OECD Environmental Performance Reviews: Austria 2026

Report

22 May 2026

Assessment and recommendations

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Abstract

The Assessment and Recommendations present the main findings of the OECD Environmental Performance Review of Austria. They identify 40 recommendations to help the country make further progress towards its environmental objectives and international commitments.

1. Towards the green transition

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1.1. Addressing key environmental challenges

Sustaining social and environmental progress in Austria under fiscal constraints will require more cost-effective policies and stronger governance

The small, open economy of Austria has a strong manufacturing base and exports high-value goods but depends on fossil-fuel imports. The country’s population enjoys relatively high living standards and is increasingly concentrated in large and mid-sized metropolitan areas (OECD, 2024[1]), while most regions – characterised by mountainous landscapes and extensive forests – remain sparsely populated.

After steady growth in the 2010s, the economy contracted sharply during the COVID-19 pandemic and entered recession in late 2022. While recovery began in 2025, growth is expected to remain subdued (OECD, 2025[2]). Fiscal pressures intensified in 2024, prompting a fiscal consolidation plan that also affected environment-related spending. This heightens the need for improving efficiency of public spending and mobilising private investment through well-designed regulations and incentives (Section 1.2).

Between 2010 and 2024, Austria decoupled some environmental pressures from economic growth, with faster declines in the 2020s partly reflecting the economic slowdown. While the economy expanded, energy supply, greenhouse gas (GHG) emissions and major air pollutants either declined or grew more slowly than real gross domestic product (GDP) (Figure 1). Domestic material consumption (DMC) remained closely linked to economic performance until recent years, while total waste generation increased faster than GDP, highlighting the need to strengthen circularity (Section 2). Pressures on biodiversity persist, and Austria is highly exposed to climate-related extreme weather events, notably floods.

Austria has comprehensive environmental legislation and a good record of implementation. Thanks to widely available high-quality information, Austrians are generally well aware of environmental issues. They are also supportive of environmental and climate policies, although slightly less than the EU average (EC, 2024[3]; EC, 2025[4]). Public participation is shaped by the country’s “social partnership”, which provides organisations of enterprises, employees and farmers with formal access to decision making (OECD, 2013[5]). Environmental non-governmental organisations (NGOs) are also consulted. However, Austria could improve stakeholder engagement in legislative processes and environmental impact assessments (EC, 2025[6]; EC, 2025[7]). Despite progress, barriers to access to justice in environmental matters persist.

As a federal country with nine states (Bundesländer), responsibilities for climate and environmental policy in Austria are shared across national, state and local governments. Several mechanisms for horizontal and vertical co‑ordination are in place to promote policy coherence towards achieving the Sustainable Development Goals. However, supermajority voting rules for climate and energy laws can lead to political deadlock. Federal states hold significant authority over areas such as land-use planning, public transport, waste management and nature conservation. These competences can directly or indirectly conflict with national environmental objectives and slow overall progress. Diverging priorities between federal and state levels often result in agreements with weak targets, unclear responsibilities and no enforcement mechanisms (APCC, 2025[8]).

Figure 1. Environmental decoupling from economic performance has accelerated in recent years
Copy link to Figure 1. Environmental decoupling from economic performance has accelerated in recent years

Gross domestic product and selected environment-related indicators, Austria

Austria set a climate neutrality target for 2040, but the target lacks legislative backing and appears out of reach

Austria has committed to net zero by 2050 and “climate neutrality” by 2040 (Figure 2), although neither target is enshrined in law. It faces a binding target to reduce emissions under the EU Effort Sharing Regulation (ESR) by 48% by 2030 compared to 2005 levels. This target covers nearly two-thirds of the country’s GHG emissions, which are excluded from the EU Emissions Trading System (EU ETS).1 The 2024 National Energy and Climate Plan (NECP) specifies that the 2040 climate neutrality target also focuses on ESR emissions. This approach excludes a significant share of emissions from high-emitting industries under the EU ETS cap, in contrast to the EU’s binding economy-wide, net-zero target for 2050. Austria’s approach also differs from commitments by some countries that aim for net zero before 2050, such as Finland, Germany and Sweden. Without clear rules on allocating emission removals between ETS and ESR sectors, this partial approach to climate neutrality raises transparency concerns and the risk of double counting.

Austria would benefit from clarifying and enshrining its climate neutrality target in legislation. A draft Climate Law (under interministerial consultation at the time of writing) aims to establish the regulatory framework for climate neutrality, climate change adaptation and the circular economy. It aligns with best international practice in terms of governance and foresees developing a roadmap to outline sectoral emission pathways. However, the draft focuses on complying with the ESR obligations and omits key elements: the 2040 goal, annual sectoral targets, adjustment mechanisms and clear timelines – shortcomings already identified in the 2011 Climate Protection Act (Schulev-Steindl, Hofer and Franke, 2020[9]). Legally binding targets are essential to clarify policy intentions, foster accountability and provide certainty for investors.

