Article 15 of the 2012 Tax Reform Bill
The Italian government proposed an environmental component for excise taxes as part of the 2012 tax reform. This was a major turning point in the country’s environmental policy because such a tool has enormous potential for reducing greenhouse gas (GHG) emissions as well as accelerating the shift to a greener energy supply. With article 15 of the 2012 tax reform, the government proposed a revision of accise—or excise taxes—on energy products on the basis of environmental criteria. The idea was to introduce new rates, proportional to generated emissions, in order to curb the use of dirtier energy sources while incentivizing the use of renewables. This is a very important policy area for Italy because energy production and consumption account for about 60% of all greenhouse gas emissions.
In Italy, the system for taxing energy producers is complex, incoherent, and costly. It includes loopholes that allow for discounts, subsidies, and exemptions. Within the energy supply chain, certain producers benefit from tax exemptions. This is true in particular for suppliers of fossil fuel. These tax exemptions amount annually to 5 trillion Euros. Besides tax exemptions, certain fossil fuels suppliers benefit from federal subsidies that in 2014 equaled 548 million Euros.
By revisiting excise taxes, so that tax rates are proportional to average emissions created, the 2012 policy was intended to disincentivize top polluting suppliers and activities. While pricing out top polluters like coal and oil, the new tax system will incentivize the production of renewables as well as the use of more modern plants that run on natural gas. The second accomplishment of the revised excise policy will be to completely eliminate exemptions to energy products and subsidies from fossil fuel sources. This was intended to reduce energy waste while at the same time making renewable sources more competitive on the market.
Studies show that restructuring energy taxes, expanding the use of other environmentally related taxes, and removing environmentally harmful tax concessions would generate additional revenue that can be reinvested in low-carbon energy sources. In 2010, environmentally harmful tax concessions alone were estimated at 0.2% of GDP.
In March 2014 the law was approved. In late 2016 the Italian Minister for the Environment, Land and Sea published a report with a detailed description and evaluation of the current environmental impact of each subsidy/excise rate. This Report established a baseline of what is currently working and what is not with regard to the environmental impact of such subsidies and excise taxes. Now the government needs to continue to monitor the implementation of the new law to assess its impact on emission reduction and alternative energy production.
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To read article 15 approved in March 2014 please see http://www.gazzettaufficiale.it/eli/id/2014/03/12/14G00030/sg