'Why so generous?': Inside Italy's scheme offering huge subsidies towards low-carbon eco-homes

Italy's government is encouraging households to convert their living spaces into eco-homes by covering 110% of the cost, reports ITV News Europe Editor James Mates

When the UK government announced this week it would be giving grants of £5,000 to up to 90,000 homes towards replacing gas boilers with heat pumps, it was widely criticised as being nothing like enough.

Expensive as the promise may be, it is dwarfed by what’s being offered elsewhere, and nowhere more so than Italy, which is currently giving Europe’s most generous subsidies to convert homes into low-carbon eco-homes.

If you live in Italy and want to insulate walls and windows and install a heat pump boiler or solar panels, the government will pay you 110% of the cost. Yes, you read that right.

All of it and then 10% on top, to be offset against your taxes over the next 5 years, up to a maximum of €100,000 per home. It is an enormous offer that is being taken up by huge numbers, leading the government in Rome to claim that in the first eight months of this year they have reduced emissions of CO2 from home heating by as much as they did in the last 20 years.

The cost in 2021? A cool €9 billion.

Why so ambitious? They believe that it is the only way to convince people to get work done on their homes. Paying a proportion of the cost just doesn’t work.

Most people either can’t afford to pay the rest, or have other more urgent priorities.

And if, for example, the residents of a block of flats would like to get insulation or solar panels installed, it only takes one to say “no, I don’t have the money” and the whole thing stalls.

Why so generous? Do they really need to over-offer not just 100% but a whopping 110%? Again, it is all about persuading people there is no downside.

The money comes back through one’s taxes over 5 years but has to be paid upfront.

These tax credits – a guaranteed stream of money from the government – are very attractive to financial institutions, but at a price.

People are selling their credits to, say, a bank at a discount of 10% or so, thus breaking even but no longer having to put any money upfront. The big downside seems to be overheating the building industry with so many trying to take advantage of this offer before it expires in a year or two’s time (an end date is still up in the air).

What began as an effort to stimulate a moribund building industry, is turning into a scramble for labour and materials, inevitably pushing up prices.

As an economic stimulus, post-pandemic, the 110% super-bonus is proving pretty effective, with some of the money coming from EU stimulus funds, with Brussels approval.

The plan is likely to be extended into the future to give more people a chance to take advantage, but it seems the super generous terms may be scaled back towards 75-80% of the total cost.

Even if that is how things eventually pan-out, the scheme will remain much more generous and ambitious than anything on offer in the UK.