Figure 2. GHG emissions have declined but remain off track to meet climate targets
Copy link to Figure 2. GHG emissions have declined but remain off track to meet climate targets

Historic and projected GHG emissions and targets

While some federal states have adopted climate targets, Austria needs to clarify their role in achieving national objectives. Federal-level targets – whether designed to comply with EU requirements or set independently – are not legally enforceable at the subnational level. The system for allocating the costs of non-compliance with the 2030 ESR target provides little incentive for state-level action. States collectively bear only 20% of these costs, with individual shares based solely on population size. More effective mechanisms are needed to strengthen state-level engagement, such as allocating federal transfers (Section 1.2) and non-compliance costs based on climate-related performance (Austrian Energy Agency/KDZ/WU Wien, 2023[10]; Kletzan-Slamanig et al., 2023[11]).

Emissions need to fall faster to meet Austria’s climate targets. Between 2010 and 2024, GHG emissions (excluding land use, land-use change and forestry, or LULUCF) fell by 22%. They declined in all sectors, although progress was slower in industry and transport – the two largest consumers of fossil fuels and sources of domestic GHG emissions (see below). The sharpest decline has occurred since 2021 (Figure 2), driven largely by the economic downturn, geopolitical tensions affecting energy prices and milder winters (Umweltbundesamt, 2025[12]). However, climate policies such as carbon pricing and subsidies for heating system replacement, public transport and electric vehicles (EVs) also contributed (Section 1.2) (Eibinger, Manner and Steininger, 2025[13]; Umweltbundesamt, 2025[14]). Despite this progress, Austria’s current trajectory falls short of the 2030 ESR target. Achieving it requires cutting emissions by an additional 31% from 2024, more than twice the pace observed over the previous six years (Figure 2). Looking ahead, meeting the 2040 and 2050 climate neutrality goals will demand a faster economic transformation and a substantial expansion of carbon sinks (Umweltbundesamt, 2025[12]). Meanwhile, the LULUCF carbon sink potential is projected to decline over time, increasing the need for deeper GHG emission abatement (Figure 2).

Existing policies and the NECP’s planned measures are insufficient to meet the ESR and climate neutrality targets (Figure 2). New measures – such as carbon capture and storage, and phasing out harmful subsidies (Section 1.2) – could reduce emissions by 46% by 2030 (from 2005), narrowing the gap to the target. However, these measures face major implementation challenges, while fluctuating removals and climate-related disturbances could reduce the availability of LULUCF credits for compliance. Moreover, some measures in the NECP are being scaled back or repealed in the context of fiscal consolidation, putting achievement of the target at risk unless alternative policies are introduced. Failure to meet the 2030 ESR target would expose Austria to significant fiscal risks associated with the high cost of purchasing emission allocations from overachieving countries.

Austria needs a more comprehensive, balanced and cost-effective climate policy backed by significant investment to meet its targets. In line with the EU framework, the country applies a broad mix of GHG abatement measures. Major developments include the introduction of explicit carbon pricing for emissions outside the EU ETS in 2022 (Section 1.2) and the implementation of a mandatory climate impact analysis (Klimacheck) for all new legislation and regulations starting in 2026. However, the policy mix remains skewed towards direct subsidies (Kletzan-Slamanig, Köppls and Schratzenstaller, 2024[15]), while harmful incentives persist (Section 1.2). Modelling suggests that a rapid implementation of a coherent mix of regulatory measures, pricing instruments and well-targeted subsidies, combined with compensation for vulnerable households, can put Austria on track to meet its 2040 climate neutrality target while delivering economic growth, increasing household incomes and reducing inequality (Kettner et al., 2025[16]).

Austria leads in renewable power, but administrative barriers hinder the full renewable transition

Austria has made notable advances in its clean energy transition. It phased out coal electricity production in 2020 and reached 86% of renewable electricity in 2024. The country aims to achieve a fully renewable electricity supply on an annual net basis by 2030. While solar and wind power have expanded, hydropower remains the dominant renewable source and the government plans to develop it further. However, this raises concerns about the potential impacts on water ecosystems and biodiversity (see below). Overall, GHG emissions from energy industries declined considerably – by 47% between 2010 and 2023. Despite this progress, fossil fuels – which are mostly used in transport and industry – still account for some 60% of total energy supply. This highlights the need for stronger demand-side measures and sectoral electrification.

