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Austria has copied Germany by putting a price on the CO2
emissions created by driving vehicles and heating buildings,
although activists say it is too low to be effective.
On 3 October, the governing coalition of the conservative
People's Party and the Greens announced they had agreed on a
so-called "eco-social tax reform" for the federal budget set to be
presented to parliament next week. The reform will gradually come
into force starting on 1 January 2022 and adjust taxes for
economic, environmental, and social aims.
It not only introduces a new carbon tax, but it also reduces
other taxes and duties by €18 billion ($20.8 billion) by 2025. In a
statement, legislators said the tax cuts on items such as social
security contributions, wages, and income are designed to provide
relief for people on smaller incomes, such as retirees, and make
the Austrian economy more competitive.
The CO2 pricing kicks off in 2022 at €30 per metric ton (mt) of
CO2, rising to €55 in 2025. After this, it will be set by an
EU-wide market for such emissions expected to be introduced the
following year.
Revenue from the Austrian carbon tax will flow into a subsidy,
providing €100-200 per year of relief for households.
"The tax reform brings noticeable tax relief for companies and
their employees as well as greening the tax system through the
introduction of CO2 pricing," the Austrian Chamber of Commerce said
in a statement.
Offering the counterpoint to this view, the NGO WWF argued
Austria's debut carbon price would be ineffective in reducing
emissions in a 2020 position paper. It cited the collective
Scientists for Future, which recommended a tax of at least €50/mt
C02 in 2020 and €130/mt CO2 in 2030 to decarbonize the vehicle and
heating sectors and recommended a CO2 price of at least €150 by
2025 and then €300 by 2030.
The move comes after government subsidies intended to salvage
pandemic-hit European economies triggered calls for greener
rebuilding.
Tax on carbon
"The tax reform brings the relief that our companies and their
employees urgently need for a sustainable upswing. The investment
activity of companies will also be strengthened with the
introduction of an investment allowance," said Chamber of Commerce
President Harald Mahrer.
Already, Austria has a largely decarbonized power mix thanks to
a fleet of hydropower plants that provide most of its electricity,
according to IHS Markit
analysts.
The government intends to take this further by sourcing the
country's entire power supply from renewables by 2030. IHS Markit
experts say this requires a 27 TWh expansion of the country'
renewables capacity, encompassing 11 TWh of photovoltaic solar, 10
TWh of wind, 5 TWh of hydropower, and 1 TWh of biomass.
Austria's carbon tax is focused on emissions caused by fuel used
in heating and transportation, which is different to the focus of
the parallel, EU-wide system, the EU Emissions Trading System (ETS)
that runs in member states including Austria. The EU ETS focuses
solely on industrial and power emissions.
Like that rule, the Austrian tax reform introduces financial
relief to prevent offshoring of carbon-intensive activities, or
"carbon leakage." In the Austrian version, companies whose fuel
costs make up a large share of overall business costs and
compensation, plus those companies unable to switch to CO2-neutral
alternatives, will get relief.
Domestic consumers are cushioned from the tax rise by a rebate
that varies by region, and takes into account whether public
transportation is available instead of private vehicle
transport.
Subsidy a remedy
Beyond offsetting the environmental measures, Austria granted
more tax exemptions for families with children, as well as for
companies with employees that will see "both employers and
employees benefit," according to the Chamber of Commerce.
Spurring companies to make environmental investments, the
government has also granted some tax exemptions on green
investments.
Another bonus for greening companies is the addition of an
electricity tax exemption for those that install renewable energy.
This rule encompasses "all renewable forms of electricity," but in
particular hydropower, wind power, and biogas.
Within the wider EU, the expected launch of the second EU ETS
for vehicles and heating fuel will be accompanied by a similar subsidy supporting
consumers, the Social Climate Fund, the likes of which the WWF
acknowledged was a "remedy" for social unrest.
France's "Yellow Vest" protest movement in 2018 led to President
Emmanuel Macron's withdrawal of a similar environmental tax paid by
consumers of diesel and gasoline.
Posted 06 October 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability
