How Distorting Policies Can Affect Energy Efficiency and Sustainability: The Case of Biogas Production in the Po Valley (Italy)

Similarly to other EU countries, Italy began subsidizing electric energy production from renewable sources such as biogas. This proved to be an inefficient way of using available resources. In the Po Valley—the most productive agricultural area in Italy—the share of corn area used for biogas production increased from 0.4% in 2007 to more than 10% in 2012, reaching 18.2% in Lombardy. This, in a framework of declining acreage due to Common Agricultural Policy (CAP) reform, increases demand, competition for land, and agricultural prices, therefore pushing up production cost for livestock and, consequently, famous Italian quality products. Italy has started reforming its energy policy by incentivizing the construction of small manurebased biogas plants but more can and has to be done to promote a more efficient utilization of biogas, which, for example, can be upgraded into biomethane (with relatively low energy requirements) and injected into the natural gas grid.