Austria needs to further increase the share of renewables to support electrification across sectors, along with expanding storage capacity, upgrading the power grid and improving interconnections (EC, 2025[6]). Austria has simplified permitting and made renewable‑energy support more cost effective. However, significant delays and administrative hurdles persist, partly due to staff shortages, and differing zoning and permitting requirements across states (IMF, 2024[17]; OECD, 2024[18]). At the time of writing, legislation on renewables was under development to remove regulatory barriers and designate renewable acceleration areas with simplified permitting procedures. Its swift adoption will be critical to meeting Austria’s 2030 renewable electricity target.

Industrial decarbonisation is progressing slowly

The EU ETS has not provided sufficient incentives for industrial decarbonisation in Austria. Free allocations of allowances (determined at EU level), combined with energy tax refunds and exemptions, significantly weaken the carbon price signal in a sector that includes several energy-intensive industries. The country’s manufacturing sector has invested less in climate mitigation than the EU average (Eurostat, 2026[19]). Manufacturing is Austria’s largest emitting sector, accounting for 36% of domestic emissions in 2023, primarily from industrial processes and product use (IPPU). IPPU emissions have declined the least and remain above 1990 levels. Emissions are largely concentrated in steelmaking, which still relies on a highly carbon-intensive process.

Austria has introduced several measures to decarbonise industry, including legislation to promote hydrogen and targeted funding programmes. The 2022 Hydrogen Strategy positions “climate-neutral” hydrogen as a key solution for hard-to-abate sectors such as iron and steel.2 In 2024, Austria adopted a Carbon Management Strategy to enable carbon capture, utilisation and storage for manufacturing, with a view to lifting the 2011 ban on geological storage; legislation was under development at the time of writing. Austria is also a leading innovator in steel decarbonisation within the EU, ranking second only to Germany in related patents (Somers, 2022[20]). However, further support for low-carbon technologies, sustainable supply chains and circular economy practices is needed to ensure that innovation translates into industrial deployment (EC, 2025[6]).

Reducing car dependency and deploying electric mobility are key to cutting persistently high transport emissions

Transport is Austria’s second largest emission source, accounting for 29% of total emissions in 2024. Despite efficiency gains, suburban sprawl, car dependency, rising mileage and fuel exports to trucks in transit drove emissions up for most of the 2010s (Umweltbundesamt, 2025[12]). Car ownership is high in Austria, with a relatively large share of heavy, powerful vehicles in the fleet (Eurostat, 2026[21]). Considerable tax incentives continue to support car ownership and use, while road pricing and parking fees provide little incentive to limit driving (Section 1.2). Transport emissions have fallen since 2021 but remain well above 1990 levels. Recent emission reductions are mostly due to lower road freight volumes during the economic downturn and increased remote work after the pandemic. Measures such as the KlimaTicket – a single annual ticket offering nearly unlimited public transport across Austria – EV incentives and higher biofuel blending quotas also contributed (Umweltbundesamt, 2025[12]). Emissions from fuel exports have also fallen as diesel price gaps with neighbouring countries narrowed due to national carbon pricing as from 2022 (Section 1.2).

Austria has well-developed transport infrastructures and public transport services, although public transport access is uneven. Austrians use public transport more frequently than most EU peers. Public passenger transport has grown since 2021, driven by expanded rail services, the KlimaTicket and higher fuel costs (Umweltbundesamt, 2025[14]). However, there are large gaps in public transport access between urban and peripheral areas, especially in rural regions where limited services encourage car ownership and use (OECD, 2024[18]). The government plans major investments in public and sustainable transport and electric mobility, including to better connect rural areas.

Generous incentives have spurred strong EV sales growth but should be made more cost effective. In 2025, EVs made up more than 30% of new car registrations (above the EU average), helping lower average CO₂ emissions of new cars (EAFO, 2026[22]; Eurostat, 2026[23]). Amid fiscal consolidation efforts, the government scaled back EV incentives for cars in 2025. However, the design and targeting of remaining incentives should improve to reduce costs and address regressivity. EV support should prioritise low-income buyers or residents in sparsely populated rural areas, where public transport provision is economically unviable. It should be progressively replaced by higher taxes on fossil-fuel powered cars (Section 1.2). Public funding and targeted incentives have helped expand the EV‑charging network considerably. Further extending fast‑charging availability, particularly in rural regions, would accelerate EV rollout.

