Italian Member Committee

WHAT IS SHIFTING FASTEST – AND WHAT FEELS HARDEST TO MOVE?

The World Energy Issues Monitor 2026 for Italy reflects a complex and structural, still progressing transition, with three noticeable dynamics: Economic Security & Industrial Competitiveness, Speed of Infrastructure Delivery (including permitting), and the reinforcement of System Integration and resilience across electricity and gas networks.

Economic security has become a central organising principle of energy decision-making. Even more so after the escalation in the Strait of Hormuz, which led to the near-complete closure of tanker traffic by mid-March 2026, thus exposing once again a structural vulnerability in the energy market. This has resulted in elevated price volatility in both Brent crude and European gas prices, despite relatively robust physical fundamentals.

The energy transition pathways are increasingly assessed in light of industrial competitiveness, exposure to global market volatility and security, and the evolution of European regulatory frameworks. The interaction between the EU Emissions Trading System (ETS), which Italy has proposed to reform together with other member States, the Carbon Border Adjustment Mechanism (CBAM), and the Net Zero Industry Act - to name only a few relevant initiatives being discussed - is shaping the investment and trade expectations across the Italian industry.

The debate is no longer framed in terms of transition versus competitiveness, but rather on how to ensure that decarbonisation, industrial resilience, and affordability evolve in parallel within an increasingly integrated energy system. The coming months will be crucial for implementing the most recent European commitments, while navigating the exposure of industrial sectors and aligning investments with competitive positioning in the restructuring of value chains.

At the same time, Permitting & Clean Investment Rules and Infrastructure Delivery Speed continue to witness critical constraints, as they sit at the intersection of high impact and elevated uncertainty. The challenge lies rather in implementation sequencing, administrative capacity, and coordination across governance levels rather than in policy ambition. These elements must evolve and advance coherently for grid reinforcement, renewable energy integration, storage deployment, hydrogen readiness, and carbon management infrastructure, as part of a more integrated and resilient energy system, and to preserve system stability and investor confidence.

Italy’s positioning within the broader Mediterranean energy space remains a key structural dimension catering for further developments and opportunities in terms of renewables expansion, energy interconnections, diversified supply routes and multi-modal Carbon Capture and Storage infrastructures, with a strategic orientation toward a further regional integration. This positioning enhances system resilience while reinforcing Italy’s role within Europe’s evolving energy architecture.

TRILEMMA TRADE-OFFS: SECURITY, AFFORDABILITY, SUSTAINABILITY

Italy’s 2026 map highlights an increasingly interconnected Trilemma.

• Security and system stability

The diversification of supply sources and infrastructure reinforcement have strengthened short-term security for Italy, while the current market context calls for a more decisive effort to reduce the reliance on imported gas. In this context, gas infrastructure flexibility — including storage, strategic storage and LNG capacity — continues to play an essential stabilising role within the energy mix, while renewable penetration and electrification need to be deepened. In the Italian context, gas still represents a key component of the energy mix, and as a balancing vector within an increasingly integrated and decarbonized energy system, where different energy carriers and infrastructures evolve in a complementary way rather than in a substitutive way. In the meanwhile, in the light of recent geopolitical developments, the dependence and vulnerability of the energy system call for a strong diversification effort. Renewable energy, storage technologies and potentially nuclear power - subject to further assessment - are emerging as key pillars for strengthening energy security and sovereignty, including the development of strategic national industrial value chains in green technologies, such as the 3SUN gigafactory in Catania, to reduce dependencies from abroad. In this perspective, the existing gas infrastructure is providing a source of flexibility and represents a key enabler for the evolution of the Italian energy system, as investments are being progressively designed to enhance energy security and accommodate low-carbon molecules such as biomethane and hydrogen over time, thus supporting an energy system geared towards complementarity and more interconnected features.

This approach reflects a technology-neutral perspective: resilience derives from optionality and system flexibility rather than reliance on a single pathway. The impact of sudden geopolitical shocks, such as the March 2026 crisis, will be mitigated by continued diversification of import routes and by sufficient storage capacity to manage short-term supply disruptions and prevent structural system failure.

• Affordability and industrial competitiveness

European climate instruments such as ETS and CBAM aim to align environmental ambition with competitiveness safeguards. However, their interaction between energy market dynamics, global trade trends and investment cycles introduces complexity. For Italy’s diversified and fragmented industrial base, maintaining predictable cost frameworks and regulatory stability are essential to preserve competitiveness while continuing to invest in decarbonisation technologies. Within this context, CCUS is being considered among the available options to reduce emissions in hard‑to‑abate sectors, as it represents a decarbonization solution enabling emission reduction while preserving industrial activity, preventing deindustrialisation, and supporting the competitiveness of Italy’s industrial base, particularly in those sectors where alternative solutions are not yet technically or economically viable.

The coming 12–24 months will be decisive in ensuring that industrial policy, energy market design and infrastructure roll-out reinforce rather than constrain one another. In this regard, the debate around ETS, CBAM and the NZIA should take in due account overall policy stability a determining element for investment decisions in this timeframe.

• Acceleration and social legitimacy

The magnitude of the challenges faced by the energy system has called in the past few years for fast delivery to strengthen security and competitiveness. Maintaining public trust and social licence remains fundamental as infrastructure deployment intensifies, as long-term stability depends on transparent processes and inclusive engagement. Sustainability, security and affordability must therefore be pursued through balanced and credible governance. The high costs and volatility of fossil fuels pose a threat to Italy’s economic development, increasing uncertainty for businesses and households. A continued public engagement on the transformation required for the energy model relies on continued efforts to deepen the public trust on prioritising renewables, storage, low carbon solutions and CCUS deployment, for the tensions to be solved between decarbonisation speed and the social consensus, which is essential for the long-term sustainability of projects.

