On top of that, Rome may have overestimated the effect the measure will have on household bills, the former executive said. Renewable energy prices are largely determined outside the market through fixed, bilateral contracts — meaning bills are only marginally exposed to the ETS price.
Renewable energy producers, on the other hand, base their long-term investment strategies on those higher, ETS-linked prices, and the new law could derail those plans, while favoring gas, the person added. The CEO of energy company Edison, for example, said last week that the government’s plans could slow down the green transition.
Growing pressure on ETS
The European Commission did not respond to requests for comment and has not yet formally reacted to the Italian decree, which is yet to pass into law. But the EU executive is under intensifying pressure to soften the ETS as it prepares its review of the mechanism, due in the third quarter of this year.
Austrian Energy Minister Elizabeth Zehetner told POLITICO last week that gas-fired power plants should be exempt from the ETS, arguing that the EU should “differentiate between gas and coal,” punishing only the “higher carbon.”
At Thursday’s industry ministers’ meeting in Brussels, Austria doubled down and praised the Italian approach.
Germany also reiterated its demand for a wide-ranging ETS revision, with Economy Minister Katharina Reiche telling reporters that the Commission standards for calculating how many free-of-charge pollution permits each sector gets are “not feasible for our chemical industry.”