Relief is not resilience

There is little doubt that Malta’s energy subsidies have served a purpose.

When energy prices surged following Russia’s invasion of Ukraine, shielding households and businesses from the full shock was a defensible policy. Nobody seriously expects the government to sit back while families suddenly find their electricity and fuel bills doubling.

But temporary relief and long-term policy are not the same thing.

Five years later, Malta is expected to spend around €392 million on energy subsidies in 2026, bringing the total spent on energy and fuel subsidies over the past five years to around €1.3 billion. The Government says another €400 million may be required in 2027.

At some point, therefore, the question stops being whether subsidies were justified.

It becomes: what did we build with the money?

This is the question that seems to be missing from much of the debate.

The Government is right to point out the consequences of simply switching subsidies off. Its own modelling suggests that removing them could significantly reduce consumption and investment, cost thousands of jobs and knock hundreds of millions off GDP over the next three years.

But that argument also tells us something rather important.

If removing subsidies would cause such a shock, then Malta has become deeply dependent on them.

And dependency is not resilience.

The Malta Chamber has made the obvious alternative argument: rather than spending so much on keeping prices artificially low, some of that money could have been invested in renewable generation, batteries, grid reinforcement and other measures designed to reduce our exposure to future energy shocks. It estimates that a relatively modest fuel-price adjustment in 2022 could have freed around €100 million for renewable-energy investment.

Perhaps the Chamber is right. Perhaps the calculation is too simplistic. Either way, the question deserves an answer.

Because there is a fundamental difference between absorbing a shock and becoming better equipped to withstand the next one.

Subsidies protect consumers from prices. They do not, by themselves, make energy cheaper to produce. Nor do they make Malta less dependent on imported energy. And by insulating consumers from the true cost of consumption, they can weaken the incentive to invest in efficiency and alternative sources.

This does not mean subsidies should suddenly disappear. It means they should have a destination.

If the State is going to spend hundreds of millions protecting us from an energy crisis, some of that spending should leave behind something more durable than a cheaper electricity bill.

More solar. More storage. A stronger grid. Greater efficiency. Less dependence. Otherwise, what happens when the next crisis comes?

Do we simply write another cheque? Malta has already spent €1.3 billion. The Government should now be able to tell us what resilience that €1.3 billion has bought.

Because relief is useful. But relief is not resilience.