Green Certificates in Italy

By Gianfranco Puopolo and Riccardo Croce
February 2001

The Authors are partners in Puopolo Sistilli Geffers & Luise, an International law firm specializing in Environmental and Energy Law. They counsel foreign companies and multinationals in all aspects of Italian environmental and energy law, project finance and environmental audits. → See also:


  1. Introduction
  2. Green Certificates: General Considerations
    1. What are Green Certificates?
    2. Requirements for the issuance of Green Certificates
    3. Possible business applications of the Green Certificates
  3. The Green Certificates Market
    1. Expected demand for Green Certificates and relative economical value
    2. Compatibility with investment incentives
    3. Calendar of actions
  4. Conclusions

I. Introduction

This memorandum is aimed at offering a comprehensive analysis concerning the discipline of Green Certificates (hereinafter "GC") in Italy. In particular, this analysis is directed at verifying the current status of implementation of the Energy Stock Exchange as well as quantifying the economical value of said certificates in Italy.

Relevant EU regulations encourage the increasing use of renewable energy within the Internal Market. Precisely, as consequence of the conclusions of the Conference of Kyoto, held in December 1998, regarding the need of reducing harmful emissions, the percentage of renewable energy to be consumed by the year 2010 is 12% of the entire domestic consumption. However, energy obtained by fossils is considerably cheaper than producing renewable energy, thus, public incentives are needed to implement its use. Nevertheless, producers must be stimulated alongside with the entrepreneurs whose activity is focused on the commercialisation and trade of energy. Legislative Decree n.79/99, also known as the Bersani Decree (hereinafter the "Bersani Decree"), obliges all energy users or producers to insert, by the year 2002, into the national circuits at least 2% of the total amount of energy used the previous year in the form of renewable energy. In order to meet said annual threshold, interested operators are required to file GC with the Administrator of the National Circuits Network (hereinafter the "Administrator"). Therefore, according to the Bersani Decree, all certified sources of energy are granted investment incentives with the exception to those provided by Resolution 6/92 of the Intermisterial Price Committee ("CIP 6/92"), which regulates certain issues concerning energy produced by renewable sources.

The value of said certificates is currently unquantifiable. However, although uncertainty is brought by the absence of the Energy Stock Market, many workshops and testing projects utilise parameters and projections providing economical values as potential terms of reference to assess the price of said certificates.

II. Green Certificates: General Considerations

  1. What are Green Certificates?

    Electric energy created by renewable energy plants are entitled to receive GC, related to the KWh produced, for the first eight years of production since their last inspection. Said GC are issued by the Administrator with reference to the previous year´s effective production or in accordance with the foreseeable quantity of energy that will be produced the following year by the requesting operator. Each GC represents a certain quantity of energy for a given year of production, as evidenced on the document itself. Precisely, the value of these certificates is equal to a minimum of 100 MWh, or to multiple of said initial value. GC must be filed with the Administrator within one year from the one of issuance. The scope of such filing is to comply with the Green Portfolio requirements provided by the Bersani Decree.

    Specifically, all operators of the field, whether producers or traders, must possess and subsequently file a certain number of GC equal to 2% of the energy used/produced in the course of the previous year. GC are securities representing renewable energy whose purchase and filing with the Administrator must occur to avoid unlawful use of the energy by the operator. Also noteworthy is the fact that the Administrator issues the GC and is then required to annul them, thus entitling the operators to comply with the above indicated Green Portfolio requirements.

    GC may be traded independently from the related renewable energy. Further, there is no legal limitation on the possibility to freely and repeatedly trade GC before they are annulled by the Administrator. The only limit is given by the need of using certificates representing the past year´s production. By way of example, if a GC is issued at the beginning of the year 2001, referring to energy that will be produced in the year 2002, its annulment must occur by March 31, 2003. Therefore, throughout the entire period running from the date of issuance to the date of annulment, operators are entitled to trade GC, privately or within the Energy Stock Market, without any legal limitations whatsoever, except to the possibility of exporting the certificates abroad. In particular, as briefly mentioned above, GC do not necessarily have to be traded in connection with the energy they represent, as long as the relative sale takes place in Italy. Contrarily, GC can be sold abroad only in conjunction with the sale of energy.

