research

and development expenditures to reduce air pollution, tax credits, exemptions from real

property taxes, and additional tax incentives for qualified enterprises operating within

Special Economic and Freeport Zones.

f. Other Monitoring Programs

Other government monitoring programs include lead monitoring, Persistent Organic

Pollutants (POPS) monitoring, and acid rain monitoring. The lead monitoring program

was carried out in parallel with the phaseout of leaded gasoline and showed that ambient

levels of lead have dropped since 2000. POPS monitoring is being carried out in connection

with the Philippine commitments to the Stockholm Convention of 2001.



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POPS are chemical substances that persist in the environment, bioaccumulate through the

food web, and pose a risk to human health and the environment. They are classified as

pesticides (e.g., aldrin, chlordane, dieldrin), industrial chemicals (e.g., PCBs), and

unintended by-products (e.g., dioxins and furans).

The Philippines is a participant in the Acid Deposition Monitoring Network in East Asia

(EANET). Acid deposition monitoring covers four environmental items: wet deposition,

dry deposition, soil and vegetation, and inland aquatic environment. The first two monitor

the land surface and the last two assess the adverse impacts on terrestrial and aquatic

ecosystems.

E. Water1. Overview of Water Quality Management

Former President Ferdinand E. Marcos promulgated the Pollution Control Law (PD 984).

PD 984 makes it unlawful for a person to dispose any organic or inorganic matter or any

substance in gaseous or liquid form which may cause water pollution in any Philippine water

resource.

The Water Code (PD 1067) prohibits any person from building any treatment works that

may produce dangerous or noxious substances, or from performing any actions, which may

result in the introduction of sewage, industrial waste or any pollutant into any source of

water supply without prior permission from the EMB.

In 1990, the DENR also issued DAO 34 and 35. DAO 35 regulates the discharge of

industrial wastewater effluents, while DAO 34 classifies bodies of water according to their

beneficial uses. Together, DAOs 34 and 35 regulate the discharge of wastewater effluents

into varying water bodies.

2. The Clean Water Act

As mentioned, on March 22, 2004, the Clean Water Act was enacted and signed into

law by President Gloria Macapagal-Arroyo. The Clean Water Act mandates the DENR to

implement a comprehensive water quality management program to guarantee effective water

utilization and conservation.

The Clean Water Act (RA 9275) applies to water quality management in all water

bodies, focusing on the abatement and control of pollution from land based sources.

Notwithstanding this regulatory focus, the water quality standards and regulations and

the applicable civil liability and penal provisions of the Clean Water Act are enforced

irrespective of the actual sources of pollution. The DENR issued DAO 2005-10 as the

implementing rules and regulations for the Clean Water Act.



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Under the Clean Water Act, the DENR, in coordination with the National Water Resources

Board (NWRB), will designate certain areas as water quality management areas. Each

management area will be governed by a governing board composed of various stakeholders

and is tasked to formulate strategies to coordinate policies necessary for the effective

implementation of the Clean Water Act.

a. Water Pollution Permits and Charges

(i) Wastewater Charge SystemUnder the Clean Water Act, the DENR implements a wastewater charge system in all water

management areas, including the Laguna Lake Region and Regional Industrial Centers,through the collection of wastewater charges/fees. The system is established on the basis

of payment to the government for discharging wastewater into the water bodies. The fee is

based on the net waste load depending on the wastewater charge formula established after

public consultation. The wastewater charge system does not apply to wastewater from

geothermal exploration.

(ii) Discharge PermitsThe DENR requires owners or operators of facilities that discharge regulated effluents

pursuant to the Clean Water Act to secure a permit to discharge (DAO 2004-25). The

discharge permit specifies the quantity and quality of effluent that said facilities are

allowed to discharge into a particular water body, compliance schedules and monitoringrequirements. A self-monitoring report of the company should also be submitted to the

EMB. As part of the permitting procedure, the DENR encourages the adoption of waste

minimization and waste treatment technologies when such technologies are cost effective.

Effluent trading may be allowed per management area.

b. Financial Liability Mechanism

(i) Financial Liability for Environmental RehabilitationUnder the Clean Water Act, the DENR requires program and project proponents to set up an

environmental guarantee fund (EGF) as part of the environmental management plan attached

to the environmental compliance certificate. The EGF will finance the maintenance ofthe health of the ecosystems, the conservation of watersheds and aquifers affected by the

development, and the needs of emergency response, clean-up or rehabilitation of areas that

may be damaged during the programs or projects actual implementation. Liability for

damages will continue after the termination of a program or project for a prescribed period

of time as indicated in the environmental compliance certificate.



