How the Meloni government uses the Italian Climate Fund to finance ENI projects in Africa and the Mattei plan

It seems prehistoric but in 2015, at the time of COP21 and the Paris Agreements, among the commitments set to keep the increase in temperatures within 1.5 °C compared to the pre-industrial era there was also the allocation of 100 billion euros per year by the richest states towards the countries of the so-called south of the world.

It was, and is, a key point in climate finance.As explains ECCO, the Italian climate think tank, “the term applies to financial resources dedicated to addressing climate change by all public and private actors from global to local scales, including international financial flows to developing countries to assist them in addressing climate change.”

For Italy the main public instrument to pursue the objective of the Paris Agreements is the Italian Climate Fund:until 2026 it will have a total budget of 4.4 billion euros, in addition to 40 million euros per year from 2027 for non-repayable contributions and management expenses.Established with the Draghi government in 2021, in the meantime the Italian Climate Fund has become a means of political propaganda for the Meloni government, given that it alone constitutes more than half of all investments relating to the Mattei Plan:of the 5.5 billion euros between credits, gift operations and guarantees, intended for cooperation with Africa in the name of safety, approximately 3 billion derive from this fund.Only now, nine years after the promise established at an international level, it is discovered that Italy intends to pursue support for the countries most affected by the effects of the climate crisis by relying on its largest and most important fossil fuel company.

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The first officially allocated contribution from the Italian Climate Fund, exactly 75 million euros, will go to finance ENI's biofuels supply chain in Africa. I agree that the Mattei Plan takes its name from the founder of ENI but that the State should finance the industrial projects of the energy company is perplexing.Especially if these projects concern biofuels, whose role in decarbonisation is significant discussed.The decision was made by the steering committee of the Italian Climate Fund at its meeting on 22 March 2024, the minutes of which were only made public on 16 May.In the minutes of the committee that approves the financing of individual operations - after the strategic committee has outlined the objectives of the fund - it is read only that the financing will go to "ENI Kenya BV or another company controlled directly or indirectly by ENI spa - which remains in any case guarantor for the entire amount of the financing - for the production of biofuels".

The next day, May 17, the Ministry of the Environment and Energy Security (MASE) he spread a much broader and more triumphant note announcing an additional $135 million from the International Finance Corporation (IFC) “to expand the production and processing of advanced biofuels, supporting the decarbonization of the global transportation system while ensuring livelihoods of up to 200,000 small-scale Kenyan oilseed farmers.”

ENI's project is the first officially financed by the Italian Climate Fund, established with the 2022 Budget Law and which intends to support, writes the MASE, "projects to combat climate change in the countries receiving public development assistance identified by the OECD Development Assistance Committee (DAC).Projects capable of reducing greenhouse gas emissions (mitigation) and improving the capacity to absorb the impacts of climate change (adaptation) will be selected as a priority.Projects to protect biodiversity and combat desertification will also be evaluated.The sectors of intervention are, among others:agriculture, energy, transport and water infrastructure”.

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A choice that strengthens ENI's positioning in a strategic sector also for the Meloni government, which aims, through fuels derived from biomass - be they of organic, vegetal or animal origin - to maintain the current automotive structure based mainly on fuel engines thermal combustion - petrol, diesel, methane, LPG.With the new institutional structure of the European Union that will emerge after the June elections, the Government's declared objective is to be able to include biofuels in the exemptions from the stop to the production of cars with internal combustion engines starting from 2035, in the wake of the exception obtained already from Germany on e-fuels.

The Government's triumphalist tones on biofuels after the G7 Environment and Climate in Turin

Sometimes a press release says more than it reports.In the MASE meeting of 16 May, in which the desire to support the production of biofuels and farmers in Kenya was announced, triumphalism prevailed:

The investment consists of $135 million from IFC and $75 million mobilized by the Italian Climate Fund, as part of the implementation of the Italian government's Mattei Plan in Kenya.This will allow ENI to increase both the production of advanced biofuel feedstocks (agrifeedstock) grown in Kenya and processing capacity through the construction of new pressing plants.The production of oilseeds, which is the primary raw material, is expected to increase from 44,000 tonnes to 500,000 tonnes per year.The project will also work with farmers, providing inputs, mechanization, logistics, certification and training to help them produce oilseeds, which are grown on degraded land unsuitable for food production and/or grown in rotation with food crops, helping to improve the soil fertility.The agreement was announced at the ongoing Africa CEO Forum 2024 in Kigali, Rwanda.