Heating efficiency has improved, but building renovation should accelerate

After remaining relatively stable for most of the past decade, GHG emissions from fossil-fuel use in buildings have fallen considerably in recent years. This decline reflects a combination of mild winters, high natural gas prices and subsidies for replacing fossil-fuel heating systems with cleaner ones (Umweltbundesamt, 2025[12]). Heating represents over two-thirds of residential energy use and CO₂ emissions in Austria. While energy and carbon intensity of space heating have improved, Austria still shows higher energy intensity than the EU average and even than some colder countries (Odyssee-Mure, 2026[24]). The ban on fossil-fuel boilers in new buildings (as from 2024) is a positive step. Biomass covers a significant part of heating needs. However, wood-based systems emit GHGs and air pollutants during combustion and can entail significant lifecycle CO₂ emissions depending on the biomass source (see below). To address particulate pollution, biomass heating should be restricted in urban areas and limited to advanced systems in energy-efficient buildings.

Like most EU countries, Austria faces the challenge of accelerating energy-efficiency retrofits. Renovation rates remain low and deep renovations have declined (OECD, 2024[18]; Umweltbundesamt, 2025[12]). EU-aligned performance standards for buildings apply, but inconsistent building codes and standards across states hinder both construction and renovation projects (EC, 2025[6]). High upfront costs with delayed returns, combined with complex co‑ordination among multiple stakeholders (owners, tenants and shared properties), are major barriers to retrofits. Government grants have encouraged energy efficiency measures in buildings. However, efficiency and targeting of support could be improved by prioritising more cost-effective interventions and vulnerable households (OECD, 2024[18]). Improving tracking of renovation activity would support better policy design and more effective targeting of incentives. Austria could build on its Building and Housing Register to establish a comprehensive monitoring system.

Air quality generally meets EU requirements with substantial local variations

Emissions of major air pollutants have continued to decline significantly over the last decade. Austria has met or exceeded its 2020 targets under EU legislation for all five key pollutants (nitrogen oxides, sulphur oxides, fine particulate matters, non-methanic volatile organic compounds and ammonia). It is on track to meet the stricter 2030 targets for all pollutants but ammonia. Thorough implementation of the 2023 Ammonia Reduction Ordinance is expected to drive progress in agriculture – the main source of ammonia emissions.

Air quality is generally good, but transport, heating and agriculture remain key sources of air pollution in urban areas and valleys. Austria met all EU air quality limits in 2023; however, exceedances of the ozone target value still occurred (EEA, 2024[25]). Concentrations of fine particulate matter (PM_2.5) comply with EU standards (25 μg/m³). However, while levels vary widely across regions, concentrations remain nearly twice as high as World Health Organization guidelines (5 μg/m³) (Umweltbundesamt, 2026[26]). Old biomass and fossil-fuel heating systems are the main contributors to PM emissions. Public authorities have provided substantial subsidies to replace fossil-fuel heating systems with cleaner alternatives. Accelerating electrification of buildings and transport is essential to further improve air quality, along with curbing GHG emissions and providing health co-benefits.

Extensive land conversion and soil sealing are long-standing challenges

Although declining, land take and soil sealing3 still exert significant pressures on the environment, contributing to biodiversity loss and exacerbating flood risks and urban heat. Moreover, Austria’s highly sprawled urban areas drive up transport-related GHG emissions. After a period of sustained growth, the annual rate of land conversion more than halved between 2013-2016 and 2022-2025. Socio-economic factors drove this trend in the 2010s (Getzner and Kadi, 2019[27]), while the economic slowdown has likely contributed in recent years. About 53% of land used is sealed (ÖROK, 2025[28]). If the current pace of decline continues, the government 2030 target of 2.5 hectares per day appears attainable (Figure 3). However, land conversion could accelerate again as economic conditions improve.

Austria’s land-use target is stricter than in some neighbouring countries (Alpine Convention, 2022[29]), but it lacks consensus and enforceability at subnational level. While the Austrian Conference on Spatial Planning (ÖROK) has long co‑ordinated and monitored spatial planning, municipalities retain responsibility for land-use planning within frameworks set by the Bundesländer. Any land-take target should be differentiated across states and embedded into their legislation, as recognised by the latest Austrian Spatial Development Concept (ÖREK 2030).

Figure 3. Annual land take has declined and is nearing the end-of-decade target
Copy link to Figure 3. Annual land take has declined and is nearing the end-of-decade target

Land-take increase, three-year periods

Reducing land take requires stronger multi-level governance, along with the reform of fiscal incentives and regulations that encourage unsustainable practices. Local governments often zone more land for development than needed, especially for commercial activities, aiming to attract businesses and residents, and boost tax revenue and fiscal transfers (Arnold et al., 2023[30]; Jandl et al., 2024[31]). Local government associations and mergers could be promoted to help mitigate this competition, while federal transfers should be made dependent on actions to reduce land take (Jandl et al., 2024[31]; OECD, 2024[18]). Housing subsidies also fuel soil sealing, while commuter allowances, company car benefits and parking space requirements encourage longer commutes and, ultimately, urban sprawl (Schratzenstaller and Sinabell, 2024[32]) (Section 1.2).