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(ii) Clean-Up OperationsAny person who pollutes water bodies in excess of the applicable standards will be

responsible for containing, removing and cleaning up any pollution at his or her own

expense, to the extent the water bodies have been rendered unfit for use. In the event

emergency clean-up operations are necessary and the polluter fails to immediately undertake

them, the DENR, in coordination with other government agencies, may conduct

containment, removal and clean-up operations at the expense of the persons found to have

caused the pollution.

(iii) Programmatic Environmental Impact AssessmentProgrammatic compliance with the environmental impact assessment system is required

by the DENR where (a) development consists of a series of similar projects, or a project

subdivided into several phases and/or stages whether situated in a contiguous area or

geographically dispersed, and (b) development consists of several components or a cluster

of projects co-located in an area such as an industrial estate, an export processing zone,

or a development zone identified in a local land use plan.

c. Rewards and Incentives

Rewards, monetary or otherwise, will be provided to individuals, private organization and

entities that have undertaken outstanding and innovative projects, technologies, processes,

and techniques or activities in water quality management. Rewards will be provided out ofthe Water Quality Management Fund. An incentive scheme is also provided for the purpose

of encouraging LGUs, water districts (WDs), enterprises, private entities, and individuals

to develop or undertake an effective water quality management and to actively participate in

programs geared towards the promotion thereof.

Subject to the rules and regulations of the Philippines Board of Investments (BOI),

industrial wastewater treatment, water pollution control technology, cleaner production, and

waste minimization technologies will be classified as preferred areas of investment under its

annual priority plan and will enjoy the applicable fiscal and non-fiscal incentives provided

under law.

Fiscal incentives include tax and duty exemptions on imported capital equipment and spareparts used for industrial wastewater treatment/collection and treatment facilities subject to

certain conditions and a tax credit equivalent to one hundred percent (100%) of the value of

the national internal revenue taxes and customs duties on the machinery, equipment, and

spare parts, had these items been imported, subject to certain conditions and prohibitions.

All legacies, gifts and donations to LGUs, WDs, enterprises, or private entities and

individuals for the support and maintenance of the program for effective water quality



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management will be exempt from donor taxes and will be deductible from the gross income

of the donor for income tax purposes.

Imported articles donated to or for the account of any LGUs, WDs, local water utilities,

enterprises, or private entities and individuals to be exclusively used for water quality

management programs will be exempted from the payment of customs duties and applicable

internal revenue taxes.

d. Civil Liability / Penal Provisions

The Clean Water Act provides for a number of prohibited acts. Under its implementing

rules and regulations, the following elements constitute prohibited acts as provided in theClean Water Act:

Facility discharge without permit;

Disposal of infectious waste from vessel;

Unauthorized transport or dumping of sewage sludge or solid waste into sea waters;

Chemical dumping;

Illegal facility operations resulting in discharges to water bodies;

Sewerage development/expansion in violation of EIA; and

Illegal discharges without valid permits.

Any person who commits any of the prohibited acts above or violates any of the provision

of the Clean Water Act or its implementing rules and regulations will be fined by the DENR

Secretary upon the recommendation of the Pollution Adjudication Board (PAB) for every

day of violation. The fines prescribed will be increased by ten percent (10%) every two (2)

years to compensate for inflation and to maintain the deterrent function of such fines.

The DENR Secretary, upon recommendation of the PAB, may order the closure, suspension

of development or construction, cessation of operations, disconnection of water supplies,

until such time that proper environmental safeguards are put in place and/or compliance is

undertaken. Penalties will be without prejudice to the issuance of an ex parte order for such

closure, suspension of development or construction, or cessation of operations during the

pendency of the case.

Failure to undertake clean-up operations willfully or through gross negligence can be

punished by imprisonment and a fine computed per day for each day of violation. Failure



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which results in serious injury or loss of life and/or irreversible water contamination of

surface, ground, coastal, and marine water is subject to a greater term of imprisonment

and a higher fine computed per day for each day during which the omission and/or

contamination continues.

In case of gross violations of the Clean Water Act, the PAB will issue a resolution

recommending that the proper government agencies file criminal charges against the

violators. Gross violations are:

deliberate discharge of toxic pollutants identified pursuant to RA 6969 in toxicamounts;

five (5) or more violations within a period of two (2) years; or

blatant disregard of the orders of the PAB, such as the non-payment of fines,breaking of seals, or operating despite the existence of an order for closure,

discontinuance or cessation of operation.

Offenders are punished with a fine computed per day for each day of violation,

imprisonment, or both, at the discretion of the court. The president, manager, pollution

control officer, or the official in charge of the operations may be criminally liable.

