In 2005, Italy's nominal gross domestic product (GDP) was $1.7 trillion, the fourth-largest in Europe and the tenth-largest in the world. In recent years, however, the performance of Italy's economy has lagged the rest of the Eurozone countries. In 2004 and 2005, Italy experienced real GDP growth of 1.0 and 0.1 percent, respectively, compared to 1.8 and 1.4 percent for the Eurozone as a whole. Analysts predict that the Italian economy will grow by 1.0 percent in 2006, still well below the Eurozone average. The sluggish performance of the Italian economy has led to a deterioration of the country's public finances, with Italy's fiscal deficit again breeching the 3.0 percent cap imposed by the EU Growth and Stability Pact.
With limited domestic energy sources, Italy is highly dependent on imports to meet its consumption needs. In absolute terms, oil consumption has remained relatively static since 1970, but oil's share of Italy’s primary energy mix has decreased significantly, steadily being replaced by natural gas. A pressing issue affecting Italy has been the country's electricity supply. In the summer of 2003, increased electricity demand during a heat wave overwhelmed Italy’s electricity generation facilities, resulting in rolling blackouts. In September 2003, Italy suffered a nationwide blackout after a storm damaged a transmission line in Switzerland carrying electricity from France. Over the past decade, Italy’s installed electricity generation has not been able to keep up with demand, resulting in an increased share of electricity imports as a percent of total consumption.
According to the Oil and Gas Journal (OGJ), Italy had proven crude oil reserves of 622 million barrels in 2006, the third-largest in the EU behind the UK and Denmark. The country consumed 1.8 million barrels per day (bbl/d) of oil in 2005, a 3 percent decrease from the previous year. A general slowdown in economic growth was the principle cause of the decline in oil consumption. Italy's domestic oil production in 2005 (total liquids) was 155,000 barrels per day (bbl/d), sufficient to meet only 9 percent of domestic oil needs. As a result, according to Eurostat, Italy imported 1.8 million bbl/d of crude oil in 2005, with the largest sources of these imports being Libya (25 percent), Russia (23 percent), and Saudi Arabia (13 percent).
Eni is the largest oil and natural gas company in Italy. In 1992, the Italian government passed legislation to transform Eni from a wholly state-owned enterprise into a joint-stock company. The government has slowly reduced its holdings in the company since the 1990s, but it still remains the single-largest shareholder, with about one-third of total shares. In 2005, Eni’s global hydrocarbon production (including liquids and natural gas) amounted to 1.7 million barrels of oil equivalent per day (boe/d), making it one of the largest oil and gas companies in the world. The company’s hydrocarbon reserves totaled 6.8 billion barrels of oil equivalent (boe) in 2005, spread throughout the globe.
Exploration and Production
Italy produced 115,000 bbl/d of crude oil in 2005, with some 75 percent of that production coming from Eni. Three projects contributed over 70 percent of Eni's total production in Italy: Val d'Agri in southern Italy, Villafortuna in the north, and Aquila off the south-east Adriatic coast. Other important oil fields in the country include Ropso, Vega, Gela, and Ragusa. French oil major Total is leading development of the the Tempa Rossa project, adjacent to Val d'Agri. Tempa Rossa contains an estimated 200 million barrels of oil, and the project will come on stream in 2010, with peak production of 50,000 bbl/d.
In December 2001, Eni completed the 85-mile Monte Alpi pipeline, with a capacity of 150,000 bbl/d. The Monte Alpi system connects the Val d'Agri oil project with Eni's Taranto refinery.
According to Oil and Gas Journal (1/1/06), Italy had 2.3 million bbl/d of total refining capacity, the largest in the EU. The country has seventeen major refineries, concentrated along the Mediterranean coastline. The largest refinery in the country is the 300,000-bbl/d Sarroch facility on the island of Sardinia, operated by Saras S.p.A. Eni controls five refineries with combined capacity of 553,000 bbl/d, making it the largest refining company in the country. It also holds a 50 percent stake in the 241,000 bbl/d Milazzo plant. Eni reported that it achieved near 100 percent utilization at its facilities in Italy during 2005. Other large refining companies include ERG (453,000 bbl/d) and ExxonMobil (372,000 bbl/d).