Austria could introduce more effective policy instruments to promote land conservation and restrict new land conversion. In a positive step, the government completed the first national map of potential brownfield sites for redevelopment in 2025. All states have introduced spatial planning measures and building regulations to promote densification, brownfields redevelopment and use of vacant property. However, the design and enforceability of these measures vary considerably, and their effectiveness is unclear (Arnold et al., 2023[30]). Fiscal instruments play a limited role (Arnold et al., 2023[30]). Property taxes are low and based on outdated property values (OECD, 2024[18]). Other mechanisms could also be considered, such as infrastructure development fees, tradeable development rights and land compensation arrangements. At the same time, policymakers should consider the impact of measures to reduce land take on social and territorial equity.

Despite extensive protected areas and environment-friendly farming, biodiversity remains under pressure

Austria boasts a wide diversity of vegetation, wildlife and ecosystem services, but several habitats and species have continued to deteriorate. Forests and agricultural landscapes are the main ecosystems in the country. Despite continuous conservation and restoration efforts, about 68% of habitats and 75% of species of EU conservation importance4 were in a poor or bad state in 2013‑2018 (the latest assessment period) (Figure 4, panel A). Hydrological changes, farming, forestry, landscape fragmentation and soil sealing are the main pressures on Austria’s biodiversity, with climate change amplifying them (BMK, 2022[33]). Austria also experiences higher levels of poaching than other EU countries (EC, 2025[7]).

Figure 4. The protected area network is extensive, but habitats and species are under pressure
Copy link to Figure 4. The protected area network is extensive, but habitats and species are under pressure

Efforts have been made to reduce the pressures of agricultural intensification and land abandonment on agroecosystems. Improved effectiveness of agri-environmental measures and the expansion of organic farming have contributed to slow the decline of many farmland bird populations since the mid‑2010s (Umweltbundesamt, 2025[34]). Austria has the highest share of agricultural land under organic farming in the OECD and EU (27%). It aims to further expand organic and biodiversity-friendly agricultural practices, including through tighter environmental conditions, eco-schemes and allocating 44% of the 2023‑2027 Common Agricultural Policy (CAP) Strategic Plan to landscape and biodiversity objectives (EC, 2025[35]; EC, 2025[36]).

Protected areas (PAs) have expanded, but their effectiveness should improve. The PA network covers nearly 30% of the country, keeping Austria on track to meeting the 2030 global target (Figure 4, panel B). However, less than 3% of the country’s area is under strict protection compared to the target of 10% by 2030. The Natura 2000 network, which largely overlaps with nationally designated PAs, is less extensive than on average in the EU (EEA, 2025[37]). Concerns remain regarding the ecological coherence, representativeness, connectivity and effectiveness of the PA network (EC, 2025[7]). Austria lacks a uniform approach to setting conservation objectives and measures for Natura 2000 sites, as nature conservation is an exclusive competence of the states (see below). Moreover, the management effectiveness of PAs varies widely across regions and types of areas. National parks are generally better managed with more up-to-date management plans.

The biodiversity policy framework is sound, but institutional fragmentation, insufficient funding and harmful incentives hamper implementation

Austria has strengthened its policy framework for biodiversity conservation and sustainable use with adoption of the Biodiversity Strategy Austria 2030+. The country produces a wide range of biodiversity-related data and indicators, but there is room to improve their quality, completeness and accessibility. The government should follow through on establishing a national biodiversity information platform with harmonised data, as envisaged in the strategy. Work is ongoing to develop the National Restoration Plan as required by the 2024 EU Nature Restoration Regulation. However, there are concerns that inter-institutional co‑ordination and financial resources will be insufficient to implement the regulation (Österreichischer Biodiversitätsrat, 2025[38]).

Reaching biodiversity goals requires more effective institutional arrangements. Governance is fragmented: the federal level oversees biodiversity policy, while the states control nature conservation and spatial planning, with uneven financial and technical capacity. Austria lacks national legislation that sets framework conditions for nature conservation. Despite co‑ordination mechanisms, autonomous powers often lead to weak goals and implementation gaps (Österreichischer Biodiversitätsrat, 2025[38]; Pröbstl, 2025[39]). The Biodiversity Strategy Austria 2030+ calls for an inter-institutional dialogue about biodiversity governance. Austria would benefit from establishing a central institution to co‑ordinate implementation of biodiversity policies, harmonise monitoring and support PA management – on the model of the ÖROK (see above) or agencies in France, Germany and Spain. As in other environmental policy areas, the federal government could use the funding lever to encourage action at state level (Schratzenstaller and Sinabell, 2024[32]).

