Panel 1
Antonio Caputo
In 2021, the fifth edition of the Catalogue of Environmentally Relevant Subsidies identified a total of 168 measures, resulting in €22.4 billion in environmentally harmful subsidies and €18.6 billion in environmentally beneficial subsidies (an increase of +16.3% and a decrease of -1.7%, respectively, compared to the previous year). Subsidies totaling €11.5 billion are classified as of uncertain attribution (down by -15.8% from 2020). Among the environmentally harmful subsidies, those related to fossil fuels amounted to €14.5 billion in 2021 (Figure 1 and Table 1).
The indicator classifies subsidies based on their environmental impact as beneficial, harmful, or uncertain. These subsidies include incentives, tax breaks, soft loans, and tax exemptions aimed directly at environmental protection. They are divided into two main categories: direct subsidies (e.g., grants, concessions) and indirect subsidies (e.g., tax expenditures, exemptions). Indirect subsidies also include implicit subsidies, which can arise from the regular tax system and may promote or encourage behaviors and consumption (or production) choices that are either beneficial or harmful to the environment. The indicator provides information on direct and indirect incentives for energy resources, supporting tax system reform aimed at decarbonizing the economy and promoting environmentally sustainable activities.
Summarizing subsidies with beneficial and harmful environmental impacts is intended to provide policymakers with the information needed to phase out harmful subsidies and adopt, strengthen, and optimize environmentally beneficial ones.
Article 68 of Law No. 221 of December 28, 2015 established the “Catalogue of Environmentally Harmful and Environmentally Beneficial Subsidies” under the Ministry for the Environment and Protection of Land and Sea (now MASE), to be managed using existing human, financial, and technical resources without additional public expenditure. The same article mandates the catalogue to be updated annually by June 30.
The main objectives of the catalogue are:
a) to identify interventions for tax reform in accordance with the “polluter pays” principle;
b) to reduce taxes on labor and businesses while recovering tax revenue through environmental taxation targeting harmful consumption and production;
c) to reduce overall tax expenditures.
Panel 2
MASE, Catalogue of Environmentally Harmful and Environmentally Beneficial Subsidies
Data quality assessment
MASE (Ministry of the Environment and Energy Security)
MASE, Catalogue of Environmentally Harmful and Environmentally Beneficial Subsidies https://www.mase.gov.it/pagina/catalogo-dei-sussidi-ambientalmente-dannosi-e-dei-sussidi-ambientalmente-favorevoli
National
2016-2021
Indicator assessment
The definition of "subsidy" used in the catalogue aligns with the OECD definition and includes, among other things, incentives, tax breaks, soft loans, and tax exemptions directly aimed at environmental protection. Both direct subsidies and tax expenditures are included. Various methodologies (e.g., quick scans, checklists) are analyzed to identify subsidies, and different approaches are used for their quantification (e.g., price gap, marginal social cost, external costs), aiming to provide policymakers with solid data to eliminate harmful subsidies and enhance beneficial ones.
In 2021, environmentally harmful subsidies amounted to €22.4 billion, while environmentally beneficial subsidies totaled €18.6 billion and subsidies of uncertain classification reached €11.5 billion
Given the high share of environmentally harmful subsidies (42.7%), the country can be assessed as performing poorly in this regard.
Compared to 2016, all categories of environmental subsidies have increased. Environmentally harmful subsidies grew by +10.1%, while environmentally beneficial subsidies increased more significantly (+15.0%), and those of uncertain attribution saw the largest rise (+35.7%), indicating a slightly improving trend.
Data
Table 1: Estimated total annual subsidies by sector and type (million euros)
MASE: Ministry of the Environment and Energy Security
SAD: Environmentally Harmful Subsidy; SAF: Environmentally Beneficial Subsidy; U: Uncertain (to be quantified)
Figure 1: Total annual subsidies by environmental impact category
ISPRA elaborations based on MASE data
In 2021, compared to the previous year, environmentally harmful subsidies rose by +16.3%; environmentally beneficial subsidies declined by -1.7%, while uncertain subsidies decreased by -15.8%. Subsidies are categorized into "Agriculture and fisheries", "Energy", "Transport", "Other subsidies", "Reduced VAT". These categories follow international classifications and reflect each sector’s environmental impact. In 2021 the "energy" and "reduced VAT" categories absorbed nearly 90% of environmentally harmful subsidies; the "energy" and "agriculture and fisheries" categories accounted for over 80% of environmentally beneficial subsidies; the "reduced VAT" and "agriculture and fisheries" categories covered nearly 90% of subsidies with uncertain classification (Table 1). Analysis by category also shows year-over-year increases in environmentally harmful subsidies in "other subsidies" (+30.8%), "energy" (+19.0%) and "reduced VAT" (+13.2%). Meanwhile, "agriculture and fisheries" and "transport" categories remained stable.