Costs and Benefits of the Green Transition Envisaged in the Italian NRRP. An Evaluation using the Social Cost of Carbon

23 Pages Posted: 30 May 2023

Multiple version iconThere are 2 versions of this paper

Date Written: October 12, 2022

Abstract

We perform a cost-benefit analysis of the green investments contained in the Italian National Recovery and Resilience Plan (NRRP). We compute the future discounted benefits in terms of expected emission reductions using various estimates of the Social Cost of Carbon, and compare them with the investment cost. Our results suggest that several projects would not have a positive net present value, unless policymakers are willing to use relatively low discount rates and give higher weight to benefits accruing to developing countries. The fact that investments under the NRRP are financed via long-term debt helps in bridging the gap between costs and benefits. Investments in renewable energy are an exception, as their benefits outweigh the cost within a short time-frame.

Keywords: inflation density, inflation risk premium, objective probability

JEL Classification: C22, C58, G12, E31, E44

Suggested Citation

Alpino, Matteo and Citino, Luca and Zeni, Federica, Costs and Benefits of the Green Transition Envisaged in the Italian NRRP. An Evaluation using the Social Cost of Carbon (October 12, 2022). Bank of Italy Occasional Paper No. 720, Available at SSRN: https://ssrn.com/abstract=4462965 or http://dx.doi.org/10.2139/ssrn.4462965

Matteo Alpino

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Luca Citino (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Federica Zeni

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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