Funding for biodiversity has increased considerably in recent years but remains insufficient. The EU CAP accounts for more than half of total biodiversity financing, mostly delivered through agri-environmental measures (EC, 2025[7]). The establishment of the Biodiversity Fund in 2021 has narrowed a long-standing financing gap (Österreichischer Biodiversitätsrat, 2025[38]) and provides a stable funding framework. With additional EU support, the Fund helped execute several conservation and restoration projects in its early years. However, current public and private funding is estimated to cover 30% of the investment needed to achieve Austria’s biodiversity objectives (EC, 2025[7]). The Biodiversity Strategy Austria 2030+ does not quantify the financing needed to achieve its goals. It delegates the identification of funding sources to the institutions responsible for implementation.

Reforming harmful subsidies and incentives, and scaling up biodiversity-positive economic instruments, would promote sustainable biodiversity use and mobilise funds. Several subsidies negatively affect biodiversity, including in areas related to agriculture, housing, commuter allowances and company cars (Kletzan-Slamanig et al., 2022[40]; Schratzenstaller and Sinabell, 2024[32]), but more comprehensive information is needed. Nature-related levies (e.g. hunting, fishing, landscape protection, tree protection in Vienna) generate negligible revenue. Beyond raising these taxes, there is scope to reform existing instruments (e.g. wastewater charges and property taxes) or introduce new ones (e.g. a tax on pesticides and payments for ecosystem services).

Despite abundant and good-quality water resources and extensive service provision, Austria faces substantial investment needs

Austria has ample freshwater resources, but climate change, population growth and rising irrigation needs could create local water stress. Groundwater, which supplies irrigation and drinking water, is unevenly distributed (BMLRT, 2021[41]). A large share of the country experiences increased drought frequency and intensity (OECD, 2025[42]). Under unfavourable climate and socio-economic scenarios, groundwater resources could decline by up to 23% by 2050, leading to water scarcity in eastern regions where irrigated farmland is concentrated (BMLRT, 2021[41]).

Regional drought management plans in areas where groundwater is under pressure could help enhance resilience and preparedness (OECD, 2025[42]). Such plans should prioritise measures to improve water efficiency, soil management and water retention, offering alternatives to increased abstraction. In 2023, the federal and state governments adopted a joint five-point plan to secure drinking water supply. Meanwhile, measures to secure water availability focus on reducing water use and improving water retention. If these efforts prove insufficient, plans include increasing abstractions from the Danube, which may affect ecosystems and downstream countries and should be carefully assessed (EC, 2025[43]).

Improving water allocation arrangements and monitoring would help address future water scarcity challenges. Consistent sectoral water-use data are lacking. While water users need a permit, they are not charged for water abstraction. Regional abstraction permit registers are often incomplete and not digitalised, metering is limited and permits are granted for long periods. These factors make it difficult for authorities to establish the total water balance, and to grant or review permits based on water availability (EC, 2025[43]).5 A central register of water abstractions is planned for 2026 – a welcome step. However, further reform is needed to shorten permit durations, phase out exemptions and expand metering, especially in regions at risk of water scarcity.

Austria’s water quality ranks among the best in Europe, although localised pressures from agriculture, industry and climate change persist. State-of-the-art wastewater treatment infrastructure has minimised pollution from point sources and urban wastewater. With 95% of the population connected to tertiary treatment plants, Austria ranks third in the OECD (OECD, 2025[44]). Over 95% of groundwater bodies show good chemical status, with nitrates and pesticides the main source of pollution. Thanks to tighter control measures, exceedances of nitrate quality standards in groundwater have slightly but steadily declined in the last decade (BML, 2024[45]). The CAP Strategic Plan 2023‑2027 aims for 56% of agricultural land to adopt practices that protect water quality (EC, 2025[35]).

As of 2021, only about half of the country’s surface water bodies achieved at least good ecological status or potential. Structural alterations of rivers and lakes for hydropower and flood protection are the main pressures on surface water bodies (EC, 2025[43]). Federal funding for river renaturation has helped improve conditions slightly since 2015. Austria also adopted legally binding minimum ecological flow standards for all water abstractions, including for hydropower. However, 80% of hydropower plants still fail to meet them (EC, 2025[6]). Accelerating and strengthening the implementation of ecological flow standards is particularly important in view of the planned extension of hydropower capacity.

