Italy's government is proposing to cut power bills by removing carbon costs from wholesale electricity prices, setting up a confrontation with Brussels. Prime Minister Giorgia Meloni calls the current EU system a "de facto tax imposed by Europe." The plan would shift the burden of carbon permit costs from gas-fired power plants to consumers, potentially lowering Italy's 30% higher-than-average electricity prices.

Rome faces fierce industry pressure as industrial output contracted 0.2% in 2025 following a 4% drop in 2024. The Italian proposal would see the government reimburse gas producers for carbon permit costs using funds from electricity consumers. This threatens the EU Emissions Trading System, a centerpiece of the bloc's green deal, which forces heavy polluters to buy permits to discourage fossil fuel use.

Analysts warn the measure would reduce clean energy revenues at a time when Italy's renewable rollout lags behind other EU economies. Energy economist Carlo Stagnaro calls it "tantamount to eliminating carbon pricing." The Italian renewable energy company ERG Group called the plan a "cure worse than the disease," warning it would result in a "push for gas" and potentially set a damaging precedent across Europe.