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Italy's financial stimulus plan has to assume domestically

For months, the public debate on Italy's post-pandemic economic recovery has focused on an imminent deadline: on April 30, the country will have to submit a “recovery and resilience plan” to the European Commission in order to access funds from its EU program the next generation. Italy must take the environment into account: the program is a key element in the planned climate change of the European Union, which should be the first climate-neutral bloc by 2050. As part of the EU's next generation program to help EU countries due to the economic crisis caused by the COVID-19 pandemic, 37 percent of each country's investments – including measures like developing renewable energy, improving the energy efficiency of buildings and the promotion of sustainable transport – related to the climate.

By tying recovery funds to its climate goals, Brussels is betting on a fundamental transformation of the economies and societies of the EU member states. In Italy, however, the imminent deadline has sparked a kind of “fear of missing out” that has drowned out the discussion about the real content of the plan. Critics say it is designed with little transparency or civil society involvement. They argue that what little is known indicates an oversized focus on technology with no accompanying guidelines that support community-based economic investment. Given the importance of small and medium-sized businesses to the Italian economy and the growing role of local, sustainable companies in production and consumption worldwide, it is a missed opportunity for the Italian government to embark on a green growth lead.

In Italy, three drafts of the plan were published between December 2020 and January 2021, but they lacked technical details. Filling in these points was a major controversy when Italy's ruling coalition collapsed earlier this year following an uprising by former Prime Minister Matteo Renzi and his tiny Italia Viva party. Former European Central Bank President Mario Draghi is now at the helm as Italy grapples with a third wave of coronavirus cases and deaths. Amid an unexpectedly slow roll-out of vaccines across the EU, Italy recently recorded 100,000 known deaths, second only to the UK in Europe.

"At this last stage, civil society and the citizens' group were not consulted," said Vittorio Cogliati Dezza, member of the Coordinating Committee of the Forum on Inequality and Diversity, which includes nine leading civil society groups and researchers. “And before that, the consultations only went so far as to listen. There were no working groups in which civil society could contribute its expertise. “What is missing, in turn, is more attention to social welfare and the reduction of inequalities. Renewable energy projects are measured only in terms of the gigawatts they bring to market, in square meters of solar panels or kilometers of bike paths, regardless of their social impact. "

Italy is not going to start from scratch when it comes to adapting its economy to climate change. Italy is already a leader in Europe in the circular economy, in large part due to technological advances. Although waste disposal has been extremely problematic in some of Italy's major cities, including Rome, Italy is also home to some of the most innovative recycling technologies in the world, including the first facility to recycle diapers and the only one in the world to make the organic compound butanediol from sugar to compostable Bioplastics.

While industrial innovation is important to building a circular economy, it is also important to the community. The idea of ​​moving away from an economic model based on extracting, manufacturing and disposing of a model based on recycling, reuse and repair has, by definition, a strong human dimension. In the midst of an economic crisis, innovations in the community can be used to create jobs and reduce greenhouse gas emissions. In the latter case, the focus is often on renewable energies. However, an estimated 45 percent of emissions come from the production and consumption of products and food, which means that the circularity of the economy should play a key role.

"A circular economy would be one in which there are more opportunities for localized, shorter supply chains," said Tim Gore, director of the program for low carbon and circular economy at the Institute for European Environmental Policy, a think tank for sustainability. "It's about re-establishing connections in our communities with the products we own. When we have real people, we meet to fix a product, for example to be closer to where a product comes from."

An example of a hyperlocal approach in Italy is Ripe San Ginesio, a town of just 800 inhabitants that aims to be a model for sustainability while revitalizing the local economy through tourism. Three years ago Marta Baldassarri and Valentina Vitali began making bespoke clothing from natural and recycled fabrics and dyes from their homes in Macerata, central Italy. Because of their nature-inspired designs and ethical imprint, they received a small start-up grant from their local community to set up a workshop in Ripe San Ginesio.

Baldassarri and Vitali, who are over 30 years old, strive for sustainability throughout their supply chain, both in terms of land use and labor practices. They aim to make an impact in a sector where such changes are urgently needed: the European Parliament estimates that the production and waste of textile products are responsible for 10 percent of global greenhouse gas emissions – more than international flights and shipping combined.

Baldassarri and Vitali have experimented with making colorings from natural ingredients that they source locally. "We work with a pub that supplies us with onion skins to make yellow, and we want to work with sushi restaurants to source avocado for a pink print," said Baldassarri. Their small, newly set up workshop has struggled with pandemic closings, but they are confident that their idea will work. They are less confident that aid will come directly from European funds. Baldassarri said they could not afford access in the past as it required an upfront investment that they could not make.

At government level, the EU expects Italy to implement the necessary policy changes to support a recovery plan tied to EU funds. Legambiente, one of Italy's top environmental organizations, has identified five major reforms needed to efficiently carry out the projects, which, according to EU rules, should be completed by 2026. These reforms include simplifying the approval procedures for green economic projects, including recycling and renewable energy plants, and involving citizens in decision-making processes when projects affect their territory. Regarding the circular economy approach, Legambiente has suggested that each province recycle compost and other materials independently. Community education in circular economy practices and innovation in the supply chain should also be encouraged.

“The Italian economy consists mainly of [small and medium-sized enterprises]. Taking into account their innovation and their ability to restart will be key, ”said Stefano Ciafani, President of Legambiente. Small and medium-sized businesses have been hit by the crisis, and often smaller businesses rely on informal workers and processes. This has made it more difficult for the government to reach some areas of society with subsidies, which has contributed to widening income inequalities. Ciafani sees the upcoming recovery plan as an opportunity to reach all areas of the Italian economy, especially those that have struggled the most during the pandemic. “We can't just have Eni, Enel and the other big players in the Italian economy writing this plan. It should be rebalanced, ”said Ciafani.

"The opportunity here is to use these resources in ways that are truly transformative," said Gore. “However, this opportunity could easily be missed if left to the usual suspects to essentially create plans behind closed doors and enforce their consent without proper scrutiny. The risk is that we will only see more of the currently dominant sectors that will benefit from these funds, just as the post-2008 financial crisis stimulus measures essentially benefited the status quo and did not do enough to drive transformation of the European economy. "

Italy will soon have another chance to face this challenge alongside the EU's recovery plan. The Circular Economy Network, a coalition of business and trade associations, points out in its latest report that Italy has used scarce resources efficiently but is lagging behind on investment and innovation patents. Italy also lacks a national strategy and an action plan. The newly created Ministry of Ecological Change, headed by Roberto Cingolani, a physicist and academic who is one of eight "technical" ministers in Draghi's mixed cabinet, is tasked with developing such a plan. This ministry replaces the environment ministry and adds a new responsibility for the energy sector.

"The Restoration Fund is one of the tools we need to use to increase our capacities, remain at the forefront and possibly become a beacon on a global scale," said Cingolani in a recent speech at a conference on the circular economy where he spoke at length of Italy's ability to Recycle materials, including metals, from heavy industry. "These technologies are vital to the future of generations to come and we must do our best to appreciate them," he said. When contacted, the ministry was unable to provide further details on the recovery plan or the circular economy strategy, both of which "are in the process of being defined".

Both under the recovery plan and in a possible national strategy, the Italian government has the opportunity to involve small and medium-sized enterprises as well as local efforts. It remains to be seen whether policy makers will do this.

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