Malta has generally taken an active role in encouraging climate action at the international level. As early as 1988, at the 43rd session of the UN General Assembly, Malta requested the inclusion of an item entitled “Declaration Proclaiming Climate as part of the Common Heritage of Mankind” in the provisional agenda, encouraging action to be taken for the protection of the global climate for present and future generations of mankind. In October 1988, Malta formally introduced the item at a meeting of the Plenary Session of the UN General Assembly. Malta explained, during the session, that there should be global recognition of the fundamental right of every human being to enjoy the climate in a state that best sustains life. Malta subsequently presented a proposal in the form of a draft resolution that was submitted for consideration in the Second Committee. Resolution 43/53 was unanimously adopted in the plenary meeting of the General Assembly on 6 December 1988. This resolution paved the way for a series of events that led to formulation of the United Nations Framework Convention on Climate Change (UNFCCC).

Malta ratified the UNFCCC in March 1994 as a non-annex I country and in November 2001 went on to ratify the Kyoto Protocol. Malta subsequently became an Annex I state. In October 2016, Malta ratified the Paris Agreement as a member state of the EU.

Over the last decade, and particularly since the conclusion of the Paris Agreement, Malta has stepped up its efforts in climate action, both in terms of mitigation and adaptation. It is now working towards achieving the objectives the EU’s 2030 Energy and Climate Framework, and the decarbonisation of Europe by 2050. Malta also recognises the urgency to adapt to the impacts of climate change. During its tenure of the Presidency of the Council of the European Union, it highlighted the need for attention to be paid to adaptation to climate change.

As an EU member state, Malta necessarily participates in the adoption of the EU’s climate regulatory framework, with which it is obliged to comply.

As an EU member state, Malta’s climate policy is primarily driven by EU climate action, being also obliged to abide by relevant EU legislative instruments. Its policy is also guided by its Annex I status under the UNFCCC and the commitments undertaken in the Kyoto Protocol, as well as more recently, in the Paris Agreement.

Malta’s climate policy for the period up to 2030 is set out in its National Energy and Climate Plan of 2019 (NECP). The plan outlines Malta’s national objectives and contributions for 2030 in the areas of decarbonisation, renewable energy and energy efficiency. It also describes the policies and measures required to be implemented in order to reach these objectives. The adoption of the EU’s new climate framework in April 2021 led Malta to launch a public consultation for a Low Carbon Development Strategy which, although aligned with the NECP, sets out a pathway for emission reduction up to 2050. 

Malta’s particular characteristics, specifically its geographical constraints, limit its potential in terms of both mitigation and promotion of renewable energy. Over the past five years, Malta has transformed the energy mix its uses for electricity generation from one based on heavy fuel oil and gas to a more sustainable energy mix based on natural gas, electricity imports and renewables. The increased efficiency of the island’s new gas-fired generation plant, commissioned in 2017, significantly reduced primary energy demand in Malta. Nonetheless, increasing population, and corresponding demand in the housing market, and the growth of tourism have intensified pressure on land and scarce natural potable water resources. Steep population and GDP growth in recent years have indeed made it difficult to restrain an increase in energy consumption.

Despite these challenges, as an EU member state, Malta must contribute towards the achievement of the EU’s climate objectives, and to this end must make certain determined contributions. The objective of these contributions, or targets, is three-fold: (i) abate greenhouse gas (GHG) emissions, (ii) increase production of renewable energy, and (iii) increase energy efficiency.

Abatement of GHG Emissions

In terms of reduction of emissions for the period up to 2030, EU climate legislation commits Malta to a 19% reduction in GHG emissions compared with 2005, pursuant to the Effort Sharing Regulation (see 2.2 National Climate Change Legal Regime). Malta has limited mitigation potential which arises from its service-based economy, specifically in the transport and agricultural sectors, and its limited geographical area, restricting options for enhancement of land-based carbon sinks. Diseconomies of scale also hinder its ability to take advantage of alternative and innovative technologies. Thus, whilst Malta remains committed to continue working towards mitigation action to meet its obligations and comply with the provisions as listed in the Effort Sharing Regulation, it has no option but to make use of the flexible options available under the Effort Sharing Decision (such as carbon offsets and intra-EU transfers), at least in the short term.