  2. Requirements for the issuance of Green Certificates

    As a preliminary matter, it should be underlined that GC are granted only with respect to plants that exploit renewable energy sources. As provided by the Bersani Decree, "renewable energy sources are the sun, the wind, water, geothermal sources, tides, the wave-motion and the transformation into electric energy of vegetal products as well as organic and inorganic waste". Only plants that have been completed and tested before April 1, 1999 are entitled to the issuance of GC. Instead, plants that have entered into production after such date or that are expecting to produce energy by 2002 are entitled to apply for GC.

    As mentioned above, renewable energy plant owners may obtain both national and community incentives, although they are not be entitled to the issuance of GC. In fact, producers that benefit from the incentives provided for under CIP 6/92 cannot obtain GC, although the GC corresponding to the amount of energy produced are issued and kept by the Administrator for the purpose of trading them, thus satisfying the Green Portfolio requirements of the relative undertaker.

    The steps to be followed, in order to obtain the certificates, may be summarised as follows:

    1. Firstly, the operator must request a certificate attesting the qualification of the plant as a renewable energy plant. An application must be filed with the Administrator that must provide within the following 90 days. However, should the Administrator fails to reply within the above term, the requested approval is considered to be granted. The application may concern plants that are not operative yet provided that appropriate documentation, proving feasibility and final testing, is provided;

    2. Once the plant´s qualification has been certified, it is possible to request the GC concerning the current, the subsequent or the previous year´s energy production. The GC must be issued no later than 30 days after the request has been submitted;

    3. A declaration attesting the amount of energy produced the previous year must be filed with the Financial Technical Office (hereinafter "the FTO") together with the application. This declaration is not required for applications concerning the first year of production.

  3. Possible business applications of the Green Certificates

    GC can be freely traded directly between private parties or, at least theoretically, on the Energy Stock Exchange. To date, national implementing legislation does not provide for any rules to limit or regulate the trade of GC in Italy. Therefore, within the 31st of March of the year subsequent to the one indicated on the certificate, the plant owner will file an amount of GC with the Administrator, whose quantity shall be equal to 2% of the previous year´s energy production. Said certificates will be annulled and, thus, they will be no longer usable for further trading. Other possible forms of exploitation consist in the exportation of GC in order to sell them on foreign Energy Stock Exchange, or via private trading abroad, but always together with the renewable energy they represent.

III. The Green Certificates Market

  1. Expected demand for Green Certificates and relative economical value

    Currently, the economical value of GC is not easy to determine, although it is reasonable to predict that it will be largely influenced by the future demand of electricity.

    Future demand of GC will depend on the growth of the demand of electricity in Italy, which has increased during the last ten years by a rate of 2,5% per annum. Said percentage, definitely higher compared to other OECD countries, is the consequence of the low pro-capita energy consumption in Italy during previous years.

    In any event, the increasing number of investors in Italy interested in the implementation of renewable energy plants, especially in consideration of the consistent incentives given by national as well as community development programs must not be undermined for the purpose of determining the price of GC. Therefore, subsequent to the initial phase, where the price will be fixed by the Administrator, the effective amount of renewable energy and of related GC available on the market will determine their economical value.

    At this time, there are no precise indications to assess the actual date of implementation of the Energy Stock Exchange, originally set for January 2001 which the Italian Authorities have already postponed to spring 2001. Further, it is not clear whether the Administrator will grant Green Certificates before said implementation, or whether this will happen only once the market starts operating.

    Concluding, at the present stage it is not possible to determine with certainty the initial value of GC. Nevertheless, on the basis of recent trade simulations, done under the auspices of the Region Lombardia Workshop held on September 25, 2000, the estimated price of GC in Italy, for the year 2002 will be ranging from 100 to 140 ITL/KWh. The above prices have been confirmed by relevant enterprises operating in the field, such as the Green Certificates S.p.A. However, the foregoing shall not be construed as having any certainty inasmuch as it is based on variable as well as hypothetical estimates.

  2. Compatibility with investment incentives

    GC are compatible with most public investments incentives, granted by Regional Authorities, Governments or the EU. However, as previously mentioned, GC do not fall within the scope of the incentives granted under CIP 6/92. In fact, any GC issued in relation to plants using CIP incentives would remain at the disposal of the Administrator itself.

