Twenty years of white certificates in Italy: Lessons from crisis, reform and recovery

Early phase and rapid growth (2005–2012)

In its initial years, the scheme experienced rapid expansion, both in terms of participation and volume of certificates issued. This phase was characterised by a relatively simple operational framework and a high degree of supply elasticity.

A key enabling factor was the widespread use of standardised and deemed savings methodologies, which allowed projects—particularly in the residential and tertiary sectors—to be developed and replicated with limited transaction costs. Many large distributors played an active role in this period, while the role of ESCOs grew until they became the main actor in terms of proposals presented, initially acting as aggregators of small-scale interventions, pushing the participation of industrial enterprises, and facilitating market development.

The introduction of the tau coefficient in 2011 further reinforced this trend (see Di Santo, Biele, Forni 2012). By allowing future savings to be anticipated within the WhC scheme, the coefficient significantly increased the number of certificates issued per project, improving investment attractiveness and accelerating market growth.² However, this design choice also introduced a structural distortion. The link between certificates and actual annual energy savings became less direct, and part of the scheme’s performance was effectively “front-loaded”. While this did not immediately affect the functioning of the market, it contributed to building expectations on supply levels that would later prove difficult to sustain under different regulatory conditions.

Increasing complexity and structural weaknesses (2013–2016)

The period following 2012 marked a gradual transition towards a more stringent and complex regulatory framework. Several measures were introduced with the objective of improving the quality and materiality of savings, but with significant implications for the functioning of the scheme.

First, the prohibition of cumulating white certificates with other national incentives reduced the attractiveness of the mechanism for certain types of interventions, particularly in the residential sector.³ This, together with an increased capability from ESCOs to understand and propose energy efficiency projects also for manufacturing processes, contributed to a structural shift towards industrial projects (Di Santo et al. 2018a).

Second, the requirement to submit project applications before implementation introduced a stricter control on materiality but also increased planning constraints for project developers.

The combined effect of these changes was a gradual reduction in supply elasticity. Among projects based on metered savings⁴ (also known as monitoring plan projects, MPPs) complexity increased, development times rose, and the pool of easily replicable interventions shrank. At the same time, targets continued to grow, based on expectations derived from the previous phase.

This divergence between expected and actual supply potential did not immediately result in a visible imbalance, partly due to the residual effects of earlier design choices, including the tau coefficient and the stock of projects developed under more favourable conditions. This is the reason why MPPs peaked in 2014, as shown in Figure 2.

Figure 2

Besides, the tau coefficient—by increasing the economic value of all projects—started to produce the appetite from malevolent organisations to participate in the scheme through purposely created companies, which began to present non-existent standardised projects falsifying the requested documentation (the growth of standardised projects in 2015–2016 was unfortunately in part related to frauds and laid the foundations for the structural issues that would have soon emerged and produced the 2017 reform).

The 2017 reform and the crisis of the scheme (2017–2021)

The 2017 revision of the scheme represents the most critical turning point in its evolution. The reform introduced a fundamental shift in the approach to M&V and project eligibility. Simplified and deemed savings methodologies were effectively phased out, and a stronger reliance on metered savings was enforced. Baseline definitions became more stringent, with additional requirements for meters and M&V procedures, and additionality requirements were reinforced.

At the same time, the scheme was affected by the emergence of significant fraud cases linked to previous project types. The response to these events involved tighter controls and the exclusion or revision of entire categories of projects, leading to the withdrawal or non-issuance of a substantial volume of certificates.

While these measures were partially justified in terms of improving the credibility and integrity of the scheme, their combined impact on the supply side was substantial. The transition to a fully metered approach significantly increased the complexity of project development and evaluation. Lead times lengthened, and the number of new projects capable of generating certificates decreased sharply. As Figure 2 shows for the first four years after the reform, the certificates issued for new projects remained negligible.

This structural contraction of supply occurred in a context where targets had not yet been adequately adjusted. As a result, a persistent gap between demand and supply emerged. The market progressively shifted into a “short” position, with the number of available certificates insufficient to meet the obligations.

