Marcos orders creation of carbon market
The Philippines has become the latest country to formalise a national carbon market system. President Ferdinand Marcos Jr signed Executive Order No. 127 on 13 October 2026, creating the legal foundation for a market that could turn verified emissions reductions into tradable assets. The order was published two days later and sets out a framework intended to connect climate projects with finance while generating income for communities, farmers and businesses that protect forests or reduce emissions.
For UK firms operating in the Philippines or sourcing from suppliers there, the development carries practical implications. Carbon markets are expanding across Southeast Asia as countries seek to meet Paris Agreement commitments while attracting climate investment. Understanding how these systems work and what they require will matter for supply chain reporting, tender participation and commercial relationships with Philippine counterparts.
The executive order does not create a carbon tax. Instead, it establishes the rules and institutions needed to verify emissions reductions, issue tradable credits and track transactions through a national registry. The Department of Environment and Natural Resources now has responsibility for building the policy framework, which must be submitted within 30 days of the order taking effect.
How the Philippine carbon framework will operate
Executive Order No. 127 directs the Department of Environment and Natural Resources to formulate what the government calls the Philippine Carbon Market Policy Framework. This framework will govern participation in both voluntary and international carbon markets. It will also align carbon credit activities with the country's climate commitments under the Paris Agreement.
The policy is designed to cover a range of projects. Forest protection and conservation will be eligible, as will tree planting and reforestation programmes. Clean energy deployment qualifies, alongside pollution reduction initiatives. Any activity that demonstrably reduces or removes greenhouse gas emissions could potentially generate credits, provided it meets the standards that the department will set.
Executive Secretary Ralph Recto explained the basic concept in straightforward terms. For every activity proven to reduce greenhouse gases, credits will be awarded that can then be sold. Companies or other entities seeking to meet climate commitments could purchase those credits. However, projects will not automatically qualify. They must meet government standards and undergo measurement, monitoring and verification before any credits are issued.
The Department of Environment and Natural Resources has several central responsibilities under the order. It must establish eligibility rules for carbon credit projects and set methods for measuring and verifying emissions reductions. Rules for issuing and transferring credits will be developed, alongside safeguards for international transfers of emissions reduction outcomes. The department will also create rules for distributing revenues and other project benefits among participants.
Notably, the order requires the department to establish and maintain the Philippine National Carbon Registry. This registry is intended to track projects, credits and transactions while preventing double counting. Double counting occurs when the same emissions reduction is claimed by more than one entity or market, undermining the environmental integrity of the system.
An Inter-Agency Committee on Carbon Markets has also been created. The Climate Change Commission will chair this committee, with the Department of Finance serving as vice chair. The committee will oversee policy development and implementation. Once the department submits its proposed framework, the committee will have 30 days to review and approve it.
Understanding carbon credits and market mechanics
A carbon credit generally represents a verified reduction or removal of greenhouse gases. The measurement is commonly expressed in tonnes of carbon dioxide equivalent. Credits may arise from activities that avoid emissions, such as replacing fossil fuel generation with renewable energy. Alternatively, they can come from activities that remove carbon from the atmosphere, such as reforestation or soil carbon sequestration.
The value of any carbon market depends on the credibility of the reductions it certifies. Therefore, a functioning market requires clear baselines against which reductions are measured. Independent verification is essential, as is reliable monitoring over time. Safeguards against double counting protect market integrity and prevent the same reduction from being claimed in multiple jurisdictions or reporting systems.
Executive Order No. 127 addresses these requirements through its emphasis on eligibility standards, verification procedures and the national registry. Without these elements, credits risk becoming merely paper claims with little environmental substance. The detailed rules that the Department of Environment and Natural Resources develops will determine whether the Philippine market produces credible instruments or questionable offsets.
Commercial and compliance implications for businesses
UK firms with operations or supply chains in the Philippines should consider several practical consequences. First, Philippine suppliers may soon have access to carbon market revenue as an additional income stream. This could affect pricing structures, contract terms and the financial viability of certain suppliers, particularly those involved in agriculture, forestry or renewable energy.
Second, carbon accounting and reporting will become more complex. If a UK business sources products from a Philippine supplier that generates carbon credits, questions arise about who owns those credits and how they should be reported. Supply chain emissions calculations under Scope 3 may need adjustment to avoid double counting between buyer and supplier reporting.
Third, the framework could create new opportunities for joint ventures or project investment. UK firms with sustainability commitments or net zero targets may find Philippine carbon projects an avenue for high quality removal credits, particularly from nature based solutions. However, this depends entirely on the rigour of the verification system and the rules governing international transfers.
Public sector suppliers face additional considerations. Procurement Policy Note 06/21 and its successors require UK government suppliers to publish carbon reduction plans and demonstrate progress toward net zero. As carbon markets mature in supplier countries, understanding how those markets interact with UK reporting requirements becomes important. Credits generated overseas may or may not be acceptable depending on how they are verified and whether they meet UK government standards.
For manufacturers sourcing raw materials from forestry, agriculture or other land based sectors in the Philippines, the benefit sharing rules will matter. If communities and smallholders receive meaningful revenue from carbon projects, this could improve social sustainability credentials and reduce supply chain risks. Conversely, if benefits are captured by intermediaries or large landowners, social risks may increase even as carbon credits are generated.
Financial planning may also be affected. Carbon markets introduce price volatility and regulatory uncertainty. Philippine suppliers participating in carbon projects will face new compliance costs for measurement, verification and registry fees. These costs will likely be passed through supply chains or reflected in project economics. UK firms should consider how these factors might affect long term contract stability and supplier resilience.