For violations of PD 979, or the Marine Pollution Decree of 1976, or any of its regulations,

persons may be liable for a fine or imprisonment, or both, for each offense, without limitingthe civil liability of the offender. Officers, directors, agents, or any person primarily

responsible for a company or operations may be held liable. Any vessel that discharges

oil or other harmful substances will invoke a fine. The Philippines may withhold clearance

of the vessel from the port of the Philippines until the fine is paid, and the penalty will

constitute a lien on the vessel. The owner or operator of a vessel or facility which

discharged the oil or other harmful substances will be liable to pay for any clean-up costs.

Local government officials also may be subject to administrative sanctions for failure to

comply with their action plan.

3. National Environmental Users Fee of 2002

To prevent, abate and control water pollution and encourage efficient use of water resources,

the DENR adopted the National Environmental Users Fee (NEUF) through its wastewater

permitting system by issuing DAO 2002-16 and its implementing rules, DAO 2003-39.

NEUF was adopted to reduce water pollution and improve the ambient quality of water

bodies, encourage firms to pursue the least-cost means of pollution reduction, encourage

self-regulation, and implement the Environmental User Fee nationwide. The NEUF applies



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to all establishments and installations that discharge industrial and commercial wastewater

into water bodies and/or land resources.

Under DAO 2003-39, any person who discharges industrial or commercial wastewater into

Philippine water and/or land resources must secure a Wastewater Discharge Permit (WDP)

from the relevant Regional Office of the EMB. DAO 2003-39 provides that no person shall

dispose or cause to be disposed into any of the water and/or land resources of the country,

any organic or inorganic matter or any substance in liquid form without an approved WDP

from the Regional Office. Likewise, no person shall perform, cause or undertake any of the

following activities without first securing the WDP from the Regional Office:

Increase volume or strength of wastes in excess of the permitted discharge; or

Construct or use any outlet or unauthorized by-pass channels for the discharge ofany untreated wastes, liquid or solid, directly into the water and/or land resources of

the Philippines.

If the applicant continues to discharge despite disapproval of its application or other

suspension /revocation of a WDP, the DENR Secretary or his duly authorized representative

will immediately issue a Cease and Desist Order directing the discharger to discontinue

discharging its wastewater or stop its operations. The Order will typically also include the

levying of fines and penalties, without prejudice to criminal prosecution under PD 984 and

other applicable laws.

WDPs are transferable if there is a sale or transfer of ownership. However, in the case of sale

or transfer of ownership or control of the establishment and/or facilities, the transferee must

notify the Regional Office of the fact of transfer of ownership or control and must also file

an application for transfer of the permit in his name provided that there is no change in the

nature of the business. The WDP will expire according to the original expiry date.

Any person found violating or failing to comply with DAO 2003-39 and/or conditions

embodied in the permits issued by the Regional Office will be liable for administrative fines

in addition to such other sanctions. The imposition of the said fines does not preclude the

DENR from instituting, before the appropriate courts, the proper criminal or civil action as

the case may warrant.

III. Other Developments

A. The Clean Development MechanismThe Philippines has signed and ratified the Kyoto Protocol to the United Nations Framework

Convention on Climate Change (Kyoto Protocol) under the belief that the reduction of

harmful gas emissions in the atmosphere like carbon dioxide and methane is the concern of



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everyone. The Country is also looking to take advantage of investment opportunities under

the Clean Development Mechanism (CDM) of the Kyoto Protocol.

Signatory countries to the Kyoto Protocol engage themselves to reduce their emission of

methane and other greenhouse gases or to otherwise address these issues through emissions

trading. Under the CDM, industrialized countries with greenhouse gas reduction

commitments may invest in emission reducing projects in developing countries as an

alternative to the actual reduction of emissions in their own countries.

In 2004, the President issued Executive Order (EO) No. 320 designating the DENR as the

National Authority for CDM and the Department has been granted the following powers and

functions:

Formulate and develop a national Clean Development Mechanism policy;

Develop the criteria, indicators, standards, systems and procedures, and evaluationtools for the review of CDM projects;

Undertake the assessment and approval of CDM projects that will be submitted tothe UNFCCC and Kyoto Protocol;

Monitor the implementation of CDM projects; and

Perform other functions that are related to and in furtherance of the development ofCDM.

The National Authority is authorized to create Technical Evaluation Committees necessary

for the efficient and effective implementation of its functions while the Department of

Energy is the lead agency in the evaluation of energy-related projects.