An announced triumph?Certainly an expected result, especially after the recent outcome of the G7 Environment and Climate, which was held in Turin last 29 and 30 April.In which, how declared by Minister Fratin a Republic, the presence of biofuels in the final text is "our success".Actually if you read the whole thing document final of the G7 Environment and Climate in Turin - 35 pages long - we note that the word "biofuels" appears just three times.The most important quote concerns the “Turin joint declaration on sustainable biofuels addressed to G7 ministers by biofuels sectoral stakeholders”.Declaration that came as part of the initiatives related to Planet Week that accompanied the G7.In particular, on 28 April the "International Forum on Sustainable Biofuels" was held in Turin, promoted by the Ministry of the Environment.The event saw the involvement of the ministers of the G7 member countries and the Brazilian presidency of the G20 (Brazil is one of the world's largest producers of biofuels) as well as the main public and private stakeholders active in the biofuels sector.And that's where she was drawn up the “joint declaration”, coordinated by the Clean Energy Biofuture Campaign and the Polytechnic of Turin.

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As points out the site Circular Economy.com:

Of the seven pages of the document, four are dedicated only to memberships, and the most numerous are the Italian ones:Assitol, Assobiodiesel, Assocostieri, Coldiretti, Italian Biogas Consortium, ENEA, EniLive, RSE, Iveco.The letter calls for “recognition of the contribution that sustainable biofuels can make as part of systematic solutions to de-fossilize air, sea and road transport, while generating co-products in the bioeconomy and circular economy sectors, recovering waste and using residues”, thus espousing the thesis that biofuels should also be used in cars and not just for heavy transport, which is notoriously difficult to electrify.

Even the International Energy Agency (IEA) itself has partially modified its assessments on biofuels.Self in 2022 the intergovernmental organisation, founded in 1974 following the oil shock and then becoming a point of reference in the analysis of the energy policies of member countries, in its annual World Energy Outlook made more doubts than certainties prevail over biofuels, focusing on high prices and a possible raw material supply crisis, in 2023 the perspective has changed.And a lot.Both in the Net Zero scenario (net zero emissions by 2050) and in the APS scenario (the scenario of announced commitments, taking the states' announcements as valid), is expected a notable increase in the use of biofuels worldwide:

Demand for biofuels is expected to expand by 38 billion liters in 2023-2028, an increase of almost 30% compared to the last five years (...) Both biofuels and renewable electricity contribute to achieving the objectives of domestic transportation policies such as low carbon standards in the United States and the RED Directive in the European Union.Biofuels have historically reduced oil demand the most, but electric vehicles claim a larger share of reductions in the gasoline segment during the forecast period.However, biofuels continue to be the dominant option for reducing oil demand in the diesel and jet fuel segments..

Partly contradicting the statements of previous years, now for the IEA "electric vehicles and biofuels are proving to be a powerful combination to reduce oil demand".A notable assist for those who have decided to invest in the sector for years.

Six-legged biofuels

ENI is already the second largest producer of biofuels in Europe today.In 2023, biorefining capacity reached 1.65 million tonnes of biofuels, thanks to the biorefineries of Porto Marghera and Gela and the co-management of a biorefinery in the USA.The start and completion of the conversion into a biorefinery is expected by 2026 of the Livorno plant, And it seems that on the horizon there is also the conversion of the Sannazzaro refinery (indiscretion partially confirmed by ENI at the shareholders' meeting).Furthermore, new biorefineries are being studied and developed in Malaysia and South Korea.In short:the business for the six-legged dog is booming.The goal is to reach an annual production capacity of 3 million tons in 2025 and 5 million in 2030.

Managing the entire biofuel supply chain is Enilive, the latest ENI subsidiary in chronological order, born from an offshoot of Plenitude, which recently he got people talking of himself for the announcement of the sponsorship of the men's football series A for the next three years.According to reported from the agency HANDLE, the agreement between ENI and the Serie A League will entail an outlay by the energy company of approximately 22 million euros per year (approximately 17% more than the last agreement with TIM).A signal, among many, which confirms ENI's strong positioning.

