The ever-increasing global focus on climate change requires greater awareness of the main risks and opportunities that it presents.

Operational and regulatory risks

In the current scenario, extreme weather events, natural disasters and the failure of initiatives to mitigate and adapt to climate change expose the Group to operational and regulatory risks, especially in terms of damage to assets and infrastructures that could result in their prolonged unavailability (see the chapter “Getting to know Enel - Main risk types”).

Political uncertainty increases regulatory risk by reopening the debate on the introduction of alternative and potentially less efficient policy instruments (such as the carbon tax and European standards on CO2 emissions).

To minimize these long-term risks, Enel has accelerated its decarbonization program by developing new business opportunities in the field of renewable energy, energy efficiency and new digital technologies in the end-use market. Key opportunities include: the digitalization of networks, the growth in renewable sources and the decarbonization of the energy mix, the development of new products and services for energy efficiency for consumers, and the promotion of electricity in the transport (e-mobility) and housing construction sectors.

TCFD – Task Force on Climate-related Financial Disclosure

In 2015, on the request of the Central Bank Governors and Finance Ministers of the G20 countries, the Financial Stability Board (FSB) launched the Task Force on Climate-related Financial Disclosure (TCFD). Led by Michael Bloomberg, the Task Force aims to develop specific recommendations on voluntary disclosures on the financial impacts of climate risk. The final recommendations were published in June 2017.

Enel signed the letter of support for the implementation of the TCFD guidelines and has set up a multifunctional working group that is adopting the recommendations by working on three main themes:

  • development of long-term climate models;
  • mapping risks and opportunities related to climate change;
  • financial reporting associated with climate change.

In terms of identifying future scenarios, Enel and ICTP (The Abdus Salam International Center for Theoretical Physics) signed a two-year agreement in early 2018 to carry out the research project “Climate Change and Resilience”. The project calls for ICTP to develop a series of simulations of climate scenarios, to allow Enel to carry out analyses on the medium-long term resilience of its assets and its business (2020-2050).

Enel’s reference regulatory framework and positioning

The decision-making and regulatory processes of the European Union (EU) are shaping the current energy transition. This, in turn, has an effect on companies’ business models and on the behavior of consumers and citizens, and directly impacts national legislation in the countries where the Group operates. Furthermore, given its transnational nature and current global challenges, the European legislative process is becoming increasingly complex, requiring ever closer cooperation between the EU institutions and other stakeholders. Accordingly, Enel has decided some years ago to set up a European Affairs Function to monitor the relevant issues and represent the Group at European level in dealings with institutions, organizations, associations and other active counterparties. One specific unit is responsible for consolidating and representing the Group’s position on policies relating to climate change, low-carbon policies, international regulation of the carbon market, the environment, and security of supply. The main areas of interest to the Group and the initiatives it was involved in during 2017 are described below.

Carbon pricing policies

Although the market is increasingly interconnected in terms of technology and product circulation, the regulatory instruments adopted by individual countries are still too fragmented. The biggest challenge in this area is carbon pricing policies. Today there are many forms of regulation, such as the Emissions Trading Scheme (ETS) used in the EU, New Zealand, California, South Korea and some regions of China, as well as various types of direct taxation or hybrid solutions. Coordinating different policy instruments that also have complementary objectives (including policies on renewable energy and energy efficiency measures) is a crucial factor in identifying cost-effective policies. Establishing an emissions trading system based on a robust regulatory framework ensures certainty over long-term climate goals.

Instruments based on market mechanisms result in prices that are more consistent with macroeconomic cycles and have proven to be more cost-effective in achieving climate targets in various geographical areas. The debate over the suitability of a “cap and trade” system or a carbon tax needs to be addressed from multiple perspectives, balancing the cost-effectiveness and feasibility of the instruments. Such a debate must also include an assessment of the areas to be covered by the system and limitations due to the current political framework. The EU’s ETS1 system makes it possible to exploit an existing harmonized scheme at European level which guarantees technological neutrality and uniform treatment of market operators.

