LITTLETON, Colorado, Oct 2 (Reuters) - Italy's enduring economic malaise is resulting in the lowest emissions from its power sector in decades. But climate activists should beware that planned measures to boost the economy could trigger a swift U-turn in pollution trends.

Over a decade of economic stagnation has seen Italy's economic growth fall far behind that of regional rivals, resulting in steadily declining goods output and exports and lower power consumption by many of the country's businesses.

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Lower power demand from industry has in turn allowed Italy's utilities to curb fossil fuel-fired power output and cut power sector emissions to historic lows in what was formerly a top-10 polluting nation.

In response to the enduring economic quandary, though, the government is rolling out stimulus measures aimed at reviving industrial activity that will likely trigger higher power generation and emissions in the world's eighth-largest economy.

LOSING GROUND

High public debt levels, rising labour costs, a stifling bureaucracy and a declining population have resulted in Italy's economy stagnating since the 2008 financial crisis, while Europe's overall economy has expanded by more than 20%.

Italy's gross domestic product (GDP) in 2025 is roughly flat compared to 2008, at around $2.4 trillion, data from the International Monetary Fund (IMF) shows.

Over that same time span, Germany's economy expanded by close to 25%, France's economy by 10%, and the overall economy of the European Union by 22%.

Due to hefty public debt levels - the highest among major European economies - alongside strict European Union rules over currency adjustments, Italy's government has so far been restricted in terms of intervention options.

This has left industry fending for itself and resulted in a steep decline in the output of durable goods such as cars and machinery that had previously been major drivers of Italy's economy.

POWERING DOWN

On top of the limited government help, Italy's industries have also had to contend with a drastic upheaval to local natural gas markets in the aftermath of Russia's invasion of Ukraine, and some of the highest power costs in Europe.

Italy gets over 40% of its electricity from gas-fired power plants and secures over 90% of its gas supplies from imports, according to data from the Energy Institute.

This gas-heavy slant to its energy system has resulted in a steep rise in Italy's wholesale power costs, which have averaged around 32% more than those in Germany and France and 70% more than those in Spain since 2022, data from LSEG shows.

Such sharply higher power costs have further undermined the competitiveness of Italy-based businesses, and resulted in a historic decline in overall power demand in the country as industries curtailed output.

Between 2008 and 2024, Italy's total electricity output declined by 15% to around 265 terawatt hours, data from Ember shows.

Fossil fuel-fired electricity production dropped by 47% between 2008 and 2024, while output from clean energy sources rose by 124%.

CLEAN GROWTH?

The rise in clean electricity supplies - driven mainly by surges in solar and wind power output - has resulted in Italy's power system emissions falling by 50% between 2008 and 2024, to around 76 million tons of carbon dioxide, Ember data shows.

Any sustained upturn in overall economic activity, however, will require utilities to boost output from fossil fuel plants, as renewable energy supplies remain too patchy to properly support a consistent rise in total energy demand.

What's more, many of the economic stimulus measures being pursued are targeted at building Italy's infrastructure, on the assumption that construction of road, rail, power and tunnel systems will send positive ripples throughout the economy.

Yet such projects require the energy-intensive production of steel and cement, which not only require higher volumes of industrial power supplies but also emit substantial amounts of emissions themselves.

Further development of Italy's clean energy supplies is also targeted in government infrastructure plans, including large battery energy storage projects in northern Italy, new wind farms along southern regions, and the country's largest solar park in the countryside north of Rome.

Once completed, those projects will help utilities make further cuts to their dependence on gas and coal for power, and may help limit any forthcoming rebounds in power emissions.

But over the near term at least, the expected coordinated rise in industrial activity aimed at boosting economic growth will likely also lift Italy's emissions, and snap the recent trend of steadily falling pollution.

The opinions expressed here are those of the author, a columnist for Reuters.

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https://www.reuters.com/markets/europe/italys-economic-woes-have-climate-upside-now-2025-10-02/