Italy is a net exporter of refined petroleum products. According to Eurostat, the country imported 13.6 million metric tons (mt) and exported 27.6 million mt of petroleum products in 2005. The largest amount of product imports came from Libya (24 percent), the United States (17 percent), and Algeria (10 percent), while the largest amount of product exports went to Spain (18 percent), Belgium (8 percent), and the United States (7 percent).
According to the Oil and Gas Journal (OGJ), Italy had proven natural gas reserves of 8.0 trillion cubic feet (Tcf) in 2006, the fourth-largest in the EU. In 2005, Eurostat reported that Italy produced 421.5 billion cubic feet (Bcf) of natural gas, a decrease of 4 percent from 2004. The country consumed 3.0 Tcf of natural gas in 2005, 8 percent above 2004 levels. An increase in the construction of combined-cycle, gas-fired turbines (CCGFT) has been the principle driving force behind the increase in natural gas consumption.
The maturation of Italy's natural gas fields and the rapid advance in domestic consumption have increased the country's reliance upon natural gas imports. According to Eurostat, Italy's natural gas imports supplied 84 percent of the country's domestic consumption in 2004, versus 59 percent in 1985. The largest sources of these imports in 2004 were Algeria (38 percent), Russia (32 percent), and the Netherlands (14 percent). In early 2006, Italy experienced a severe shortage of natural gas, caused by 1) a demand surge to meet heating needs caused by extremely low temperatures, and 2) shortfalls in Russian imports. The shortages forced the country to dip into its strategic natural gas reserve, and the experience highlighted Italy’s dependence upon external energy supplies.
Eni is the dominant actor in all aspects of the natural gas sector. The company controls almost all of Italy's natural gas production. An Eni subsidiary, Snam Rete Gas S.p.A. (Snam), owns and operates the domestic natural gas transportation system. Another Eni subsidiary, Stoccaggi Gas Italia S.p.A. (Stogit) manages most of the natural gas storage facilities in the country. Finally, Eni subsidiary Italgas controls one quarter of the retail gas distribution market.
Italy has mostly brought its natural gas sector into compliance with EU regulations concerning liberalization. These areas include the opening of the sector to new entrants; the unbundling of production, distribution, and transmission activities; and the freeing of gas prices from state control. Natural gas liberalization has slowly eroded Eni's dominant position in the sector, with Eni's share of total natural gas delivered to the national grid declining from almost 100 percent prior to liberalization to 68 percent in 2003. Besides Eni, the other major players in the Italian natural gas sector include Edison (majority-owned by Italian automaker Fiat and France's Electricite de France) and Enel, the fomer electricity monopoly. There are also numerous, small companies in the retail distribution market that have arisen to challenge Italgas. One outstanding issue in Italy's liberalization plans is Eni's majority ownership of Snam; in 2005, the Italian government introduced legislation that would require Eni to reduce its holdings in Snam from 50 percent to 20 percent by 2007.
Exploration and Production
Eni controls over 80 percent of Italy's domestic natural gas production, with the company reporting that it produced 350.5 Bcf in 2005. Important offshore natural gas fields operated by Eni include include Barbera, Porto Garibaldi/Agostino, Angela/Angelina, Cervia/Arianna, Porto Corsini, Mare Ovest, and Luna. The company is currently developing the onshore Pizzo Tamburino, Fiumetto, and Samperi fields in Sicily.
Italy has the third-largest natural gas transmission system in Europe. According to Snam, the system consists of 19,000 miles of pipelines carrying over 2.7 Tcf of natural gas per year. Italian law guarantees open and nondiscriminatory access to the system.
