Policy and purpose mandate
- The State policy is to reduce dependence on imported fuels while protecting public health, the environment, and natural ecosystems, consistent with sustainable economic growth (Section 2).
- The Act mandates the use of biofuels to:
- develop and utilize indigenous renewable and sustainably-sourced clean energy sources to reduce dependence on imported oil (Section 2);
- mitigate toxic and greenhouse gas (GHG) emissions (Section 2);
- increase rural employment and income (Section 2); and
- ensure availability of alternative and renewable clean energy without detriment to natural ecosystem, biodiversity, and food reserves (Section 2).
Key definitions established
- AFTA refers to the ASEAN Free Trade Agreement initiated by ASEAN (Section 3).
- Alternative Fuel Vehicles/Engines are vehicles/engines that use alternative fuels such as biodiesel, bioethanol, natural gas, electricity, hydrogen, and automotive LPG, instead of gasoline and diesel (Section 3).
- Bioethanol is ethanol (C2H5OH) produced from feedstock and other biomass (Section 3).
- Biodiesel is Fatty Acid Methyl Ester (FAME) or mono-alkyl esters derived from vegetable oils or animal fats and other biomass-derived oils that are technically proven and approved by the DOE for diesel engines, with quality specifications in accordance with the Philippine National Standards (PNS) (Section 3).
- Bioethanol Fuel is hydrous or anhydrous bioethanol suitably denatured for use as motor fuel, with quality specifications in accordance with the PNS (Section 3).
- Biofuel means bioethanol, biodiesel, and other fuels made from biomass and primarily used for motive, thermal and power generation, with quality specifications in accordance with the PNS (Section 3).
- Biomass is any organic matter, particularly cellulosic or ligno-lignocellulosic matter, available on a renewable or recurring basis, including trees, crops and associated residues, plant fiber, poultry litter and other animal wastes, industrial wastes, and the biodegradable component of solid waste (Section 3).
- DOE, DENR, DA, DOLE, DOF, DOST, DOTC, DTI, PNS, Motor fuel, Gasoline, Diesel, Oil Company, NBB or Board, and other defined terms are established for use throughout the Act (Section 3).
- Renewable Energy Sources are energy sources with no upper limit on total quantity and renewable on a regular basis (Section 3).
Mandatory blends for gasoline and diesel
The Act mandates that all liquid fuels for motors and engines sold in the Philippines shall contain locally-sourced biofuels components in the following phased requirements (Section 5).
Bioethanol in gasoline (5% minimum first phase):
- Within two years from the effectivity of the Act, at least five percent (5%) bioethanol must comprise the annual total volume of gasoline fuel actually sold and distributed by each and every oil company in the country (Section 5.1).
- All bioethanol blended gasoline must contain a minimum of five percent (5%) bioethanol by volume (Section 5.1).
- The ethanol blend must conform to the PNS (Section 5.1).
Bioethanol in gasoline (NBB recommendation toward 10%):
- Within four years from effectivity, the NBB is empowered to determine feasibility and thereafter recommend to the DOE to mandate a minimum of ten percent (10%) bioethanol by volume into all gasoline fuel distributed and sold by each and every oil company (Section 5.2).
- During the four-year period, if there is a supply shortage of locally-produced bioethanol, oil companies may import bioethanol only to the extent of the shortage as determined by the NBB (Section 5.2).
Biodiesel in diesel fuels (1% minimum first phase):
- Within three months from effectivity, a minimum of one percent (1%) biodiesel by volume must be blended into all diesel engine fuels sold in the country (Section 5).
- The biodiesel blend must conform to the PNS for biodiesel (Section 5).
Biodiesel in diesel fuels (NBB recommendation toward 2%):
- Within two years from effectivity, the NBB is empowered to determine feasibility and thereafter recommend to the DOE to mandate a minimum of two percent (2%) biodiesel by volume, which may be increased considering, among others, domestic supply and availability of locally-sourced biodiesel component (Section 5).
Biofuels program: DOE and NBB duties
- The DOE must implement the Act and, within three months from effectivity, must:
- formulate the implementing rules and regulations (IRR) under Section 15 (Section 7(a));
- prepare the Philippine Biofuel Program consistent with the Philippine Energy Plan, considering the DOE’s existing biofuels program (Section 7(b));
- establish technical fuel quality standards for biofuels and biofuel-blended gasoline and diesel that comply with the PNS (Section 7(c));
- establish guidelines for transport, storage, and handling of biofuels (Section 7(d));
- impose fines and penalties against persons or entities that commit prohibited acts under Section 12(b) to (e) (Section 7(e));
- stop the sale of biofuels and biofuel-blended gasoline and diesel not conforming with the specifications in Section 5, the PNS, and DOE issuances (Section 7(f)); and
- conduct an information campaign to promote the use of biofuels (Section 7(g)).