    In particular, the incentives envisaged in the legislation listed below are compatible with the issuance of GC:

    • Legislative Decree n.79/99, "Implementation of the Dir.96/92/CE, common rules for the internal electric energy market";

    • Law n.448/98, "Public Financial Measures for stabilisation and development";

    • Law n.488/92, "Extraordinary intervention into Southern Italy and rules to favour the production activities";

    • Law n.10/91, "Rules to implement the National Energetic Plan regarding the rational exploitation of energy, energy saving and the development of renewable energy sources";

    • Law n.46/82, "Technological research and applied research",

    • Fifth European Frame Program for the presentation of the RST action within the specific research program, the technological development and relative feasibility into the energy market, according to environmental issues and sustainable development (1998-2002);

    • Altener II, "Multi-Annual Program for promoting the renewable energy sources into the community": EU Program to develop renewable energy sources;

    • Save II, "Strategies for the rational exploitation of the energy": EU Project.

  3. Calendar of actions

    In compliance with Ministerial Decree November 11, 1999, owners of renewable energy plants interested in obtaining GC shall comply with the calendar of action described below:

    • As of January 1, 2001, the owners of renewable plants may file an application with the Administrator for the issuance of GC for the estimated energy production for the year 2002. However, to date it is not clear if the lack of implementation of the Energy Stock Exchange will cause any delays for the purpose of obtaining the certificates;

    • As of January 1, 2001, GC will be freely tradable between private parties. Instead, the trading of GC on the Energy Stock Market has been postponed until this market is implemented. The Italian Energy Authority has recently declared that the foreseeable date for its implementation is spring 2001, that is to say about six months later than expected according to the national legislation on the subject matter;

    • As of January 1, 2001, the Administrator will indicate the value of GC as determined on the Energy Stock Exchange (see the paragraph above);

    • As of January 1, 2002, the owners of renewable plants may ask for the issuance of the GC in relation to the energy expected to be produced for the year 2003;

    • As of January 1, 2003 until March 31, 2003, the owners/producers will have to file:

      1. The declaration, concerning the energy production for the year 2002 with the FTO;
      2. A number of GC equivalent to 2% of the assessed energy for the year 2001 with the Administrator.
    • As of January 1, 2004 until March 31, 2004, the owners/producer will have to file:

      1. The declaration concerning energy production for the year 2003 with the FTO;
      2. A number of GC equivalent to the 2% of the assessed energy for the year 2003 with the Administrator.

IV. Conclusions

In the light of the foregoing, Italian legislation on Green Certificates appears to be theoretically innovatory. In practice, it does not suffice to implement a market where the value of GC should be determined by the encounter of demand and offer. In fact, for the years to come their value will be quantified by the price that the Administrator will decide to settle. Consequently, it will depend on the price that the Administrator is willing to pay for the energy minus the incentives given to the producers. Further, as incentives vary in consideration of the energy source, it is currently difficult to estimate the future price of GC.

With reference to the exportation of GC, two programs, at both the Community and international level, have been promoted in order to make possible the transfer of the Renewable Certificates into trans-national markets. These programs are the RECS - Renewable Energy Certificate System, and the RECERT - European Renewable Electricity Trading Project.

The RECS consists in an international program, created to coordinate national systems concerning GC and with a view at harmonising their trade between different country markets. It represents a voluntary system where the demand is already fixed by the relevant operators of the field. In particular, this program is aimed at introducing a distinctive trademark for energy produced by renewable sources. The similarity to the American E-Green trademark is quite evident. The promoters of the above program guarantee that by March 2001 a concrete exchange of Renewable Certificates will be possible within a unified market constituted by Italy, Germany, Denmark, Holland and UK. In particular, entrepreneurs are interested in buying GC driven by marketing reasons, such as presenting the company´s image coherent with sustainable development and environmental issues. In addition, many national legislations offer a variety of incentives and tax exemptions related to the use of renewable energy.

On the other hand, the RECERT Project involves 26 European companies to promote the idea of trading energy by using European Green Certificates. The project is financed by the EU Commission and shares the RECS scope and activities. These activities are aimed at offering economical projections on the effective demand for GC in the EU, especially in consideration of the growing rate of European welfare, of the increasing need of energy and of the effective offer available on the market. In fact, the RECERT Project will offer a useful tool for future projections and estimations on the prices of the Green Certificates in Europe.


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