In the long term, Malta’s strategy in terms of mitigation will focus on reducing (i) the use of fossil fuel in electricity generation, by exploiting alternative renewable energy technologies; and (ii) emissions from road transport, by transitioning to electric vehicles. Other areas of focus include enhancement of energy efficiency in buildings, and sustainable waste management.

Renewable Energy

The second objective is to increase energy generation from renewable sources. In this respect, solar energy is, so far, the predominant viable renewable energy source in Malta and thus national policy aims to fully exploit this source of renewal energy to meet its contribution commitments. While Malta, like other EU member states, does not have defined renewable energy share (RES) targets for the period up to 2030, Malta’s contribution to the EU’s overall 2030 target in terms of the share of energy from renewable energy in gross final consumption is expected to amount to 11.5% in 2030.

Malta’s climate policy further contemplates introduction of measures to increase its RES share in electricity, heating and cooling, and transport. The RES share in electricity is expected to be met though energy generation from solar photovoltaic (PV) technology and waste. With respect to transport, the RES share is expected to be met by an increase in biofuel consumption, achieved through an obligation on importers of road diesel and petrol to increase the share of biofuels in the fuel mix.

Energy Efficiency

The third and last objective of the national policy is to increase energy efficiency. Malta is expected to contribute to the EU’s 2030 target of 32.5% by achieving an energy intensity level of 0.07 tonnes of oil equivalent (TOE)/EUR2,005 as compared to a level of 0.15 TOE/EUR2,005 in 2005. The focus areas for energy efficiency improvement are transport, industry and services, and households. With respect to households, special focus will be given to vulnerable and energy poor households.

The carrying out of energy audits is highly encouraged for private households, and is mandatory for companies (other than SMEs) registered and doing business in Malta. A scheme was set up in 2018 whereby SMEs can benefit from grants to help them carry out energy audits of their premises/processes/plants.

Adaptation

Malta has also focused on adaptation strategies and implemented the National Change Adaptation Strategy, which identifies the principal strategic climate impacts likely to affect Malta and outlines actions to be taken. Some of the actions delineate measures to be taken in the design of buildings that should be improved, if necessary, through enforcement and economic disincentives or incentives; and to maximise passive cooling supported by the education of households and industry on cost-effective retrofitting of energy and water efficiency-improving technologies onto existing buildings, among other actions. It also encourages commercial and industrial sectors to build reservoirs and other rainwater catchment measures to reuse captured water and to recycle grey water for non-potable purposes, and to introduce efficient water use technologies through the introduction of incentive schemes.

Malta’s climate action policy is implemented through the enactment of various pieces of legislation, including principal Acts and subsidiary legislation.

GHG Emissions Reduction

In terms of mitigation, the reduction of emissions is mainly regulated by what is known as the Effort Sharing Regulation (Regulation (EU) 2018/842 of the European Parliament and of the Council of 30 May 2018 on binding annual greenhouse gas emission reductions by member states from 2021 to 2030 contributing to climate action to meet commitments under the Paris Agreement and amending Regulation (EU) No 525/2013). EU Regulations are directly applicable under Maltese law and thus the Regulations form part of the national legislation without the need of formal transposition. The Regulation commits each member state to specific reduction targets for those sectors of the economy that fall outside the scope of the EU Emissions Trading System (ETS), such as transport, agriculture and waste.

Malta must achieve 19% emission reduction in 2030 in relation to its 2005 level. It is, however, one of nine member states to be given flexibility in that it has the option of using a limited amount of ETS allowances for offsetting emissions in the effort sharing sectors in 2021 to 2030.

Renewable Energy

In terms of generation of electricity from renewable energy sources, the Promotion of Energy from Renewable Sources Regulations (Subsidiary Legislation 545.35 enacted under Chapter 545 of the Laws of Malta) is the main piece of legislation. Among other things, the Regulations contain provisions for the implementation of national support schemes for energy from renewable sources, and co-operation mechanisms among EU states. They also set out the indicative and estimated targets of the RES share in heating and cooling as well as transport, for the period up to 2030.

