In retrospect, an ancient Greek philosopher and poet Salon (the law-giver) warns us to keep our emphasis on virtue and self-control.
Such behaviour serves as a reminder that ethical and democratic considerations guide our decisions and actions, both as individuals and as a collective body. We must stop sugar-coating vices to dress them as virtues. Businesses are encouraged to improve their ethical standards by giving importance to factors beyond profit.
There is a new focus on the impact of business on the environment, such as on energy use and resource conservation, as well as on social issues over labour practices, human rights, employee diversity and inclusion, community engagement and consumer protection. To top it all, a warning about our excessive deficit procedure has been filed by the European Commission.
With this introduction, I would like to discuss a number of problems that are battling our democratic state. Let us start with climate change. The EU is urging us by 2030, to cut greenhouse gas emissions by at least 55% below 1990 levels. In addition, the EU has pledged to reach net-zero emissions by 2050 under the European Green Deal. Definitely, de-carbonisation is not a walk in the park.
Close to home, climate change is manifesting itself in higher summer temperatures and unusual rainy seasons these past years. We brace ourselves to more violent storms this coming winter perhaps not so fierce as that which plagued Libya with torrential rain flooding the Benghazi area, leaving over 10,000 dead. The harm inflicted in other neighbouring countries such as Italy, Spain, Portugal and Germany have a hallmark of approaching climate change disasters.
It so happens, that Dr Miriam Dalli as energy minister, blames climate change and the high temperatures which heat underground cables in streets. This was the official cause that triggered long black-outs last summer. Many streets had to be dug up this year laying over 70km of new cables painstakingly carried out by Enemalta engineers in searing heat. Moving on, we notice how Europe aims to set global standards on cutting emissions - Green deal is expected to generate jobs, for example in renewable energy, energy efficient buildings and the future generation of green hydrogen.
Perhaps even more importantly, the Commission will seek to reform the EU Emissions Trading System (ETS), a carbon market in which industry (including aviation and shipping) 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.
Moving on, one meets a Climate Target Plan stoically indicating 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. Our renewable energy supply reaches a paltry 13.2% of domestic electricity generation.
The housing and building sector in Malta must decarbonise rapidly, particularly adding heating and cooling pumps, which are still largely powered by utility plants burning fossil fuels (LNG) such as BWSC, two massive stand-by diesel generators and the controversial Electrogas operation. The construction and its cousin, the real estate sector, are both Teflon-coated in Malta.
The paradox is how they rallied during the 30 months of the pandemic. Exogenous factors persuaded many savers to withdraw money from their bank deposits that hardly paid any interest and wholeheartedly park them in the real estate sector. Building codes for both new buildings and renovations must result in an increasing share of buildings that are retro fitted with heat pumps. The detractors of the Green deal pay lip service to the necessary reforms needed - saying these cost millions. With the Green parties losing votes to the Right parties in last MEP election, the movement is at loggerheads over how to share the cost of these measures, so industrial lobbyists will fight some of the policies as the final drafting process continues.
For instance, airlines complain that ETS is a measure to tax aviation fuel for intra-European flights. This would distort the market with the rest of the world. Again, it is an enigma how environmentalists are unconvinced by plans to promote natural carbon sinks like forests. Most decry that immediate action about emissions taxes threaten the competitiveness of businesses and hastens the EU business trajectory to a recovery. They argue that a combined effect of rising oil prices, supply chain disruption due to the war on Ukraine mean global prices were expected to fuel inflation.
In retrospect, our ex-prime minister Joseph Muscat, engineered an economic model in 2013 that started a mass importation of third-country nationals (paid low-wages) via temping agencies. This had a head-on effect such that many local entrepreneurs invested in low-cost business models rather than jobs based on smarter IT and digital productivity. To add a fly in the ointment, tourism policymakers keep promoting Malta to attract low-spending tourists and surreptitiously subsidise low-cost airlines. The latter with their competitive advantage and use of multiple carriers has finally caused the death knell to Airmalta.
Furthermore, the longer the economy remains dependent on a cocktail of the burgeoning construction industry, low-cost labour, corruption in state procurement and low-spending tourism, the more painful the adjustment process will be for any finance minister to put the economy back on an even keel. An immediate cure is needed to repair the damage inflicted on our education structure, where 40% of young students fail to obtain a pass mark in six O levels.
In conclusion, Salon - The law-giver of Ancient Athens, would have tried hard to reform the system, yet many observers feel that both the business community and general public has had enough of cowboys running roughshod over good governance and clean business. Resistance to change can take many forms: questioning the authority of the change leaders, seemingly agreeing to a change and then doing nothing, poking holes in plans as a means of delaying action or explaining the reasons how change does not apply to you.
gmm@pkfmalta.com
George M. Mangion is a senior partner in PKFMalta, an audit and business advisory firm