Abstract
In recent years, the EU has supported actions to develop the green economy. Among these, incentives to sustain the growth of the wind power (WP) sector were welcomed as strategic for promoting environmental sustainability. This paper argues that the enthusiasm in supporting the green economy, without a preliminary assessment for crime opportunities, could end up fueling the black one. In particular, looking at the Italian case, the intention to facilitate wind farm construction provided remarkable (economic and procedural) incentives but neglected the issue of crime infiltration in the legitimate economy. Consequently, investments in wind farms also became a very lucrative business for organized crime (OC) groups. Through an analysis of the WP sector in Italy, this paper aims to show that, in territories characterized by a significant presence and control of OC groups, regulation could have an adverse effect providing opportunities for OC infiltrations in the legitimate economy. In particular this paper discusses whether investments in the WP sector in Italy are more likely in those regions with higher levels of OC presence and analyzes the role played by OC groups in cases of criminal infiltrations in the WP sector.
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Introduction
Renewable energy has been on the world’s political agenda since the mid-90s and concerns about climate change had led the United Nations to ask for a change of direction in national energy plans with the Kyoto Convention (1997). Europe has played a leading role in the issue of sustainable development and in 1997 the White Paper “Energy for the Future: Renewable Sources of Energy”Footnote 1 indicated “a 12 % penetration of renewables in the Union by 2010” [p. 10]. In response to this White Paper, in 2001 the Directive on Electricity Production from Renewable Energy Sources (RES)Footnote 2 set national non-binding targets for the proportion of electricity to be produced from RES in each new Member State. The new Renewable Energy Directive,Footnote 3 which repealed the old one, establishes mandatory national overall targets and requires that each state prepare National renewable energy action plans. Generally, the aim is to reach a renewable energy use of 20 % by 2020.Footnote 4 According to Eurostat, in 2010 RES in the 27 countries of the EU accounted for 12.5 % of gross final energy consumption while “the quantity of renewable energy produced increased overall by 72.4 % between 2000 and 2010, equivalent to an average increase of 5.6 % per annum.” [1]. Among the RES, wind energy achieved a remarkable growth rate. The European Wind Energy Association (EWEA) reported that “annual installations of wind power have increased steadily over the last 15 years from 814 MW in 1995 to 9,295 MW in 2010, an annual average market growth of 17.6 %” [2, p. 3]. Future estimates support this green trend [3] which received further impulse from the 2011 Fukushima nuclear incident [4, p. 69]. This strong growth is certainly due to technological advances that have improved the efficiency of wind plants but primarily to government support schemes which have made wind energy a profitable investment. Usually, incentives by EU Countries aim at compensating the generation costs of wind energy [5]. There are only three countries where the support level is significantly higher than generation costs (Belgium, UK and Italy). According to the EWEA “[t]he reasons for the higher support level, expressed by the current green certificate prices, may differ; but the main reasons are risk premiums, immature Tradable Green CertificateFootnote 5 markets and inadequate validity times of certificates (Italy and Belgium)” [5, p. 236].
Among the three, Italy seems the most interesting case since its incentives are the highest. In particular, the energy produced in Italy by windfarms is paid at a fixed rate guaranteed for 15 years, either as a 300 Euro/MWh feed-in tariff for plants lower than 220 KW or 180 Euro/MWh for bigger windfarms [6]. In both cases, it is the highest support level in the EU and probably the highest in the world [5], much higher than the Italian electricity market price (less than 70 € / MWh in 2010) [6] and greater than the feed-in tariffs applied, for example, in Germany and Spain (between 70 and 80 € MWh). In addition, the energy produced in Italy by windfarms has priority access to the grid, as do other renewable sources. Nonetheless due to structural constraints of the grid, the national energy agency often requests production to be interrupted. The loss is paid back to producers at market prices, and the costs are borne by final consumers.Footnote 6
What are the results of the Italian wind support scheme? Incentives effectively stimulated a fast growth of the Italian wind sector. From 2000 to 2012,Footnote 7 the installed windpower capacity jumped from 363 MW to 7,455 MW [7, 8]. The number of windfarms reached the quota of 542 (55 in 2000) with an estimated increase of more than 30,000 potential new jobs by 2011 [9]. In 2011, Italy ranked 7th worldwide for wind power capacity, and 3rd in the EU [4].
