Italy has paid out 16 billion euros in subsidies harmful to the environment. It is the Ministry of the Environment itself that states this, in an unprecedented exercise in transparency.
In 2016, Italy paid out subsidies harmful to the environment totalling 16 billion euros. It is not an environmental NGO making the accusation, but the Ministry of the Environment itself admitting it in a document published at the end of February under the telling title Catalogo dei sussidi ambientali favorevoli e dei sussidi ambientali dannosi 2016. The ministry's technical staff went through the full set of measures approved by our country to keep prices for consumers below market levels, prices for producers above market levels, or to reduce costs for both producers and consumers. Here is what they found.
The majority of subsidies for 2016 are contained within the Stability Law and concern the construction sector. But that is not all: they range from tax deductions for the purchase of properties with an energy class of A or B, to refinancing for the conversion of sugar refineries into biomass power plants, through to the repeal of the tax on pleasure craft. Taken together, between the Stability Law and other measures, it is estimated that last year 41 billion euros in subsidies were paid out, equivalent to approximately 2.5% of national gross domestic product. According to the ministry's analysts, nine of these have an uncertain or negligible impact on the environment. The remaining 32, by contrast, are split between those that are beneficial and those that are harmful.
The definition of a harmful subsidy is not universally agreed upon. The OECD, for example, considers harmful any subsidy that "increases production levels through greater use of the natural resource, with a consequent increase in the level of waste, pollution and exploitation of the natural resource" and destruction of biodiversity. Without even counting the economic and social effects of a funded project. In short, estimating the link between a subsidy and the harmful effects of a project on the environment is no simple exercise. Yet that did not stop the ministry from taking on the challenge, arriving at a figure of 16.6 billion euros. The primary beneficiaries are fossil energy sources, which receive 11.5 billion euros in subsidies, equal to 69 per cent. The list is long and includes, for example, the exemption from excise duty on electricity produced by gasification plants or on fuels used by the armed forces, the free emission allowances allocated under the European Trading Scheme, and the incentive mechanism for energy produced from assimilated sources (CIP6… the notorious "ecoballe").
With more than six billion euros in direct subsidies, electric photovoltaic is the top recipient of subsidies classified as beneficial to the environment. Adding the direct subsidies to all other forms of energy from renewable sources — equal to five billion seven hundred thousand euros — brings the total to 12 billion euros. That is 80 per cent of the 15.4 billion euros in beneficial subsidies estimated by the ministry's analysts. A figure that is therefore lower than that of the subsidies harmful to the environment, which includes — to give a few examples — the 45 million euros set aside in 2016 to incentivise the purchase of quieter, less polluting tractors and agricultural machinery, the 49 million euros in excise duty exemptions on electricity produced from renewable sources for self-consumption, and the tax credit for the purchase of vehicles powered by methane or LPG.
The catalogue is one of the measures introduced by the 2015 law on green economy e il contenimento dell'uso eccessivo delle risorse naturali. Its main effect is to reveal the perverse paradox of a state that ends up spending more money destroying the environment than it spends protecting it, thereby undermining every virtuous effort in favour of sustainability. In the introduction, Minister Gian Luca Galletti writes:
We will hardly achieve the objectives of the Paris Agreement on climate change if we do not proceed to eliminate subsidies to fossil fuels in our countries.