This study aimed to propose market-based instruments to help support the local Activated Carbon (AC) industry, thereby yielding more revenues for the government and creating more jobs in the country. Over the years, AC has become one of the major coconut export products of the country. However, the AC industry is presently suffering from a recurring shortage of its main raw material, which is the coconut shell, as some companies utilize the same as mere fuel with lower application value. Due to the recurring shortage of coconut shells in the AC industry, the Philippine Coconut Authority (PCA) proposes to look into the possible imposition of a tax on companies using the same as mere fuel.
While the good intention of the proposal is recognized, the administration and enforcement of such tax may be deemed unfeasible due to the inherent complications in the coconut value chain. It also has low revenue take, and its impact and effectiveness are not guaranteed. Moreover, new taxes are generally not welcomed politically as they add to the burden of its bearers, that is, also of farmers in this case. Lastly, the proposal also goes against Republic Act No. 9513, which promotes the use of biomass, including coconut shells, as a renewable energy source.
As an alternative measure to tax, the PCA may consider imposing restrictions on the usage of coconut shells to reduce inefficiencies associated with excessive utilization of these resources in other major sub-coconut industries. Moreover, the PCA may also coordinate the inclusion of the AC production in the Strategic Investment Priority Plan (SIPP) with the Board of Investments. In this way, eligible producers of AC could avail of the tax incentive package under the Corporate Recovery and Tax Incentives for Enterprises or CREATE Act. Lastly, imposing an export tax on the coconut shell charcoal industry may be considered while providing direct subsidies to the AC industry. These other policy directions are worth exploring to help the AC sector, which has the potential to generate more revenues for the government.