ITALY’S ROLE IN EUROPEAN ENERGY SECURITY AND DECARBONIZATION

Italy’s geography and infrastructure place it at the crossroads of Europe’s evolving energy system. This role is anchored in tangible infrastructure which is not a future possibility, but an existing or planned network of projects under development. Whether Italy remains primarily a national system with limited regional impact or becomes a genuine Mediterranean energy bridge will be determined by whether or not the projects are implemented successfully.

Through highly diversified routes, via pipeline and LNG, regasification capacity, electricity interconnections, multi-modal infrastructure hub for carbon capture and storage, and emerging hydrogen corridors — including the South H₂ Corridor, linking North Africa to Central Europe, H2Poseidon, connecting Italy with Balkans and central Asia, and the North Adriatic H2 Terminal, giving access to the global markets through a diversified portfolio of vectors, like NH3 — Italy contributes to strengthening Europe’s collective resilience and to reducing the current risks of external dependence. In addition, the Elmed electricity interconnector between Italy and Tunisia serves as a strategic driver of decarbonisation and mutual socio‑economic development, creating a resilient energy bridge that enhances renewable integration, strengthens energy security across the Euro‑Mediterranean region, also in line with the Mattei Plan promoted by the Italian government.

In addition to the expansion and resilience in receiving facilities, Italy has been able to count on the diversification of supplies, especially for LNG, thanks to long-standing collaboration with producing countries (eg Mozambique, Congo). This role would be enhanced by a prolonged, complete shutdown of transit through the Strait of Hormuz, which would have further impacts on Europe. In a context of progressive decarbonization, the only way Europe could currently compensate for this would be to use alternative sources and optimise stock.

The role Italy plays is not limited to supply diversification but also to the geopolitical dimension of the Mediterranean region as a structural factor for Europe’s energy security. Italy’s increasingly integrated electricity and gas infrastructure, combined with growing storage capacity and carbon management initiatives with a regional relevance, such as the Ravenna CCS project, supports flexibility at the continental scale. In this sense, Italy is on the path to becoming a transit hub and a system stabiliser within the European framework in order to strengthen the strategic relevance of regional integration efforts and Mediterranean energy corridors.

Looking ahead, deeper Mediterranean integration — grounded in cooperation, infrastructure interoperability and regulatory alignment — may further enhance Europe’s security dimension of the Trilemma, along with the decarbonization one . At the same time, coordination with EU industrial policy and internal market rules remains essential to avoid fragmentation.

Italy’s experience illustrates that regional integration and domestic system resilience are mutually reinforcing. In this direction, it is important to pay attention to costs and benefits of cross-border network infrastructures and burden-sharing rules.

ONE BLIND SPOT OR A BOTTLENECK

The most persistent constraint remains administration bandwidth and implementation coherence.

Ambitious objectives exist across renewables, electrification, hydrogen, biomethane, storage, CCUS and digital optimisation. Yet alignment between regulatory timelines, infrastructure permitting development, and investment cycles requires sustained coordination.

If infrastructure delivery lags behind regulatory evolution or industrial transformation, system costs may rise and competitiveness pressures intensify. Conversely, overly rapid sequencing without adequate institutional capacity could weaken predictability.

The risk is not technological insufficiency, but misalignment across scales and timelines. Trilemma risks come into play if regulatory and administrative bottlenecks are not resolved. In this case Italy could become locked into a slower, or even negative, pathway.

ONE BRIGHT SPOT

A clear area of momentum lies in system integration, system flexibility and digital optimisation.

Investments in grids, storage solutions, and AI-enabled system management are increasingly recognised as foundational enablers of the energy transition. Digital tools enhance demand forecasting, grid balancing, predictive maintenance and climate resilience.

By improving efficiency and transparency, digitalisation can ease tensions between affordability and sustainability while strengthening security.

The convergence of infrastructure reinforcement, regional integration and digital optimisation offers Italy a pathway to manage complexity without narrowing technological options. Italy could also share and integrate digital grid investments to support the integration of the Mediterranean energy market, going beyond physical infrastructure.

FROM INSIGHT TO CONNECTION – TOWARDS RIYADH 2027

Italy’s 2026 signal to the global community is one of integration under complexity.

CENTRAL QUESTION EMERGING FROM THE ISSUES MAPS:

How can countries synchronise industrial competitiveness, infrastructure delivery, and regional energy integration while preserving affordability, security and sustainability in equal measure?

As the World Energy Congress in Riyadh approaches, Italy’s experience suggests that the next phase of the transition is defined less by ambition gaps and more by coordination capacity.

Key areas for peer exchange include:

• Designing infrastructure systems that remain flexible across multiple technological pathways
• Aligning European industrial policy instruments with global trade realities
• Leveraging regional corridors and strengthening new partnerships to enhance collective resilience
• Using digitalisation to strengthen affordability and system stability

Italy’s trajectory in 2026 reflects a transition that is advancing within a context of geopolitical exposure and institutional complexity. The opportunity ahead lies in reinforcing cooperation — across the Mediterranean, within Europe, and globally — to ensure that energy transformation remains inclusive, resilient and technology-neutral.

Acknowledgements

Italy Member Committee