What UK businesses need to know about the Philippine framework
Executive Order No. 127 was signed on 13 October 2026 and published on 15 October. The Department of Environment and Natural Resources has 30 days from effectivity to submit a proposed framework. The Inter-Agency Committee on Carbon Markets then has 30 days to review and approve it. Consequently, the detailed rules governing project eligibility, verification and credit issuance should emerge within approximately 60 days of the order taking effect.
The framework will cover both voluntary and international carbon markets. Voluntary markets involve buyers purchasing credits to meet corporate sustainability goals or offset residual emissions. International markets include mechanisms under Article 6 of the Paris Agreement, which allows countries to trade emissions reductions toward their national climate targets.
Projects must demonstrate additionality, meaning the emissions reductions would not have occurred without carbon market financing. This requirement prevents credits from being issued for activities that would have happened anyway. Permanence is also critical, particularly for forest and land based projects. Reductions must be protected against reversals caused by fires, logging, storms or land use change.
The national registry will track all credits issued, transferred and retired within the system. This should prevent the same credit from being sold multiple times or claimed by multiple parties. However, interoperability with international registries will be essential for credits that move across borders. The rules governing international transfers must ensure consistency with national climate accounting and applicable international safeguards.
Benefit sharing arrangements will determine how revenues are distributed among project participants. For community based projects involving Indigenous peoples or smallholder farmers, transparent agreements are essential. These agreements should cover ownership, revenue distribution and grievance procedures. Without clear benefit sharing rules, carbon projects risk replicating existing power imbalances or creating new disputes over land and resources.
Implementation challenges and risks ahead
The executive order creates a framework, but it does not guarantee that credits will be valuable, environmentally effective or equitably distributed. Several implementation challenges will determine whether the Philippine carbon market becomes a credible climate finance mechanism or produces low quality offsets.
Verification costs present a significant barrier, especially for smaller community projects. Measurement systems must be affordable enough to enable participation by smallholders and local groups while remaining credible to buyers. If verification costs are too high, only large commercial projects will participate, excluding the communities that the policy aims to benefit.
Monitoring technology and capacity will also matter. Remote sensing, satellite data and digital monitoring tools can reduce costs and improve accuracy. However, these technologies require technical capacity, data infrastructure and ongoing investment. The Department of Environment and Natural Resources will need to build this capacity or partner with organisations that possess it.
Governance and transparency are critical for market confidence. Buyers need assurance that credits represent real, verified emissions reductions. This requires independent auditors, public reporting of project data and clear accountability mechanisms. Weak governance or opaque processes will undermine market credibility and discourage investment.
International alignment presents another challenge. The Philippines participates in regional initiatives and international agreements that set standards for carbon markets. The national framework must align with these standards while retaining enough flexibility to suit local conditions. Misalignment could prevent Philippine credits from being accepted in international markets or under Article 6 mechanisms.
Strategic considerations for firms with Philippine exposure
Businesses should begin monitoring how the framework develops over the coming months. The detailed rules that emerge will clarify which types of projects qualify, what verification standards apply and how credits can be transferred internationally. These details will determine whether the market offers genuine opportunities or creates new compliance burdens.
Supply chain due diligence may need updating. If Philippine suppliers begin participating in carbon projects, UK buyers should understand the implications for Scope 3 reporting, benefit sharing and project additionality. Contracts may need clauses addressing ownership of carbon credits and responsibility for verification costs.
For firms considering investment in Philippine carbon projects, early engagement could provide advantages. However, this must be balanced against the risks of committing capital before the regulatory framework is finalised. Waiting for clarity on verification standards, registry procedures and international transfer rules may be prudent.
Companies with existing sustainability commitments should assess whether Philippine carbon credits could contribute to their targets. This depends on the quality of credits, their eligibility under corporate reporting standards and their acceptance by stakeholders and auditors. Credits that lack rigorous verification or clear additionality may attract criticism even if they are technically compliant with national rules.
Engagement with industry bodies and standard setters could also be valuable. As Southeast Asian carbon markets develop, regional standards and coordination mechanisms are emerging. UK firms active in the region may benefit from participating in discussions about verification protocols, registry interoperability and benefit sharing norms.
Where to find detailed guidance and updates
The Philippine Information Agency and Philippine News Agency provide official updates on government policy developments. Both agencies published details of Executive Order No. 127 shortly after its signing. These sources will likely continue to report on the framework as it is developed by the Department of Environment and Natural Resources.
The Department of Environment and Natural Resources website should host the proposed framework once it is submitted to the Inter-Agency Committee on Carbon Markets. Businesses with Philippine operations or suppliers should monitor this for detailed eligibility criteria, verification standards and registry procedures.
For broader context on carbon markets in Southeast Asia, the Association of Southeast Asian Nations has published materials on regional climate cooperation and carbon market mechanisms. These documents provide insight into how national systems like the Philippine framework fit within regional initiatives.
UK firms seeking guidance on how international carbon markets interact with domestic compliance obligations can consult the Department for Energy Security and Net Zero. The department oversees UK climate policy and provides resources on carbon accounting, international transfers and Article 6 mechanisms under the Paris Agreement.
Organisations such as the International Emissions Trading Association publish technical resources on carbon market standards, verification protocols and registry systems. These materials can help businesses understand the technical requirements that credible carbon markets must meet, providing a benchmark against which to assess the Philippine framework as it develops.