Wind energy investments are mainly concentrated in the Southern part of Italy (93 % of MW and 86 % of facilities) which, in general, has a greater wind potential (see below). This concentration raised concerns for the risk of infiltration of Italian Organised Crime groups, traditionally present in Southern Italy (Cosa Nostra in Sicily, Camorra in Campania, ‘Ndrangheta in Calabria, Apulian OC in Apulia). These concerns found confirmation in several investigations carried out by the anti-mafia prosecutors. In 2012, the Consiglio Nazionale Economia e Lavoro (CNEL) released a report on the issue of OC presence in the wind sector [10]. CNEL observed that “our country, and in particular Southern regions, benefited from over 300 million Euros for renewable sources and energy efficiency. About twice as much as Spain and France, and much more than Poland, Greece, Germany, the UK, Lithuania and Portugal [10], p. 39]”. Nevertheless, the capacity of electricity generation from RES for every 1,000 people, was equal to the EU average (465,5 KW), and worse than other countries such as Germany (565), Portugal (803), Spain (894,6) and Sweden (1,938). In other words “Italy received more [EU funds] to produce substantially as much as the other EU countries” [10, p. 40]. All of these elements should call into question if and how the support scheme regulation, combined with terrorial context could have increased criminal opportunities in the wind energy market.
In recent years, some authors [11–14] have highlighted how the conditions and characteristics of certain markets increase their vulnerability to crime and that subjecting regulation to a preliminary crime risk assessment could help to reduce crime opportunities (“crime proofing”) [15–17]. Vulnerability studies have been applied to specific economic sectors, for example, the European transport sector [18], the European music industry [19], the European pharmaceutical sector [20] and the European waste management industry [21]. Our study specifically analyzes the environmental and regulative vulnerabilities of the Italian wind power sector.
Aim
This paper aims to show that, in territories characterized by a significant presence and control of organized crime groups, regulation could have an adverse effect providing opportunities for OC infiltration in the legitimate economy. In particular this paper has two objectives: a) to test if investments in the WP sector in Italy are more likely in those regions with higher levels of OC presence and b) to analyze the role played by OC groups in criminal infiltration in the WP sector.
Data and methodology
To respond to the research questions introduced above, two methodological approaches are adopted in this paper: a quantitative approach, with a statistical analysis of the distribution of WP capacity installed, WP potential and OC presence across Italian regions; and a qualitative approach, with an analysis of 15 case studies of criminal infiltrations in the WP sector.
Quantitative approach: methodology and data
The quantitative analysis aims to show that the distribution of WP plants across Italian regions is correlated with the presence of OC even removing the effect of wind power potential.
Specifically, a partial correlation is calculated at NUTS 2 level with WP installed as the dependent variable, a measurement of OC presence as the independent variable and a measurement of WP potential as the controlling variable.
Wind power potential
Wind power potential, i.e. the potential to produce electricity from wind power [22], depends primarily on the wind speed of the site where a wind farm could be built. Hence a positive significant correlation between the distribution of WP farms and the level of wind speed could be hypothesized.
However wind speed is only part of the story. Technical, environmental, economic or social constraints (e.g. unsuitable terrain, natural reserves, lack of road or grid connections) exist which make it impossible to build wind farms and produce WP even in areas with high levels of wind speed. Wind speed is not hence sufficient as a proxy of wind potential, while measures of “constrained” wind power potential must be considered [5, p. 33].
For this reason it has been decided to use as a proxy of wind potential an indicator developed by the ESPON ReRisk project in 2010Footnote 8 which takes into account Natura 2000 protected areas, natural reserves and other constraints to the production of WP. The indicator (WP potential), expressed in (m/s · Km2) so as to account for the area size of the region [22, p. 220], is converted in NUTS 2 level for all EU regions by ReRisk, drawing on data provided by the Centre on Air and Climate change (ETC/ACC), led by PBL, by request of the European Environmental Agency (EEA).