Most of Italy's natural gas imports enter the country through international pipelines. The 670-mile Trans-Mediterranean (Transmed, also called Enrico Mattei) line runs from the Hassi R'Mel gas field in Algeria to Sicily, via Tunisia, where it interfaces with the domestic gas network. Completed in 1983 and doubled in 1994, Transmed has a capacity of 2.33 billion cubic feet per day (Bcf/d). There are plans to construct an additional compressor station along the Transmed that could increase capacity to 3.48 Bcf/d. The Trans-European Pipeline (TENP) and the Transitgas pipeline bring natural gas from northern Europe (mostly the Netherlands and Norway) into Italy, entering the country at the Passo Gries transit point near Milan. Italy imports natural gas from Russia at two entry points: via the Trans-Austrian Gas Pipeline (TAG) at Tarvisio, and via Slovenia at Gorizia.
In October 2004, natural gas flowed for the first time through the Greenstream pipeline linking Mellitah, Libya to Gela, Sicily. Majority-owned by Eni, the 370-mile Greenstream has a capacity of 970 million cubic feet per day (Mmcf/d) and connects Italy with the Western Libya Gas Project. In order to comply with Italian energy regulations, Eni has agreed to sell all gas supplied by Greenstream to other natural gas companies.
In 2002, Algeria's Sonatrach signed a deal with Italy's Enel and Germany's Wintershall to form Galsi, a consortium to build another natural gas pipeline from Algeria to Italy. Current plans call for an onshore pipeline from Gassi R'Mel to El Kal, Algeria, then an underwater section to Cagliari, Sardinia. This is to be followed by an onshore section to Olbia, Sardinia, then a final, offshore pipeline to C.D. Pescaia, Italy. Galsi estimates initial capacity on the 910-mile line will be 970 Mmcf/d, and there are plans for a parallel power cable. In May 2005, Sonatrach signed letters of intent with twelve potential natural gas purchasers, covering the entire planned capacity of the system. Galsi plans to complete the $2-billion project in 2009-2010.
In November 2005, government officials from Italy and Greece signed an agreement to build a $1.3-billion natural gas pipeline between the two countries. Current plans call for a 500-mile pipeline from northern Greece to south-eastern Italy, under the Strait of Otranto. The system will be an extension of a natural gas pipeline currently under construction between Greece and Turkey, allowing Italy potential access to natural gas supplies in Central Asia and the Middle East. The first natural gas shipments through the pipeline could occur by 2010.
Liquefied Natural Gas (LNG)
Imports of liquefied natural gas (LNG) constitute a very small portion of Italy's total natural gas imports. The country has a single LNG receiving terminal at Panigaglia, located on the country's western coast near La Spezia. According to Snam, the terminal's operator, the Panigaglia facility produced 240.9 Mmcf/d of natural gas in 2005.
Natural gas companies are planning to construct several LNG receiving terminals in Italy in order to meet estimated future demand. British Gas (BG) plans to construct an LNG receiving terminal in Brindisi, along Italy's southeast coast. In late 2004, it awarded a contract for construction of the facility to Italy's Tecnimont. BG expected the facility to begin operations in 2009, with an initial output capacity of 770 million cubic feet per day (Mmcf/d). In March 2006, the federal government overturned a ban on the construction of the project by local authorities who had opposed the terminal on environmental grounds. BG has already secured a supply of LNG for the terminal from its own integrated production-gasification project in Egypt.
ExxonMobil and Qatar Petroleum each hold 45 percent stakes in the proposed North Adriatic LNG project, an effort led by Italy's Edison to build an LNG receiving terminal on Italy's northern Adriatic coast. The project consists of a 770-Mmcf/d, offshore regasification facility near Rovigo, using LNG supplied by the RasGas II gas liquefaction project in Qatar. In May 2005, the consortium awarded a contract for construction of the main LNG recieiving terminal to Norway’s Aker Kvaerner. Edison has stated that it expects initial production from the project by 2008.
