The European Union and National governments have been largely promoting the use of renewable energy sources through financial incentives, to boost investment projects in the sector. The aim of the paper is to assess the use of incentives for renewable energy in Italy and understand its role, as a determinant of economic development, through panel data 2008-2014. The gap between issued and allocated funds shows the difficulty of Italian regions in efficiently using the funds. However, empirically analyses carried out in this study show that even in the case of allocation of the total funds, investments in renewable energy could not be considered as a strong vehicle of economic development. © 2017, Universiti Malaysia Sarawak. All rights reserved.