The “constrained” wind potential measure provided by ESPON ReRisk is available for 277 European NUTS 2 areas (268 considering only EU Member States).Footnote 9 In Italy it is available for the whole set of 21 NUTS 2 regions and 20 administrative regions.Footnote 10
Wind power installed
Statistics about wind power installed are calculated on the basis of a database provided by ANEV (Italian National Association for Wind Power) which provides information, updated to September 2012, about the location of each wind farm installed in Italy, its number of wind turbine generators (WTG), average and total WP capacity installed (expressed in MW), date of connection to the electrical grid and ownership.
For each Italian region (NUTS 2) the following is calculated:Footnote 11
-
the cumulative WP capacity installed (in MW), calculated as the sum of the plant power capacity of all the wind farms located in the region (MW installed);Footnote 12
-
the total number of WTG installed, calculated as the sum of the number of WTG of all the wind farms located in the region (WTG installed).
Statistics on WP installed in EU MS are instead taken from EWEA 2011.
Organized crime presence
An indicator developed by Transcrime [23] is used as a proxy of OC presence in Italian regions. The Transcrime indicator draws on previous measurements of organized crime in Italy [24, 25], and takes into account five dimensions which are considered to be characteristic of OC presence and activity [23]:
-
Violence: Mafia homicides and attempted homicides;
-
Organization: Mafia members reported by the police;
-
Organization: number of mafia-type groups identified in the reports by special anti-mafia law enforcement and prosecution agencies;
-
Economy: Assets confiscated from the mafias;
-
Politics: Dissolution of city councils due to mafia infiltration.
The indicator is provided at a municipal (LAU 2) and provincial (NUTS 3) level and then, for the purpose of this paper, calculated at the regional (NUTS 2) level as the average of the municipal values weighted for the population of the municipality [26, pp. 34–35].
NUTS 2 level
For the purpose of the quantitative analysis, the NUTS 2 (regional) level is preferred to NUTS 3 (province) or municipal (LAU 2) level for various reasons.
First of all, the indicator of the real wind potential provided by ReRisk, taking into account all technical, environmental, social and economic constraints above described, is available only at NUTS 2 level. It is worth noting that measures of wind speed are made available by the Italian agency Ricerca sul Sistema Energetico – RSE for the entire Italian territory in a very detailed way. Thus in theory it would be possible to calculate, drawing on RSE data, measurements of average wind speed at both municipal, provincial and regional levels but these measurements would not take into account any of the constraints listed above, hence providing an unrealistic picture of the wind potential of each area: for example it is possible that in a very windy region there would be little opportunity for the exploitation of wind power due to unsuitable terrain or lack of roads and grid connections which would make it not economically viable to invest in windfarms.
Secondly, previous studies (e.g. [23–25]), based both on crime and criminal justice statistics and on anti-mafia LEAs reports, show that in Italy the activity of mafia-type criminal organizations, especially in Southern regions, has a very strong regional specificity. For example, excluding Northern and Central Italian regions, the activity of Camorra, Cosa Nostra, ‘Ndrangheta and Apulian OC groups (by far the most important OC groups operating in Italy) is mainly concentrated respectively in Campania, Sicily, Calabria and Apulia while very few cases of cross-regional infiltrations can be identified [23]. It can be hence assumed that in Southern Italian regions (the most significant both in terms of wind potential and WP installed, see below) the region itself is the “area of influence” of each mafia-type group.
Finally, in the administrative process which precedes the installation of WP plants, regional governments play a crucial role in terms of issuing WP guidelines, authorizing installations (jointly with city councils) and distributing public funds (especially EU funds through Piani Operativi Regionali – POR programmes), while minor roles are played by provinces.
It has therefore been preferred, despite the lower number of observations (20 regions)Footnote 13, to perform the analysis at regional level because it is more meaningful due to the reasons described above.
Qualitative approach: methodology and data
Cases selected and analyzed
To study the dynamics of OC infiltration of the wind power sector in Italy a qualitative analysis of cases of investigations has been carried out.
A list of cases of infiltration was initially compiled based on those published by Legambiente and the Consiglio Nazionale Economia e Lavoro [10, 27]. The cases profiled in these reports were then selected to form a subset of 15 cases chosen on the basis of availability of the information necessary for this analysis.
The selected cases present irregularities in the phases of preparation, authorization, fund raising, the execution of the construction and the activation of wind power plants in Italy. Additionally, only cases in which a specific plot of land had been selected for the construction of a wind farm were included in the analysis.
