The Philippines faces growing risks from extreme weather, with global warming projected to raise output losses, inflation, and hardship for the poor. Addressing these risks requires investing in long-term adaptation while contributing to global mitigation efforts.
As a tropical island nation, the Philippines is highly vulnerable to climate change, with projections pointing to more frequent and intense typhoons, accelerated sea-level rise, and increasingly extreme rainfall events. These pose significant risks to businesses, infrastructure, ecosystems, and communities — particularly the most vulnerable. In response, the government is advancing a dual strategy of adaptation and mitigation. While preparing for the long-term consequences of a warmer climate, it is also implementing measures to curb greenhouse gas emissions.
Adaptation efforts should be focused on hotspot areas where poverty coincides with high climate risk — such as flood-prone coastal and low-income areas. Households living in poverty and those in informal employment are disproportionately vulnerable to climate extremes — such as heatwaves, heavy rainfall, and landslides — due to limited resources and safety nets. Key investments include resilient infrastructure, such as coastal seawalls to protect against storm surges, robust early warning systems for floods and landslides, and improved land‑use planning, such as coastal setback zones.
Land subsidence in Metro Manila, largely driven by excessive groundwater extraction, poses growing threats to infrastructure integrity, flood resilience, and long-term urban sustainability. Addressing this challenge requires a shift to volumetric water pricing, using price signals to manage demand. Tiered tariffs that reflect the true cost of extraction would incentivise conservation and encourage alternative water sourcing. Strengthened regulatory enforcement — through mandatory metering, strict permitting, and penalties for illegal extraction — will need to support such reforms. Investing in digital monitoring systems and improving coordination among local governments and water utilities would further enhance compliance, transparency, and the effectiveness of groundwater management.
Despite increasing climate risks, home insurance coverage remains weak. Microinsurance uptake is high but concentrated in life and vehicle insurance, leaving most households exposed to economic damages from typhoons and floods. Mandatory coverage applies mainly to mortgaged homes, creating a large protection gap. Expanding property insurance is essential. Public–private risk-sharing schemes, deeper reinsurance markets, and a dedicated fund to subsidise premiums for low-income households would diversify risk more efficiently, stabilise insurer balance sheets, and make climate adaptation financially viable for vulnerable communities.
In 2020, the Philippines imposed a moratorium on new coal-fired power plants to reduce emissions and meet climate targets. However, coal remains the dominant source of electricity, and low excise taxes undermine incentives to shift to cleaner energy. The moratorium alone has proven insufficient to halt the expansion of coal-based generation capacity, as it does not prevent expansion through existing facilities. Halting all expansions of coal-based generation while promoting the early retirement of existing plants would accelerate the transition to renewable energy. Increasing the coal excise tax and aligning all energy excise taxes with CO₂ content would strengthen price signals and support climate objectives.
The introduction of an Emissions Trading System (ETS) is currently under review in the Philippine Congress. ETS represent a cost-effective, market-based approach to reducing greenhouse gas emissions, providing price signals that incentivise cleaner production and energy use. In addition to driving emissions reductions, well-designed ETS schemes can generate substantial public revenues that may be recycled to support vulnerable groups, finance green investments, or offset the broader fiscal impact of climate policies. The authorities should move forward with full implementation, initially covering high-emitting sectors such as power generation and heavy industry, where mitigation potential and cost-effectiveness are highest.