In light of these considerations, the Enel Group does not support the introduction of national carbon taxes, as it would significantly distort competition within the EU single market while increasing the overall cost of achieving the desired environmental result. Environmental taxation is more suited to countries with a weaker institutional framework and sectors characterized by diverse emissions sources. In this regard, Enel welcomes the outcome of the EU-ETS negotiations for the period 2021-2030 and sees the ETS as a key element of EU climate policy that should be strengthened by ensuring that other policies complement it and allow climate goals to be achieved, while also safeguarding the EU’s competitiveness.

Signs of a long-term stable price for investments in low-carbon technologies and consistency between EU and national policies are crucial in restoring the role of the EU-ETS in driving emissions reductions.

In particular, in the response to the ETS consultation, Enel asked for structural reform of the scheme based on an ambitious climate target for 2030, flexible supply (Market Stability Reserve) and a dedicated program to support innovation (NER400 Innovation Fund).

In regions outside the EU (such as Latin America), Enel resources are increasingly covered by carbon pricing schemes, mainly taking the form of taxes that could be transformed into “cap and trade” schemes in the medium- long term.

Internal CO2 reference price

The strategic and industrial planning process also assesses the impact of carbon prices on short-, medium- and long-term investments and decisions. However, because low-carbon growth is one of the four ESG strategic pillars, investment choices in new capacities are automatically and directly in line with the objective of keeping the global temperature rise below 2 °C. As for the short term, the internal CO2 reference price is set within the range of 6-12 euro/ t, in line with the international recommendation and guidelines for the ETS. The short-term prospects reflect regulatory scenarios and market expectations and allow the impact of the CO2 price on Enel’s activities to be assessed.

Clean Energy Package - proposal to make Europe lead the energy transition

The Clean Energy Package is a package of legislative proposals covering the areas of renewable energy sources, energy efficiency, the electricity market, EU governance and mobility. The measures introduced by the European Commission at the end of 2016 aim to make safe, sustainable and competitive energy available to EU consumers at affordable prices. To achieve this, the Commission believes that it is necessary to radically overhaul the European energy system so that it is an integrated system based on competition and optimal use of resources, and which results in a sustainable, low-carbon and climate-friendly economy that is built to last. Energy efficiency, renewable energy, competitiveness and innovation will play key roles. The proposals contained in the package will be approved following the standard European legislative procedure, which involves a co-decision process between the European Parliament and the Council of the European Union. It is estimated that the process will be completed in 2018.

Mobility Package - actions for clean, competitive and connected mobility in Europe

In 2017, the European Commission brought in a series of legislative measures (“Europe on the Move”) to promote clean, competitive and connected mobility. This package is one of the European commitments under the Paris Agreement to reduce emissions, especially in the transport sector and particularly on roads. Over the last 25 years, emissions in this sector have steadily increased in relation to the growth in mobility demand and represent a quarter of EU greenhouse gas emissions (road transport alone is responsible for 22%). The package is aimed at combating climate change, improving the quality of life of European citizens and ensuring that European industries create jobs, generate sustainable economic growth and drive innovation in renewable energy technologies. Unlike the Clean Energy Package, the Mobility Package is only in the early stages of the European legislative procedure.

Energy efficiency, air quality and environmental policies and the circular economy

Energy efficiency is one of the key ways to decarbonize economic systems. Electrical technology is now widely used in many sectors (residential, services, industrial and transport) and some of it, such as heat pumps and electric vehicles, can make a substantial contribution to energy efficiency and have additional benefits. However, delivery of these benefits is often hampered by strong non-economic barriers, including: information barriers, transaction barriers and lack of awareness. Enel is engaging with institutions in this area in order to facilitate specific actions, integrating them into an incentivizing regulatory framework to encourage the spread of efficient technologies on the retail market. As already demonstrated in several countries, funding initiatives supported effectively by information campaigns could play an increasingly important role, allowing operators to promote energy efficiency technologies.

The European Union’s strategy is also oriented towards achieving air quality levels that do not have a significant impact on human health and the environment. Although electricity production is going through an extensive process of reducing greenhouse gases and pollutants and switching to renewable sources, other sectors and energy uses are lagging behind and show significant room for improvement. The energy used in transport comes almost entirely from fossil fuels. Likewise, the heating and cooling sector could be much more energy efficient and less polluting. Emissions from both sectors could be significantly reduced by increasing their electrification and exploiting the increase in the share of electricity generated from renewable sources in Europe.

