Since the start of the war in Ukraine, the Maltese government has frozen energy prices so that they do not increase as a result of the war.
This price freeze was not a result of cheap energy sourcing, but subsidies that make up for the price increases in energy.
The energy subsidies may feel nice, and they did freeze prices at favourable rates compared to much of Europe. Yet, as the government surely knows, they are not sustainable long-term. There are other solutions to keep energy prices stable while not spending hundreds of millions of euros every year.
Why the energy subsidies were introduced
Let’s be honest about why the subsidies had been introduced and why the energy prices were frozen.
They were not frozen in sympathy to the population. They were frozen to avoid economic shock, and above all, the political repurcussions of high energy prices.
What could have been done so that energy prices would remain stable without the need for super-expensive long-term subsidies
Renewable energy in Malta makes up a very low share of energy generated, much lower than the EU average. Malta generates 17.2% of its energy from renewable sources. In contrast, the EU average is 47%.
The government should have introduced the energy subsidies as a short-term measure, and in parallel introduced a programme for the rapid installation of renewable energy infrastructure, for example, solar panels.
Increasing the share of renewable energy in total energy generated would have also made Malta much more independent in terms of energy. It would have reduced Malta’s reliance on the interconnector, and on imported gas.
In turn, reducing Malta’s reliance on imported gas and the interconnector would reduce Malta’s energy price susceptibility to shocks on the price of fossil fuels.
It would also reduce dependency on an interconnector which is susceptible to accidents and attacks.
Additionally, it would have opened up a road for Malta to reduce or remove the energy subsidies, without sending energy prices soaring.
Not to mention that this would obviously increase Malta’s share of energy generated from renewables. rendering the island’s energy greener and pushing Malta closer to its renewable energy goals.
The Politics
Source: The Malta Independent
The government did not invest in alternatives or seriously plan for the future of energy subsidies. It did not consider that these may not really be financially sustainable for the country.
It thought in election cycles, and did not have a vision beyond the next election.
Its interest was one: preventing the political repercussions of high-energy prices.
It did not worry about Malta’s growing debts, which have now hit €12B.
Now it seems that behind the scenes, Malta’s public finances are facing pressures, and Malta isn’t as financially strong as we were always told.
The President of the Malta Chamber has recently warned that the government was painting a smooth economy for the general public, while warning about tight finances behind closed doors. Details here.
A government MP, Clint Azzopardi Flores, has now called for a bipartisan agreement on how energy subsidies should be faced out.
The MP is fore-sighting the political backlash that such a phasing out (which will sometime happen) without planning may cause, and suggesting a bipartisan agreement so that the political backlash is distributed between the government and the opposition, thus avoiding any political shifts.
No, the issue should not be the subject of bipartisan agreement. And the reason is not partisan politics. The reason is political responsibility.
The government should be politically responsible for not investing in energy alternatives and/or a plan for the future of energy subsidies. It should not try to escape accountability by placing the issue on a “bipartisan agreement”.
See also: Malta: Are public finances actually strong, or less so?
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