Joanna Borg Cardona
Climate change is no longer a distant occurrence. We are currently experiencing its negative effects, which are becoming increasingly difficult to ignore.
Understandably, many around the world might be sceptical. However, when looking at what’s happening from devastating flash floods and record-breaking heatwaves, as well as extreme weather events, surely, we must be more vigilant to not disrupt lives and livelihoods.
Certainly, we must start asking ourselves how our daily lifestyle is affecting the environment and hence climate change.
Climate is rapidly changing, and so is the regulatory environment which is trying hard to control human behaviour and economic activities.
The landmark 2015 Paris Agreement set the stage for global climate policies. Leaders, including those within the EU, agreed to implement measures to prevent global warming from exceeding 2°C above pre-industrial levels.
In response, the EU launched the European Green Deal in 2019, setting an ambitious pathway to reach climate neutrality by 2050.
Climate neutrality became legally binding in 2021, when the European Climate Law entered into force. This legislation also sets an interim target to reduce greenhouse gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels.
Data by the European Environment Agency points towards a reduction of 31% in net GHG emissions between 1990 and 2022, with an even greater decrease being estimated until 2023 of 37%.
With the current policy stance, data points to an underachievement of the interim target, by around 6%. This means that further policies are needed to reach the 55% reduction by 2030.
“Regulation and technology are key to building a sustainable future and protecting society”
The Fit for 55 package, adopted in 2023, presented several additional legislations that support the EU climate goals and interim targets.
It focuses on various measures, including the enhancement of the Emission Trading System (ETS) and a new carbon border adjustment mechanism (CBAM), where the latter imposes a carbon price on certain imported products.
The package also included regulations governing road vehicles, vessels and aircrafts, such as the new CO2 emission standards for new cars and vans, the Alternative Fuels Infrastructure Regulation (AFIR), as well as the ReFuel EU Aviation and Maritime Regulations.
Moreover, the package also presented revisions for the Renewable Energy Directive (RED III) to accelerate Europe’s transition to renewable energy sources, as well as the Energy Performance Building Directive (EPBD), which sets targets for new and existing zero-emission buildings to achieve a fully decarbonised building stock by 2050.
These regulations impose a change in the way the economy operates and how people live. They guide governments, businesses, as well as citizens towards sustainable economic practices.
Some might perceive them as inconvenience, but they are mitigation and adaptation techniques against prolonged heatwaves or unexpected floods, against coastal erosion and ocean acidification, and other physical risks.
Physical risks can be divided into two types, acute and chronic.
Acute physical risks are sudden, even-driven hazards such as heavy rainfall, wildfires, heatwaves, hurricanes and droughts. They usually impact the short term, although their consequence might have a longer impact. These events can damage buildings, roads, the power grid and also communication systems.
The economy will be impacted through various sectors, through disruptions in production and also distribution of goods and services.
Some hazards also impact human health, especially heatwaves, putting additional strain on the health sector. Moreover, floods can contribute to the spread of certain viruses, besides contaminating water sources.
On the other hand, chronic physical risks develop slowly, with gradual environmental impacts such as rising sea levels, ecosystem changes, land degradation, ocean acidification and desertification.
Though less immediate, these risks still affect the economy and society.
Agriculture and livestock are already impacted by shifting rainfall patterns, which disrupt planting, harvesting and water availability.
Chronic physical risks can affect species distribution, as well as coastal and marine ecosystems. The fishing sector is also vulnerable, as warmer seas alter fish populations.
Everyone will benefit from climate change mitigation and adaptation.
Mitigation means reducing GHG emissions by using renewable energy, increasing energy efficiency, adopting sustainable farming, planting more trees and changing habits like reducing waste, better water management systems and choosing eco-friendly food.
Adaptation helps us adjust to climate impacts. This includes building homes to resist heat and flooding, installing water storage like wells, and using new farming and fishing methods to cope with changing conditions.
Regulation and technology are key to building a sustainable future and protecting society from worsening climate change. Governments can guide this transition, while financial institutions offer green solutions to support it.
If everyone contributes, we can create a better world for future generations.
Joanna Borg Caruana is a member of the Bank of Valletta’s ESG team. The information provided in this article is based on the personal opinion of the author and is being provided solely for information purposes. This information should not be construed as investment advice, advice concerning investment products or decisions, tax or legal advice. Issued by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta plc is a public limited company regulated by the MFSA and is licensed to carry out the business of investment services in terms of the Investment Services Act (Cap. 370 of the Laws of Malta).