As mandated, the DENR promulgated DAO No. 2005-17, or the Rules and Regulations

Governing the Implementation of Executive Order No. 320 Series of 2004. Designating the

DENR as the National Authority for Clean Development Mechanism. With DAO No. 2005-

17, the Philippines can now formally host CDM projects, which is expected to improve the

countrys capability to bring about sustainable development.

Under DAO No. 2005-17, the proponent of a proposed CDM project activity can be any

natural or juridical person intending to develop and implement a proposed CDM project

activity within the Philippines. In the case of a natural person, the project proponent must

possess Philippine citizenship. In the case of a juridical person, the project proponent must

be constituted as a legal entity under Philippines laws and authorized to engage in the

proposed CDM project activity in accordance with the Philippine Constitution and relevant

laws. Under DAO No. 2005-17, it is essential that any CDM project activity assist the



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Philippines in achieving sustainable development. The sustainable development criteria

and indicators are provided under the rules.

B. CDM and Direct Foreign Investment LawsPhilippine foreign investment laws may affect a CDM project if a foreign corporation

provides financing to, or equity investments in, a CDM project. The Philippines Foreign

Investment Act of 1991, as amended (FIA), regulates foreign investments in corporations

engaged in business in the Philippines. Under the FIA, a foreign national or foreign

corporation may engage in business in the Philippines or invest in up to 100% of the capital

stock of a domestic corporation as long as the proposed activity is not included in the

Negative List. The Negative List enumerates the business activities in which foreignownership or participation in a domestic corporation is limited or prohibited. The Negative

List is updated every two years. If the CDM project qualifies as an activity within the

Negative List, foreign investment in the project may be limited or prohibited.

Under E.O. No. 389 promulgating the sixth and latest Negative List for instance, and further

to the Build, Operate and Transfer Law or BOT Law (RA 6957 as amended by RA 7718)

up to 40% foreign equity is allowed in a project proponent and facility operator of a BOT

Project requiring a public utilities franchise (e.g. projects involving the distribution of

electricity). Projects involving the generation or transmission, but not distribution, of

electricity may be 100% foreign-owned.

Under the BOT Law, project proponents are eligible for fiscal incentives as provided underthe Omnibus Investments Code. Local government units may also provide for additional tax

incentives, exemptions or relief. The Government may also provide any form of direct or

indirect support or contribution, such as, but not limited to, cost sharing, credit

enhancements, direct government subsidy, or government equity.

Projects registered with the Board of Investments (BOI) may qualify for incentives

granted under the Omnibus Investments Code. An investor may enjoy certain benefits

and incentives provided he invests in preferred areas of investments found in the current

Investments Priority Plan (IPP).

Under the 2006 IPP, the exploration, development, and/or utilization of energy sources,

including new and renewable energy resource development (e.g. solar, biomass, wind,

forestry resources, animal wastes, municipal solid wastes, etc.) and activities using energy

technologies leading to energy efficiency and conservation in accordance with the program

of the Department of Energy (DOE) are preferred areas of investment. Infrastructure

projects, including projects under the BOT law and toxic and hazardous waste management,

are also preferred areas of investment. Activities and projects pursuant to the Ecological

Solid Waste Management Act (RA 9003) and Clean Water Act (RA 9275) are likewise

included in the 2006 IPP as provided under the law.



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Fiscal incentives to BOI-registered enterprises include the following:

Income tax holiday of 6 years for new projects with pioneer status and 4 years fornon-pioneer status;

Exemption from taxes and duties on imported spare parts for consigned equipmentor those imported with incentives;

Exemption from wharfage dues and export tax, duty, impost and fees on its non-traditional export products for 10 years from date of registration;

Exemption for agricultural producers from the payment of all taxes and duties ontheir importation of breeding stocks and genetic materials within ten (10) years from

the date of registration or commercial operation;

Tax credits; and

Additional deductions from taxable income, such as for labor expense, andnecessary and major infrastructure works.

Non-fiscal incentives include the following:

Employment of foreign nationals in supervisory, technical or advisory positionsfor five (5) years from the date of registration;

Simplification of customs procedures for the importation of equipment, spare parts,raw materials and supplies, and exports of processed products. Importation of

consigned equipment for a period of 10 years from date of registration, subject to

posting of a re-export bond; and

The privilege to operate a bonded manufacturing/trading warehouse subject tocustoms rules and regulations.

