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Network News • 07-12-2023

Facing the challenges in COP28

Author: George Mangion - Senior Partner at PKF Malta
Published on the Malta Business Today: 7th December 2023


For COP28, this is the first time there will be a global effort since the Paris Agreement mechanism to collectively review each nations’ greenhouse gas emissions so as to measure progress toward meeting set goals.  Head of States want to encourage their nations to ramp up their climate change mitigation actions and their respective Nationally Determined Contributions (NDCs).

Carbon pricing and an annual emissions cap must ensure that polluters pay, and that Member States generate revenues which can be invested in the green transition. The revised EU emissions trading system gradually extends carbon pricing to new sectors of the economy to support their emissions reductions, in particular transport, aviation, heating fuels, and shipping.

The conclusions of the exercise could have implications for both international and domestic climate change-focused legal frameworks.  So last week, we witnessed the gathering of World leaders in Dubai for the next round of climate talks .

This began with a pledge to set up a US$30 billion private investment fund focused on climate change in vulnerable countries and building a “loss and damage” fund.  Key themes included emissions mitigation targets, phase out fossil fuel, financing from developed nations, focus on industry-led solutions, low-carbon innovation, differences between developed and developing nations.

With 80,000 attendees, including 23,500 government representatives and 27,208 policy experts, academics and senior company executives, the COP28 is the United Nations’ largest-ever climate summit.  So how will all this effect tiny Malta?  The prime minister at the UN podium said that Malta’s goal remains that of being climate neutral by 2050.  In view of limited resources and burgeoning national debt, one can honestly praise the island for its sustained efforts.

Robert Abela exclaimed stoically Malta was “punching far above its weight”.  Although, Malta is a laggard among other EU countries in renewable energy generation, this can be explained because of its set policy to produce electricity via burning of fossil fuel, yet the penny dropped (albeit late) that there is immense offshore potential for the Green energy.

This could have been exploited years ago but the main trust of the ex-prime minister Joseph Muscat was to assist a private company Electrogas to set up an LNG electricity generating facility supplied by a floating vessel.  In this way, an electoral promise to reduce tariffs could be honoured.  According to Robert Abela, the sitting prime minister, he reiterates in Dubai how his government is actively considering the establishment of extensive offshore wind or solar farms.

In the COP28 event, global leaders in Dubai pledged to establish a $30 billion private investment fund targeted to address climate change initiatives in vulnerable nations, alongside a fund addressing “loss and damage” concerns.

Next to speak at COP28 following Robert Abel’s contribution is Miriam Dalli, energy and environment minister. She said that despite being one of the smallest countries, Malta’s commitment is strong. It hopes to exceed climate goals, aiming for a 55% reduction in pollution by 2030 compared to 1990.Another important topic is the fear of rising sea water levels due to climate change.

Dalli also reiterated that Malta has been urging the international community to tackle the impacts of sea level rise on small island states.

The energy minister warned that for small island states, the risk of sea level rise is real. The IPPC’s special report on the Ocean and Cryosphere in a Changing Climate speaks loud and clear about the alarming prospect of accelerating rise in sea levels over recent years. It even indicates a possible sea level gradual rise of two metres over this century.

Malta is the 10th smallest state in the world and being an archipelago, such fears augment our sensitivity to this shocking reality. For a relatively small island with villages located a few centimetres above sea level, this can lead to partial or complete submersion.  Places like Sliema, Gzira, Msida and Marsa are particularly vulnerable.

The displacement of entire villages will inevitably happen yet with this reform, Member States will now spend 100% of their emissions trading revenues on climate and energy-related projects and the social dimension of the transition.

The newly-created Social Climate Fund will dedicate 65 billion euros from the EU budget, and about 86 billion euros to support the most vulnerable citizens particularly SMEs against the deleterious effect of this Green transition. The new Carbon Border Adjustment Mechanism will ensure that imported products on transshipment vessels will also pay a carbon price at the border in the sectors covered.

Malta and other transshipment ports have protested that feeder vessels from Asia entering the Mediterranean may choose to unload in non-EU African ports to save on the carbon tax. Environmentalists on the other hand hail this measure as a valuable rule for promoting global emissions reductions and help leveraging the EU market to pursue global climate goals.

In combination with the EU Emissions Trading System, this reduces the risk of ‘carbon leakage', whereby shipping companies may have to save costs, move their production out of Europe to countries with less strict environmental standards.  The agreement on the revised Renewable Energy Directive sets the EU's binding renewable energy target.

Another topic is how to augment investment in clean energy. The revised CO2 standards will ensure that all new cars and vans registered in Europe will be zero-emission by 2035. The new Regulation for the deployment of alternative fuels infrastructure (AFIR) sets mandatory deployment targets for enhanced electric charging facilities and more hydrogen refuelling stations.

In this way, ideally the publicly accessible recharging infrastructure for construction machinery and heavy vehicles grows at the same speed as that engineered for the electric vehicle fleet.

All this poses a challenge for Malta and the rest of Europe - what is the future of fossil fuels? Head of States attending COP28, discussed divergent priorities, including the question of whether fossil fuels should be “phased down” or “phased out”. Whatever the answer to that question, it will surely impact the implementation of the Paris Agreement.

One thing stands out clear - it looks clear that if the world does not triple renewable capacity by 2030, it will be highly unlikely that we reach the goal of limiting global warming to 1.5°C.

Author: George Mangion - Senior Partner at PKF Malta
Published on the Malta Business Today: 7th December 2023


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