The price signal reacted accordingly. Certificate prices increased rapidly, reaching levels that were significantly higher than in previous years. However, due to the intrinsic characteristics of the scheme, higher prices did not translate into a proportional increase in supply. The development of new projects under the revised rules required time, technical capacity, and a level of regulatory certainty that was not immediately available.

This phase highlights a critical structural feature of the Italian scheme: the limited short-term responsiveness of supply in a system based on project-based, metered savings. Unlike mechanisms relying on deemed savings, where supply can adjust relatively quickly, the Italian WhC scheme exhibits significant inertia, making it particularly sensitive to abrupt regulatory changes. Moreover, since white certificates are issued over the project lifetime—rather than as a one-off allocation, as in the French scheme—any increase in market prices had a significant impact on the overall cost of the scheme (until the introduction of the cap on the tariff reimbursement). This is because higher prices also apply to certificates generated by existing projects that are still within their lifetime.

By the end of the 2010s, the scheme was therefore characterised by a persistent shortage of certificates, which was worsened by the 2017 reform, increasing compliance risks for obliged parties, and growing concerns about the overall stability of the mechanism (Figure 3). The introduction of temporary measures, such as price caps and flexibility instruments, helped mitigate the most immediate effects but did not resolve the underlying imbalance.

Figure 3

This situation set the stage for the comprehensive reform introduced in 2021, aimed at restoring a functional equilibrium between demand and supply and rebuilding confidence in the system.

Addressing demand rigidity: target revision and market stability

The most immediate and impactful measure introduced by the reform concerns the revision of targets. Targets for the years preceding the reform were significantly reduced and aligned with NECP, and new targets for the subsequent period were set at levels more consistent with the observed and expected supply of certificates. This decision reflects a clear recognition that the previous target trajectory was no longer achievable under the revised regulatory conditions.

To prevent future misalignments, a market stability mechanism was introduced, allowing the Ministry to periodically revise targets based on a set of monitored indicators, including the volume of issued certificates and the pipeline of projects under evaluation. This represents an attempt to introduce a feedback loop into a system that had previously operated with relatively rigid target-setting procedures.

Another relevant aspect concerns the management of compliance flexibility. By reducing targets and redefining the conditions for accessing alternative compliance options—such as virtual certificates—the reform aimed to gradually reduce the reliance on exceptional measures that had been introduced to cope with the shortage phase (i.e. virtual certificates and reimbursement cap). In doing so, it sought to bring the system back to a situation where compliance is primarily achieved through “real” energy savings.

Enhancing supply: enlargement of eligible projects

On the supply side, a first set of measures focuses on expanding the pool of eligible projects. The reform introduced an updated and more articulated classification of interventions, with the objective of facilitating the identification and development of projects across different sectors. In addition to traditional categories such as retrofit and new installations, a new class of “integrated projects” was defined, allowing for combinations of interventions affecting entire systems or production lines.

This change addresses one of the structural limitations that had emerged in previous phases: the difficulty of fitting complex, real-world interventions into rigid project categories. By providing a more flexible framework, the reform aims to better capture the diversity of energy efficiency opportunities, particularly in the industrial sector.

Reducing transaction costs: simplifications in project development

A second group of measures targets the reduction of transaction costs associated with project development and submission.

One of the most relevant changes concerns the definition of the ex-ante baseline. Under specific conditions, proponents are allowed to avoid the requirement of a full twelve-month monitoring period prior to the intervention, particularly when repeating patterns can be identified or when reference values derived from market data can be used. This addresses one of the most critical bottlenecks in the previous framework, where baseline definition often represented a significant barrier in terms of time and cost.

Additional simplifications include the reduction of minimum thresholds for certificate issuance and the possibility to anticipate a higher share of savings in the first years of project lifetime for certain sectors, such as buildings and transport. These measures improve the financial attractiveness of projects and facilitate participation, especially for medium-sized interventions.

The reform also introduced procedural simplifications in the evaluation process. The possibility for the managing authority to request additional information only once, combined with defined timelines for the conclusion of evaluations, contributes to increasing transparency and reducing uncertainty for applicants.

