Italy’s Superbonus and the Capture of Climate Policy by Modern Monetary Theory

In 2020, Italy introduced an unprecedented incentive scheme for residential renovations as part of a broader stimulus package aimed at promoting economic recovery from the COVID-19 crisis. The measure, known as the Superbonus, remained in effect from late 2020 through 2023. It allowed households to claim a tax credit of 110% on expenditures related to retrofitting properties to improve energy efficiency and/or seismic resilience. The tax credit was fully transferable to third parties or could be used as an invoice discount. Together with other home-renovation incentives, the Superbonus generated an estimated fiscal cost of approximately EUR 220 billion, exceeding the initial projections by about 150 billion. In its final year (2023), the cost of the program reached 4.2% of GDP, making it one of the largest industrial-policy initiatives in Italian history and arguably the most significant budgetary shock in Europe since World War II. Although the Superbonus enjoyed broad bipartisan support, its intellectual origins can be traced to a heterodox economic school of thought known as Modern Monetary Theory (MMT). This study examines the Superbonus through that theoretical lens, demonstrating how a small group of MMT advocates assumed influential roles within the government in 2020 and advanced their policy agenda by capitalizing on the exceptional circumstances and fiscal leniency that followed the pandemic. It further assesses the outcomes of the Superbonus across multiple dimensions—including its effects on economic growth, fiscal sustainability, and environmental performance.