The Italian city of Livorno, on Italy's central west coast, has been considered as a site for two LNG proposals. In May 2004, the Offshore LNG Terminal (OLT) consortium received environmental approval for its proposed LNG receiving terminal near Livorno; OLT, composed of Golar LNG and Italy's CrossGas, plans to permanently moor a standard LNG tanker offshore, convert it into a floating storage and regasification unit, then connect it to the coast via a sub-sea pipeline. Once completed, the Livorno offshore facility will have an initial capacity of 390-Mmcf/d. In March 2006, Endesa purchased a 25 percent stake in the project. Construction was slated to begin in mid 2006, with completion by 2008.
A consortium of BP, Edison, and chemical company Solvay plan to construct a 290-Mmcf/d LNG terminal on the site of a former Solvay chemicals plant near Livorno. In January 2005, Italy's environmental ministry approved plans for the construction of the project. However, local government leaders have expressed opposition to the project, which could delay its planned initial production date of 2012.
In March 2005, Spain's Gas Natural (GN) presented plans to local officials for the construction of two LNG receiving terminals in Italy, located in the northern city of Trieste and the southern port of Taranto. Under its proposal, GN would build facilities at each location with production capacities of 770 Mmcf/d each, in order to fuel its plans to expand its presence in the Italian natural gas market. In the case of the Trieste site, Endesa would join with GN in the project, offloading much of the plant’s output for its nearby power plant. GN planned to complete the projects by 2010, though neither has yet to receive full regulatory approval.
Royal Dutch Shell signed an agreement in August 2005 with Italy's ERG to build an LNG receiving terminal next to ERG's oil refinery at Priolo Gargallo, Sicily. Shell stated that, pending approval of government officials, it would begin construction of the $510 million, 770-Mmcf/d facility by 2007, for completion in 2010.
It is unclear if all of the proposed LNG projects will actually proceed to completion. It is unlikely that Italy’s domestic market could absorb this large new natural gas supply, especially considering the expansion of piped gas imports from North Africa. However, there has been some talk of using Italy as a natural gas hub, landing LNG there for re-export to the rest of Europe.
Italy was one of the first European countries to completely stop domestic coal production, with the last facility closing in 2001. The importance of coal in Italy's energy needs declined to only 7.3 percent in 2003, one of the lowest levels in the EU. The country consumed 24.2 million short tons (Mmst) of coal in 2003, the bulk of which fueled electricity generation. According to Eurostat, Italian imports of coal during the first ten months of 2005 came principally from South Africa (20 percent), Colombia (13 percent), and Australia (12 percent).
Italy had 69.5 gigawatts of installed electricity generating capacity in 2003. In that same year, Italy generated 270 billion kilowatt-hours (Bkwh) of electricity, while consuming 302 Bkwh. Most generation comes from conventional thermal sources (82 percent), with smaller amounts from hydroelectricity (13 percent) and other renewables (4 percent). Electricity imports made up for the country’s supply shortfalls, and according to Eurostat, the largest sources of these imports in 2003 were Switzerland (51 percent), France (35 percent), and Slovenia (9 percent).
Italy began liberalizing its electricity sector in 1999, initially allowing only large customers to choose their own supplier. Liberalization has now spread to the majority of the retail market. As part of the liberalization, the Italian government began to privatize Enel, the former, state-owned power monopoly that previously controlled all aspects of the electricity sector. In 2000, the Italian government forced Enel to sell 27 percent of its generating capacity, and to that end, Enel created three new, independent companies: Elettrogen, Eurogen, and Interpower. Along with removing Enel's monopoly on electricity generation, distribution, and transmission, the Italian government began to divest its holdings in the company: as of April 2006, the government held 31 percent of the company’s shares.