Reducing risk and uncertainty: preliminary procedures

A distinctive and effective feature of the 2021 reform is the introduction of preliminary communication and preliminary verification procedures, two types of preliminary assessment. These instruments allow project proponents to interact with the managing authority before the formal submission of a project. In the case of preliminary communications, proponents can signal their intention to develop a project and receive initial feedback on eligibility. Preliminary verifications go further, providing a more detailed evaluation of key aspects such as M&V methodology, baseline definition, and expected savings.

From a market perspective, these tools play a crucial role in reducing perceived risk. In a system characterised by high complexity and historically high rejection rates, the possibility to obtain ex-ante validation significantly lowers the uncertainty associated with project development.

This is particularly relevant for industrial projects, where investments are often substantial and the cost of a rejected application can be significant. By reducing this risk, the reform aims to unlock a portion of the supply that was previously constrained not by lack of technical potential, but by regulatory uncertainty.

Strengthening institutional support and market confidence

Beyond regulatory adjustments, the reform places strong emphasis on the role of institutional support. The managing authority (GSE) is tasked with developing a comprehensive set of tools and services aimed at supporting project developers. These include detailed guidelines, databases of reference projects, tools for estimating potential savings, and dedicated assistance services.

This shift reflects a broader change in approach. While previous phases of the scheme were characterised by a more control-oriented framework, the 2021 reform recognises that, in a complex system based on project-specific M&V, effective functioning requires continuous interaction between regulators and market participants.

Improving the quality and clarity of guidance is also instrumental in reducing the rate of rejected projects, which had been a major issue in the years preceding the reform. A higher success rate, in turn, contributes to rebuilding trust in the mechanism, which is a critical condition for long-term participation.

Project pipeline and participation dynamics

One of the first observable effects of the reform concerns the renewed activity on the supply side, particularly in terms of project submissions. After a prolonged period characterised by declining participation and high uncertainty, the number of new project proposals has started to increase (Figure 5). This trend is especially visible in the use of preliminary procedures, which have been widely adopted by proponents (Figure 6). The uptake of preliminary assessments, in particular, suggests that market actors perceive these tools as effective in reducing the risk associated with project development.

Figure 5

Figure 6

This is a relevant signal from a behavioural perspective. In the years preceding the reform, high rejection rates and evolving interpretation of rules had significantly eroded trust in the mechanism. The availability of ex-ante validation mechanisms appears to have reversed this trend, encouraging proponents to re-engage with the scheme.

Approval rates and administrative performance

Another key indicator of recovery is the improvement in project approval rates. During the crisis phase, rejection rates for monitoring plan proposals had reached very high levels, in some cases exceeding 50%, mainly due to the increasing complexity of M&V requirements and the lack of clarity in their application. This represented a major barrier to participation, as the risk of rejection translated directly into financial risk for project developers.

Following the reform, and in parallel with the strengthening of support measures by GSE, approval rates have increased significantly. Although data must be interpreted with caution—given that not all submitted projects complete the evaluation process within the same time frame—the trend is clear: a higher share of projects reaches a positive outcome. According to GSE data in 2026 (Various Authors 2026), only 1% of the applications has had a negative evaluation, and all applications following a preliminary request have had a positive evaluation so far.

This improvement can be attributed to several factors. First, the introduction of preliminary assessments allows potential issues to be identified and addressed before formal submission. Second, clearer guidelines and increased interaction with the managing authority reduce the likelihood of misunderstandings. Third, the procedural simplifications introduced by the reform streamline the evaluation process.

From a systemic perspective, a higher approval rate is not only a matter of administrative efficiency, but also a key driver of market confidence. The expectation of a reasonable probability of success is essential to justify the upfront costs associated with project development.

Certificate supply: slow recovery and structural inertia

In terms of issued certificates, the recovery appears more gradual and less pronounced. This is consistent with the structural characteristics of the scheme. As discussed in previous sections, there is an inherent time lag between the submission of a project and the generation of certificates, due to the need for implementation and subsequent monitoring of savings. As a result, improvements in the project pipeline translate into increased supply only after a delay.