National Biofuel Board (NBB) structure
- The Act creates the National Biofuel Board (NBB) (Section 8).
- The NBB consists of the Secretary of the DOE as Chairman; the Secretaries of DTI, DOST, DA, DOF, DOLE; and the Administrators of PCA and SRA as members (Section 8).
- The DOE Secretary, in the role of Chairperson, must convene the NBB within one month from effectivity (Section 8).
- A Technical Secretariat attached to the Office of the DOE Secretary assists the NBB; it must be headed by a Director appointed by the Board (Section 8).
- The Technical Secretariat’s staff size and positions are determined by the NBB, subject to DBM approval and existing civil service rules (Section 8).
NBB monitoring, reporting, and blend recommendations
The NBB must:
- monitor implementation of and evaluate for expansion the National Biofuel Program (NBP) prepared by the DOE under Section 7(b) (Section 9(a));
- monitor supply and utilization of biofuels and biofuel-blends and recommend measures to the DOE Secretary to address shortage of feedstock supply (Section 9(b));
- empower itself to require entities engaged in production, blending, and distribution to submit reports of actual and projected sales and inventory of biofuels in a format the NBB prescribes (Section 9(b)(1));
- determine availability of locally-sourced biofuels and recommend to DOE the appropriate level or percentage of locally-sourced biofuels to the total annual volume of gasoline and diesel sold and distributed (Section 9(b)(2)).
The NBB must review and recommend adjustment in minimum mandated biofuel blends based on locally-sourced biofuel availability, with these limits:
- the minimum blend may be decreased only within the first four years from effectivity (Section 9(c)); and
- after the first four years, the minimum blends of five percent (5%) (bioethanol) and two percent (2%) (biodiesel) must not be decreased (Section 9(c)).
The NBB must also recommend to the DOE:
- a program ensuring availability of alternative fuel technology for vehicles, engines, and parts in consonance with mandated minimum blends, to maximize utilization of biofuels including other biofuels (Section 9(d));
- use of biofuel-blends in air transport considering safety and technical viability (Section 9(e));
- specific actions for implementation of the NBP, including economic, technical, environment, and social impact (Section 9(f)).
Security of domestic sugar supply
- The Act directs that the Sugar Regulatory Administration (SRA) must, at all times, ensure that sugar supply meets domestic demand and that sugar price remains stable (Section 10).
- The SRA must recommend, and proper agencies must undertake, importation of sugar whenever necessary (Section 10).
- The SRA must make appropriate adjustments to the minimum access volume parameters for sugar in the Tariff and Customs Code (Section 10).
- The SRA’s mandate applies notwithstanding any contrary provision in the Act (Section 10).
Roles of government agencies
- The Department of Finance (DOF) must monitor production and importation of biofuels through the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) (Section 11).
- The DOST and the DA must coordinate in identifying and developing viable feedstock for biofuel production (Section 11).
- The DOST, through PCIERD, must develop and implement R&D supporting sustainable improvement in biofuel production and utilization technology, and must publish and promote related technologies developed locally and abroad (Section 11).
- The DA through relevant agencies must:
- within three months from effectivity, develop a national program for production of crops for use as feedstock supply, with SRA and PCA administrators and other DA-attached agencies developing and implementing policies supporting the Philippine Biofuel Program for submission to the DA Secretary for consideration (Section 11);
- ensure increased productivity and sustainable feedstock supply by instituting a program guaranteeing sufficient and reliable feedstock allocation for biofuel production (Section 11);
- publish information on available and suitable areas for cultivation and production of such crops (Section 11).
- The DOLE must:
- promote gainful livelihood opportunities and facilitate productive employment through effective employment services and regulation (Section 11);
- ensure workers’ access to productive resources and social protection coverage (Section 11);
- recommend plans, policies, and programs enhancing the social impact of the NBP (Section 11).
- The Tariff Commission, in coordination with appropriate agencies, must create and classify a tariff line for biofuels and biofuel-blends considering WTO and AFTA agreements (Section 11).
- Local Government Units (LGUs) must assist the DOE in monitoring the distribution, sale, and use of biofuels and biofuel-blends (Section 11).
Incentives for investment and production
- The Act provides that the specific tax on local or imported biofuels component per liter of volume is zero (0) (Section 6).
- The gasoline and diesel fuel components remain subject to prevailing specific tax rates (Section 6).
- The sale of raw materials used in biofuel production—such as coconut, jatropha, sugarcane, cassava, corn, and sweet sorghum—is exempt from Value Added Tax (Section 6).