Finally, the European Union has made the adoption of models in line with the principles of the circular economy a strategic priority2, as it offers an opportunity for growth and development in terms of competitiveness, innovation, environment and employment. Business models that are less tied to the use of raw materials enable the development of a cost structure that is less exposed to price volatility risk, both in terms of market dynamics and regulatory measures. Limiting environmental impact makes an important contribution to reducing both marine and terrestrial waste and air pollution, and also contributes to curbing global warming as foreseen by the Paris Agreement. The reduction in the quantity of raw materials used and the growth of value- added services could result in a shift in the cost structure from raw materials to labor, i.e. from more automated sectors to sectors mainly involving human work, with consequent growth in employment.


1 The European Union Emissions Trading Scheme (EU-ETS) is the main instrument adopted by the European Union, in implementation of the Kyoto Protocol, to reduce greenhouse gas emissions in energy-intensive sectors, meaning those with the highest emissions. It is a “cap and trade” system because it sets a maximum cap on the total level of emissions allowed for all entities bound by the system but allows participants to buy and sell on the market (“trade”) CO2 emissions entitlements (“units”) according to their needs, within the established limit.
2 uropean Union 2015 “Towards a circular economy: A zero waste program for Europe”.

Action platforms and partnerships

The Group actively participates in industry associations and organizations to promote issues related to the energy transition. Below are some examples (see also the chapter “Getting to know Enel”).

Alliance of CEO Climate Leaders The CEO of Enel is a member of the Alliance of CEO Climate Leaders, organized by the World Economic Forum. In 2017, Enel co-signed a declaration that supports effective climate solutions that are promoted by the business, expressing strong support for the recommendations of the TCFD.
Carbon Pricing Leadership Coalition Enel is a member of the Carbon Pricing Leadership Coalition (CPLC) launched in 2014 by the World Bank, with the aim of bringing together public and private players to speed up the adoption of effective carbon pricing solutions worldwide.
“A more ambitious EU-wide renewable energy target for 2030” declaration The “A more ambitious EU-wide renewable energy target for 2030” declaration was signed by six European companies in the energy sector: EDP, Enel, EnBW, Iberdrola, Ørsted and SSE. In this joint declaration, the signatories set a more challenging goal for renewable energy, rising from a 27% share to 35% by 2030. This goal is to be achieved through greater electrification of the transport and heating sectors, together with a redesigned electricity market for renewable energies, in line with the decarbonization targets set by the Paris Agreement.
Electrification Alliance The Electrification Alliance is an initiative of the leading European associations that promote the key role of electricity in the decarbonization process. In 2017, a statement was published reiterating the role of electricity and the commitment to support the reduction of climate-altering emissions, as well as the increase in investments in non-issuing technologies such as renewable energy, energy storage and smart grids, while promoting integration with the heating, cooling and transport sectors. In the early months of 2018, the Alliance focused on defining the EU’s post-2020 budget (the Multi-Annual Financial Framework - MFF) and the Mobility Package. With regard to the MFF, the Alliance has requested that public spending in the EU reflects the strategy of the Paris Agreement and is intended to support the related commitments on climate and energy in all EU countries, including the objective of carbon neutrality for infrastructures and the wider EU target for 2030 on renewable energy, as well as the electrification of consumption for smart and efficient use of energy. As for the Mobility Package, the Alliance calls for recognition of the importance of transport electrification as a key factor for achieving road-travel decarbonization in the EU and highlights the need for a more stringent commitment in that regard.
Platform for Electro-Mobility The Platform for Electro-Mobility is a joint initiative of companies, associations and NGOs (non-governmental organizations) committed to promoting electric mobility and to collectively developing solutions for the electrification of European transport. Enel was the first utility to participate in the platform.
eurelectric new Industry Vision Under Enel’s leadership, eurelectric has repositioned itself in order to accelerate the energy transition by investing in the production of clean energy and in solutions enabling the change to reduce emissions and to reach the goal of becoming carbon-neutral well before the middle of the century. Thanks to this new vision, the electrical sector reaffirms its commitment to leading the transition towards a future of the energy sector in a fully sustainable EU, creating value for customers and for society. The new Vision received the unanimous support of eurelectric members and a significant number of Managing Directors of the EU electricity companies.