Terna owns the electricity transmission grid in Italy. The company was previously a wholly-owned subsidiary of Enel, but Enel has reduced its holdings in the company in order to satisfy Italy's energy liberalization goals: in 2005, Enel only held 5 percent of the shares of Terna. While Enel remains the dominant generator and distributor of electricity in Italy, other companies have emerged as significant players in the sector. The most important of these include Edison, Enipower, Acea, Energia Italia, Spain's Endesa, and Belgium's Electrabel. Many of these companies have extended their market share by purchasing the former assets of Enel: subsequent to the Enel divesture in 2000 discussed above, Endesa Italia purchased Elettrogen; Edison purchased Eurogen; and a consortium of Belgium's Electrabel, Italy's Acea, and Italy's Energia Italia purchased Interpower, rebranding it Tirreno Power.
In the summer and early fall of 2003, Italy experienced two significant power blackouts. The first occurred on June 26, 2003, when supply was unable to meet a surge in power demand as the result of increased air conditioning use during an extreme heat wave. On September 28, 2003, all of Italy, except Sardinia, experienced a second blackout, when a tree struck a power transmission pylon in Switzerland. Although it appeared that these blackouts were caused by temporary or incidental factors, many analysts have suggested that the root of the cause lies in under-investment in Italy’s power sector, which has resulted in less than sufficient reserve generation capacity and increased dependence on electricity imports. In response to the power crisis, the Italian government eased regulations on building new power plants and sought to encourage greater investment in the electricity sector.
There have been reoccurring disputes between Italy and France concerning the liberalization of their respective electricity sectors. Italy has implemented most EU requirements relatively quickly, whereas France has been one of the slowest countries to adopt these changes. The dispute surrounding Electricite de France’s purchase of a stake in Italy’s Edison was only resolved after the French government agreed to allow Enel to invest in the French electricity sector. In 2006, the French government objected to Enel’s purchase of France’s Suez, engineering a merger between Suez and state-controlled Gaz de France to stave off the acquisition.
As mentioned above, Italy gets the majority of its electricity supply from conventional thermal sources, the bulk of which are oil-fired. The high cost of oil compared to other sources of thermal generation have caused Italian electricity consumers to pay some of the highest rates in Europe. In response, power generators have begun to switch to alternative fuel sources, especially natural gas and co-firing plants burning combinations of oil, natural gas, and coal. Enel has announced that it would like to phase out all oil-fired power plants by 2008, though the current tightness of Italy's electricity supply raises questions about the feasibility of this plan.
Most new investment in electricity generating capacity in Italy has been in the form of gas-fired plants, specifically combined-cycle, gas-fired turbines (CCGFTs). In October 2005, Germany’s E.ON announced that it would build a 800-MW CCGFT in Livorno. Also in 2005, Linate airport in Milan awarded a contract for the construction of a 24-MW, gas-fired cogeneration plant to supply electricity and heating. In 2004, Electrabel began construction of a 400-MW CCGFT in Rosignano. Eni power completed gas-fired power plants in Ravenna (780 MW) and Ferrera Erbognone (1,030 MW) in 2004; the company is also in the process of building gas-fired plants in Mantua (780 MW) and Brindisi (1,170 MW). Energia Italiana plans to build at least five new plants in Italy, each with a capacity of 780 MW and burning combinations of natural gas and coal. In 2004, Endesa spent some $690 million to convert several oil-fired plants into gas- or coal-fired.
Prompted by the 1986 Chernobyl incident, Italy banned nuclear power generation in a 1987 referendum. In light of Italy's recent blackouts and its domestic supply crunch, some domestic leaders have suggested restarting the four existing plants in the country. However, Sogin, the state-owned company responsible for the plants, has stated that such a proposal is unrealistic, due to the age and condition of the facilities. Italy already imports electricity directly from a Slovenian nuclear power plant 60 miles from the Italian city of Trieste.
