Last Updated on Thursday, 12 December, 2024 at 12:48 pm by Andre Camilleri
Last week I had the opportunity to attend an interesting conference about climate change adaptation. The topic is quite complex and not many professionals can comprehend. The technicalities, and the interconnectedness of our economies, makes it even more difficult to grasp the transition risks. I can tell you that it is also difficult for economists to understand the dynamics. Imagine those policy makers who do not even have a background in economics, finance or a science.
Several government appointees are trying hard to figure out the possible scenarios that are needed to adapt to climate change. However, even abroad, it is getting difficult for authorities to understand what needs to be done to expediate the process to transit to greener practices. Let’s for instance understand what is happening in the market. Malta will surely be affected by heatwaves and droughts. This is scientifically proven and is not something that comes out of thin air. It is also documented. Malta will experience periods of prolonged heatwaves in the future, even if we put mitigations in place, today.
In this regard, the agriculture and energy sectors will definitely be affected through climate physical risks. Subsequently, even the accommodation sector will be affected through transition risks. This is why in Malta we need to have an online Energy Performance Certificate directory, as well as additional information on climate and environmental risk hazards, ideally, centralised through a system. The banking and financial industry are keen to aid in the green transition. It is also an opportunity for them to tap into more business, and clients. However, the information as well as the literature on how climate and environmental risks will affect Malta’s economic sectors, is still missing. Certainly, it is making it even more difficult to allocate credit to additional productive investments, thereby aligning to the EU’s strategic objectives to decarbonise the continent by 2050. For instance, the French authorities, are providing the public with additional information beyond the energy efficiency of dwelling. Besides the energy performance certificate for each and every building, policy makers in France are providing an adaptation directory for each dwelling. Let’s say a buyer needs information on how climate change will be affecting a specific dwelling, all they need to do is just type the address through an online platform, and it gives them the physical (acute and chronic) and transition (technological) risks.
Essentially, even the purchase price of a dwelling might be affected. Also, the insurance risk premia which might potentially be dearer for some areas affected by physical climate risks. The transparency and granular information are so granular that there is no way that anyone in the EU market will escape the level of reporting. This means that if someone is looking to purchase a dwelling, it is useful to check the climate change risks on that specific address in France. Also, this is being carried out as part of an exercise for the insurance industry, because some areas that are prone to flooding, are being excluded from infrastructure insurance coverage. An adaptation group within the European Commission is exploring policy areas to improve businesses access to insurance affected by physical risks. It is posing additional problems to economic operators. The idea is to adapt to climate change, and if certain areas/zones are more prone to pluvial floods, the options are for the economic operator to move elsewhere or for the government to provide for water defence structures. Hence, investing in upgrading the infrastructure for climate defence.
In truth, defence is not just about military mobility, but also about climate risk events. And here I propose that the funds that will be mobilised for the military mobility and upgrade in Europe’s infrastructure, part of it, is also channelled for climate defence. This is why we need such information, as we need to start tapping into new funding. Unless we are provided with such level of information, in Malta it is going to be difficult to design policy that considers this level of detail to channel additional credit and leveraging private capital. I am glad to see that several companies, are now preparing their transition plans ahead of the Corporate Sustainable Reporting Directive. However, this is not enough. The authorities must help in this transition. True the social part of ESG must not be forgotten, but I think it is now time to act and expediate the E.
If Malta is going to be affected by future cliamte change events, including heatwaves, ideally, we mitigate by upgrading our energy infrastructure. Besides, we need to provide more green financing to real estate, and companies that are ready to invest in cleaner technologies. True, sea level rise is not going to affect Malta as the annual increments are trivial. However, agriculture, soil moisture, and crops productivity will be affected. The same applies to tourism. It could eventually be the case that tourists will find it difficult to adapt to prolonged heatwaves and warmer climate, and it might affect the accommodation sector. Even the health system might be affected, especially when one reads the World Health Organisation Reports on the southern Mediterranean region including Malta. What we need to understand is that without this level of detail it is going to be difficult for the industry to provide policy makers what they really need.
It is good that the government is investing in batteries, and renewable energy for the electricity and energy sector. This will surely be needed as otherwise the strain on the infrastructure will get worse, as time goes by. The higher the weather temperatures, the higher the demand for electricity, and the bigger the strain on the infrastructure. And more burning of fossil fuels if we do not transit. Well, in turn more emissions that a few decades down the line translate into warmer temperatures. As I see it, at an EU level it is not going to be easy to ringfence the financing blended with the defence needs, especially in the upcoming MFF. The reasons are myriad. However, we need to bear in mind that climate defence is also a necessity.
Next week I will be writing an article about the ongoing political developments unfolding in Syria and the region. Surely, additional instability in the region will create negative spillover effects on the EU. I truly hope that migrants are not weaponised. The EU is not prepared to absorb the same migration and refugee shocks that experienced in 2015. HRVP Kallas has a big role to play, even though we know her fixation about the east. However, we need her to focus on the region. And this is for obvious reasons which are not needed to be spelled out. Lastly, I sincerely hope that Syria is not used as a proxy, by those who gave political asylum to Bashar al-Assad. Time will tell!
