Circular Economy and Environmental Sustainability: A Policy Coherence Analysis of Current Italian Subsidies

Abstract

Policy instruments for a circular economy and for environmental protection both aim at sustainable development, but do not necessarily share the same goals. The purpose of the paper is to assess the coherence with the EU-recognized circular economy principles of a large set of subsidies currently in force in Italy: those listed in the Italian Catalogue of Environmentally Harmful Subsidies and Environmentally Friendly Subsidies. The method is inspired by the OECD’s “Checklist” method and “Policy Coherence for Sustainable Development” approach recommended by the UN 2030 Agenda, which can be usefully applied to all policy instruments, including subsidies and green budgeting. The analysis allows one to identify as many as 56 potentially harmful subsidies for the circular economy in Italy, for a financial value of at least 13.5 billion euros in 2019, and 75 potentially friendly subsidies for the circular economy, for at least 13.0 billion euros. A total of 25% of subsidy schemes analyzed with a circular economy perspective have contradictory effects when compared to the Catalogue’s results obtained with an environmental perspective. The results of the study underline the importance of coordination between environmental and circular economy policies in achieving sustainable development goals. The analysis can be considered a “pilot study” on a national case; its method can be easily replicated by administrations also in ex-ante evaluation of new subsidy schemes.