The EU Emission Trading Scheme (EU ETS) is one of the bloc’s core climate policies, obliging certain energy-intensive industries to pay for a proportion of the greenhouse gases (GHG) their operations emit. In February 2021, the price for the EU ETS emission allowances hit its all-time high of €100 per tonne, leading to discussions about what a “meaningful” price signal should be and if the policy is effective in reducing industry emissions. In order to meet the increased European ambition to reduce GHG by 55% by 2030, the EU has been overhauling its climate policies as part of the EU Green Deal and is looking at expanding the EU ETS to more sectors.
The direct impact of EU ETS on the Maltese industry has been limited so far, as only large-scale electricity production and intra-EU flights have been actively in scope. However, with the planned expansion of the EU ETS to the maritime sector, to fossil fuels used for heating/buildings and road transport, as well as stricter rules on aviation emissions, the impact on Maltese businesses and consumers will shift. Furthermore, the Carbon Border Tax Adjustment Mechanism (CBAM) will add compliance and administrative cost for companies and likely affect pricing of CBAM products.
Maltese businesses have been reducing GHG emissions by means of moving to more energy efficient processes or substituting fossil energy/electricity with energy from renewable sources, as well as by providing sustainable finance such as ESG-linked loans and earmarked green deposits. The high and increasing carbon price alongside high energy prices in Europe in general could help unlock green investments into novel and more expensive abatement technologies. Additionally, companies are also further supporting their climate commitments by investing into additional GHG emission removals or offsets/avoidance (e.g. nature-based solutions).
The right carbon pricing, such as taxation or cap and trade models as well as voluntary measures, can be effective tools to accelerate the transition to a low carbon economy. For a country like Malta, special focus should be put on the value chain emissions, as understanding this indirect impact and trying to work jointly with suppliers and customers to reduce emissions will help unlock novel low carbon opportunities and business models.
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