In some cases the involvement of OC was confirmed; in three cases Cosa Nostra was involved in the phases of wind farm installation, the ‘Ndrangheta was involved in three cases and Apulian OC was involved in one case. In most of the other cases the involvement of OC can neither be confirmed nor denied.
The cases have been covered by the media with great interest from the public and are for the most part still awaiting final sentencing. Given the mostly unresolved legal status of the cases, official court documents were available only in one case.
The study of the cases was therefore conducted through an analysis of open sources including news articles, reports made by environmentalist and anti-mafia non-profit organizations, government reports and the official websites of companies that own wind farms (Table 1).
Methodology
To better understand the dynamics of infiltration by OC groups in the wind energy sector a break-down of the phases of windfarm construction has been outlined (Steps). This analysis has been done following the script approach [28] which has been recently also applied to OC [29].
The 15 selected cases have been analyzed focusing on the steps of the creation of wind farms: Preparation, Authorization, Fund Raising, Execution and Activation. In each step various illegal actions can be committed that denote the infiltration of OC groups.
The first step is the Preparation phase of the project and refers to the selection of a location. The options available to an investor to gain access to land on which to build a wind farm are to choose an area that is already owned by the investor, rent or buy a plot, or obtain permission to build on state-owned land.
Once an investor expresses an interest in the construction of a wind farm in a certain area the necessary contacts with public administration must be made to obtain the formal authorization. This refers to the second step (Authorization phase).
Once an authorization has been obtained the Fund raising phase (third step) can be identified where the investors have to collect the necessary funds to build the wind farm. Financing could take the form of bank loans or equity; there are also conspicuous public subsidies available to companies that invest in clean energy, mainly provided at regional and European Union level.
The fourth step is the Execution phase which starts when the contractors handle the building of the wind energy plant locally.
Eventually, the fifth step - the Activation phase - starts once the wind farm is ready to operate (Table 2).
Results
Quantitative analysis
In the first stage of the study, a statistical analysis of the distribution of WP installed, wind potential and OC presence is carried out across Italian regions (NUTS 2 level), with the aim of identifying if a positive correlation between WP installed and OC presence exists even after controlling for WP potential.
Descriptive statistics
When compared to other EU regions, Italy does not show a strong WP potential. The Italian region with the highest WP potential (Apulia) according to ESPON ReRisk ranks only 72nd out of the 277 EU NUTS 2 regions for which the measure is available.Footnote 14 Looking only at the national level, it could be noted that most of the Italian regions with the highest WP potential are in the south, while Northern regions are characterized by low levels (Fig. 1).Footnote 15 This is mainly due to the levels of wind speed (Fig. 2), which are higher in southern regions, but also to other reasons, such as the unsuitable terrain for the installation of wind-farms in areas such as the Alps.
Despite the low WP potential compared to other EU regions, Italy has witnessed a strong growth of WP plants and at the end of 2011 ranked third in the EU, after Germany and Spain, in terms of WP installed [2, pp. 4, 10]. In particular, between 2005 and 2011 on average the total WP capacity installed in Italy increased by 32 % per year compared to the 21 % of the rest of the EU (authors elaboration on EWEA 2011 and ANEV 2012 data).
At the end of September 2012, in Italy the total cumulative WP capacity amounted to almost 7455 MW and 5872 WTGFootnote 16 (Table 1). Not surprisingly most of the WP plants have been installed in the south. Sicily ranks first with almost 1756 MW (1.76 GW) and 1484 wind turbine generators installed, followed by Apulia (1523 MW installed), Campania (1208 MW), Sardinia (992 MW) and Calabria (889 MW) (Fig. 3
and Table 3
).
Finally, Fig. 4 shows the levels of OC presence, measured with the composite indicator developed by Transcrime [23], across Italian regions. Results are in line with the relevant academic literature (see [24] for a review) and the reports of Italian anti-mafia LEAs and judiciary authorities. In fact it can be noted that, while the presence of OC has been acknowledged in almost all of the Italian territory, Southern Italian regions, historically the places of origin of mafia-type organizations, are those with the highest level of OC presence. In particular the highest values are in Campania (61.2), Calabria (41.8), Sicily (31.8) and Apulia (17.8). Significant levels of OC presence also characterize selected Northern and Central Italian regions such as Lombardy and Lazio (Fig. 4).