In addition to incentives granted by the BOI, incentives may likewise be given to a

geothermal service contractor under PD 1442 or an Act to Promote the Exploration andDevelopment of Geothermal Resources. Under PD 1442, the Philippine government may

undertake the exploration and development of geothermal resources through service

contracts for financial, technical, management, or other forms of assistance with qualified

domestic and foreign entities. Geothermal energy is among the renewable energy sources

currently preferred to be developed to displace fossil fuels and it may be possible for CDM

projects in this area of activity to enjoy incentives such as:



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Exemption from payment of tariff duties and compensating tax on the importation ofmachinery and equipment, spare parts, and all materials required for geothermal

operations;

Entry of alien technical and specialized personnel (including the immediatemembers of their families);

Subject to the regulations of Bangko Sentral Pilipinas (BSP), repatriation ofcapital investment and remittance of earnings derived from its service contract

operations, as well as such sums as may be necessary to cover principal and interest

of foreign obligations incurred for the geothermal operations;

Other privileges provided in Section 12 of Presidential Decree No. 87 as may beapplied to the geothermal operation;

Recovery of operating expenses not exceeding 90% of the gross value in any yearwith carry forward of unrecovered cost; and

Service fee of up to 40% of net proceeds.

RA 7156, or the Mini-hydroelectric Power Incentive Act, also provides for specific

incentives for mini-hydroelectric power development, including the following tax incentives

or privileges:

Special privilege tax rates The tax payable by grantees to develop potential sitesfor hydroelectric power and to generate, transmit and sell electric power shall be two

percent (2%) of their gross receipts from the sale of electric power and from

transactions incident to the generation, transmission and sale of electric power;

Tax and duty-free importation of machinery, equipment and materials within seven(7) years from the date of award, subject to certain conditions;

Tax credit on domestic capital equipment equivalent to one hundred percent (100%)of the value of the value-added tax and customs duties that would have been paid on

the machinery, equipment, materials, and parts had these items been imported if the

awardee-developer purchases machinery, equipment, materials, and parts from a

domestic manufacturer subject to certain conditions;

Special realty tax rates on equipment and machinery;

Value-added tax exemption on the gross receipts derived from the sale of electricpower; and

Income tax holiday for seven (7) years from the start of commercial operation.



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EO 462 also provides incentives for exploration, development and utilization of ocean, solar

and wind energy resources.

C. CDM Projects in the PhilippinesIn December 2004, the Philippines took a major and innovative step into a new renewable

energy era with the signing of the first greenhouse gas emission reductions purchase

agreement (ERPA). The NorthWind Bangui Bay Project, located in the foreshore of Bangui

Bay in Ilocos Norte Province at the northern tip of Luzon, consists of 15 state-of-the-art

wind turbines with an estimated annual energy production of about 74.48 gigawatt hours.

The project sponsor is a local private company, NorthWind Power Development

Corporation.

The Philippines 2001 Electric Power Industry Reform Act (EPIRA) stressed the

development and utilization of indigenous and renewable energy resources to tackle the

countrys dependence on imported oil and coal for power generation. All power produced

by the project will be sold to the Ilocos Norte Electric Cooperative (INEC) which has the

exclusive franchise to distribute electricity in the area. The certified emission reductions

generated by the project will be purchased by the Prototype Carbon Fund and is targeted at

356,000 tons of carbon dioxide equivalent (CO2e).

Wind power is one of the most mature renewable energy technologies of relevance to the

Philippines where the wind resource is estimated to have a generation potential of 70,000

megawatts. Considering only those areas of good-to-excellent wind resource, there are 47provinces in the Philippines with at least 500 megawatts of wind potential and 25 provinces

with at least 1,000 megawatts of wind potential.

In addition to the North Wind Bangui Bay Project, there is another wind power project being

developed in the Municipality of Burgos and a geothermal power plant project in the

Province of Negros Oriental that are in the process of validation.

There are also a number of methane recovery and electric generation projects in the

Philippines. These are small-scale CDM projects which are anaerobic digestion swine

wastewater treatment projects in various farms. The farms currently manage waste with a

series of concrete lagoons (oxidation ponds). Development of the projects will directly

reduce greenhouse gas emissions produced by the release of methane from the concrete

lagoons. Other project developers intend to implement a turnkey covered in-ground

anaerobic reactor (CIGAR) that will utilize organic material currently treated in the

wastewater ponds to produce biogas. The CIGAR system will treat organically laden

wastewater to reduce its Chemical Oxygen Demand prior to the wastewater reaching the

main pond system. Currently, these farms rely on electricity from a local distributed

power grid.



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Another project activity that will establish an installation to recover, destroy and utilize

landfill gas (LFG) generated within the Payatas dumpsite in Quezon City (Metro Manila,

Philippines) is also in the process of validation. The electricity generated from this project

(1 megawatt) will be sold to the Luzon grid. Excess recovered LFG will be flared.

Documents

2006 IEC Philippines Country Paper