Italy has begun to push renewable energy sources as a way to increase its generating capacity, reduce its reliance on oil-fired plants, and decrease its carbon dioxide emissions. Enel announced in 2005 that it would build 71 wind turbines throughout the country, each generating 1.5 megawatts (MW) of electricity. Endesa is also considering the construction of a wind farm on the island of Sardinia. According to Enel, Italy is the fifth-largest producer of wind energy in the world, though the country does not have the same natural advantage for wind power as northern European countries such as Germany, Denmark, and the United Kingdom. Italy does have one of the largest potentials for solar energy in Europe. Under a government program implemented in late 2005, surplus solar energy generated by residential and commercial installations can be sold back to the grid for three-times the average rate of regular electric power.
Italy's most promising source of renewable electricity generation could be geothermal. The first-ever geothermal power generation took place in Larderello, Tuscany at the beginning of the 20th century. According to the International Geothermal Association (IGA), Italy has the fourth-largest installed geothermal capacity in the world (795 MW), and the country has some 94 percent of the total geothermal electricity capacity in the EU. Analysts estimate that Italy could have the largest per-capita geothermal potential in the world.
Environmental awareness in Italy continues to grow as the effects of climate change, air pollution, and oil spills are manifest in the country's historic cities and long coastline. Traffic congestion from increased automobile and motor scooter usage has resulted in soot damage to ancient buildings in Rome, Milan, and Florence, while emissions from the transportation sector often causes a haze of air pollution that affects Italy's major cities. Smog not only causes an eyesore that affects the country's lucrative tourist industry, but also affects tourists and locals alike with respiratory ailments. Marine pollution from oil spills has blighted Italy's coastline, and the effects of rising waters from climate change has damaged many buildings in the series of islands that make up Venice, threatening the historic city's future.
Thus, the Italian government is gradually strengthening environmental laws, not only in response to Italian public opinion, but also as a result of the country's obligations as a member of the European Union. The legal text of the European Union's environmental law is gradually being incorporated into Italy's national law. Combating the negative effects of air pollution and climate change while encouraging energy efficiency and less reliance on the automobile are goals of the Italian government. Doing all this while not curtailing economic growth has become a key priority and a tricky balancing act for Italy.
Italy first adopted a Clean Air Act in 1966, with additional regulations added in 1983 and 1988, which set guidelines for controlling pollution. Over the past couple of decades, Italy has made great improvements in reducing emissions of sulfur dioxide (SO2), primarily by substituting natural gas for coal. However, since Italy has one of the highest per capita levels of car ownership in the world, air quality in cities such as Milan, Rome, Turin, Florence, and Bologna, has deteriorated in recent years. Italy's ever-present scooters and their noxious emissions contribute to the problem.
Smog and other environmental problems associated with high automobile usage are particularly severe in Italy's economic powerhouse, Milan. In addition to automobiles, Milan suffers from emissions resulting from heating systems and carbon fuel plants. These emissions are then trapped over the Po River Plain (where the city sits) by thermal inversions caused by the surrounding mountains.
The Italian government is undertaking numerous measures to mitigate growing air pollution problems. In 1999, an electric car-sharing program was launched in Rome, Milan, Turin, Modena, Brescia, Udine, Florence, Bologna and Venice. Several cities have also made held occasional "car-free" Sundays, during which cars and motorcycles are banned for an 8-10 hour period while entrance to many museums is free, as is public transport. The popularity and success—pollution levels have dropped noticeably—of the "car-free" Sundays program has prompted environmental organizations to call for the ban to be extended to every Sunday.
The Italian government also has proposed instituting tolls on cars in cities. Rome, Bologna and Florence are working on the construction of a system that would use "electronic police" to monitor entry permits on cars and charge fines to cars that are prohibited from driving in restricted areas. Following the implementation of a "congestion charge" in central London in February 2003 under which commuters pay 5 British pounds per day for driving in the center of the city, several Italian cities are considering similar programs. London's congestion charge has been a qualified success, with a significant reduction in traffic resulting in less pollution, although there are still problems in collecting tariffs.