Correlations
Before measuring the correlation among the variables described above, it is worth noting that, while Italian regions with high levels of WP capacity installed such as Sicily, Apulia and Sardinia rank also among those with the highest wind power potential, others such as Campania and Calabria have lower levels of WP potential. For this reason it is interesting to measure the WP capacity installed per “unit” of WP potential and to compare it with the values of other EU Member States (MS).
An indicator is therefore calculated as the ratio between the total WP capacity installed (in KW) in an area and the constrained wind power potential of the same area (expressed in m/s x Km2). There is no need to account also for the size of the area since it is already included by the indicator of WP potential developed by ESPON ReRisk.
Results are shown in Fig. 5, which compares Italy (average), the five Italian regions with the highest level of WP capacity installed and the 4 EU MS which, along with Italy, are at the top of the EU ranking in terms of WP installations. It could be noted that Italy is almost four times the EU average and that Calabria, Campania and Sicily are higher than any of the other EU MS. In particular in Campania 47.2 KW have been installed per each “unit” of WP potential.
Table 4 shows the correlation matrix of the four variables listed in Table 3 and described in the previous paragraph. It could be noted that, not surprisingly, the total WP capacity expressed by MW installed has a high positive correlation with the number of WTG installed. WP capacity is also correlated with the level of WP potential and the level of OC presence, while the latter and WP potential do not seem to be significantly correlated.
Results confirm the hypothesis that higher levels of WP potential constitute an incentive for the installation of WP plants, but also that stronger levels of OC presence could spur investments in the WP sectors due to the reasons described in the introduction, which will be analyzed in detail in paragraph 3.2.
To test the robustness of this association a partial correlation is calculated using WP installed (either MW installed or WTG installed) as the dependent variable, OC presence as the independent variable and WP potential as the controlling variable. Results are reported in Table 5.
In both cases the correlation not only remains significant but slightly increases, confirming a strong positive correlation between the distribution of WP installed across Italian regions and the level of OC presence even after controlling for the WP potential of the region. In other words the level of OC activity contributes to explaining the amount of investments in the WP sector in Italian regions as well as the wind speed and the availability of windy areas where it is possible to install wind farms.
By providing evidence of OC involvement in WP investments and by identifying the vulnerabilities in the WP sector regulations which facilitate OC infiltration, the next paragraph will present some cases of OC infiltration.
Qualitative analysis
The qualitative analysis is carried out according to the phases shown in Table 2. Each phase provides a description of different methods of infiltration of OC groups in the WP sector. Table 6 summarizes the illegal conducts that could be perpetrated.
Phase 1 – Preparation
The first step of the wind farm project is the selection of a location. It is often during this phase that, in the Southern regions (Apulia, Calabria, Campania, Sicily), legal entrepreneurs have their first contact with OC groups. The territorial control exerted by OC groups, in fact, gives them considerable leverage. In this phase, the vulnerability of the process lies in the strong influence of OC in regions where wind farm creation is more frequent and the weakness of public institutions due to widespread corruption and lack of outside control.
The options available to an investor to gain access to land on which to build a wind farm are to choose an area that is already owned by the investor, rent or buy a plot or obtain permission to build on state-owned land.
In the first case, the land runs the risk of being controlled or directly owned by a local OC group. To rent or buy land, pressures can be made on the original owner of the land to obtain a lease or a sale at an advantageous price. A renter with a clean record may be chosen to figure as owner of the property.
In three of the analyzed cases members of OC groups had acquired plots of land either to then apply for building authorizations themselves or, in one case, because it was common knowledge that a wind farm investor had expressed an interest in a certain plot of land. Only in the third case, was an effort made by the criminal group to conceal the involvement of OC by using an intermediary to purchase the land, acquired with use of violence from an unwilling seller. This is a traditional activity of OC groups: the use of violence or simply the threat of violence are well-known means of coercion in areas controlled by OC and land is a visible indicator of OC power.
An alternative to the acquisition of privately owned land, which might be traceable to OC groups, is to opt for state owned land. According to Italian law, certain areas, that show higher wind power potential and therefore would be better for wind farm placement, have protected status.Footnote 17 The choice of one of these areas would therefore allow for a greater profit once the wind farm is completed.
