The Maltese population has almost doubled in the past one hundred years and is the smallest member state of the EU with the most densely populated territory (as inhabitants/km2). These circumstances, as well as the lack of natural resources, especially water, makes it one of the biggest environmental challenges facing our ecology nowadays.

 During the Environment Council Meeting in June 2017 held under the Maltese EU Presidency, presided by the Minister for the Environment, Sustainable Development and Climate Change José Herrera, a resolution was adopted by all the EU Member States to introduce the EU 2030 emissions reduction targets and to deliver on the EU's commitments under the Paris Agreement. Dr Herrera stated that there must be no second thoughts when it comes to action against climate change, saying that future generations need a clean and sustainable planet.

Concerning the scarcity of natural resources in Malta, this year the European Commission has declared the main three challenges facing the implementation of EU environmental policy and law. These can be summarized as follows:

• Speeding up the implementation of EU waste-management requirements, as landfill use is extremely high and recycling rates low, as well as improving water management to ensure protection of water catchment and prevent flash floods.
• Improving the air quality in the most urbanised areas by introducing systemic solutions for transport congestion.
• Improving the protection of habitats and species of EU interest by fully implementing the Natura 2000 instruments and strengthening the enforcement of the Birds Directive.

According to the European Commission study, we could accomplish more by bringing about improvements especially in areas where the country has a good knowledge base and good practices, this refers in particular to:

• Supporting small and medium enterprises (SMEs) to move towards a more circular economy.
• Improving compliance assurance by stepping up inspections and enforcement action.
• Investing in the tourism sector to make it more sustainable which is a double win: less environmental pressure and a more attractive tourist destination.

At present, the European Commission is moving member states towards the European Union Strategy 2020 so as to develop and implement environment and green economy in Europe. All the member states of the European Union apply some of the economic instruments such as environmental taxes, fees and charges tradable permits, deposit-refund system and subsidies determined by EU policy. The EU is the world leader in the projection, admission and implementation of strict environmental policies. From this position, concerns have emerged about the unfavorable effects of the Environmental Tax Reform (ETR) and climate impact on employment, income distribution, economic growth and exports. Together with other North European countries (Denmark, Finland, Norway and The Netherlands), Sweden was the first one to implement the ETR in the early 1990s. The main purpose was to stimulate employment and to reduce taxes on labour. Germany, Denmark and Sweden stand out as the lead countries based on their experience with environmental tax reforms and provide an important lesson for other EU countries. As a result, in terms of the collection of revenue from environmental taxes, these countries have seen the highest benefit rising out of environmental taxation during the last decades.

An ongoing process of greening tax systems can be observed across all the European Union. Therefore, political approval of environmental tax systems gives a relevant and strong motive for the sustainable development in the global economy. Certainly, the evolution of environmental taxes is based on historical heritage of the European Union and economic aspects, such as the level of economic development, the size of the state and population. Relating to European Union requests in the field of environmental and climate protection caused by the steady development and growing of standard of living pushes us to desire that such reforms are triggered in all the states of the European Union. 

energy taxes in Malta reach 51.3 per cent of the revenues from environmental taxes .Compare this to northern countries where we find that it registered 55.4 per cent of the total in Norway, Denmark (55.5 per cent) and The Netherlands (55.9 per cent). As a general comment, transport taxes represented the second most important contribution to total environmental tax revenues, with 19.8 per cent of the EU-28 total in 2015. Their relative significance was considerably higher in Austria (35.5 per cent of all revenues from environmental taxes), Ireland (38 per cent) and Denmark (38.7 per cent) and even more so in Malta (40.3 per cent) and slightly higher in Norway (40.6 per cent). The smallest share of transport taxes in total revenues from environmental taxes were in Estonia (2.2 per cent) and Lithuania (2.5 per cent). This shows how Malta compares with other states being in the higher bracket for transport taxes.

Across the EU member states, businesses paid a little more than half (54 per cent) of all energy tax revenue collected by governments in 2014. The contribution of households, albeit lower, was also significant (at 44 per cent in 2014). The remainder (two per cent) relates to the amounts paid by non-residents or could not be allocated to a specific group of payers. Luxembourg stands out with the largest share of the energy tax revenue (at 63 per cent) collected from non-residents largely due to non-resident purchases of petrol and diesel. Locally, this share also reaches a substantial high percentage (at 41 per cent).

As a rule, one can assume that the revenues from environmental taxes will increase in all the countries of the EU till 2020. Positive growing trends are based on alterations of environmental policies, which have been made in the EU countries by national governments during the period 1999 - 2013.

In the recent decades, the intensive use of natural resources has increased the human footprint on the earth and has been threatening the security of goods supply. Consequently, environment protection and management are one of the important priorities of government institutions today. Environmental taxation evolution has taken different paths across European Union countries, underpinned by different environmental policy frameworks. The collection of environmental taxes differs among EU countries. It is partly related to environmental policy of each EU country and partly due to environmental tax reforms, which have been implemented in Sweden, Denmark or Germany. It may also be due to more ambitious goals and purposes when it comes to the drive to limit fossil fuel emissions as a strategy to protect the environment.

To conclude, it is imperative that all stakeholders are aware of this obligation to conform to the strategy on emissions and work together to make sure the targets of EU2030 are reached as soon as possible. Considering the small size of the island, this should be much easier; however, everyone must pull up their socks rather than continuing fighting windmills in our quest to avoid enhancing environmental protection. To enforce such practices we need effective environmental tax methodologies.

 

 Ms Kurtinaitytė is an Economist at PKF Malta

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