In 2001, Italy consumed 8.1 quadrillion British thermal units (Btu) (one quadrillion Btu is referred to as a "quad") of energy, the fourth highest energy consumption level in Europe behind Germany (14.4 quads), France (10.5 quads), and the United Kingdom (9.8 quads). Petroleum consumption accounts for a significant portion of Italy's energy consumption at 50%, followed by natural gas (34%), coal (7%), hydroelectricity (7%), and other renewables (2%).
Traditionally, Italy has been dependent on oil imports from North Africa to meet domestic energy demand. In recent years, however, the percentage of oil usage in Italy's overall energy consumption has declined as natural gas consumption has risen. The growing importance of natural gas in Italy's energy consumption mix not only allows Italy to achieve its goal of energy diversification, but it also helps the Italian government to meet domestic and European environmental requirements for a cleaner environment.
Italy has one of the lowest levels of energy consumption per capita in Europe. In 2001, Italy consumed 140 million Btu per person, lower than smaller countries such as the Netherlands (263.8), Sweden (251.6), Austria (175.7), and Denmark (168). Italy's per capita energy consumption was lower than other large European Union members such as France, Germany, the United Kingdom, and Spain (see table). Italy's per capita energy consumption has risen gradually over the past two decades, up from 109.7 million Btu per person in 1980.
In early 2003, Italy held up the passage of the long-awaited EU energy tax that was designed to curb energy consumption by raising existing minimum tax levels for oil products and to introduce EU-wide minimums for coal, natural gas, and electricity. Proponents view the tax as essential to encouraging businesses and individuals to use energy wisely and to reduce pollution caused by fossil fuels and nuclear power. Italian negotiators demanded an exemption, seeking to keep tax breaks for fuel for truckers crossing Alpine mountain passes. Environmentalists said the original energy tax directive had already been too watered down, but after the directive was modified further, it was passed in April 2003.
Italy hopes its increased use of natural gas at the expense of petroleum and coal will help the country achieve its obligations under the Kyoto Protocol, the 1997 international agreement designed to mitigate the effects of climate change. Under the Protocol, the European Union as a whole agreed to reduce carbon and greenhouse gas (GHG) emissions to 8% below 1990 levels by the 2008-2012 time frame. Italy signed the Protocol on April 29, 1998 and ratified it with the European Union on May 31, 2002.
However, in 2001, Italy emitted 121.5 million metric tons of carbon, 7.3% higher than the 1990 level of 113.2 million metric tons. Italy's increase in carbon emissions—much of which has occurred since the Kyoto Protocol was agreed in December 1997—is mirrored elsewhere in Europe, with Spain (34% higher) and France (6% increase) having a higher level of carbon emissions in 2001 than they did in 1990. Among major European countries, only Germany (an 18% decline in 2001 from the combined sum of East and West Germany's carbon emissions in 1990) and the UK (5.7% lower) witnessed a decrease in carbon emissions over the past decade, and much of Germany's lower carbon emissions can be explained by the collapse in industrial production in the eastern part of the country following the collapse of the former communist regime and the subsequent shutdown of inefficient factories.
In 2001, Italy generated 2.1 metric tons of carbon per person, up from 1.8 in 1980 but still lower than the majority of Italy's fellow European Union members. By comparison, the UK's per capita carbon emission level in 2001 was 2.6 metric tons, while Germany's was 2.7. Smaller states such as Denmark (3.1) and Greece (2.7) also had a higher per capita figure for carbon emissions than Italy, although both France (1.8) and Spain (2.1) had lower levels than Italy in 2001.
In the longer-term, the Italian government is hoping that a carbon tax enacted in January 1999 will help to reduce carbon emissions as consumers switch to less carbon-intensive fuels. Revenues accrued from the tax will be used to finance energy efficiency and renewable energy initiatives, among other ecological projects.
Energy and Carbon Intensity
Italy is one of the least energy-intensive countries in the world. In 2001, the country's energy intensity (energy consumption per dollar of gross domestic product, GDP) stood at just 6,618 Btu per $1995, well below the OECD average. Italy's energy intensity has been on a slight downward trend over the past 20 years as the country has developed and implemented energy efficient technologies in order to reduce the need for energy imports and to protect Italy's national security. Italy's higher energy prices compared to other countries also provide a strong stimulus for businesses to invest in energy efficiency research and development.