Nonetheless Italian regulation is very loose, allowing that plots classified as farmlands are viable for authorization. Also, areas that have protected status due to natural, historical or cultural value, can be used given the “public usefulness, undeferrable and urgent” status that has been attributed to wind farms in the dedicated legislation [10, 62].
In three cases wind farms were constructed on lands protected for environmental reasons; in one case a wind farm was being constructed in a natural park, in another the wind farm had not been cleared by environmental agencies because the site would have disrupted the local biodiversity and in yet another case the wind farm was built on land considered prone to landslides and earthquakes.
Phase 2 – Authorization
Once an investor expresses an interest in the construction of a wind farm in a certain area the necessary contacts with public administration must be made to obtain the formal authorization, thus initiating the authorization phase. The investor may consult experts, such as engineers and architects or clean energy specialists [10, 62].
The process requires the involvement of a great number of public officials, both within the local administration and belonging to other entities such as environmental protection agencies. Given the complexities of the authorization process and the many figures involved, contacts within public administration offices can be the key to obtaining all the necessary documentation and ensuring the positive outcome of the authorization process; furthermore there is no nationally standardized authorization procedure for the construction of wind farm plants, leaving local officials to piece together incomplete and unclear regulations and often operate in uncharted territory. This state of uncertainty in which local officials operate gives them unparalleled discretion in the authorization process [10, 62, 63]. As CNEL also noted [10, p. 35], discretion left in the hands of local authorities facilitates the infiltration of OC groups. Usually small municipalities are more vulnerable since their personnel are usually inexperienced and more exposed to threat, retaliations and/or corruption by OC groups.
In this phase illegal activities to obtain authorization can include bribery, corruption and conflict of interest of public officials; in all of the eight cases where a wind farm was completed and the infiltration occurred in the authorization phase, public officials were involved in irregularities, whether because of corruption by the investor, a personal interest in the completion of the project or connections to local OC groups. The types of incentive for abuse of office vary: the cases reveal promises of funding and support for re-election campaigns, the construction of city monuments, donations to local soccer teams, job positions for relatives and cars besides cash bribes in return for backing in the authorization phase. In two cases, members of the public administration acted in a clear conflict of interest by authorizing the construction of wind farms on their own land; in these cases, the wind farm investor paid the public official rent for the use of the land. In both cases, changes were made to the original projects to further benefit the landowners.
In addition, documents may be forged or hidden during the authorization process; in all of the ten cases involving public officials in the authorization phase, tampering (either by forgery, omission or removal) of official documents was involved, with the help of public officials.
Given the novelty of the sector, the complexity of the authorization procedure and the specific know-how required for the construction of a wind farm, an investor may not be equipped to successfully navigate the process. The figures of facilitators or developers have emerged in recent years as key figures in this field. Individuals with a business background, specialized in the creation of wind farm plants, and often connected, directly or indirectly, to OC groups can be instrumental in the authorization and construction phases by providing their services to both foreign and national investors. These developers supply the necessary know-how to deal with both the legal and technical requirements of wind farm construction and often have pre-existing contacts with public officials, technicians and experts [10, 62].
The same developers, sometimes equipped with international experience, can be often found across different cases, emphasizing how small the sector is but also how crucial it is for a company to have an experienced professional to consult in the whole process. A developer, either a public official or a businessman, was present in six of the eight cases where a wind farm was completed successfully and the infiltration occurred in the authorization phase.
Once again, this phase is vulnerable to infiltrations because of the influence of OC and the weakness of public institutions in these areas, especially at the municipal level. Additionally this phase is subject to irregularities because of the considerable discretion of local government given the absence of clear guidelines and outside control throughout the authorization process.
Phase 3 – Fund Raising
Once an authorization has been obtained, it is necessary for investing companies to fund their investments through bank loans, private equity or other forms of financing. Conspicuous public subsidies are also available, mainly provided at regional or EU level: e.g. non-repayable grants up to 50 % of the cost of the plant [63, 64] or public fundings foreseen by the national law 488/1992. The latter requires the intermediation of an authorized bank, identified by the awarded company (from a list compiled by the Ministry of Economic Development), which would be responsible for guaranteeing the financial viability and stability of the investing company itself. The company must present documents to bank officials demonstrating that the chosen site is available for construction and that it can co-finance the investment in the WP plant. The phase of fund raising is also an opportunity to commit illicit activities. Fraud can be committed by presenting documents that falsely state the availability of the land and financial viability of the company; corruption of bank officials may also be involved to ensure that due diligence is not respected.
