LNG offsets coal reliance in Philippines but decarbonisation still an issue

The Philippines is still grappling with an outdated power sector that relies heavily on coal. However, due to increased LNG development, coal usage in the energy mix decreased for the first time in 17 years, according to a recent Reuters report.

In June, the Philippines’ gas-fired generation surged by more than 25% year-on-year. It also increased by 5.2% to 10.36 terawatt hours (TWh) in the first half of 2025, the report added, citing data from the Independent Electricity Market Operator of the Philippines. This drove up the share of gas in the country’s energy mix to 17.5% in the first half of 2025. Higher LNG imports are expected to drive the country’s annual gas-fired output up 65% by 2030 from 2024 levels.

Kesher Sumeet, a Senior LNG Analyst at Energy Aspects, forecasted that the Philippines’ LNG import demand in 2025 will rise by more than 50% to 2.1 million tons from 2024, driven by the addition of new gas-fired capacity.

Jonathan Stern, a senior energy expert at the Oxford Institute for Energy Studies, put the Philippines’ increased LNG usage into context. He told Gas Outlook that the Philippines has an LNG import capacity of 8.3mt but the two regasification terminals only started up in 2023. This meant that last year was their first full year of operation. Imports increased significantly but only to 2.3mt – far short of capacity. This indicates that the terminal owners would have been and will continue to be motivated to increase capacity utilisation.

“Significant economic benefits for the Philippines transitioning from a coal-based power system to LNG would be if LNG prices dropped below coal prices; risks would be if the opposite happened,” he said. “But we are expecting a significant fall in LNG prices up to 2030 (compared with 2021-25) because of a very large amount of global LNG capacity coming on stream in the next few years.”

In addition to more gas usage, the Philippines also increased electricity generation from low-carbon sources to 21% in 2024, according to Ember data. However, that’s still well below the global average of 41%. The Philippines’ largest sources of clean electricity are hydro power at 8% and geothermal at 8.3%. Its share of wind and solar (3.8%) is also much lower than the global average of 15%.

Economic growth

Though the Philippines relied on fossil fuels for 79% of its electricity in 2024, its emissions per capita were just a third of the global average. However, that per capita figure will likely change going forward due to the country’s continued economic growth. The Philippines, along with Vietnam, is expected to record the fastest GDP growth in Southeast Asia this year, despite external pressures from uncertain U.S. tariff policy and softer imports in China, an S&P Global report found. The agency raised its 2025 GDP growth forecast for the Philippines to 5.9% from an earlier 5.7% estimate.

Yet, the Philippines still has the most coal dependant grid in Southeast Asia, creating angst among the country’s climate watchdog groups. Coal still represents around 60% of the country’s total energy mix. 

The Philippines has also set a goal for renewable energy to make up 35% of its energy mix by 2030. That’s also below the global share of 60% renewable electricity set out in the International Energy Agency (IEA) Net Zero Emissions scenario.

Lacking net zero goals

Complicating matters, the Philippines is currently one of just a few countries that hasn’t committed to a net zero emissions target. While the country has committed to a Nationally Determined Contribution (NDC) to reduce carbon emissions by 75% by 2030 (conditional on international support), that’s distinct from a net zero goal.

The private sector in the Philippines, through initiatives like the Net Zero Carbon Alliance (NZCA), is actively working towards net-zero goals, but these efforts aren’t yet backed by a national declaration, according to the NZCA.

There’s been considerable debate within the Philippines over why the government hasn’t set a net zero goal. Though many reasons have been given in both the media and in public discourse, including a combination of economic, political, and technical factors, the government simply prioritises avoiding emissions over emission removal or reduction. Though that might sound like energy sector double-speak, there’s a vast difference.

Carbon removal, for its part, differs from carbon avoidance in that it eliminates CO2​ from the atmosphere. Avoidance, however, seeks to minimise the volume of GHGs being emitted. Simply put, carbon removal directly takes CO2​ out of the atmosphere, whereas carbon avoidance prevents additional GHGs like CO2​ from entering the atmosphere.

However, focusing solely on emissions avoidance without addressing emission removals or reductions is not a viable solution for climate change because it fails to account for the existing atmospheric carbon and the potential for irreversible damage from those emissions.

(Writing by Tim Daiss; editing by Sophie Davies)