ADB: Targeted fuel subsidies preferred over excise tax cuts

By Katherine K. Chan, Reporter

TARGETED ASSISTANCE for the segments of society deemed vulnerable to oil price volatility will likely be more beneficial for the Philippines than suspending or reducing excise taxes on fuel, the Asian Development Bank (ADB) said.

“I imagine that greater targeting of the assistance would be better than a blanket reduction in excise tax, because if you reduce the excise tax, rich people with lots of cars would benefit more, whereas you could have provided, say, income or food subsidies for the more vulnerable,” ADB Lead Economist for Southeast Asia James P. Villafuerte said at a briefing on Thursday.

He added that effectively reading the cost of fuel sends the “wrong signal” because “gasoline pollutes.”

The government said it will release P5,000 worth of fuel subsidies for the public transport sector starting next week.

A measure seeking to grant President Ferdinand R. Marcos, Jr. the authority to reduce or suspend the excise tax on fuel is awaiting third reading at the House of Representatives.

Fuel prices have spiked after the US and Israel attacked Iran, which sits on the north shore of the Strait of Hormuz, a waterway in heavy use by tankers carrying Middle Eastern crude oil.

On Tuesday, Philippine fuel retailers raised gasoline prices by between P7 and P13 per liter, diesel by between P17.50 and P23, and kerosene by between P32 and P36.

The Department of Energy has said that pump prices are expected to climb further due to the uncertainty that continues to hang over the supply of Persian Gulf oil.

Mr. Villafuerte also noted that the high price of petroleum-based fuel may drive demand for electric vehicles (EV) in the Philippines.

“I think… most people will probably begin to really think about either hybrid or EV because of the price of gasoline,” he said, adding that the Iran crisis may end up conditioning the public to “get comfortable (with crude prices of) $200 per barrel,” he said.

Mr. Villafuerte noted that the shift to EVs or hybrid cars has lagged adoption rates in Thailand, Singapore and Indonesia.

Separately, the ADB called the “green transition” a “moral imperative” and “strategic opportunity” for Association of Southeast Asian Nations (ASEAN) members, especially those vulnerable to climate risks.

“By aligning economic growth with environmental sustainability and social equity, ASEAN can transform its development model to one that is future-proof, resilient, and inclusive,” the ADB said in a report published on Thursday.

“The green economy transition is not only a moral imperative but a strategic opportunity to drive innovation, build climate-resilient economies, and reduce systemic inequalities,” it added.

According to the ADB, the green transition could also help the region’s green economy generate up to $1 trillion in revenue by 2030 and create 30 million jobs.