Regulatory Risks in European Energy Infrastructure Deals: Assessing Snam's Strategic Exposure and Investment Implications

The European Union's accelerating energy transition is reshaping the investment landscape for infrastructure operators. At the heart of this transformation lies Snam, Italy's dominant gas infrastructure firm, whose strategic ambitions face a critical juncture. While the company's €27 billion investment plan for 2025–2034 aims to modernize gas networks, expand carbon capture and storage (CCS), and build a hydrogen backbone, it must navigate a regulatory environment increasingly focused on decarbonization and transparency. The interplay between Snam's strategy and the EU's Clean Industrial Deal—launched in February 2025—reveals both opportunities and risks that investors must scrutinize.

The EU's Regulatory Overhaul: A Double-Edged Sword

The Clean Industrial Deal seeks to fast-track the transition to clean energy by reducing permitting times, derisking investments, and aligning projects with the EU Taxonomy for sustainable activities. According to a report by Deloitte, the EU aims to cut permitting times for renewable and grid projects to six months for simpler cases, while a EUR 1 billion industrial decarbonisation facility will support electrification and hydrogen projectsEnergy: How New EU Regulatory Developments Can Change the Investment Case^[1]. These reforms are designed to attract private capital through state guarantees and tripartite contracts, which lock in predictable regulatory timelines.

However, the same reforms also impose stricter criteria for what constitutes “climate-aligned” activity. The EU Taxonomy, which classifies economic activities based on their contribution to climate goals, now demands that projects demonstrate measurable emissions reductions and avoid carbon lock-in. For Snam, this creates a paradox: its current strategy relies heavily on gas infrastructure, including blue hydrogen and biomethane, which remain contentious under the taxonomy. Less than half of its planned investments are expected to meet these criteriaEnergy: How New EU Regulatory Developments Can Change the Investment Case^[1], exposing the company to potential funding constraints and reputational risks.

Snam's Strategic Dilemma: Gas vs. Green

Snam's 2025–2029 plan allocates €12.4 billion to infrastructure upgrades and energy transition initiatives, with a further €14.7 billion earmarked for 2030–2034Snam's 12,4-2025 Plan to Invest 2029 Billion, Focusing on LNG^[3]. While the company emphasizes its role in decarbonizing the energy system through hydrogen and CCS, its reliance on gas infrastructure remains a sticking point. A critical issue is the lack of alignment between Snam's Scope 3 emissions—linked to the end-use of transported gas—and its net-zero targets. As noted by the Institute for Energy Economics and Financial Analysis (IEFA), these emissions are 100 times greater than its Scope 1 and 2 emissions, yet they remain inadequately addressedEnergy: How New EU Regulatory Developments Can Change the Investment Case^[1].

The company's Sustainable Financing Framework, which includes Green and Sustainability-Linked pillars, attempts to bridge this gap. Green Financing supports EU Taxonomy-aligned projects, such as pipeline retrofits, while the Sustainability-Linked pillar ties borrowing costs to ESG performance targetsSnam Overhauls Sustainable Financing Framework with Green and ESG-Linked Pillars^[2]. However, the credibility of these instruments is undermined by the fact that less than half of Snam's capital expenditures meet taxonomy standards. This misalignment raises questions about the effectiveness of its transition strategy and the potential for regulatory pushback.

Investment Implications: Navigating Uncertainty

For investors, the key risks lie in regulatory uncertainty and the potential for stranded assets. Snam's heavy exposure to gas infrastructure—despite the EU's push for electrification—could lead to stranded costs if policy shifts accelerate. The Clean Industrial Deal's emphasis on electrification (targeting 35% of final energy use by 2030) suggests that gas will play a diminishing role in the long-term energy mixEnergy: How New EU Regulatory Developments Can Change the Investment Case^[1]. While hydrogen and CCS offer pathways to decarbonize gas networks, their scalability remains unproven, and the EU Taxonomy's evolving criteria could further constrain Snam's options.

Conversely, the EU's new State aid framework and tripartite contracts present opportunities for Snam to secure funding and regulatory clarity. By aligning its hydrogen and CCS projects with the Clean Industrial Deal's priorities, the company could access the EUR 1 billion decarbonisation facility and benefit from streamlined permitting. However, this requires a strategic pivot toward projects that demonstrably reduce emissions and avoid reliance on fossil fuels.

Conclusion: A Test of Adaptability

Snam's ability to navigate the EU's regulatory landscape will determine its long-term viability. While its scale and expertise in gas infrastructure provide a foundation for transition, the company must address its misalignment with EU climate objectives. Investors should monitor three key areas: (1) the proportion of its capital expenditures that meet EU Taxonomy criteria, (2) progress in reducing Scope 3 emissions, and (3) the integration of hydrogen and CCS into a broader decarbonization strategy. The Clean Industrial Deal offers a window of opportunity, but only if Snam can demonstrate that its investments are not just financially sound but also environmentally credible.