The European Commission has approved the introduction of stringent CO2 emission limits in the Italian capacity mechanism, noting that the measure will contribute to ensuring security of supply and increase the level of environmental protection without unduly distorting competition in the Single Market.

The Commission in February 2018 approved a market-wide capacity mechanism in Italy under EU State aid rules. Italy notified to the Commission its plans to introduce certain changes to the approved capacity mechanism, which will be applied to the first auction under the Italian capacity mechanism, scheduled to take place later this year.

In particular, Italy will only allow capacity providers that comply with stringent CO2 emission limits to participate in the auction. These limits are defined in the recently adopted Electricity Regulation but are not yet compulsory.

The CO2 emission limits will prevent high-emission electricity generation, such as coal-fired power plants, from participating in the Italian capacity mechanism. At the same time, Italy will apply several measures to ensure that the mechanism remains competitive in spite of the exclusion of such capacity providers.

The Commission said the EC assessed the capacity mechanism, as modified by the changes proposed by Italy, under EU State aid rules. It found that the measure would continue to ensure security of supply and further increase the level of environmental protection without unduly distorting competition in the Single Market. On this basis, the Commission concluded that the measure complies with EU State aid rules.