In only one case, including seven wind farms, a complex fraud, involving the investing company and bank employees, was put in place in order to obtain public funds for the building of wind farm plants. Documents guaranteeing the availability of wind farm sites were forged, while the financial viability of the applicants was the result of accounting manipulations. In particular, the declared available funds were in reality infra-group transfers between the applying companies and others, which had already received subsidies for wind farm installations. In other cases the intent to benefit illicitly from 488/92 funding was revealed during investigations.
This type of scheme is very complex and requires both significant accounting expertise and the involvement of skilled professionals. The risk of this illicit activity for this sector lies in the considerable funding available to investors if the fraud is successful.
Phase 4 – Execution
In the execution phase of wind farm creation, referring to the construction and assembly of the plant, the investor, the contractor and subcontractor can commit irregularities while infiltration of OC can occur in the form of a protection racket.
In five cases, the investor was accused of violating building and environmental regulations, in one case even building the wind farm in a different location than the approved one.
In this phase contractors, who handle the construction of the windfarm, also play an important role: foreign companies or investors based in other parts of Italy may rely heavily on the local knowledge of a construction company, especially since areas with worthwhile wind potential are often in remote southern regions [10, 62, 65]. This phase can be very lucrative for OC groups and/or corrupted public officials who can make money through the involvement of colluded local companies. In fact, contractors and subcontractors can be selected as a favor to local powerful people, whether institutional or criminal: in four cases, the contractors were selected because of their connections to OC or local institutions and, in at least two cases, with considerable extra costs to the investor.
A final role that OC may play in the construction of wind farms is the racketeer. Protection racketeering committed by OC is not a novelty. In particular, in the case of wind farm construction, OC may pressure builders for two reasons: the location of the site and the construction-related nature of the business. As described above, windy areas in Italy are located in areas with an historical presence of OC; the local OC group may therefore feel entitled to acknowledgement by the investor, either with a one-time fee, much like a tax paid to a local authority, or through the “classic” periodic protection fee that would be expected of any other local business. Besides the location of the wind farm, the construction project may be targeted by local OC because of the activities involved. Italian OC groups have traditionally been involved in the supply and production of building materials, transportation and construction businesses. Besides the on-site assembly of the wind turbines and the construction of the structures necessary for energy collection, complementary activities could involve also the building of roads to the site, especially in remote locations. The local OC representatives may feel entitled to have a role in these activities even if other local businesses are in charge of the work [10, 62].
The presence of a protection racket was brought to light in three cases: in one case the investor allegedly met with local OC representatives to pay a racket fee but the plant was nonetheless damaged by OC; in another the company was allegedly forced to pay a “tax” on concrete to two different groups and to supply concrete, free of charge, to a mafia clan; in the third case the contractor was forced to pay a salary to relatives of a local boss without them actually working for the company.
The construction of wind farms can also present an opportunity for money laundering if the contractor is under the control of an OC group. In two cases, individuals were also indicted for money laundering.
Phase 5 – Activation
In the final phase, the wind farm is complete and ready to operate. There is little evidence of protection rackets forcing entrepreneurs to pay to avoid sabotage and vandalism to wind power plants. However, it is possible that entrepreneurs pay OC groups to avoid damages to the wind farm. If so the payment can be made in cash or through the hiring of OC members (or their acquaintances) in the company, usually as members of the security staff. In this way, the company does not need to use slush funds. In addition OC groups can force the company to use only “OC-friendly” suppliers.
Conclusions
Renewable energy is a challenge for the future of our world and its use must be encouraged. Nevertheless, policymakers have to take into account that regulation, even when dealing with environmental policies, can provide opportunities for crime. Namely, the Italian economic support scheme for wind power was disproportionately high compared to other EU countries. High profitability attracted legitimate and illegitimate investors. The absence of clear regulations in wind farm authorizations gave large discretion to local public officials. These ingredients, combined with other factors (highest levels of WP potential in Southern regions where OC groups are stronger and public administration is more corrupt), generated the perfect environment for OC infiltration and for joint-ventures between legal and illegal players.