Moreover, part of the observed dynamics is influenced by exogenous factors. In particular, the effects of the COVID-19 pandemic on industrial activity have had a temporary impact on energy consumption patterns and on the ability of projects to generate measurable savings.

Despite these constraints, there are indications that the downward trend observed after 2017 has stabilised. In some segments, particularly for projects developed under the post-2017 rules, the number of certificates issued has started to increase, albeit from relatively low levels.

An important aspect to consider is the progressive exhaustion of certificates generated under previous regulatory regimes (Figure 1). As these certificates reach the end of their lifetime, the system increasingly relies on new projects developed under the new rules. This transition is critical, as it will determine the long-term sustainability of the scheme.

Market balance and price dynamics

The effects of the reform are more immediately visible in market dynamics. The reduction of targets has contributed to alleviating the pressure on the demand side, leading to a gradual rebalancing of the market. Price levels, which had reached very high values during the shortage phase, have dropped below €250/certificate since the second half of 2023.

However, this adjustment should not be interpreted as a simple return to equilibrium. Rather, it reflects a new balance point, characterised by lower targets and a supply that is still constrained but more consistent with demand.

The role of regulatory mechanisms, such as the tariff reimbursement cap and the conditions for accessing virtual certificates, remains significant in shaping price dynamics. These instruments act as stabilisers, preventing extreme price fluctuations but also limiting the extent to which price signals can incentivise additional supply.

From an analytical perspective, the current phase can be described as a transition from a structurally short market to a more balanced equilibrium.

Rebuilding confidence and system credibility

Beyond quantitative indicators, one of the most relevant outcomes of the reform is the gradual rebuilding of confidence among stakeholders. The combination of more realistic targets, reduced uncertainty in project development, and improved interaction with the managing authority has contributed to restoring the perception of the scheme as a viable and predictable policy instrument, as collected by FIRE through surveys and interviews.

This aspect is particularly important in a system where investment decisions are made by a heterogeneous set of actors, often based on expectations about future regulatory and market conditions. Confidence, in this sense, acts as an enabling factor that influences both the quantity and the quality of projects entering the pipeline.

At the same time, this recovery remains conditional. The experience of previous years has shown that the scheme is highly sensitive to regulatory changes and to the consistency of their implementation. Maintaining a stable and transparent framework, together with the right support to operators from GSE, is therefore essential to consolidate the positive trends observed so far.

Expected effects on supply dynamics and early evidence

From an analytical perspective, the 2025 measures are expected to act primarily on three dimensions of the supply function:

• they should reduce transaction costs, lowering the threshold for project participation

• they are likely to shorten development cycles, reducing the time lag between project conception and certificate generation

• by reducing uncertainty associated with baseline definition and procedural requirements, the reform may further strengthen the positive trends in participation and project pipeline observed after 2021.

However, it is important to note that these effects will materialise only progressively, given the intrinsic characteristics of the scheme.

Given the recent introduction of the 2025 update, quantitative evidence is still limited. However, initial qualitative signals suggest a positive reception among stakeholders, particularly regarding the simplification of procedures and the reduction of administrative burdens. Figure 5 and Figure 6 seem to confirm the feedback collected from a large sample market operators and the information shared by GSE at the beginning of 2026, including a positive expectation on the capability of the scheme to reach the targets in the coming years.

If effectively implemented, these measures have the potential to consolidate the recovery initiated by the 2021 reform, moving the scheme towards a more stable and functional equilibrium.

Target setting must reflect effective, not theoretical, supply potential

One of the most critical lessons concerns the setting of targets. In the Italian experience, the imbalance that emerged in the second half of the 2010s was not primarily due to a lack of technical potential for energy savings, but to a mismatch between targets and the system’s ability to deliver projects under the prevailing regulatory conditions. This distinction is crucial. Technical potential assumes ideal conditions, while effective supply depends on transaction costs, regulatory constraints, project development cycles, and market confidence.