- Water effluents, including distillery slops used as liquid fertilizer and for other agricultural purposes, are considered “reuse” and are exempt from wastewater charges under Section 13 of Republic Act No. 9275, subject to guidelines issued pursuant to R.A. No. 9275, and subject to monitoring and evaluation by DENR and approval by DA (Section 6).
- Government financial institutions must accord high priority to financing biofuel activities for Filipino citizens or entities meeting the ownership threshold:
- financing must prioritize, to the extent allowed by the enabling provisions of their charters or applicable laws, entities at least sixty percent (60%) of whose capital stock belongs to citizens of the Philippines;
- the entities must engage in activities involving production, storage, handling, transport of biofuel and biofuel feedstock, including blending with petroleum; and
- financing is to be provided as certified by the DOE (Section 6).
Prohibited acts
- The Act prohibits:
- diversion of biofuels (locally produced or imported) to purposes other than those envisioned in the Act (Section 12(a));
- sale of biofuel-blended gasoline or diesel that fails to comply with the minimum biofuel-blend by volume in violation of Section 5 (Section 12(b));
- distribution, sale, and use of automotive fuel containing harmful additives such as MTBE at a concentration exceeding limits determined by the NBB (Section 12(c));
- noncompliance with established guidelines of the PNS and DOE adopted for implementation of the Act (Section 12(d));
- false labeling of gasoline, diesel, biofuels, and biofuel-blended gasoline and diesel (Section 12(e)).
Offenses and penalties
- Persons who willfully aid or abet a prohibited offense, or cause its commission by another, are liable as principals (Section 13).
- For associations, partnerships, or corporations, the penalty is imposed on responsible corporate officers and directors, including the partner, president, chief operating officer, chief executive officer, directors or officers, responsible for the violation (Section 13).
- Upon conviction of an act enumerated in Section 12, the penalty is imprisonment of one year to five years and a fine ranging from PHP 1,000,000.00 to PHP 5,000,000.00 (Section 13).
- The DOE must confiscate amounts of nonconforming products failing to meet requirements under Sections 4 and 5 and DOE implementing issuances (Section 13).
- The DOE must determine the appropriate process and manner of disposal and utilization of confiscated products (Section 13).
- The DOE is empowered to stop and suspend the operation of businesses for refusal to comply with any DOE Secretary order or instruction in exercising functions under the Act (Section 13).
- The DOE may impose administrative fines and penalties for violations of the Act, IRR, and other issuances relative to the Act (Section 13).
Harmful gasoline additives phase-out
- Within six months from effectivity, the DOE must gradually phase out the use of harmful gasoline additives such as MTBE, using duly accepted international standards (Section 4).
Implementing rules, oversight committee
The DOE, in consultation with the NBB, stakeholders, and other concerned agencies, must promulgate the IRR within three months from effectivity (Section 15).
Before IRR effectivity, the draft IRR must be posted on the DOE website for at least one month and published in at least two newspapers of general circulation (Section 15).
Upon effectivity, a Biofuels Oversight Committee is constituted (Section 16).
The Biofuels Oversight Committee has fourteen (14) members, with the Chairmen of the Energy Committees of both Houses as co-chairmen (Section 16).
The Chairmen of the Agriculture and Trade and Industry Committees are ex officio members (Section 16).
Each House designates an additional four (4) members respectively, designated by the Senate President and the Speaker of the House of Representatives (Section 16).
Minority members receive pro-rata representation, with at least one representative in the Committee (Section 16).
Worker benefits and special clauses
- The Act protects existing benefits of sugar workers under Republic Act No. 6982 (Sugar Amelioration Act of 1991) and provides that the Act does not result in forfeiture or diminution of those benefits when sugarcane is used as feedstock (Section 17).
- The NBB must establish a mechanism similar to that in Republic Act No. 6982 for other biofuel workers (Section 17).
- The Act provides that it is not prejudicial to clean development mechanism (CDM) projects that reduce carbon dioxide (CO2) and greenhouse gas (GHG) emissions through biofuels use (Section 18).
Appropriations, repeals, separability
- Funding for initial implementation comes from the DOE’s current appropriations, and thereafter funds needed to carry out the Act must be included in the annual General Appropriations Act (Section 14).
- The Act repeals, modifies, or amends accordingly Section 148(d) of Republic Act No. 8424 (Tax Reform Act of 1997) and all other laws, presidential decrees or issuances, executive orders, presidential proclamations, rules and regulations, or parts inconsistent with the Act (Section 19).
- If any provision is declared unconstitutional, remaining provisions keep their validity and effectivity (Section 20).