Making Green Buildings in Italy
Italy has identified its built environment as a key focus for efforts to achieve the European Target of Net zero by 2050 (National Recovery and Resilience Plan, May 2021). KPMG ranks Italy as 10th globally on its Net Zero Readiness Index, ahead of countries such as Spain and the United States. However, progress towards this goal is mixed, with grounds for both optimism and concern.
The challenge
On the energy production side of the equation, Italy is making good progress in moving away from fossil fuels and at the same time, increasing its energy security. Around 20% of Italy’s total energy sources in 2021 were from renewables (wind, solar, hydro, biofuels). The remainder are from fossil fuels (Italy has no nuclear power generation) with natural gas accounting for 43.7% (source; International Energy Agency 2021). It aims to reach 30% of total energy sources through renewables by 2030.
On the consumption side, Italy faces greater challenges to reduce demand. The country’s built stock is relatively old - 15% of residential properties date before 1918 and 65% of total stock was built before 1976 (source; ENEA, Portale 4E). Data collected from residential properties listed on-line for sale suggests around 75% of the current housing stock is rated G to F (source, Il Sole 24 Ore, Feb 2023). Energy is also expensive, with electricity charges for domestic and non-domestic users being amongst the highest in Europe. The intentions are there, but the question is how will the transition to Green Buildings in Italy be financed.
Legislation
In line with European directives, the Italian government introduced the Energy Performance Certificate in 2005, later to be amended as the APE (attestato di prestazione energetica). These are required for the sale or letting of property and have a 10 year validity.
The most recent European revisions to the relevant directives (COM(2021) 802 final) will require all new homes from 2028 to be zero emissions. New buildings owned, operated or occupied by Public bodies should be zero emission from 2026. The objective is for domestic buildings will need to achieve an E rating by 2030 and a D rating by 2033. The obligation on commercial and public buildings is stricter, with deadlines of 2027 and 2030 respectively.
Italy has yet to introduce its own national legislation to implement the directive and it is possible that these requirements may not be met in full, as the directive allows for divergence where it is not technically feasible or financially viable. National governments may ask the EU to take into account the circumstances of each country’s patrimony, which could entail exceptions for buildings of historical, architectural or public significance.
Progress to date
As a proxy for the upgrading of the commercial estate, we can consider the prevalence of certifications awarded by bodies such as Green Building Council and the Building Research Establishment.
There are 1,501 certified projects in Italy, with 86 rated LEED Platinum or equivalent (source, Green Building Information Gateway).
This compares well with Germany (2,214 projects) but lags behind France (6,421) and far behind the UK (20,362)
However, by one measure it may be catching up fast. According to the Green Building Council, Italy is a leader in developing green buildings, with 96 projects certified in 2022, for 1.34 million square metres. This would place it 9th globally on GBC index and 3rd in Europe.
Focus on Residential
To date, government policy has focused on the residential sector.
Government intervention has principally been one of fiscal incentives, for example allowing homeowners to recover up to 110% of expenditure on improving the energy efficiency of their homes (the so-called “ecobonus”) against income tax. The Italian state has invested €21 billion over the past 3 years for its Ecobonus scheme.
No such incentives exist for the commercial sector.
Implications for Italy
There is only so much Italy can do to achieve its net zero targets through fiscal incentives and new construction, so the real challenge will be on the upgrading of existing stock.
We should expect legislation to come into being within the next 12 months to implement the European directive. However, the greater impetus in the non-domestic sector is likely to come from the demands of occupiers, investors and lenders for energy efficient properties.
Our top predictions;
1) Net zero status will be the key dividing line in the mid 21st century between successful properties and the rest.
2) The prime sector of the market will be defined by its ability to monopolise available capital and knowledge and absorb the costs of decarbonising, through higher rents. Regional inequality is likely to rise as result.
3) Planning authorities have a key role to play. Those which take a pragmatic approach to development including change of use, will be more successful in attracting capital and thereby preserving their built environment.
4) Without a rapid upskilling in the real estate service industry, owners, lenders and occupiers will struggle to meet the overall objectives set by governments and industry.
5) Public Administration bodies will be amongst the slowest to decarbonise, due to lack of funds and will use the derogations to their widest interpretation. They will be forced to collaborate to a greater extent than ever with the private sector.