Author: George Mangion - Senior Partner PKF Malta
Published on Business Today: 15th September 2022

In 2015, the EU ratified the Paris Agreement, the first universal agreement to combat climate change. Its goal is to mitigate climate change by maintaining the increase in global temperature at 1.5°C compared to pre-industrialised times. Now, the EU is urging cutting greenhouse gas emissions in the EU by at least 55% below 1990 levels by 2030.

In addition, the EU has pledged to reach net-zero emissions by 2050 under the European Green Deal. How can this lofty target be reached - the answer is that EU has put in action several measures how to reach it.  Defiantly, post Covid, de-carbonization is not a walk in the park. Ideally, business will benefit from de-carbonization as new opportunities are created in areas where Europe aims to set global standards. “Green deal” is also expected to generate jobs, for example in renewable energy, energy efficient buildings and processes.

Realistically, we recall the silver lining during the two-year pandemic when the island saw a reduction in carbon emissions. The cost of a better environment during the pandemic lull was the extra debt by various countries incurred to save jobs. Still, we should thank Heaven for little mercies and welcome a new package announced last year, called ‘Fit for 55’. Undoubtedly this can be Damascene.

This package may help guide us to slash gas emissions, which will likely reshape how people commute, how land is managed, and how new homes are built. Both, the “Green Deal” and “Fit for 55” slogans are eye-catching pledges, such as the solemn decision to ban the sales of new internal combustion engine cars starting from 2035. Perhaps even more importantly, the Commission will seek to reform the EU Emissions Trading System (ETS), a carbon market in which industry trade their pollution quotas.

According to the European Commission, the building sector must reduce emissions by 60% to meet the 55% emissions-reduction goal by 2030. Locally, this could be a watershed event for our Planning Authority which needs to pull its socks up and clean its stables - stoically managed by politically appointed board members.

On a pan-European scale, the 2030 Climate Target Plan indicates that the share of coal, oil and fossil gas in residential buildings final energy consumption will need to be reduced by 55% by 2030, ostensibly to be achieved through energy savings, electricity use and ambient energy using heat pumps.

Can Malta follow suit? The construction and its cousin the real estate sector are both teflon coated in Malta. The local housing and building sector must de-carbonise rapidly, particularly heating and cooling which is still largely based on electricity generated partly by Enemalta and Electrogas burning fossil fuels (LNG). The paradox is a construction frenzy rallied during 16 months of the pandemic as evidenced by One TV, that continues to remind us how demand for new builds is rising.

The decarbonization of the building sector therefore depends on an effective combination of policy enabling both reduction in energy demand through higher energy efficiency and mandating a fuel switch from fossil-based heat supply to clean, renewable sources. Building codes for both new buildings and renovation must result in an increasing share of buildings fitted with renewable heating and cooling systems.

The detractors of the “Green deal” pay lip service to the necessary reforms needed saying these cost millions. EU member states are at loggerheads over who will bear the cost of such measures, and as the drafting policy continues watch out for industrial lobbyists who fight some of the rules. For instance, the aviation sector complains that a measure to tax aviation fuel for intra-European flights would distort the market when compared with the rest of the world.

Equally belligerent is Poland which relies heavily on coal, and will resist tighter emission reduction targets. Again, it is an enigma how environmentalists are unconvinced by plans to promote natural carbon sinks like forests (locally, we started a race to the bottom to fell trees in a mad rush to widen roads).

Despite widespread support for achieving net-zero emissions by 2050, the opposition to short-term regulatory ambition on climate is often accompanied by claims that immediate action threatens the competitiveness of European business.

So the darlings of “Fit for 55” are renewable energy such as solar and wind. These don’t emit carbon dioxide and other greenhouse gases that contribute to global warming. Back to Malta’s energy policy - this on paper focuses on maximizing Malta’s effective renewable energy potential. We all remember the thousand electoral promises from the Abela administration saying it increased efforts to support the deployment of renewable energy (R.E) especially photovoltaics, solar water heaters and heat pump water heaters (which are particularly well suited to Malta’s geographic location).

The administration also persuaded the party faithful about the technical, geographical and spatial barriers limiting renewable energy potential. Yes our rating in using R.E is a mere 8% compared to 34% - the EU average. Facts show how Malta does not have a natural gas network (LNG is delivered by an FSU to Electrogas - the power plant), although uses of natural gas in niche applications may start to develop if the Malta-Italy gas pipeline is completed.

Last year, the government announced that it identified within the Economic Exclusive Zone (EEZ) two blocks where it intends issuing concessions to private companies for the production of renewable energy, the production and storage of hydrogen, fish farms and the establishment of “artificial islands”.

It committed to fast-track planning permits for such projects to a maximum duration of three months from the submission of all required documents. The PMC document suggests that the area around Hurd’s Bank is characterised by its relatively shallow waters. It is the jewel in our crown. In fact, the area of interest adjacent to Hurd’s Bank has a depth ranging from 50m to 100m, with an area of 900sq.km.

What are the benefits arising from exploitation of such exclusive zones? At a time, when Europe is frantically looking for a greener alternative to burning fossil fuel, the next goal is the alternative use of green hydrogen.

Hopefully, this signals the government’s intention to seriously explore local production of this energy sector, instead of relying exclusively on the hydrogen-ready pipeline linking us to Sicily.

Author: George Mangion - Senior Partner PKF Malta
Published on Business Today: 15th September 2022
Get in touch: info@pkfmalta.com