The Budget and renewables

Budget Day 2007 has come and gone. Comments have been varied but, all in all, most of them were quite positive. Indeed, after the gross mismanagement of our economy in the years prior to our country's joining the European Union, it is heartening to see that the government is backtracking, at least partially, on some of those measures, such as the airport embarkation tax, that have rendered the Maltese inferior citizens of the EU.

So, all in all, a Budget with a number of positive aspects, I would say. However, it could be further improved if a number of proposals made, including those by Alternattiva Demokratika, were taken up.

What I do find strange in this Budget is that low-wage earners will benefit less from its measures than taxpayers in a higher wage bracket. For example, "a household with an income of Lm6,500 (the average wage of most employees in Malta) in which one of the parents has to stay at home to take care of very young children, will save Lm55 on income tax in one year. On the other hand, a household earning more than Lm10,000 will save Lm243 on income tax" (Ralph Cassar, The Times, October 21).

The philosophy behind the Lawrence Gonzi-Tonio Fenech Budget seems to be the opposite of what Italian Prime Minister Romano Prodi and Finance Minister Tommaso Padoa-Schioppa had in mind when drawing up their budget in Italy. Here, the aim was to ensure that the people in the lowest income bracket would get more benefits, while those in the higher bracket would get less. Basically, while the Italians have put social equity and fiscal morality at the backbone of their financial exercise, their Maltese counterparts do not seem to be as adamant on the strict respect of these criteria.

Having said this, I would like to focus on the renewable energy, energy-saving and energy efficiency aspects of the Maltese Budget. Massimo Farrugia, reporting in The Times (October 19), lists 13 major points of the Budget. Of these, only one concerns energy issues, i.e. the granting of a 20 per cent rebate (up to Lm50) on energy-efficient appliances.

Of course, this is a positive measure since it will start encouraging people to invest in A-marked white goods and appliances which, though costlier, will go a long way towards reducing CO2 emissions in the atmosphere. However, there are no other measures concerning energy issues; there is nothing about the transport system in Malta, for example.

Moreover, this incentive on white goods is not a very strong one and could therefore discourage consumers from taking advantage of the rebate on offer. I say this in view of recent experiences. In fact, some time back the Maltese government did give the opportunity to the Maltese to invest in alternative means of generation of electricity through renewable energy sources, such as photovoltaic systems on roofs. Unfortunately, however, the return on the investment in capital outlay, the offsetting of part of the electricity bill, is relatively low and no more than 1,000 individuals in Malta have profited from this offer so far this year.

As Ing. Ronnie Vella pointed out (The Sunday Times, October 22), the prospective investor in a rooftop photovoltaic system "can only hope to get from Government 3c per unit exported while the domestic tariffs for the sale of electricity vary from 3.27c to 7.36c per unit including surcharge. This policy hardly offers any encouragement and the results speak for themselves because private investments in Renewable Energy Sources (RES) electricity have been very disappointing locally. Germany, Spain and Denmark, who have adopted more reasonable feed in tariffs encompassing other initiatives besides more favourable rates, have experienced a boom in RES investments in recent years."

Indeed, it is not only these three countries that are encouraging their citizens to switch to clean, renewable technology. The Italian government has also introduced schemes in the recently announced budget to encourage consumers to move away from fossil fuels. The first measure is basically the same as the one proposed by the Maltese government: a 20 per cent tax rebate on fridges, geysers and engines with a high energy-efficient consumption. But the Italian government led by Romano Prodi does not stop here, when it comes to promoting the envronment.

A second innovative step by the Prodi government is an astounding 55 per cent tax rebate on the cost of installation of solar panels to improve households' energy efficiency. This can translate into up to €30,000 in 2007-2009. Apart from this, the budget is offering Italians another 36 per cent tax rebate on expenses incurred in the restructuring and renovation of old buildings, using energy efficient materials.

If these incentives were offered to citizens in Malta, we would not only be seeing many old abandoned buildings being renovated; we would not only be safeguarding the environment; but we would also have people enjoying a much better quality of life, with warmer Maltese houses (as opposed to the freezing houses today) ... and much less bone arthrosis in our old age!

The above are the incentives up for offer for individuals in Italy. But thinking for the future does not stop there: so much so, that the present budget is putting aside €25 million a year for the next three years to set up a Fund for Sustainable Development, which will finance eco-sustainable projects as well as environmental education and information initiatives. And, to crown it all, another €960 million are being earmarked for the next three years for research in energy and environmental projects, through a scientific and technological fund, known as FIRST.

The 2007 Italian Budget has its defects. In the innovative energy field, however, it stands out for its innovative verve. Why is it that, as regards such a sensitive thing as energy, there is such a big difference in approach and solutions between the Italian and Maltese budgets? "Elementary, my dear Watson": in the Italian government team there is a Green minister, Alfonso Pecoraro Scanio, who has the clout to green the multicoloured coalition government team.

Maybe, if we really want to move into the future, the time has come for Malta to start having Green Ministers in its Cabinet.

Arnold Cassola, a Maltese Green MP in the Italian parliament, was elected in the European constituency in Prime Minister Romano Prodi's list in last April's general election.

arnold.cassola@alternattiva.org.mt