Climate and the economy

The last three budgets have all included measures aimed at making our country environmentally more secure, in a world undergoing grave, man-made climate change. Next week, however, during the budget speech, I will be looking for more and firmer steps.

We are quite used to hearing about the consequences of climate change for our environment, health and lifestyles. We hear much less about what climate change will do to economies. Yet, climate change is almost certainly going to be the biggest thing to hit firms and entire economies since computerisation.

Firms are increasingly going to have to face green taxes. As a result, auditing procedures and ways of keeping the books will very likely change.

Firms saddled with green taxes by environmentally-responsible governments will threaten to relocate to less responsible jurisdictions - unless something is done internationally to prevent unfair competition from firms that have fewer green overheads.

The likely result: new international tariffs, based on regional trade agreements (RTAs), which would favour Kyoto-compliant firms (if not Kyoto, something with similar aims). A recent Green Paper by the European Commission has mooted this suggestion, while something similar was proposed last month to the European People's Party in a paper that was written by the think tank AZAD (which I chair) together with Austrian, French, German, Greek, Hungarian, Spanish and Slovenian counterparts.

Such a prospect is completely ignored by the Labour Party's Plan For A New Beginning; I have seen more concrete proposals on climate change in short letters to this newspaper. But in terms of what we should expect from the government that is neither here nor there. Dealing with the consequences of climate change will have to be a core aspect of the implementation of several major planks of its 2015 vision.

As is pointed out in a new collection of studies edited by Carlo Carraro and Christian Egenhofer (Climate And Trade Policy, Edward Elgar Publishing), climate change - like the 2015 vision - is an intergenerational challenge. Moreover, on the way to Malta's rendezvous with 2015, there is the 2012 milestone of the Kyoto Protocol, where new environmental targets should come into effect.

The range of economic activities affected by these targets include manufacturing and services, both targeted by Vision 2015. The authors could also have included tourism - because if the Mediterranean ceases to have an attractive climate in the summers, in the long run, tourists will go elsewhere. Such a change would occur years after 2015, of course, but the erosion of our capacity to be a top tourist destination would have begun in the years when we were supposed to be gearing up to being number one in our chosen niches.

It would not quite be fair to say the government is not doing anything about this. True, many of us are surprised to learn that, 19 years ago, it was Malta that brought climate change to the attention of the UN General Assembly: our surprise is a sign that successive PN-led governments have not exactly been champions of the policies that ought to address the problem. It is also true that a report card on the government's efforts to reduce carbon dioxide emissions would read "Could do better".

However, that same report card would give much better marks for the government's efforts - through some of its waste disposal projects - to reduce emissions of methane, a greenhouse gas more toxic than carbon dioxide.

Above all, it would show that the government has grasped the international scope of the challenge: It is very difficult for Malta to make domestic progress in this area without building international alliances, and bringing larger countries to see the particular difficulties that small island states face.

The studies edited by Carraro and Egenhofer suggest why a top-down, global agreement on climate change is unlikely. There are too many different perspectives and interests involved. And some are valid. There is only passing reference to the special needs for small island states, but it is fairly clear that the very size of such states makes them more vulnerable to the consequences of climate change (rising sea levels, for example, would gobble up their territory). At the same time, the large spaces that many renewable sources of energy need means that the generation of such energy is a more difficult and expensive project.

Carraro and Egenhofer explore the incentives of bottom-up regional and sub-global agreements. They show why, for example, China might have enough incentive to enter into an agreement with Japan. To my mind, their explorations of the economics and politics of such agreements also show that the Prime Minister, in his address to the UN three weeks ago, was not just engaging in rhetoric.

By highlighting the special needs for small states, he was making an argument for a differentiated approach that would possibly be more effective. If taken seriously, it would certainly help small states like Malta meet their global environmental obligations more easily.

But just as our domestic progress needs international Maltese initiatives, our international initiatives need domestic progress on the climate-change front to be taken seriously. That is why next week I will be listening attentively to what the government proposes to do for the environment.

ranierfsadni@europe.com