The main raw materials of biofuels produced by the state energy company, which exploit the Ecofining technology owned by the same company, are castor oil, used cooking oils, animal fats and other biomass.The company declares furthermore that, depending on the charge used, the hydrogenated biofuel HVO (Hydrotreated Vegetable Oil) is "capable of reducing between 60% and 90% of CO emissions_2eq (calculated along the entire value chain) compared to the reference fossil mix pursuant to the RED II Directive (2018/2001)”.

Until October 2022 the main supply of the biorefineries of Venice and Gela was palm oil, coming mainly from Indonesia and Malaysia, whose industrial use for the production of biodiesel was banned by the European Union, and then received from Italy, due to the deforestation that this supply entailed.For this reason, for a year and a half ENI has strengthened the production of so-called second generation biofuels, obtained through production techniques that they do not involve the removal of agricultural land from food production or changes in agricultural use.

If ENI is forced to resort largely to imports for used oils, from especially from China, the energy multinational has instead chosen to do it itself with regard to castor oil, creating a complex supply chain that connects from Africa to Italy.They are the so-called agri-feedstock, i.e. an industrial agriculture model that operates in this way:Castor seeds are collected from agricultural land and then taken to local agri-hubs, collection and pressing centres, where the vegetable oil is obtained which is finally sent to biorefineries for the creation of biofuels.

ENI he claims that castor oil cultivation takes place on abandoned, degraded land and not in competition with the food supply chain.The first projects were carried out in Kenya and Congo.And others will be launched shortly in Angola, Ivory Coast, Mozambique and Rwanda.At the moment the most advanced African state in the biofuels supply chain is Kenya.According to the data provided from ENI to the shareholders' meeting, in Kenya at the end of 2023 around 50 thousand hectares were used for the cultivation of castor beans, with the involvement of 80 thousand farmers.Which with the funds of the Mattei Plan and the International Finance Corporation should become 200 thousand.Huge numbers, which however do not seem to take into account the critical issues that have already emerged.

Critical issues regarding biofuels

We were saying that the most advanced African country in the biofuel supply chain is Kenya, where the agrifeedsock project he left in July 2022.ENI told shareholders that in 2023  production was 7 thousand tonnes of castor oil, of which 5 thousand have so far been shipped to Italy.A bit little, if you consider the enormous efforts made.

Doubts which are associated with the critical testimonies of Kenyan farmers, collected as part of a university laboratory organized by the Faculty of Human Sciences of the Environment, Territory and Landscape of the State University of Milan and published in March in reports of the A Sud association, entitled “Biofuels - an all-Italian game”.On that occasion the farmers they complained the poor yield, especially if you try to combine other crops with castor, and the poor economic performance.So much so that two years after the start of cultivation, many of them have expressed their intention not to renew the contract with SAFA (African Forestry Agricultural Services), the society intermediary to which ENI relies and which has offered farmers the free supply of seeds, the plowing of the fields paid for by the company and a fixed price at which the harvest is purchased.

Added to this are other critical elements, again highlighted by the A Sud report:

According to an investigation joint of the African newspaper The Continent and the NGO Transport & Environment, in the Republic of Congo ENI is adopting a large-scale approach, collaborating with large agri-food companies and encountering many difficulties in adapting seed varieties to local conditions.The projects have not yet taken off and farmers involved in the production of castor oil in the two of the pilot sites claim that the land they traditionally cultivated for food production has been expropriated by the government in favor of the companies with which ENI does business:Agri Resources and Toulon.Castor oil is not the only problematic supply chain for ENI.In another search signed Transport & Environment, after announcing in October 2022 that it had kept the official promise made to shareholders in 2020 to eliminate the use of palm oil in its refineries, ENI continued to use its derivatives such as distilled palm oil, the PFAD.When ENI committed to abandoning PFAD, it still left space open for the use of palm mill effluents (POME), which are wash waters generated from the milling of palm oil.In T&E's analysis, PFAD biofuels do not qualify as 'advanced', i.e. biofuels that receive preferential support under the EU Renewable Energy Directive and have also been excluded from the aviation fuel policy targets recently adopted by the 'EU (ReFuel EU).But above all, crude palm oil and its derivatives increase the risks of deforestation in producing countries through direct land conversion.In July 2023, the NGO followed the route of a chemical tanker named Lovestaken that unloaded PFAD at the Gela refinery, and later analyzed the route of three other ships departing from Indonesia to unload in Italy.

