SADs are falling: the Meloni government cannot boast about it, and the broad coalition is fighting to keep them

In 2025, environmentally harmful subsidies (EHS) fell by around 1.3 billion euros. This is the first time since records began and is the result of a conscious and deliberate economic policy choice – but it is also a manifestation of the disconnect between political rhetoric and governmental responsibility, on both the right and the left. According to the latest edition of the Catalogo dei sussidi ambientalmente dannosi e ambientalmente favorevoli, published last week by the Ministry for the Environment (MASE), in 2025 EHS stood at €22.4 billion, 5.9 per cent lower than the previous year and approximately €2 billion (-7.8 per cent) below the 2022 peak (excluding extraordinary measures relating to the war in Ukraine). Taking inflation into account, the real decline is 7.2 per cent compared with 2024 and 14.5 per cent compared with 2022. The Catalogue adopts a very broad definition of SAD: “Incentives, concessions, subsidised loans and tax exemptions directly aimed at environmental protection”, including concessions that “arise implicitly from a specific differentiation in the level of taxation and which [may] encourage the adoption of technologies or fuels that are more or less polluting”. Complicating matters are the frequent – and not always disclosed – methodological adjustments, which make it virtually impossible to compare the different versions. For example, the value of SADs in 2020 was 21.6 billion in the 2021 edition of the Catalogue, 19.2 in the 2022 edition, 18.0 in last year’s edition and 17.4 in this one. But the trend is clear: up until 2022 they were rising; now they are falling.

Much of the reduction is attributable to a few factors: the different tax treatment of petrol and diesel (€2.5 billion in 2025 compared with €3.1 billion in 2024), tax relief on company cars (from €1.6 billion to €1.0 billion) and the reduced VAT rate of 4 per cent on the sale of new first homes (from €2.7 billion to €2.3 billion). Other items have increased slightly, such as the reduced VAT rate of 10 per cent on homes other than the primary residence (from 2.9 to 3.1 billion) or the exemption from excise duty on aviation fuel (from 1.4 to 1.6 billion). These changes may be due to market factors (such as a slowdown in property sales or an increase in air travel) or to political decisions. The key development lies precisely in the latter: last year, the government raised excise duties on diesel by 1.5 cents and reduced those on petrol by the same amount, narrowing the gap from 11 to 8 cents, and cut tax relief on company cars. When the next edition of the Catalogue is published, with excise duties fully aligned, we will see a further reduction of 2.5 billion euros (based on 2025 figures): the largest cut to the SAD ever recorded. It must be said that the Catalogue’s methodology is far from universally accepted. For example, classifying the reduced VAT rate for new homes as a ‘SAD’ implies that any such incentive has a negative environmental impact.

As the Mase Catalogue itself acknowledges, the Tax Expenditure Commission does not even consider it a subsidy. Furthermore, if a more energy-efficient property replaces one that is less efficient, the impact is certainly positive. Worse still, on the very day that the Commission makes the electrification of end-use sectors a standalone objective, Mase states that the exemption from excise duty and the reduced VAT rate of 10 per cent on domestic electricity consumption (which amount to 531 million and 3 billion respectively) are subsidies. The effort to measure the environmental effects of fiscal policy is commendable. The problem with the Catalogue is that it fulfils three different functions without ever making them explicit: it measures subsidies, assesses their environmental impact and guides future decisions. The absence of a substantive debate, the opacity of the adjustments and its imperviousness to criticism undermine its authority and risk endorsing questionable policies. For example: what sense would it make, in the name of combating SADs, to raise VAT on electricity consumption at the very moment when Italians are being asked to replace their gas boilers with heat pumps and to buy electric cars? Minister Gilberto Pichetto Fratin, under whose leadership the first actual reduction in SADs was recorded, would have had both the opportunity and the credibility to intervene on the methodology as well. Unfortunately, he chose not to do so.

This methodological confusion has immediate political consequences. On the one hand, the government – which is constantly criticised for its alleged lack of interest in environmental issues – is in fact the only one to have reduced the SADs. On the other hand, the centre-left leaders – who accuse Giorgia Meloni of climate denial and continue to call for a cut in the SADs – have, in practice, always opposed measures to that effect. For example, whilst the Minister for the Economy, Giancarlo Giorgetti, was aligning excise duties – thereby eliminating one of the largest SADs – Elly Schlein, Giuseppe Conte and Angelo Bonelli unanimously accused him of driving up fuel prices. Consequently, the left calls in general terms for the abolition of the SADs, only to oppose any such move whenever it is actually implemented; whilst the right, despite having genuinely brought the axe to bear, is too embarrassed to claim this as an environmental achievement.