Until 1960s, hydropower was the chief source of electricity produced in Italy. Nowadays with a share of about 18% of the total production, hydropower is second only to thermal electricity generation. Among the renewables, hydroelectricity accounts for some 67% of the national production, followed by wind power and geothermal electricity sources.
Since 1990s the development of renewables, including hydroelectricity, had been incentivised, first by the decision of the Interministerial Prices Committee from 29 April 1992, and later by the so-called Bersani law (79/99). The latter introduced a compliance market based on mandatory targets from renewable energy to be supplied by each energy provider every year, and a scheme of green energy certificates (GEC). The mandatory target for renewable energy share was first set to 2% of the previous year’s production or importation of electrical energy. The companies falling short of meeting the target are obliged to purchase the GEC for the equivalent of the underperformed renewable energy. The target was successively augmented by 0.35% per year for the period 2004-06 (decree 387/2003), and later by 0.75% per year since 2007. In 2011, the mandatory target amounted to 6.05%. Since 2006 the GEC supply exceeds the demand, in 2009 for example by more than 200%. The regulation authority (Gestore Service Energetici, GSE) started to intervene by purchasing the redundant REC at a favourable price. More recently, the legislator choose to phase out the green energy certificates scheme and adopted a new instrument to boost the development of green energy.   

This study is one of the thirty ex-post assessment exercises conducted under the FP7* EPI-WATER project (“Evaluating Economic Policy Instrument for Sustainable Water Management in Europe”) set to scrutinise economic policy instruments (EPI) designed for, or bearing upon, water resource management. The paper outlines the changes to the green energy incentive scheme between 1999 and 2011; analyses its performance; and reviews the implied environmental and social (distributional) effects.

*The research leading to these results has received funding from the European Community’s Seventh Framework Programme (FP7/2007-2013).