De-carbonisation… is this a fig leaf?

George M. Mangion is a partner in PKFMalta, an audit and business advisory firm

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-industrialise times. Now, the EU is urging to cut 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 the EU has put in action several measures.

Definitely, post-Covid, de-carbonisation is not a walk in the park. Close to home, climate change is manifesting itself in higher summer temperatures and repeated low rainy seasons these past years. Ideally, business will also 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 must be ready for surgery bearing in mind how during the coronavirus pandemic economic activity, particularly in hospitality, aviation and associated industries, tanked. The silver lining was a reduction in carbon emissions but the pandemic caused the EU to face recession, so the welcoming of a new package announced this week, entitled Fit for 55, can be Damascene. This may help guide us on how best 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 expected decision to ban the sales of new petrol-driven cars 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. This could be a watershed for our Planning Authority, which needs to pull its socks up and clean its stables – stoically run by mostly politically-appointed Board members. The housing and building sector in Malta must decarbonise rapidly, particularly for heating and cooling, which is still largely based on fossil fuels (LNG) running the Electrogas utility. 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, projected 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 paradox is that they rallied during the 18 months of the pandemic. The decarbonisation 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 how to share the cost of the measures and industrial lobbyists will fight some of them as the final drafting process continues. For instance, airlines complain that a measure to tax aviation fuel for intra-European flights would distort the market with the rest of the world. Equally belligerent is Poland, which relies heavily on coal and will resist tighter emission reduction targets. Germany only generates 40% of its energy from renewables. 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 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. Is this a fig leaf? These don’t emit carbon dioxide and other greenhouse gases that contribute to global warming.

gmm@pkfmalta.com