Other Climate-Related Legislation

Other climate-related legislation includes:

• the Climate Action Act (Chapter 543 of the Laws of Malta), which sets out the guiding principles for the mitigation of GHG emissions;
• the Energy Efficiency and Cogeneration Regulations (Subsidiary Legislation 545.16), which promote the use of energy efficiency measures to ensure achievement of the EU’s 2020 target on energy efficiency;
• the Industrial Emissions (Integrated Pollution Prevention and Control) Regulations (Subsidiary Legislation 549.77), which provide a framework for the prevention and control of pollution arising from industrial activities;

• the European Union Greenhouse Gas Emissions Trading Scheme for Stationary Installations Regulations (Subsidiary Legislation 423.50); and
• the European Union Greenhouse Gas Emissions Trading Scheme for Aviation Regulations (Subsidiary Legislation 423.51).

The national legal framework is sufficiently flexible to allow for the adoption of measures and incentives to reduce emissions and encourage renewable energy generation. However, the overall effectiveness of the legal framework in practice depends very much on how it will continue to be implemented. Such implementation is in turn dependent on a series of factors, including, most notably, the administrative goodwill of the institutions and public authorities concerned as well as a mechanism of efficient financial flow.

The Malta Resources Authority, a body set up within the Ministry for the Environment, Energy and Enterprise, is the entity responsible for certain climate-related matters, namely climate change reporting and the operation of the ETS, both for stationary installations and aviation.

The Energy and Water Agency, also set up within the Ministry for the Environment, Energy and Enterprise, is the entity tasked with formulating and implementing national policies in the energy and water sectors. With respect to climate action, the agency is responsible for the implementation of the legislation and the policy measures related to renewable energy and energy efficiency. The formulation and implementation of national support schemes promoting the use of renewable energy also fall within the Agency’s competence.

Additionally, the Authority for Transport in Malta is responsible for implementing measures to reduce emissions in the transport sector. In 2016, the Authority adopted the Transport Master Plan which has a horizon up to 2025, and which sets out several measures aimed at achieving low-emission mobility, including the electrification of vehicles.

Regulatory Instruments

In terms of mitigation, national law contains obligations to reduce GHG emissions; these obligations mainly arise from the ETS regulations and the Industrial Emissions (Integrated Pollution Prevention and Control) Regulations (the IPPC Regulations). The Effort Sharing Regulations, also dealing with matters of mitigation, are addressed in 2. National Policy and Legal Regime (Overview).

The ETS works by putting a limit on overall emissions from certain installations and aircraft, which limit is reduced each year. Within this limit, companies can buy and sell emissions allowances as needed. This “cap-and-trade” approach gives companies flexibility to cut their emissions in the most cost-effective way. The ETS covers certain stationary installations and aircraft operating with a valid licence granted by the civil aviation authorities of Malta, or aircraft that, although not licensed by the civil aviation authorities of Malta, have Malta identified as the being the state with the greatest attributed emissions from flights performed by that aircraft in the base year.

In order to achieve the 2030 goals and the commitments undertaken in the Paris Agreement, the sectors covered by the ETS must reduce their emissions by 43% compared to 2005 levels. This will require an annual decrease in emission allowances of 2.2% for the period between 2021 and 2030.

GHG emissions are further controlled through the IPPC Regulations, which is the main instrument regulating pollutant emissions from “high-risk” industrial installations, such as energy plants and certain waste management activities. In terms of these regulations, installation operators are required to operate within the emissions limit values set out in the permit for the particular activities carried out by the installation. They are also required to operate the installation in accordance with the best available techniques. Installation operators must monitor, record and report annual emissions to the competent authority in accordance with the conditions laid down in the permit.

Permitting

Operators of certain installations must obtain a permit, prior to commencement of operations, under both the emissions trading regulations and the IPPC Regulations. The operator must submit an application containing information about the operator and the installation activities, the raw materials to be used that are likely to lead to emissions of GHGs, the sources of the emissions and any other information that the competent authority may require. To be granted a permit under the former regulations, the competent authority must be satisfied that the operator is capable of complying with the requirements of the regulations and the conditions of the permit.