Urged by shareholders on the use of PFAD shortly before the May meeting, ENI he recalled that “the regulatory and market framework has evolved:since this is a production waste that can be exploited for energy purposes and cannot otherwise be used or disposed of, it currently represents a part of the feedstock" but did not want to provide data on the volumes used as it is "commercially sensitive information".While on the doubts relating to the castor yield, the energy company claims that "the introduction of improved seeds, which ENI will make available, and the adoption of good agricultural practices will allow farmers to further improve yields".Finally, regarding farmers' complaints about the low prices guaranteed so far, the company states that "the ENI model guarantees farmers access to land, new market opportunities and an additional source of income, stable in the long term;in this context, the initiative has aroused profound interest from farmers, resulting in an increase from the 11 thousand farmers involved in the first 2022 campaign to around 80 thousand at the end of 2023".

Double the EU targets

Despite the critical issues that emerged, the Ministry of the Environment still chose to support the six-legged supply chain.But was the contribution from the state really necessary?In 2023 ENI only he achieved profits of 4.7 billion euros and if we broaden our gaze from 2021 we discover that in three years the energy company, thanks above all to the rising prices on the gas market, has achieved profits of over 35 billion euros.This is the reason why in recent days the Ministry of Economy and Finance has sold a part of the stake he held in ENI:more precisely, it is 2.8 percent of the company's capital, with an operation through which it collected 1.4 billion euros.Money useful for reducing the enormous Italian public debt or allowing some room for maneuver in a Budget Law that is predicted asphyxiated.For comparison, the last financial maneuver of the Meloni government is rib 28 billion euros.In 2022 alone, in the midst of the energy crisis, ENI obtained profits of 20.4 billion euros.As he remembered Other economics:

ENI is not the only energy company to have announced record profits.In recent weeks, Exxon Mobil (over 52 billion euros), TotalEnergies (almost 34 billion euros), Shell (almost 38 billion euros) and BP (over 26 billion euros) have done so.However, ENI's technical investments are still strongly unbalanced on the fossil fuel business, despite the announced "priority" of decarbonisation reiterated by Descalzi in presenting the financial statements for the year.The data reported by the company itself shows this:in 2022 technical investments amount to just over eight billion euros.79% of these, over 6.3 billion, concern the "Exploration & Production" sector alone, and in particular the development of hydrocarbon deposits, in particular in Egypt, Ivory Coast, Congo, United Arab Emirates, Mexico, Iraq, Italy and Algeria.Even the refining activity in Italy and abroad (491 million euros) and the marketing of the distribution of petroleum products (132 million) weigh more than the investments made for the "development of the renewables business, acquisition of new customers and development activities of network infrastructure for electric vehicles", which are in share with the Plenitude vehicle, limited to 481 million euros.

It was not reasonable to expect, given the role of control that in theory the State should exercise over the company through its 30.5% shareholding, that the company itself would invest in a project in which it evidently believes a lot and which aims to decarbonise the transport system and create jobs along the value chain?The fact remains that part of the energy is based on ENI's biofuels energy strategy of the Meloni government.The updated version of the Integrated National Energy and Climate Plan (PNIEC) must be presented to the European Commission by 30 June, the document with which EU member states identify policies and measures to achieve the energy and climate objectives for 2030 .In the draft elaborate the government writes that on advanced biofuels (second generation ones, i.e. those on which ENI is focusing) it is expected to exceed the specific objective set by the RED III directive, equal to 5.5% by 2030, until reaching an objective around 10%, i.e. almost double.

A fact that stands out further in light of the hostile attitude, if not outright confrontation, held by the Italian government in the last year towards any environmental and climate measure developed by the European Union ("green madness" second Brothers of Italy):from the ban on combustion engines after 2035, set as part of the Fit for 55 package of measures, to the European directive on the energy performance of buildings, better known as the “green homes directive”;from the regulation on packaging law about restoring nature.If for all these measures the EU has been accused of being too ideological and unsustainable from an economic and social point of view, on biofuels, however, the government throws its heart over the obstacle.Finally, the dual and ambiguous role of Cassa Depositi e Prestiti must be underlined:one of the main financial institutions of the Italian State, in the form of a publicly controlled joint-stock company, which manages the postal savings of Italians.On the one hand, CDP was identified by the 2021 founding law as manager of the Italian Climate Fund;on the other hand, CDP is a 28.5% shareholder of ENI.Not exactly the best guarantee of transparency.

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