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Italy extends energy bill discount and petrol tax cuts

The Italian government has outlined plans to lessen the impact of the cost of living crisis, from extending energy bill discounts to cuts on fuel excise duties.

The French government has published guidelines on what to do if you are struggling to pay your energy bills.
The Italian government has announced further discounts on energy bills and caps on petrol taxes. (Photo by Ina FASSBENDER / AFP)

Italy approved a much-awaited set of financial measures on Monday to curb the soaring cost of living, driven by energy and fuel price hikes.

The stimulus package drawn up by Italy’s prime minister Mario Draghi is aimed at combatting the knock-on effects of the conflict in Ukraine, reportedly worth around 14 billion euros – double what was previously budgeted for.

READ ALSO: How to save money on your fuel in Italy

Energy bill payers will be able to take advantage of a government discount on gas and electricity bills for a further three months, as the government has extended the current ‘Social bonus for electricity and gas’ or ‘Bonus sociale energia elettrica e gas’ to the third quarter of 2022.

Energy bills have soared over the past year fuelled by the surging cost of gas imports, hitting a record in January. This has only been made worse since Russia invaded Ukraine, as Italy is more dependent on Russian imports of natural gas for energy than most of its European neighbours and produces very little of it within the country.

READ ALSO: Italy will ‘soon’ stop buying gas from Russia, says minister

In response, Italian authorities passed a new law in March for the second quarter of the year, aimed at lowering utility bills for those on lower incomes.

The bonus’s eligibility criteria had also been amended so that all homeowners with an ‘ISEE’, an indicator of household wealth, (Indicatore della Situazione Economica Equivalente) lower than €12,000 can benefit from the energy bill discount.

That marked an increase on the previous ISEE limit of around €8,000, meaning more bill payers can offset their energy bills – now, until September 2022.

READ ALSO:

The government has also extended its previous cuts to fuel excise duties to July 8th. The move had been introduced in late March to put a brake on soaring pump prices, when petrol surged to highs of over €2 per litre.

In this case, the excise duty will fall to “zero euros per cubic metre” and there will be a reduction in VAT to 5 percent – previously 22 percent – while a cut to the price of methane is also expected.

The financial moves are included in the government’s new energy and investment decree (decreto energia e investimenti), which is yet to be published in its final version.

Draghi said the package is intended to “protect the purchasing power of families and the most vulnerable, and companies’ production capacity”.

“The measures will fight the higher cost of living. The price spiral depends on a large part on the cost of energy,” he added.

“And that means that is a temporary situation which has to be confronted with exceptional instruments.”

Also included in the upcoming decree is a cash bonus of €200 for around 28 million Italians with annual earnings of less than €35,000 for both workers and pensioners, in a bid to curb the rising cost of living.

In other measures, Italian authorities extended the building ‘superbonus 110’, to give homeowners more time to claim government aid for delayed renovation works.

Since Russia invaded Ukraine, the Italian government has already set aside some €15.5 billion for various economic relief measures. With the latest round of financial help, the country is expected to inject a total of two percentage points of GDP into the economy by the end of 2022.

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ENERGY

How long will it take Italy to wean itself off Russian gas?

Italy's government has repeatedly said it plans to end its dependence on Russia for gas supplies following the invasion of Ukraine. But as the timeline keeps changing, when and how could this happen?

How long will it take Italy to wean itself off Russian gas?

Italy is heavily dependent on Russian gas, but has been seeking new sources since Moscow’s invasion of Ukraine as part of an effort to end this reliance in the coming years.

But it remains unclear whether Italy can really end its dependence on Russia for its gas supply – or when this might be feasible.

READ ALSO: What does Italy’s Algerian gas deal mean for energy supplies?

The government has been seeking new sources since Moscow’s invasion of Ukraine, including with a recent deal to boost supplies from Algeria.

Prime Minister Mario Draghi said last week the country could be independent of Russian gas by the second half of 2024 – the latest in a series of changing estimates.

“Government estimates indicate that we can make ourselves independent from Russian gas in the second half of 2024,” Draghi told the Senate, while adding that the “first effects” of this plan would be felt by the end of this year.

He said his government was also seeking to boost its production of renewable energy, including by “destroying bureaucratic barriers” to investment, saying it was the “only way” to free Italy from having to import fossil fuels.

Explained: Why and how Italy will pay for Russian gas in rubles

In April, Italy‘s Ecological Transition Minister Roberto Cingolani estimated the country would no longer need Russian gas within 18 months, following an earlier prediction that it could take until 2025.

Italy is one of Europe’s biggest users and importers of natural gas, importing 90 percent of its gas supply with 45 percent of that coming from Russia – up from 27 percent ten years ago.

Italy now imports 29 billion cubic metres of Russian gas a year, which Cingolani said in March “must be replaced” – but he didn’t specify with what.

Analysts have said there are “a lot of questions” about how helpful Italy’s gas deal with Algeria will be.

Despite its vast natural gas reserves, Algeria is already exporting at close to full capacity.

Draghi repeated his strong support for EU sanctions on Moscow last week, including a proposed ban on imports of Russian oil, although this is currently being blocked by Hungary.

“We must continue to keep up the pressure on Russia through sanctions, because we must bring Moscow to the negotiating table,” he said.

But for now, Italian energy giant Eni says it plans to pay for Russian gas supplies in rubles, meeting a demand from Vladimir Putin.

It was not immediately clear whether the plan would fall foul of European Union sanctions, although Eni said it was “not incompatible”.

The company said its decision to open the accounts was “taken in compliance with the current international sanctions framework” and that Italian authorities had been informed.

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