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Home Investing News

Government urged to make big green energy push

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June 19, 2022
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Government urged to make big green energy push
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By Tobias Jared Tomas

THE GOVERNMENT needs to refocus its borrowing to aggressively pursue sustainable energy initiatives, which multilateral institutions are willing to fund on favorable terms, in response to the rising cost of traditional fuels, economists said.

“The ongoing constraints posed by the current global landscape should highlight the importance of alternative sources of energy,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail. “Other nations have decided to accelerate their plans to shift to renewable forms of energy to ensure stable supply chains while simultaneously championing sustainability.”

“Loans from the World Bank (WB) and the Asian Development Bank (ADB) offer very affordable rates and oftentimes target projects that are not just viable, but have a substantial impact on development, equity, and environmental sustainability.” 

Mr. Mapa said that such loan exposure is less vulnerable to swings in global markets.

“Such investments do not bear fruit overnight; thus the government must identify this shift as a priority,” he added. “Currently, the Philippines has made some strides in chasing environmental sustainability with the legislative framework recently passed. Despite these developments, however, the Philippines lags its peers in terms of progress, with the country yet to set a target date for net zero carbon emissions.”

The Philippines has set a goal of cutting its greenhouse gases emissions by 75% by 2030, particularly for agriculture, waste management, industry, transport, and energy.

Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, said in a Viber message that “it may appropriate to invest in environment and renewable energy,” but called for “careful analysis of the expected returns” from such projects.

Recent loans that the government recently took on are not cause for concern, but attention should be paid to how productively they are deployed, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.

“I think that we have a great window in dealing with the nation’s debt and be able to assess debt sustainability,” Mr. Asuncion said in an e-mail. “It is all right to be worried, but it is more productive to hold government accountable for whatever that they will do moving forward.”

The government took out a string of loans over the past few weeks. The Asian Development Bank (ADB) lent $250 million for climate mitigation, $400 million for capital market development and insurance, and $4.3 billion for the South Commuter Railway Project. It also signed a $350-million loan with China for the construction of the Samal-Davao bridge.

“In order to be sustainable, the rate of return coming from these loans needs to be greater than the interest imposed by these loans,” Mr. Lanzona said. “Regardless of the sector where these loans are placed, as long as this condition is satisfied then the loans are properly placed.”

“The concern is not the amount of loans per se, but the returns or the productivity obtained,” he added.

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