Partially because of Italy's heavy reliance on oil for power generation, the country's carbon intensity (carbon emissions per dollar of GDP) ranks it closer to the middle of the Organisation for Economic Co-operation and Development (OECD) average. Still, in 2001, Italy's carbon intensity was just 0.10 metric tons per $1995. Despite the country's rising carbon emissions over the past two decades, Italy's carbon intensity has decreased over that time period, from 0.12 metric tons per $1995 in 1980, reflecting both the country's shift to more clean-burning natural gas in its energy mix and gains in energy efficiency.
Due to Italy's heavy reliance on oil imports to meet its energy needs, energy security and diversification of energy sources are top priorities in the country's energy strategy. Thus, the Italian government has placed increasing emphasis on developing renewable energy alternatives in recent years, with goals of doubling electricity production from hydro and other renewable sources by 2012, adding over 7,000 megawatts (MW) of renewable power generation capacity. With copious amounts of sunshine, Italy has solar power potential in abundance, and as a result the Italian government has made the development of solar energy technologies one of its top priorities. Italy has set a target for 2010 of obtaining 25% of its electricity from renewable sources.
In an effort to reach this target, legislation passed in 1992 obliged all Italian utilities to pay a guaranteed premium price for "green" power over an eight-year period. This gave clean energy providers a sure return on investments. Minimum rates were guaranteed for the remainder of the project's life. The subsidies, financed by a levy on electricity prices, were designed to compensate for higher production costs of renewable energy systems. However, this law was abolished in 1997 as part of the then-government's reorganization of the electricity sector aimed at canceling all "overpricing" on energy tariffs. In March 1999, the Italian parliament passed the Bersani Decree, which goes one step beyond merely encouraging the use and production of renewable energy by obligating all Italian energy producers and importers to deliver a fixed amount of renewable energy into the national grid. New legislation binds electricity firms to buy 2% of their electricity from renewable sources.
Despite these effects, Italy looks set to fall short of the goal of receiving 25% of its power from renewable sources in 2010. With 785 MW of installed wind energy power-generating capacity, Italy is the fourth-largest wind energy producer in Europe, trailing only Germany, Spain, and Denmark. However, Italy's wind industry growth appears to be slowing down, with less new capacity coming onstream in recent years. Rather than a shortage of sites for wind farms, Paolo Tabarelli, CEO of Italian Wind Technology (IWT), a wind turbine manufacturer, has blamed the slowdown on "unfinished incentive legislation and the slowness of Italian regions to authorize the setting up of wind farms."
Italy's rising environmental awareness and public activism bodes well for the country's efforts to protect its ancient buildings, historic cities, and extensive coastline. However, recognition of the problems must translate to action. Increased car ownership will place additional pressure on Italy's natural environment and its man-made treasures. Thus, Italian citizens will have to channel their environmental awareness into action, pressing the Italian government to legislate to protect the environment while citizens do their part by changing their behavior to become more energy efficient.
With Italy's carbon emissions set to continue growing over the next few years, the challenge for Italy's government will be to de-link the country's rising energy consumption from the growth in the country's carbon emissions if it is to meet its commitments under the Kyoto Protocol by 2008-2012. Italy's efforts to cut down on its energy consumption by becoming more energy efficient could help, as could the country's increased use of natural gas instead of oil. Similarly, Italy faces the dilemma of fostering higher rates of economic growth while keeping a lid on air pollution and carbon emissions. Dedicated public efforts to improve air quality, combined with European Union regulation and oversight, should help Italy reduce the negative environmental effects of its energy consumption patterns in the future.
- EIA: Country Information on Italy
- Gestore Rete Transmissione Nazionale (Italian Grid Operator)
- Snam Rete Gas
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