Italy Expects EU Carbon Price Around 80 Euros per Tonne in 2022

ROME (Reuters) — Italy expects the price of permits on the European Union's carbon market to trade at an average of 80 euros ($91) per tonne this year, giving the government more funds to curb soaring energy bills, a Treasury document seen by Reuters showed.

The price, if confirmed, would be up from an average of 69 euros in the fourth quarter of 2021 and allow Rome to raise almost 600 million euros of additional resources to cushion energy price spikes and offer relief to households and businesses.

The government has so far budgeted around 2.8 billion euros of proceeds from carbon permit auctions, part of which will go to cut system-cost levies weighing on companies.

But in the document the Treasury now estimates it can raise 3.36 billion euros this year based on a "reliable and conservative estimate" of 80 euros per tonne, reflecting future contract prices.

Launched in 2005, the European Union Emissions Trading System (ETS) compels manufacturers, power companies and airlines to buy permits to cover each tonne of carbon dioxide they emit.

Permit prices are heading closer towards 100 euros a tonne, a level analysts say will spur further investment in low-carbon energy sources.

The Italian Treasury document, presented to parliament last week, said an average permit price of 89 euros per tonne, based on the "peak observed last December", would raise 3.73 billion euros while 69 euros per tonne would yield 2.9 billion euros.

In all three scenarios, Rome assumes an estimate of 42 million CO2 allowances.

The government has allocated some 10 billion euros since July to cushion sharp rises in energy bills, but ruling parties are urging Prime Minister Mario Draghi to introduce a new extra borrowing package to help families and firms.

The ruling right-wing League party has called for a deficit-hike worth at least 30 billion euros while the Treasury, keen to reduce the budget deficit this year to 5.6% of national output from 9.4% in 2021, is resisting pressure.

Italy's employers association Confindustria has calculated surging energy bills will cost industry some 37 billion euros this year compared to 20 billion euros last year and just 8 billion euros in 2019.

On Monday Italy's Energy Transition Minister Roberto Cingolani warned high energy bills could offset resources Italy expects from the EU Recovery Fund next year which are worth around 39 billion euros.

"The expected rise in energy costs risks having an overall cost next year that is more than the whole Recovery Plan package," Cingolani said during a conference.

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