The requirements for obtaining a permit under the IPPC Regulations are similar to that under the ETS. The operator must provide the competent authority with information on the operator, the installation and its activities, raw and auxiliary materials to be used, sources of emissions, and the proposed technology and techniques for preventing, or where not possible reducing, emissions. The operator may also be required to place a financial guarantee in favour of the competent authority to secure its obligations under the permit. The competent authority shall take into account the applicant’s suitability to undertake the proposed activity, having regard to the operator’s qualifications, experience and technical competence, and its financial capacity to comply with its obligations under the permit.

Monitoring and Reporting

Under the ETS, installation and aircraft operators must submit a monitoring plan describing the measures by which annual emissions from the installation will be monitored and reported. The monitoring plan must be approved by the competent authority and will serve as the accepted methodology for monitoring in that installation. On an annual basis, the operator of the installation must submit verified emissions reports to the competent authority. The reports must first be verified by a competent, independent accredited verifier before being submitted to the competent authority. A verification report issued by the verifier must accompany the emissions report when this is submitted to the authority.

In terms of the regulations governing industrial emissions, operators must include, in the permit application, measures for monitoring emissions. The competent authority shall ensure that the permit conditions contain detailed monitoring requirements including the methodology, frequency and evaluation procedure for monitoring emissions. At least once annually, the operator must provide the competent authority with information and results obtained from emission monitoring.

Policy Measures

Malta’s climate action policy identifies a number of key areas with potential for emissions reduction, including energy, transport, agriculture and waste. The risks and vulnerabilities of each of these sectors and the policy measures associated with each of them, are set out in the NECP and the Low Carbon Development Strategy, and are discussed in further detail in 8. Climate-Friendly Investment Support and the Malta Trends & Developments chapter in this guide.

Additionally, Malta has introduced a number of fiscal instruments, mainly environmental taxes, to discourage the use of environmentally damaging activities such as the burning of fossil fuels, while promoting other alternative and more efficient energy sources. Overall, these taxes can be grouped into three categories: energy, transportation, and pollution and resources. In terms of energy, the taxes comprise:

• carbon taxes and taxes on energy products for transportation such as diesel and petrol;
• taxes on energy products for stationary use (coal, oil products, electricity, natural gas); and
• taxes on greenhouse gases.

With respect to transport, taxes comprise road usage tax, and taxes on the import, sale and registration of motor vehicles. Lastly, pollution and resource taxes comprise taxes on air and water pollution, taxes on waste management and on raw material extraction.

The revenue generated from such taxes can in turn be used on climate-related expenditure, specifically measures and initiatives which aim to prevent, reduce, and eliminate pollution, promote cleaner technologies and enhance climate change mitigation.

National Climate Change Adaptation Strategy

The National Climate Change Adaptation Strategy was published and adopted by the government of Malta in 2012. It aims to build upon the National Strategy for Policy and Abatement Measures Relating to the Reduction of Greenhouse Gas Emissions of 2009 in terms of governance and policy infrastructure. The Adaptation Strategy seeks to identify recommendations in various sectors, which are vulnerable to climate change, such as water, agriculture, infrastructure, building, human health and tourism. It also addresses the financial impacts as well as sustainability issues. Moreover, it identifies the principal strategic climate impacts likely to affect Malta and highlights specific issues for improvements, such as that Malta cannot continue to rely exclusively on active cooling to counter the effects of poor building design.

Climate Action Act

The adoption of the Climate Action Act in 2015 streamlined Malta’s commitments on climate change on both main fronts of climate action, namely mitigation and adaptation, in a legally binding way. Specifically, on adaptation, the Climate Action Act dictates the process for conducting periodic reviews and updating the National Adaptation Strategy. It also foresees including information on actual and projected impacts of climate change.