Austria needs to mobilise additional finance to meet the growing challenges of the water sector. Major investments in water infrastructure over recent decades have ensured high-quality water and sanitation services for nearly the entire population. However, significant investment is still needed to maintain and upgrade ageing infrastructure, secure drinking water supply and improve stormwater management (BMLUK, 2025[46]). With limited scope to expand public funding, Austria needs to mobilise additional finance, including through redesigned water tariffs. Tariffs and cost recovery rates vary widely across municipalities (Kletzan-Slamanig, Kettner-Marx and Sinabell, 2021[47]), with investments often supported by federal and state transfers and loans.

Austria has built a robust capacity to manage increasing climate impacts but needs stronger incentives to drive adaptation at local and individual levels

Austria has experienced significant climate change impacts, with substantial economic losses. Temperatures have risen at about twice the global average over the past four decades, with far-reaching consequences (Umweltbundesamt, 2025[34]). Extreme weather events – mainly floods – cause average annual damages of about EUR 2 billion (0.5% of 2020 GDP). These costs are projected to increase up to threefold by 2030 and up to sixfold by mid-century (BMK, 2021[48]), posing rising budgetary risks (Köppl and Schratzenstaller, 2024[49]).

Backed by strong consensus, Austria has implemented a robust flood risk prevention and management system. Floods are the country’s most significant climate-related hazard. With large parts of the territory mountainous and forested, settlements and infrastructure tend to locate in flood-prone river valleys. Austria’s large investments in flood protection have helped limit damage from recent severe events (Friesenbichler et al., 2024[50]). While investment in traditional flood protection infrastructure continues, measures have been increasingly focussed on nature-based solutions, integrating flood risks into spatial planning and building regulations, alongside efforts to raise public awareness (BMLUK, 2025[46]). However, further action is needed to curb soil sealing in flood-prone areas (see above).

Austria adopted its national adaptation strategy and plan in 2012 and most recently updated it in 2024. The strategy emphasises the role of local governments in implementing measures and calls for stronger integration of adaptation across all political levels and sectors (Umweltbundesamt, 2025[34]). This is necessary to address gaps in legal enforceability, resource allocation and long-term planning (APCC, 2025[8]).

In Austria, as in other countries, local authorities are key to climate resilience, but smaller municipalities often lack technical and financial resources for adaptation (OECD, 2023[51]). The federal government supports local authorities through technical and financial assistance, information sharing and awareness raising, such as the KLAR! Programme for model regions and the CLIMA-MAP mapping tool. These initiatives are welcome and should be further promoted, as information sharing is key to scaling up preventive adaptation by local authorities and the private sector (OECD, 2023[51]). Austria’s population seems more informed about the risks of climate change than the average European citizen (EC, 2025[4]).

However, significant barriers continue to hinder preventive adaptation action by local authorities, businesses and households. Local authorities are encouraged to invest in climate resilience as the federal Catastrophes Fund covers only a fraction of losses to municipal assets. However, in practice, they often anticipate additional federal or state aid, which weakens their incentives for proactive adaptation – a pattern observed in many countries (OECD, 2023[51]). The government could strengthen financial signals for local adaptation and ensure that spatial planning and permitting fully consider climate risks. Adjusting fiscal transfers based on soil-sealing objectives and adaptation investments could foster local action (OECD, 2024[18]). Low awareness of risks and high upfront costs limit adaptation efforts of households. Policy options include subsidised loans, mandatory flood risk disclosure in property transactions and flood risk certifications of buildings (OECD, 2024[18]).

Austria should expand use of insurance to encourage preventive measures and manage rising climate-related fiscal exposure. Insurance coverage for climate hazards, including floods, remains low. Between 1980 and 2024, only 19% of disaster losses were insured (EEA, 2025[52]). In Austria, flood insurance is voluntary and sold through private household policies with risk‑based premiums. This discourages insurance uptake and preventive action, as adequate coverage would be too costly for many households, which also expect some form of government support through the Catastrophes Fund (OECD, 2024[18]). A public-private mandatory insurance system could provide significantly broader coverage of climate-related hazards and reduce pressures on public finances.

1.2. Enhancing policy coherence for the green transition

Awareness of the environment-fiscal link has improved, but more is needed to align decisions with climate and environmental goals across government levels

Austria has made strides in assessing the environmental dimensions of fiscal policy by adopting green budgeting practices. Beginning in 2025, a Green Budgeting Supplement has accompanied the federal budget, outlining the environmental impact and associated fiscal risks of budget provisions. However, Austria could improve the assessment of environmental impacts of public spending across all jurisdictions, as co‑ordination mechanisms and coherence of data reporting at the subnational levels are insufficient (OECD, 2024[18]; OECD, 2024[53]). The government could build on its remarkable Transparency Database, which collects information on direct subsidies and tax incentives across all levels of government.

