The government unveiled a new energy-saving package on Monday, saying the measures proved it was determined to fight global warming.
Premier Romano Prodi said the plan aims to cut energy consumption by 20% and free the country from the need to import large amounts of electricity from abroad.
"It is a comprehensive package of fiscal and economic measures and organizational changes," Prodi explained.
"It was time to take this step because we have to change gear.
"We cannot go on wasting energy without thinking about the consequences this has on the nation and the world".
A series of tax breaks will encourage individuals and companies to become more energy efficient.
For example, 55% of costs of 'eco-friendly' operations in buildings - like the installation of solar panels and the replacement of old water boilers - will be tax deductible, compared to 36% up to now.
There will also be tax incentives for construction firms to build energy-efficient buildings and for companies to buy machinery that consume less electricity.
Duties on biofuels will be cut by between 50% and 80%. These are fuels created from natural crops like sunflower seeds, which generate a fraction of the pollution and greenhouse gases of conventional petrol
The plan sets aside 1.5 billion euros a year for investment in renewable energy sources.
This includes measures that seek to increase Italy's production of solar power 100-fold over the next 10 years, taking capacity from 30 to 3,000 megawatts.
Another one billion euros will be invested over the next three years in firms that develop energy-efficient and renewable technologies and those that employ low-energy production processes.
Prodi said the plan proved the government was "actively green, not passively green".
The premier also stressed that media campaigns will be run to enlighten the Italian public on the need to reduce energy consumption and encourage them to "change their daily habits".
Global warming is caused mainly by the burning of fossil fuels such as coal, oil and gas for transport and energy generation.
This leads to the emission of greenhouse gases like carbon dioxide, which trap the sun's rays in the atmosphere, causing temperatures to rise.
Experts say that carbon dioxide-free renewable energy, like solar, wind and hydroelectric power, are part of the solution.
PEOPLE ALSO HAVE TO LEARN TO USE LESS ENERGY.
But people also have to learn to use less energy, they say, because these renewable sources cannot meet current demand, at least not in the foreseeable future.
Environment Minister Alfonso Pecoraro Scanio said the package will help put Italy back on track to meet its Kyoto Protocol commitments.
The Protocol is a binding international treaty that obliges signatory countries to cut greenhouse gases in order to fight climate change.
Kyoto sets Italy the target of cutting its 1990 level of emissions - 521 million tonnes - by 6.5% by 2012. This means going down to 480 million tonnes in five year's time.
But instead of falling, annual carbon dioxide emissions have actually gone up to 586 million.
"The lack of attention of recent years means we now have to cut 100 million tonnes of carbon dioxide by 2012," Pecoraro Scanio said. "The measures presented today move in this direction".
Economic Development Minister Pierluigi Bersani claimed the package will also boost Italy's green technology and construction sectors and the economy as a whole.
"A few tenths of a percentage point of economic growth should come out of these measures," he said.
