Tradable energy efficiency certificates: the Italian experience Marcella Pavan Received: 9 September 2007 /Accepted: 30 June 2008 /Published online: 11 August 2008 # Springer Science + Business Media B.V. 2008 Abstract The Italian white certificates scheme took effect in January 2005. The command and control component of the scheme, i.e., the energy efficiency obligation, was introduced with the implementation of the first European directives on the liberalization of the electricity and natural gas market (Ministero dell���Indus- tria, del commercio e dell���artigianato. Legislative Decree of 16th March 1999, n.79, 1999 Ministero dell���Industria, del commercio e dell���artigianato. Legis- lative Decree of 23rd May 2000, n. 164, 2000), in the form of a public service obligation (PSO) raised on distribution companies. The market-based component, the trading of energy efficiency certificates (EECs), was introduced by the government in mid-2001, together with the definition of the level of the obligation and of the other elements of the policy package. In the following three years the regulatory authority for electricity and gas (AEEG) designed the implementing technical and economic regulation gov- erning the system through an extensive public consul- tation. During the same period, a revision of some of the basic elements of the scheme was also carried out, in order to take into account some institutional changes (i.e., new shared responsibilities between the federal government and regional administrations in the energy policy field), as well as some improvements suggested by the regulator. In December 2007, some components of the mechanism were updated on the basis of the results achieved and of the critical issues that emerged during its implementation (Ministero delle Attivit�� Produttive (MSE). Ministerial Decree of revision and update of the Ministerial Decrees of 20the July 2004, 2007). Keywords Energy efficiency. Energy savings . Energy services . Market-based mechanisms . Energy regulation . Energy policy. Measurement and verification . White certificates Major design elements1 The basic design elements of the scheme are summarised in Tables 1 and 2. In this paragraph we would like to highlight some distinctive features of the mechanism that we believe should be taken into account when comparing the Italian scheme with other country experiences where some form of end- use energy efficiency obligation and/or trading ele- ment is in operation. In particular, we would like to stress the following characteristics. & The policy purpose(s): while the system aims at a range of policy purposes (e.g., greenhouse gas Energy Efficiency (2008) 1:257���266 DOI 10.1007/s12053-008-9022-x The opinions expressed in the paper are those of the author, and do no necessarily reflect the position of the Autorit�� per l���energia elettrica e il gas. M. Pavan (*) Autorit�� per l���energia elettrica e il gas, Piazza Cavour 5, 20121 Milan, Italy e-mail: mpavan@autorita.energia.it 1For a more detailed description of the design elements of the scheme as well as of the major reasons behind certain legislative/regulatory choices see Pavan, M. (2006).

emission reductions, reduced dependence on energy imports, development of the market for energy efficiency products and services) the target is set in terms of primary energy savings, i.e., tons of oil equivalent saved (toe). & The market: the trading of certificates is a central element of the system. Market deals require no authorization by AEEG or any other institutional body. Certificates are registered in an electronic registry and a specific electronic trading platform has been set up to allow the purchase and sale of certificates as an alternative to bilateral trading. Detailed rules and procedures have been designed to regulate access to the marketplace, to guarantee Table 1 Basic elements of the scheme before the changes introduced in December 2007 (MSE 2007) Subject Effect National target 2.9 Mtoe/year in 2009 (cf. Table 2) (*) Compliance period: annual Regulatory period: 2005���2009 (*) Banded: at least 50% of savings have to be delivered via measures on electricity and natural gas uses (*) Obliged parties Electricity and natural gas distributors initially only those serving at least 100,000 customers as to 31 December 2001 (*) Apportionment rule: respective market share (*) Eligible projects and measures All end-use sectors plus small photovoltaic system and some measures concerning intermediate natural gas uses Only ���hard��� measures (i.e., technology change) information campaigns only if add-on to specific ���hard��� measures Early actions: projects developed as early as 2001 provided they have not been granted government, regional or local funding Other restrictions: some restrictions apply to projects that have access to other government incentives (e.g., CHP plants with access to green certificates, PV plants with access to feed-in tariffs) Minimum project size, but bundling of projects allowed with some restrictions Eligible parties (i.e., parties that can be granted certificates) a) All electricity and natural gas distributors b) companies controlled by electricity and natural gas distributors c) energy service providers (including, but not limited to ESCOs) (*) M&V Method of accreditation: savings are accredited ex post as opposed to lifetime-discounted accreditation Crediting lifetime: generally 5 years 8 years for heating and air conditioning M&V methods: a) deemed savings b) engineering methods (partially ex post) c) complete monitoring plans approved ex ante by the regulator (AEEG). Regularly up-dated Additionality: only savings achieved over and above market trends or legislative requirements are certified Verification and accreditation body: regulator (AEEG) Certificates Issuing body: electricity market operator upon AEEG authorization Types of certificates: a) for electricity savings (type I) b) for natural gas savings (type II) for savings of other fuels (type III) Un-restricted banking in the first regulatory period (*) Trading On a specific spot market or over the counter Market rules defined by the electricity market operator and approved by the regulator Who can operate: eligible parties plus market intermediaries (i.e., traders) Non-compliance regime Financial penalty for non-compliance with targets defined by AEEG General criteria governing the quantification of the penalty set in advance, but no pre-defined unit penalty (e.g., euro/toe not saved). According to its institutional law (Law n. 481/95), for the purposes of carrying out its functions AEEG can levy fines ranging from a minimum of approximately ���25,000 to a maximum of approximately ���155 million Cost recovery Designed and administered by: AEEG Level: 100 euro/toe can be updated Eligible parties: obliged distributors Eligible costs: cost related to electricity and natural gas savings up to the occurrence of the target including costs of purchased certificates Elements marked with a (*) have been modified starting from January 2008 please refer to paragraph ���Recent legislative and regulatory changes��� 258 Energy Efficiency (2008) 1:257���266