The Ministerial Decree on Green Conditionalities: clarifications and provisions

The Ministerial Decree on Green Conditionalities provides the long-awaited clarifications on the new rules for energy intensive companies.

On 10 July 2024, the Ministry of the Environment and Energy Security (“MASE”) approved the decree (“Ministerial Decree”) identifying the “modalities and criteria” for the fulfilment of the conditions of the obligations set forth in Article 3 of Decree-Law No. 131 of 29 September 2023 (“Decree-Law No. 131/2023”), which significantly innovated the regime of the subsidies provided for in favor of energy intensive companies as of 1 January 2024. 

The Ministerial Decree completes the framework of rules for the revision of the guidelines on subsidies for energy users introduced by Decree-Law No. 131/2023 in line with the guidelines on State aid set out in the European Commission’s Communication 2022/C 80/01 of 18 February 2022 on “Guidelines on State aid for climate, environment and energy 2022”.

The reform of the subsidy scheme for energy-intensive companies

For the purposes of the article, the Decree-Law No. 131/2023 provides that in order to have access to favorable conditions in the application of the contributions to cover the general charges pertaining to the electricity system referred to in Article 3, paragraph 11 of Legislative Decree No. 79 of 16 March 1999 concerning the support of renewable energies (“Facilitation”) - in addition to the obligation to carry out an energy audit, energy intensive companies are required to adopt, alternatively, one of the following measures:

• implement the obligations set out in the energy audit if the amortization time of the investments required for this purpose does not exceed three years and the related cost does not exceed the amount of the Facilitation received;

  • demonstrate that they cover their needs from “non-carbon emitting sources” by at least 30%;

  • invest at least 50% of the amount of the Facilitation in projects that result in substantial reductions in greenhouse gas emissions.

The clarifications and provisions of the Ministerial Decree: 

(i) implementation of the actions foreseen in the energy audits

With specific reference to the measures envisaged in the energy diagnosis report (“Report”), Article 4 of the Ministerial Decree clarified that:

• the energy intensive company shall identify the interventions it intends to implement for each year of eligibility for the Facilitation, provided that these interventions have the following characteristics

  • a simple turnaround time of no more than three years;

  • a total cost of the investment (including any additional operating cost for carrying out the intervention) not exceeding the amount of the Facilitation received in the relevant year;

• in the year of reference of the Facilitation, the energy intensive company shall make investments corresponding to at least one third of the value of the above-mentioned interventions;

• the interventions shall in any case be completed within the second year following the year of the facilitation.

Article 4 of the Ministerial Decree clarified that to comply with these obligations, interventions provided for in a valid Report and implemented on or after 1 January 2024 are relevant.

The interpretation of the above provisions still appear ambiguous, and it therefore necessary to wait for the resolution with which ARERA will have to establish the methods and terms by which energy intensive companies will have to communicate their choice of interventions contained in the Report with which to fulfil their obligations.

(ii) Energy supply for at least 30 per cent of requirements from non-carbon emitting sources

With reference to the alternative of supplying energy from non-carbon emitting sources for at least 30 per cent of the energy-intensive enterprise’s needs, the DM clarifies that this obligation can be fulfilled in three ways (or a combination thereof):

• individual on-site or remote self-consumption with use of the public grid or with use of direct private cable;

• purchase of electricity through forward contracts concluded with producers of electricity from renewable sources;

• directly through the acquisition and cancellation of guarantees of origin for the corresponding value (one guarantee of origin corresponds to 1 MWh).

Some differences and coordination requirements with respect to the MASE Ministerial Decree of 23 July 2024 (“DM Energy Release”) should be taken into account when implementing the relevant provisions.

(iii) Investment of at least 50% of the amount of the Facilitation in projects leading to substantial reductions in greenhouse gas emissions 

Finally, in relation to the last of the alternatives available to energy-intensive companies, the Ministerial Decree clarified that “projects that result in substantial reductions in greenhouse gas emissions below the lowest of the following values” are eligible to meet the obligation to invest at least 50 per cent of the amount of the Facilitation:

• 90% of the applicable ETS free allocation benchmark;

• the 10% average emissions of the best installations listed in EU Regulation 2021/447 for the relevant product. 

Controls and sanctions

Finally, the Ministerial Decree assigned to ENEA, ISPRA and GSE the powers of control over the fulfilment of the above obligations according to procedures to be defined by the same entities.

In particular, ENEA will carry out controls each year on a sample of three per cent of the energy-intensive companies that have chosen to fulfil their obligations through the implementation of the measures envisaged in their energy diagnosis.

In the event of an ascertained breach, the entire facilities received during the period of the breach shall be returned to CSEA with penalties determined in accordance with Article 8 of the Ministerial Decree.

Written by Piero Viganò and Ernesto Rossi Scarpa Gregorj.