Driving change

Are Government incentives to promote the use of less polluting vehicles working?

In 2012 the energy sector emitted 2,030 thousand tonnes of greenhouse gases, or 65 per cent of all emissions in Malta. Now, these emissions are down to less than 800 thousand tonnes, or 40 per cent of total emissions.

While there is, of course, further scope for more reductions in this area, particularly through a shift to the use of more renewable energy sources, for Malta to meet its climate neutrality targets it will become increasingly vital to tackle emissions from the transport sector.

Financial incentives

In this light, Government has sought to promote the use of less polluting vehicles by means of financial incentives. For instance, in the Budget Speech for 2018, to encourage this type of technology, Government introduced grants for those purchasing these vehicles. Furthermore, for the first time, electric cars, hybrid cars, and their derivatives were completely exempted from the registration tax. As of 2018, they were also exempted from the road license tax for a period of five years.

Then in the Budget speech for 2020, the Minister for Finance announced cheaper tariffs for individuals who charge their vehicles at their homes. Finally, in the Budget Speech for 2022, the financial grant to incentivise the acquisition of new electricity-powered cars or Plug-In Hybrids was increased by €3,000 – from €8,000 to €11,000 – and up to a maximum of €12,000 if the vehicle scrappage scheme is availed of as well. In practice, this meant that Government was financing the equivalent of nearly half the cost of a new vehicle, virtually eliminating the difference in price between diesel and petrol models and less-polluting ones.

Substantial increase in less polluting vehicles

Did these incentives work? The simple answer is yes. Back in 2012 there were just 447 licensed vehicles that did not work just on petrol or diesel, or 0.1 per cent of the entire vehicle stock in Malta. The latest figures indicate that there are now 23,450 such vehicles, or 5.4 per cent of the entire vehicle stock.

Between 2012 and 2017, that is before the first strong incentives were introduced, the increase in the number of less polluting vehicles was minor, with the share of these vehicles rising from 0.1 per cent to 0.6 per cent of the total vehicle stock. Out of every 100 new vehicles on the road, only 4 were not entirely dependent on petrol or diesel to operate. By 2019 the share of less-polluting vehicles had doubled to 1.2 per cent, with 14 out of every 100 new vehicles on the road being not entirely dependent on petrol or diesel to operate.

The incentives introduced in the Budget for 2022 were an even-stronger game changer. The latest figures show that now more than half of all new vehicles work on less-polluting sources. If one focuses specifically on passenger cars, the latest data suggest that, out of the increase in the number of licensed passenger cars, 8 out of every 10 do not depend entirely on petrol or diesel. The share of less-polluting cars is now doubling every two years.

Putting EU funds to good use

At the same time Government is putting into place schemes for the electrification of the public sector vehicle fleet and the public transport network using EU funds. This is also bearing fruit. Already nearly 8 per cent of all route buses do not work on petrol or diesel; four times more than the proportion observed in the previous decade. With the introduction of more schemes directed towards the commercial sector it is expected that the changeover observed among passenger cars will be replicated in other areas, such as among good-carrying vehicles and mini-buses.

The progressive strategy adopted by Government – of introducing incentives to diminish the cost of the environmental transformation on individuals and businesses – is an excellent way of ensuring a just transition. The alternative approach of just pushing the cost onto consumers would inevitably hurt most those on lower incomes, who would end up being priced out of car-ownership. At the same time, EU funds are being allocated to ensure enough investment in the infrastructure required to sustain the electrification of the transport sector. This twin strategy is crucial for the success of Malta’s green transition.  

Photo credit: Rathaphon Nanthapreecha

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