Low Carbon Development Strategy

Recently, in June 2021, Malta launched for public consultation its Low Carbon Development Strategy (LCDS), which sets out the adaptation priorities for Malta. These priorities were identified as a result of a vulnerability assessment of the various sectors. The sectors most at risk include:

• water resources;
• infrastructure and transport;
• land use and buildings;
• natural ecosystems, agriculture and fisheries; and
• tourism

The LCDS warns that if measures are not taken to address the impacts of climate change in these sectors, the consequences could be drastic. For instance, climate change effects on water resources are a big concern for Malta, as they can significantly affect the hydrological cycle. Groundwater is Malta’s only natural freshwater source and this is becoming increasingly scarce and is suffering from a degradation in quality due to nitrate pollution and sea water intrusion. As extreme storm events increase, and flash floods become more common, the ground will become saturated more quickly, reducing the time available for water to percolate into the water table. This lack of absorption, unless properly managed, could also lead to greater run-off, leading to floods, and damage to infrastructure and property.

These extreme weather events also impact and disrupt air and sea transport activities. Being a small island with no land connections with other countries, Malta is entirely reliant on supplies, including food, being transported by air and sea from its trading partners. The effects of climate change on this are likely to lead to increased maintenance on aircraft, airport systems and air navigation systems and landside areas; as well as greater downtime for cargo ships and operations, port operations and cruise liners.

Intense rains could also damage roads and other infrastructure, which are currently insufficient and inadequate to cope with the effects of such weather events.

With sea levels rising, Malta risks losing many of its sandy beaches, as well as low-lying man-made structures such as promenades, tourist attractions, and so on.

For each of these sectors, the LCDS highlights the major risks and vulnerabilities which are assessed through an impact-likelihood matrix. It then proposes several adaptation measures. Before doing so, however, it identifies the challenges, gaps and barriers to adaptation which could act as obstacles when designing and implementing adaptation strategies.

At present, as an EU member state, Malta participates in the EU ETS, which is currently the largest global carbon market.

Malta is also likely to participate in the carbon market evolving under Article 6 of the Paris Agreement.

As part of the efforts to achieve the decarbonisation of Europe, the EU is introducing the Carbon Border Adjustment Mechanism (CBAM) to reduce the risk of carbon leakage by encouraging producers in non-EU countries to green their production processes. It was designed in compliance with World Trade Organisation rules and other international obligations of the EU.

Under the CBAM, EU importers will buy carbon certificates corresponding to the carbon price that would have been paid, had the goods been produced under the EU's carbon pricing rules. Conversely, once a non-EU producer can show that they have already paid a price for the carbon used in the production of the imported goods in a third country, the corresponding cost can be fully deducted for the EU importer.

The CBAM will be phased in gradually and will initially apply only to a selected number of sectors such as iron, cement, steel aluminium and electricity generation. The CBAM will apply to direct emissions of greenhouse gases produced during the production process of these products. It is expected to become fully operational in 2026. As an EU member state, the CBAM will inevitably apply to Malta. Given that Malta relies heavily on the importation of these particular goods (such as steel and cement), it is likely to be impacted to some extent by the CBAM.

Whilst awareness of the impacts which climate change could have on businesses, industry and society in general continues to increase, it cannot be said that the TCFD has had a noticeable influence on national policy or the regulatory framework; this is however, inevitably, a matter of time.

There is no specific legislation under Maltese law regulating the responsibility of directors for climate change impacts. Theoretically, the directors of a company may be exposed to claims that their failure to assess and mitigate against climate change risks is in breach of their fiduciary duties or their general duty of care and to act in the best interest of the company.

A Maltese company has juridical personality separate from that of its shareholders and, for this reason, the shareholders are not responsible for liabilities incurred by the company as a result of the company's failure to properly assess and report climate change risks and impacts. Similarly, with respect to parent companies, the general principle which flows from the notion of separate juridical personality is that the holding company is not liable for the acts of its subsidiaries. However, there may be instances in which a holding company will incur liability on the basis of general principles of law and independently of the fact that a holding-subsidiary relationship exists. These include situations of agency and liability in tort, for example.

