The rise in energy prices, driven by geopolitical tensions in recent years, has brought one of Italy’s structural vulnerabilities back to the forefront of the debate: its dependence on fossil fuels.

Today, gas continues to set the price of electricity for most hours of the day, passing on the volatility of fossil fuel prices to households and businesses. Fuel prices at the pump are subject to the same fluctuations. The response cannot be limited to emergency measures; what is needed are investments capable of permanently reducing fossil fuel consumption and, with it, the energy costs borne by households and businesses. The resources to finance these investments are available, and instruments designed by the European Union already exist precisely for this purpose. What is missing, rather, is the political will to activate them.

With the European Semester’s Spring Package, Brussels has opened up the possibility for Member States invoking the national safeguard clause for defence purposes to use part of their increased fiscal flexibility to invest in energy security. This includes measures such as energy efficiency, electrification of consumption, grids and renewable energy. This is a significant political step: the energy transition is now recognised as a component of European security, and the investments needed to deliver it are considered a priority from a public finance perspective as well. For Italy, this translates into a potential additional spending capacity of around 14 billion euros between 2026 and 2028.

In response to rising energy prices, Italy has in recent years relied on temporary measures, drawing on public resources and increasing debt, without addressing the structural causes of its dependence on imported fossil fuels. This has been accompanied by attempts to suspend the EU emissions trading scheme (EU ETS) for gas-fired electricity producers, attributing to it a central role in rising energy bills.

By contrast, investment in energy efficiency, electrification and renewable energy sources enables a structural reduction in fossil fuel consumption, to the benefit of households and businesses. This is also the objective of the Social Climate Fund, financed through revenues from the ETS2 system – the mechanism extending the carbon emissions trading scheme to the building and transport sectors – which, in addition to the 14 billion euros provided by budgetary flexibility, adds a further 9.3 billion euros for Italy between 2026 and 2032. In this regard, the Fund finances structural measures aimed at vulnerable households and micro-enterprises: energy renovation of buildings, replacement of fossil-fuel-powered systems, electrification of consumption and sustainable mobility. However, the benefits of the energy transition and electrification – both economic and environmental – require the support of public policies to ensure that those without sufficient capital to finance technological innovation can also access the benefits of the transition.

The postponement of ETS2’s entry into force from 2027 to 2028 has also delayed the revenue streams that are intended to finance the Social Climate Fund. Without a corrective intervention, this delay risks delaying precisely those investments needed to support households and businesses through the transition and to mitigate the impact of ETS2 on fuel prices for transport and domestic heating.

To avoid this effect, the European Investment Bank (EIB) has established a Frontloading Facility, an instrument that allows Member States to bring forward resources that will arrive in the future through ETS2 revenues.

The Facility initially makes 3 billion euros available, with the possibility of increasing this to 6 billion euros if demand from Member States justifies it. The mechanism is simple: the EIB grants long-term loans on particularly favourable terms, enabling Member States to launch investments immediately. These loans are then repaid with future ETS2 revenues. These are not new European funds, but rather an accounting solution to prevent the delay of ETS2-related revenues from also delaying investments.

The Facility does not require national co-financing, forsees a single financing agreement per Member State, and allows investments to be spread over a timeframe consistent with their economic life. Resources are allocated according to each country’s share of ETS2 revenue. The only condition is the transposition of the ETS2 Directive, which Italy has already implemented through Legislative Decree No. 147 of 10 September 2024.

The EIB has further clarified that priority will be given to projects already included in Social Climate Plans, even if not yet definitively approved; these will be eligible for a fast-track procedure as they have already been assessed by the European Commission. Only direct income support measures are excluded, whilst all structural investments covered by the Fund are fully eligible for financing. Another point of interest is the absence of a strict deadline for joining the Facility. Indeed, the European Commission has confirmed that applications remain open. 

For Italy, this represents a particularly important opportunity. It is the third-largest beneficiary of the Social Climate Fund yet continues to accumulate delays in preparing its national Social Climate Plan – and in making available the solutions that this Plan is intended to provide. The Frontloading Facility offers a way to overcome this obstacle, allowing resources to be brought forward and investments to begin immediately, even in the absence of a definitively approved national Social Climate Plan.

On the one hand, therefore, the European Commission has expanded the scope for budgetary flexibility to finance investments in the energy transition. On the other, the EIB offers a tool that allows resources from the Social Climate Fund to be brought forward. Finally, it should be noted that of the 18 billion euros in revenue generated by the ETS system for Italy (2014–2024), only 1.6 billion has been spent on measures to combat climate change, well below the expenditure targets set out in the Directive.

The resources are therefore available. What is required is a clear political commitment to channel them towards the transition.

Protecting citizens and businesses from energy price volatility should be based on a set of minimum measures, such as:

• the request to access the European Investment Bank’s Frontloading Facility;

• the identification of the Social Climate Plan measures to be financed through this instrument;
• coordination between the use of the Frontloading Facility and the greater budgetary flexibility granted by the European Commission.

These elements must be viewed holistically, within a broader vision, and embedded in a political and financial strategy capable of guiding the achievement of objectives through future revenues from ETS and ETS2 auctions; a reform of energy taxation and levies; and greater centralisation, planning and transparency of transition spending. Such coherence would ensure alignment between budgetary, energy, social and climate policies.

Now that the resources are available, it is essential to seize this opportunity to support Italian households and businesses through the energy transition. Further delays in investment risk generating an economic and social cost that will be increasingly difficult to sustain.

This article first appeared on ECCO’s website on 25 June 2026.