Abstract

The paper focuses on the allocation of the rent from oil among levels of government and residents in Italy. While Italy is not particularly rich of natural resources, the production of hydrocarbons is not marginal and there are prospects for expansion of the production. A share of the rent appropriated by the public sector is assigned to Regions and Municipalities. Residents of the producing areas receive additional benefits from the producing companies and from the cash transfers from the central government. However, their perception of these benefits is lessened by the delayed implementation of the projects funded by the rent. This creates conflicts between the desire of the central government to expand the domestic production of oil, the concerns of environmental groups and the need of subnational governments to give adequate consideration to the environmental concerns of their citizens. Consistency between the assignment of the rent, on the one hand, and the management of environmental policy, on the other to the different levels of government becomes crucial to solve potential conflicts between governments and to ensure protection of the environment.