The final Italian Recovery and Resilience Plan (RRP) was presented by Prime Minister Draghi on 27 April 2021, after disagreements over an earlier version of the plan led to the dissolution of the previous government. The RRP draws on €235bn in total, with €191.5bn coming from the EU Recovery Facility (€68.9bn grants, the remainder loans), €13bn from the REACT EU Fund, and €30.6bn from a complementary fund using domestic funding sources. Overall, Italy’s recovery measures fall short of the green transition potential of the recovery funds available.
While the plan includes investments into measures that are relevant to the green transition, there is a significant imbalance in the allocation of funds between sectors and activities. Many of the green investments in the plan are only likely to bring about an incremental shift towards a climate neutral economy and look fairly insignificant relative to the needs of an economy-wide transition to climate neutrality. In particular, we note that there is a lack of appropriate support for crucial pillars of the energy transition, notably the expansion of renewable energy generation and the direct use of electricity, as well as local sustainable mobility infrastructure.
Altogether, the plan and the associated reforms favour permitting procedures for gas infrastructure while not pushing the electrification of final energy use. There is also a risk that a relatively high share of the recovery funds will be allocated to projects on, for instance, biomethane and hydrogen, which are attributable to the gas sector. In some cases, fossil gas activities can directly access recovery resources, for example through the inclusion of support for gas boilers in energy efficiency investments or support for gas-powered buses, which would lead to a lock-in risk of infrastructure which will slow down the climate transition.
We find that Italy’s recovery plan (RRP) achieves a green spending share of 16%, below the EU’s 37% benchmark. At the same time, we find that 26% (€49.5bn) may have a positive or negative impact on the green transition depending on the implementation of the relevant measures. According to the government, the RRP achieves a climate spending share of 40%.
When assessing the full recovery package (including funds from the EU Recovery Facility, REACT EU and the Complementary Fund), Italy reaches a green spending share of 13%. Furthermore, we find that, overall, 28% (€66.7bn) may have a positive or negative impact on the green transition depending on the implementation of the relevant measures, illustrating the importance of further scrutiny during the further planning, review and implementation of the recovery measures.
This report was written by Matteo Leonardi and Francesca Bellisai (ECCO) as well as Felix Heilmann (E3G). We are grateful to Johanna Lehne, Eleonora Moro and Elisa Gianelli (E3G) as well as Helena Mölter (Wuppertal Institute) for providing valuable inputs.
The RRP includes €3.6bn in funding for smart electricity grids, which will, among other things, be used to reinforce the urban electricity distribution network. This investment will help prepare the energy system for the transition to climate neutrality, including in areas such as the mobility sector. Reinforced grids will, for example, be better able to serve the needs of electric vehicles.
The resources for measures relevant to the green transition are dispersed in various smaller components and elements, e.g. in support measures for “green islands” or agrivoltaic projects, with little funding for industrial decarbonization or other important areas of the transition, especially with regards to greening electricity supply and expanding electrification. There are, moreover, significant support measures which may favor the gas sector, such as investments in biomethane and hydrogen, while a strategy for electrification and increasing renewable electricity supply is lacking. Overall, despite its size, the RRP does not provide a clear impetus for the transition to a climate neutral economy.
Especially in the transport sector, there is only a negligible amount of support for electrification, even though it is an internationally recognized strategic component of decarbonization strategies. The total investments in electric mobility are just €1.2bn. While there are further resources allocated to public transport in municipalities, it is not clear that these will support electric mobility, and there is a risk that these funds may support fossil gas vehicles. The share of investments in electric mobility is also remarkably low compared to other EU countries’ use of EU recovery funding.