This IEA report provides a comprehensive, in-depth assessment of the energy policies of Italy, including recommendations on future policy developments. The Italian government is undertaking major reforms in the energy sector. It has started to decentralise energy policy, giving more responsibilities to regions and local authorities. Thus, co-ordination across regions and with the national government is becoming an important issue. In February 1999, competition was introduced in the electricity sector. The Government is also preparing a Legislative Decree to implement the EU Directive on natural gas. In enforcing competition, attention needs to be given to the dominant position of national companies in the electricity, natural gas and oil sectors. Italy has high taxes on energy in comparison with other IEA countries. This has encouraged the country's low energy intensity. In addition, in December 1998, the Government introduced a CO2 tax. Tax policy needs a long-term strategy which would better reflect the external cost of using energy and make the tax structure consistent across the different sectors and fuels. The report also recommends that the Government take further measures to reduce greenhouse gas emissions in order to meet the Kyoto target.