ESG reporting is not yet a regulatory requirement under Maltese law. However, this will change with the adoption of the Corporate Sustainability Reporting Directive (CSRD) by the EU, which will apply to all member states including Malta. The CSRD will come into effect in the 2023 financial year for large companies, while SMEs will have until the 2026 financial year to comply.

The EU Commission will set in place compulsory reporting requirements for large companies, of which there are approximately 50,000 in Europe. A large company is defined as fulfilling two of these three criteria: (i) EUR40 million in net turnover, (ii) EUR20 million in assets, or (iii) 250 or more employees. Separate, proportionate standards will be introduced for listed SMEs, which will have to report in a like manner.

It must be noted, however, that at present, there is a non-financial reporting obligation on large public-interest companies with more than 500 employees. This obligation stems from the Non-Financial Reporting Directive (Directive 2014/95/EU), which was transposed into Maltese law through an amendment to the Maltese Companies Act (Chapter 386 of the laws of Malta)

Climate change due diligence is not typically conducted in these types of transactions.

The Promotion of Energy from Renewable Sources Regulations (Subsidiary Legislation 545.35 enacted under Chapter 545 of the Laws of Malta) provide the regulatory support framework for the uptake of renewable energy technologies. As noted in Section 2, the Regulations contain provisions for the implementation of national support schemes for energy from renewable sources, and co-operation mechanisms among EU states.

With respect to the national support schemes, Malta has implemented several measures in the energy and transport sectors to promote the uptake of renewable technologies. Malta’s focus has so far been on solar energy as a source of electricity generation as this is the most viable source given Malta’s spatial constraints. However, the roadmap to 2050 will consider other renewable technologies, including offshore wind and hydro.

In terms of support for the uptake of solar energy, there are ongoing financial schemes for PVs (including the PV Grant Scheme and the PV Feed-in Tariff Scheme).

Support for solar PV is regulated through Subsidiary Legislation 545.27 and 545.31 which allocate support to new solar PV installations which are connected to the grid in order to help investors in the residential and non-residential sectors overcome existing cost barriers. Support is currently available in the form of operating aid, and also in the form of a grant on capital investment for households.

Because of the limited availability of land, the government has also launched a communal PV farm project for individuals who wish to invest in solar energy but do not have the space (or land) to do so. The government also encourages the installation of solar water heaters for private use through the Solar Water Heaters Scheme, which is ongoing.

A pilot scheme supporting the integration of battery storage with PV systems has recently been launched. Early adopters of solar PVs whose feed-in-tariff has expired will be eligible to receive a 25% grant (capped at EUR1,000) against the purchase of a battery system for the storage of renewable energy and therefore increase the share of self-consumption. However, the preliminary study shows that a large-scale roll-out of battery storage systems for households, PV-integrated or standalone, would require a significantly higher level of support and thus Malta intends to seek EU funds to subsidise these costs.

A new waste-to-energy plant is currently being commissioned and is expected to be operational within the next three to four years.

In the transport sector, which is almost fully dependent on fossil fuels, the government has introduced a legal obligation on importers of petrol and diesel to blend an increasing share of biofuels in their mix. This obligation will be extended until 2030 with the obligation of biofuel blending increasing from 10% in 2020 to 14% by 2030 in terms of energy content, as a share of renewable energy supplied for final consumption in the road transport sector.

Malta’s government has adopted several other measures to reduce emissions and promote climate friendly investment. For instance, free school transport for all primary and secondary school students and free use of public transport for youths and students between 16 and 20 was introduced in 2018, with the objective of reducing emissions from road transport. With the same objective, a car-sharing scheme was introduced allowing citizens to book an electric vehicle (EV) through an online app. The electrification of transport is further discussed in the Malta Trends & Developments chapter in this guide.

In addition, a number of measures have been put in place to promote energy efficiency in buildings. Predominantly, these have taken the form of financial incentives or grants. For example, as of 2018, the government has offered a grant on the purchase of roof insulation and double-glazing products for domestic use that reduce the consumption of energy.

The government has implemented other policies and measures focused on financial incentives and grants for the deployment of renewable energy, including soft loans for green or energy efficiency investments, as well as financial investments assisting businesses in becoming more energy efficient.