Findings from our study confirm a strong positive correlation between the distribution of WP installed across Italian regions and the level of OC presence even after controlling for the WP potential of the region. This suggests that OC groups took advantage of incentive policies. Analyzing the law enforcement investigations in the wind sector, this study found cases of OC presence in different phases of wind farm constructions. The most vulnerable is the authorization phase. It is possible to say that often legitimate investors delegated to OC groups the role of dealing with (and corrupting of) local public administration in order to speed up the authorization process and to avoid delays in windfarm construction. In this scenario developers/consultants played a central role bridging legitimate and criminal interests. However, there is also evidence of corruption of public officials without the direct involvement of OC groups.
Recently a study published by Lüthi & Prässler revealed that South Eastern European project developers of wind energy farms (which mainly included Poland, Italy, Romania, Spain, Bulgaria, Greece and Turkey) would consider the shortening of the “Administrative process duration” as the most significant improvement and do not tend “to see corruption as a knock-out criterion” unlike contrary to the US and North Western developer groups [66, p. 4886] . Two sides of the same coin.
Notes
COM(97)599.
Directive 2001/77/EC.
Directive 2009/28/EC.
National overall targets for the share of energy from renewable sources in 2020 vary across EU MSs according to the 2005 share. For example, Italy’s 2020 target is 17 %. Other EU MSs’ targets: Germany 18 %, France 23 %, Spain 20 %, UK 15, Sweden 49 % [67, p. 11].
Tradable Green Certificates (TGCs) are a market-based instrument to regulate the development of renewable energy [68].
In 2009 the lost wind energy production was 393 GWh, equal to € 12 millions [69, p. 43].
Last update: Septermber 2012.
Data can be downloaded at www.rerisk.eu.
Provincia Autonoma Trento and Provincia Autonoma Bolzano-Bozen are generally identified as two different NUTS 2 regions. In the light of this paper Trentino Alto Adige is considered as a single region, resulting from the average between the two values of Provincia Autonoma Trento and Provincia Autonoma Bolzano-Bozen.
Both of the measures calculated are used as dependent variables in the analysis.
The cumulative WP plant power installed takes into account also those WP farms which have been dismantled. These are included because the aim of the paper is to focus on the decision to install a WP rather on the effective production of electricity from wind power. However dismantled wind farms account only for 40 MW, equivalent to the 0,5 % of the total installed capacity.
As explained above, in this paper Trentino Alto Adige is considered as a single region resulting from the union of NUTS 2 areas Provincia Autonoma di Trento and Provincia Autonoma of Bolzano-Bozen.
76th considering the entire set including also Iceland, Liechtestein, Norway and Switzerland.
Sixteen out of 20 Italian regions are included in the 50 % of EU regions with the lowest wind power potential; only four rank in the third quartile (Apulia, Sicily, Tuscany, Sardinia), while no Italian region is in the 25 % with the highest values.
These figures include also dismantled WP plants (nearly 40 MW, equivalent to the 0,5 % of the total installed capacity).
Italian law states that coastal areas (up to 300 m away from the shore (including cliffs)), mountains (1600 m above sea level in the Alps and 1200 m above sea level in the Apennines and on islands) and all national and regional natural parks and reserves (including the protective areas surrounding them) all have protected status (D.L. 42/2004, art. 142, c. a, d and f). Since 1991, Regions should list these areas in a document stating also which types of construction are allowed. In effect, none of the Southern regions with high levels of mafia infiltration (Apulia, Calabria, Campania and Sicily, see Fig. 4) had issued the “guidelines for environmental and energy planning” (PEAR) before 2005, and Campania still does not have a regional plan.
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The authors would like to thank Ms. Alessia Remmerswaal for the contribution provided during her MA Thesis.
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Caneppele, S., Riccardi, M. & Standridge, P. Green energy and black economy: mafia investments in the wind power sector in Italy. Crime Law Soc Change 59, 319–339 (2013). https://doi.org/10.1007/s10611-013-9418-1
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DOI: https://doi.org/10.1007/s10611-013-9418-1