Setting targets without fully accounting for these factors can lead to persistent shortages that cannot be corrected by market forces alone. In such situations, price signals lose their effectiveness, and the system risks entering a self-reinforcing cycle of imbalance, whose effects on system costs also depends on the scheme rules.

The introduction of a market stability mechanism in 2021 reflects the recognition that target setting must be adaptive and based on continuous monitoring of actual system performance.

High-quality M&V requires compensatory design measures

A second key lesson concerns the role of measurement and verification. The Italian scheme demonstrates that it is possible to implement an EEOS largely based on metered savings, ensuring a high level of robustness and credibility. However, this comes at a cost in terms of complexity, time, and—without proper support and sufficient time to initially qualify market operators and end-users—reduced participation.

This implies that strong M&V requirements cannot be considered in isolation. They must be complemented by design features that mitigate their impact on supply dynamics. These include simplifications in baseline definition, procedural streamlining, and tools to support project development. For new schemes, options based on deemed savings are recommended to facilitate the start-up of the project and increase supply elasticity.

The experience of the 2017 reform shows that tightening M&V without introducing compensatory measures can lead to a sharp contraction of supply. Conversely, the reforms of 2021 and 2025 suggest that it is possible to maintain a measurement-based approach while improving accessibility and reducing transaction costs.

Market-based mechanisms require active governance

The Italian case challenges the idea that tradable certificate schemes can function as self-regulating markets. While the price of certificates plays an important role, it is not sufficient to ensure equilibrium in the presence of structural constraints on supply. In particular, when project development cycles are long and complex, the responsiveness of supply to price signals is limited. Important issues will arise also in case of strong oversupply, since this can undermine the capability of the scheme to act as incentive for end-users and market operators.

This implies that active governance is essential. Regulatory authorities must continuously monitor market conditions, adjust targets when necessary, and provide guidance to market participants. The role of the managing authority (GSE) in the Italian scheme illustrates this point. The shift towards a more supportive and interactive approach—through guidelines, preliminary assessments, and technical assistance—has been a key factor in restoring the functioning of the system.

In this sense, EEOS should be seen not as purely market-based instruments, but as hybrid systems requiring both market signals and strong institutional coordination (see also Bertoldi et al. 2010).

Regulatory stability is as important as regulatory quality

Another important lesson concerns the role of regulatory stability. The Italian experience shows that even well-designed measures can produce negative effects if introduced abruptly or without sufficient transition periods. The 2017 reform improved the theoretical robustness of the scheme but did so in a way that significantly disrupted market dynamics. Frequent or unpredictable changes undermine confidence and increase the perceived risk associated with project development. This, in turn, reduces participation and further constrains supply.

The reforms introduced after 2021 suggest a more balanced approach, combining necessary adjustments with mechanisms that enhance predictability and allow for gradual adaptation. For EEOS, this implies that the timing, sequencing, and communication of regulatory changes are as important as their technical content.

Support measures are not ancillary, but structural components

A final lesson concerns the role of support measures. At least in the Italian case, in many policy designs, support activities—such as guidelines, technical assistance, and information tools—are considered secondary elements. The WhC case suggests the opposite.

In a complex system based on project-specific M&V, the ability of participants to understand and correctly apply the rules is a key determinant of performance. High rejection rates in the years preceding the 2021 reform were not only the result of strict requirements, but also of insufficient clarity and support.

The strengthening of support functions by the managing authority has been instrumental in improving approval rates and rebuilding confidence. This indicates that support measures should be considered an integral part of the policy design, rather than an add-on.

Synthesis and broader implications

Taken together, these lessons point to a broader conclusion: the effectiveness of EEOS depends less on individual design features than on the coherence of the overall system.

The Italian WhC scheme illustrates the challenges of combining a market-based approach with high standards of measurement and verification. It also shows that achieving this balance requires continuous adjustment, informed by monitoring and feedback from the market.

For policymakers, the key implication is that EEOS should be designed as adaptive systems, capable of evolving over time while maintaining a stable and credible framework for investment (see also Rosenow and Bayer 2017, Fawcett, Rosenow, and Bertoldi 2018).