ITALY: GREEN "INVESTMENTS" IN STIMULUS PACKAGE

UNCLAS SECTION 01 OF 02 ROME 000353

SENSITIVE
SIPDIS

FOR OES/EGC B DEROSA-JOYNT AND E. FENDLEY.

E.O. 12958: N/A
TAGS: EFIN ENRG SENV IT
SUBJECT: ITALY: GREEN "INVESTMENTS" IN STIMULUS PACKAGE

REF: A. SECSTATE 26022

B. 08 ROME 1489


1. (U) The Italian government, in the context of its modest
economic stimulus effort (ref B),has implemented a number of
measures, some of which could be seen as environmentally
friendly, and others not. The government has not explicitly
sought to tackle environmental challenges as part of its
efforts to deal with the immediate and serious economic
problems facing Italian families and businesses. The Italian
Chair at a recent preparatory meeting for the G8
Environmental Ministerial expressed Environment Ministries,
frustration at not always getting the response they would
like from finance ministries and the private sector to their
calls for a move toward low-carbon technology. End Summary.


2. (U) Following is post reply to ref A, Department's
request for information on green "investments" in Italy's
economic stimulus package.


3. (U) Per ref B, the Italian government announced in late
2008 a number of modest stimulus and relief measures to deal
with the deteriorating economic situation. Its principal aim
was, and remains, bolstering confidence in the Italian
financial system, reinvigorating the flow of credit to
Italian families and businesses, and providing income relief
to the poorest Italians. In a subsequent iteration of this
relief package, the government in January 2009 implemented
tax and other incentives to stimulate the purchase of
automobiles and some durable household appliances. In March,
the government announced additional modest sector-specific
relief measures, this time for the construction industry.


4. (U) The government has not explicitly touted its economic
relief package as an environmental measure, but has tied some
of its relief provisions to environmental goals. The
automobile purchase incentives, for example, are more
generous the "greener" the new car purchased, and the
"browner" the cars consumers trade in. The central
government has also made money available for local
governments that upgrade public transport vehicles and
systems to greener ones. Tax breaks for purchasers of
household appliances are primarily intended to assist the
troubled industrial sector's sales, but they require that the
new appliances be highly-rated (A ) for energy efficiency in
order to qualify. Similarily, some tax breaks and regulatory
breaks apply only if environmentally friendly features (solar
panels, more efficient heating and windows)are used on new
structures. Recently-approved research and development
incentives include energy efficiency projects totaling 500
million euros (half from the government and half from the
private sector).


5. (U) On the other hand, one way the government sought to
lighten families' expenses over the recent holiday period was
to postpone scheduled toll-road increases. This,
theoretically, mitigates disincentives for automobile use.


6. (SBU) During the March 9 G8 Environment Ministerial
preparatory meeting, the Chair of the climate sessions,
Environment Ministry Director General Corrado Clini, noted
that despite Environment Ministers, calls for moving to
low-carbon technology such as hybrid cars, "Euros and
dollars are now going to support existing car models,"
because of the need to deal with the immediate impact of the
financial crisis. This was an example, he said, of how calls
from environmental authorities don,t always get the
hoped-for response from finance ministries and the private

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sector. Many delegations supported turning the Ministerial
discussion toward the economic crisis/climate change
intersection. Such a discussion would address the challenges
the economic crisis presents for reaching a climate agreement
in 2009, the inclusion in stimulus packages of green
financing, and the potential economic impact associated with
a move to low-carbon technology.


7. (SBU) Comment: With the Italian government already
laboring under a debt burden exceeding 107 percent of yearly
GDP, it is unable to move much more aggressively on fiscal
stimulus. By including green elements in the modest stimulus
implemented to date, the government might blunt
international criticism of its lagging stance on climate
change issues. However,
grumbling in the opposition and among the public
that the current government is not doing
enough on the economy will add to a tendency to see "green"
as an unhelpful diversion from economic priorities )
curbing economic contraction and maintaining employment.
Moreover, Italy's recent track record in converting
public-sponsored technological research into commercially
viable products and services is not very encouraging.
DIBBLE