Energy taxation and fossil fuel subsidies

Caterina Molinari

Chapter 6 in Frontiers in the Low-carbon Transition, 2026, pp 79-100 from Edward Elgar Publishing

Abstract: This chapter analyses the role that energy taxation can play in supporting decarbonisation, competitiveness and social objectives while ensuring stability of public revenue, against the backdrop of rising public debt and increasing demands on public budgets. Energy taxation has the potential to guide consumers towards decarbonised choices while ensuring stable public income. The chapter looks at the current levies imposed on energy carriers in Italy and shows how the country's historically sector- and volume-based taxation has produced structurally inconsistent price signals. Electricity, now the most decarbonised carrier capable of satisfying several uses, is burdened by disproportionately higher fiscal and parafiscal levies. This system results in fossil fuels being treated more favourably and meets the criteria used to identify an environmentally harmful subsidy, although it remains largely invisible in official accounts. The chapter argues that tackling this implicit subsidy is essential to align taxation with decarbonisation while safeguarding predictable public revenues.

Keywords: Energy Taxation; Fossil Fuel Subsidies; Electricity; Competitiveness; Energy Security; Just Transition (search for similar items in EconPapers)
Date: 2026
ISBN: 9781049412115
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