Italy coalition views green policies, greater Russia ties

Barcelona (Platts)--17 May 2018 616 am EDT/1016 GMT

A draft agreement drawn up by the two parties that intend to form a ruling coalition in Italy suggests a move towardgreener policies including electric vehicles and increased renewables, while politically it proposes closer ties with principal gas supplier Russia.

The document between the Movimento 5 Stelle (M5S) and Lega parties, dated May 15, said policy for Italy will move away from coal and fossil fuels and towards a circular economy.

"In terms of fighting climate change, we need to intervene to speed up the transition to renewable energy generation and push energy efficiency in all sectors," the document states.

A March general election in Italy failed to produce a clear winner, with M5S taking the largest share of the vote (32.2%) and Lega in third place with 17.7%.

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While there is generally cross-party consensus on the recently agreed national energy strategy (SEN) through to 2030, some tweaks to policy are likely to occur due to the individual policies of the coalition members, with the closure of coal plants one of the main uncertainties.

While Tuesday's draft makes no specific mention, the center right coalition, of which Lega is the largest member, has previously said it would not want to precipitate closures of domestic coal plants if this meant higher power prices for consumers.

By contrast, the anti-establishment M5S favors a full phase-out of coal by 2020, rather than the 2025-30 range contemplated under the SEN, as well as full adherence to ambitious 2030 renewable energy targets, with a view to 100% renewable coverage by 2050.

Under the SEN, the share of renewables in the power mix is to rise to 55% from 33% by 2030, and in total energy consumption to 28% from 17.5%, with solar and wind almost tripling.

Indeed, the draft document does single out a push to increased electric vehicle use as a means of reducing dependence on fossil fuels.

The draft says it is "a priority to use financial instruments to encourage the purchasing of new electric vehicles" as a way of progressively reducing the use of autos fed by gasoline and diesel.

The move would be accompanied by swift action to ensure that the correct infrastructure is in place to develop electric mobility.

Other transport policies would look at replacing "rubber for iron" in the transportation of goods -- moving them from road to rail -- with improved logistical links with the country's ports.

Indeed, the draft also aims to improve Italy's role as a shipping hub, given its geographic location, and to take some share of the shipping traffic that passes through the Suez Canal en route to northwest European ports such as Rotterdam, Hamburg and Antwerp.

In political terms, the draft has highlighted some doubt about Italy's ongoing role in European treaties, without any specific reference to withdrawal, but does iterate an improvement of relations with Russia -- Italy's largest single supplier of natural gas.

Italy is Europe's third-biggest gas market after Germany and the UK, with over 75 Bcm last year in domestic demand, of which Russia supplied just over 40%.

The Russia policy would include a removal of existing sanctions and partnership in economic and commercial relations, according to the document.

-- Gianluca Baratti,

-- Edited by Jonathan Fox,

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