Since the Philippines ratified the Kyoto Protocol in 2003, donors have conducted numerous capacity building (CB) initiatives to promote the Clean Development Mechanism (CDM) in the country.

These CB projects worked to remove “barriers” to implementing CDM projects in the host country. These include the lack of technical knowledge and skill by the host government and the private sector on CDM project processes, and the absence of institutional and policy frameworks for proper CDM enforcement. Donor-sponsored seminars, training workshops, and recommendations facilitated the closing of these capacity and institutional gaps by:

• Raising awareness on CDM, including appreciation of its monetary potential and supposed environmental and development co-benefits
• Training government officials, businesses, and financial institutions on CDM methods and project development procedures (e.g. design, approval, and financing)
• Supporting linkages between future participants (government and private sector) and developing the administrative, institutional and policy framework for CDM operation

More than the provision of technical and administrative skill, these initiatives represent the descent of Kyoto and Northern agendas deeper into public policy and private investment strategies in the country (see Table 2). The Renewable Energy Act of 2008 perhaps best demonstrates the mainstreaming of CDM in Philippine energy policy. The law declares as state policy the increased utilization of renewable energy (RE) sources to reduce emissions. To this end, it lavishes a score of fiscal and non-fiscal incentives on RE investments, including a seven-year income tax holiday and ten years of duty-free importation of RE materials and equipment. The law also encourages CDM investments by tax-exempting all proceeds from the sale of carbon emissions credits.

CB projects form part of what is shaping up to be, or what already is, an aid approach by donors to harmonize ODA with their climate change policies, particularly with respect to mitigation and mitigation finance in the developing world. For instance, Japan – the Philippines’ top bilateral ODA and CDM CB donor – is using ODA to promote CDM in recipient countries, with an eye to acquiring carbon credits (see Box 1). JICA, Japan’s official aid agency, has introduced CDM applicability as a criterion in evaluating ODA projects in sectors such as renewable energy, energy efficiency, and waste management – sectors where carbon credit-yielding emissions reductions projects can be funded. In other words, aid is being channeled to sectors that have the potential of yielding offset credits. This makes more sense, considering that climate-related ODA projects in the Philippines have largely focused on emissions mitigation, particularly the promotion of renewable energy, energy efficiency, and sustainable waste disposal.

What are the problems with the use of ODA in promoting CDM in RE and related sectors in the developing world?

• By exploring CDM opportunities that can be future sources of carbon credits, it helps the North to continue to offload their responsibility to reduce emissions at home to developing countries.
• It deepens the legitimacy and institutional traction of CDM among developing countries. With CDM better institutionalized in the South, it is likely to still be part of a future climate regime, blowing a hole to any new emissions commitments developed countries will be making. It plays well with the Northern agenda of getting developing countries on board to take on more than voluntary emissions reductions, which would better place the North to commit to lower emissions targets.
• It creates a demand for and dependence on commercial, Northern- and corporate-controlled clean technologies, which are promoted by trade and investment incentives such as those in the Philippine Energy Act. Intellectual property rights over RE and clean technologies allow large transnational corporations to reap monopoly profits from the sale of these equipment. ODA spent in these technologies becomes, in effect, a disguised subsidy for TNCs from donor countries like Japan and the US, rather that spent on the priority adaptation and mitigation needs of developing countries.

Table 1. Some CDM capacity building projects in the Philippines

Table 2. Philippine financial institutions with CDM portfolio

Box 1. Japan’s promotion of CDM through ODA

Source: Japan’s Official Development Assistance White Paper 2007