Between 2012 and 2024, Italian polluting companies paid €18.2 billion under the European Union Emissions Trading System (EU ETS). However, as the ECCO think tank found, only €1.6 billion was allocated to measures to combat climate change. This is evidenced by available reports. At the same time, for some budget items, it is impossible to reconstruct the actual picture of where the funds went.
As reported by the Italian media outlet Green Report, this indicates systemic gaps in both the tracking of expenditures and their intended use.
Systemic shortcomings in EU ETS expenditures
Public reports submitted to the European Commission detail Italy’s revenue from carbon auctions. Analysts decided to investigate whether these funds were directed toward environmental measures. It turned out that official reporting is limited and incomplete. The only figure the ECCO was able to confirm is €1.6 billion.
This amount represents only 9% of all EU ETS revenues, although 50% of the funds were supposed to be allocated to climate initiatives according to projections.
It is known that Italy spent at least €3.6 billion on emergency temporary measures to reduce household energy costs. However, official reporting does not account for these expenditures.
The ECCO emphasized that the ETS directive itself provides tools to reduce energy bills for businesses and households, and that these measures are long-term and consistent with climate goals.
“The main objective is to encourage a gradual shift away from dependence on fossil fuels. This dependence, aside from being responsible for greenhouse gas emissions, is one of the primary reasons for high energy costs in the Union,” the analysts noted.
Bonds instead of compensations
The ETS also allows up to 25% of carbon trading revenues to be allocated for compensating indirect costs incurred by energy-intensive companies. However, since 2020, Italy has allocated only 5.6% of carbon revenues for such industry support. In contrast, this figure stands at 26% in Germany and 38% in France.
The report indicates that, instead of supporting the green transition in industry and the residential sector through permitted and effective methods, Italy chose a different approach to spending the funds.
“The current directive clearly provides for the possibility of using funds to support low-income families and upgrade their heating systems, thereby reaffirming its redistributive purpose and requiring 100% of auction proceeds to be used. However, in its national implementation, Italy links 50% of the funds to the redemption fund for government bonds, which effectively limits the possibilities for action,” ECCO points out.
It is worth noting that Italy is one of the countries actively criticizing the EU ETS system. Authorities there claim that high electricity costs reduce the competitiveness of local businesses.
Meanwhile, Spain, which has already increased the share of renewables in its energy mix to 57%, supports the carbon market and the current system. Denmark, Portugal, Slovenia, Sweden, Finland, the Netherlands, and Luxembourg have also voiced support for the ETS.
