Two important aspects emerge from an analysis of the first National Allocation Plan.

Firstly, that the plan is based on a correlation between electricity demand trends for the Maltese islands since 1995 and Gross Domestic Product (GDP). This correlation has been used to estimate greenhouse gas emission projections for 2005, 2006 and 2007.

Secondly, the focus of the National Allocation Plan lies entirely with emissions from the energy sector, namely the Marsa and Delimara power stations run by Enemalta. These are the only installations in Malta which fall within the categories in Annex I of Directive 2003/87/EC and to which this regulation applies. Spain alone accounts for 927 installations for purposes of this directive.

Malta's first National Allocation Plan sets a total national allowance equivalent to 8,826,941 metric tonnes of carbon dioxide for the period 2005-2007. Mepa quotes the total national allowances for Cyprus, Hungary and Spain as 16.98 million tonnes, 93.8 million tonnes and 523.7 million tonnes respectively.

A total national allowance represents the maximum amount of greenhouse gas (CO2) emissions permissible under current EU legislation for that period. Under article 10 of the EU directive, 95 per cent of these allowances were distributed "free of charge". The Maltese allowance includes 2,288,466 metric tonnes intended as a reserve for new entrants, hence taking into account the liberalisation of the local energy sector which entails the establishment of other energy providers competing with Enemalta. So far there seems to be no new entrant in the Maltese energy sector and this has been envisaged by the National Allocation Plan itself.

It is also very unlikely that Maltese greenhouse emissions for 2005-2007 resulting from Enemalta operations alone should exceed the total Enemalta allowance of 6,538,475 metric tonnes stated in the plan. Clearly, however, this can only be confirmed by Enemalta itself.

The fact that the distribution of greenhouse gas allowances is described by the directive as "free of charge" automatically raises the issue about whether the global community is heading towards a full monetary valuation of atmospheric pollution emissions. Under the present legal framework operators are free to pollute as long as a particular emission ceiling is not exceeded. Thus, as yet, operators responsible for greenhouse gas emissions are not fully liable for the environmental damage they cause.

But what should happen if Enemalta emissions exceed the stipulated amount? Article 16 of Directive 2003/87/EC, the provisions of which are transposed in article 15 of Legal Notice 140 of 2005, stipulates that operators (such as Enemalta) shall be held liable for the payment of emissions penalty equivalent to €40 for each tonne of carbon dioxide emitted in excess.

Article 16 (3) of the directive further states that the penalty should rise to €100 per tonne of carbon dioxide for the five-year period commencing on January 1, 2008.

Environmental scientists and economists are still at loggerheads about setting a monetary value to environmental damage, this being a central theme in the evolution of environmental economics. Arguably, the penalties imposed by the directive do not reflect the full cost of environmental damage caused once the emission ceilings are breached. Annual greenhouse gas emissions from power stations are generally in the order of several thousands of tonnes. It may therefore be reasonable to envisage that excesses, if any, could fall within the order of hundreds of tonnes or more depending on circumstances and, thus, the penalties eventually incurred by Enemalta could be quite substantial. In a worst case scenario such penalties could significantly curtail any economic gains derived from the Clean Development Mechanism and to which Malta may be entitled under the Kyoto Protocol.

Power station emission amounts depend on a multitude of factors. Unprecedented economic growth usually brings about increased emission rates due to an increase in energy demand. Climatic conditions also play an important part. Power plant efficiency is another consideration. It may easily be the case that the Marsa power station, in operation since 1966, may still require substantial investment to improve performance and this should reflect on greenhouse gas emission rates. The quality of the fossil fuel is another factor.

Improving on energy efficiency at all levels should however be the first step in lowering power station greenhouse gas emissions coupled to steady efforts in achieving our five per cent renewable energy target.

The economic and social repercussions resulting from Malta having to meet the greenhouse gas emissions penalties as stipulated by Directive 2003/87/EC should not be underestimated. The challenge for policy-makers is to ensure that the polluter pays principle is not mismanaged into inducing unacceptable social hardships that could increase the number of people closer to the poverty line. Considerable economic and social impacts are already being envisaged as a result of the recently revised power tariffs but a full scale analysis should also take into account the hypothetical situation in which Malta's greenhouse gas emissions exceed legally binding established thresholds. It is only hoped that Malta's 2010 five per cent target in renewable electricity generation is not over-ambitious and that more immediate tangible efforts similar to the initiatives taken in the budget for 2006 are made in that direction. Failing to do so shall be at a price.

Mr Pulis teaches environmental science and chemistry at the Giovanni Curmi Higher Secondary School in Naxxar.

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