Recent trends question whether green budgeting actively influences resource allocation and improves alignment of fiscal policy with Austria’s climate objectives, or whether it primarily serves as a tracking tool. The share of expenditure with a positive (direct or indirect) climate impact has declined to about 8% in the 2025/26 budget (BMF, 2024[54]; BMF, 2025[55]), suggesting that climate-related spending is not keeping pace with overall expenditure growth. Meanwhile, progress in expanding environment-related tax instruments has remained modest following the eco-social tax reform (see below). At the same time, removing subsidies that run counter to climate objectives has proved challenging (see below).

The federal government could encourage subnational governments to contribute to national climate and environmental objectives by tying more fiscal transfers to achievement of specific outcomes (Kletzan-Slamanig et al., 2023[11]). Bundesländer and local governments lack fiscal autonomy and rely heavily on federal transfers, which are poorly targeted. They provide little incentive to offer public services at the lowest costs (OECD, 2024[18]) or to advance on climate and environmental objectives. The government has made some attempts to allocate federal transfers for subnational green investments. However, these transfers represent a small share of local revenues, without a link between performance and resource allocation, and without consequences for missed targets (OECD, 2024[18]).

Green subsidies have supported environmental improvements but need to be streamlined and better targeted

Direct subsidies are a key feature of Austria’s environmental and climate policy, more so than in most European countries and other domestic policy areas. The country has long relied on subsidies and transfers to households, businesses and local authorities to stimulate environment-related investment (OECD, 2013[5]). In 2022, environment-related subsidies and capital transfers grew to 1.4% of GDP, the highest share in the EU.6 More than half of this support targets resource management, notably energy (Eurostat, 2025[56]), with priority to climate mitigation. Other areas, such as the circular economy and biodiversity, remain comparatively underfunded (Kletzan-Slamanig, Köppls and Schratzenstaller, 2024[15]).

The federal government provides fiscal support through various measures, complemented by subsidies from states and municipalities. The main instrument remains the Environmental Support Act (UFG), which has guided federal environmental grants since 1993 (OECD, 2013[5]). UFG support for climate- and environment-related investment peaked in 2024, with nearly EUR 2 billion in subsidies mobilising EUR 5.3 billion in investment and saving over 1 Mt of GHG emissions per year. Nearly two-thirds of the funding targeted building energy efficiency and cleaner heating systems (BMLUK, 2025[57]).

Rising fiscal pressures have revealed structural weaknesses in Austria’s subsidy-heavy approach to environmental and climate policies. Questions remain regarding the cost effectiveness of green subsidies and incentives. Some benefits go to households and businesses that do not need them and create risks of technology lock-in or rebound effects. There are also risks of funding overlaps across instruments and government levels (Kletzan-Slamanig, Köppls and Schratzenstaller, 2024[15]). As part of fiscal consolidation efforts, the 2025/26 budget reduced several green support programmes. While some cuts are justified, others appear indiscriminate. Some of the reduced subsidies are part of the NECP suite to achieve the 2030 emission reduction target, which could jeopardise progress towards that goal (Section 1.1). Rather than eliminating support, reforms should focus on streamlining, better targeting and improving cost effectiveness. The government could build on the 2025 analysis of climate and energy subsidies, commissioned by the environment and energy ministries, to guide these efforts.

Environmentally harmful subsidies are well understood and need urgent reforms

Austria has made progress in identifying subsidies that may harm the environment. Several studies have examined these subsidies, focusing mainly on energy and transport, with comparatively limited attention to agriculture and forestry. The scope and methodologies used for subsidy estimates vary significantly. For example, as part of the green budgeting process, the Federal Ministry of Finance (BMF) estimated climate-counterproductive spending at about EUR 2.8 billion in 2024, or nearly 0.6% of GDP (BMF, 2025[55]). Using a broader definition, Kletzan-Slamanig et al. (2022[40]) identified a wider set of environmentally harmful subsidies, amounting to EUR 4.1‑5.7 billion per year on average over 2016‑2020 (about 1.1-1.5% of GDP during that period). Austria’s national statistical institute produces data on potentially environmentally damaging subsidies, but these data were not publicly available at the time of writing.

Support to fossil-fuel use, commuter subsidies and favourable tax treatment for company cars are major components of environmentally harmful subsidies in Austria. As in many OECD Member countries, fossil‑fuel support has risen in recent years due to the government’s response to the 2022 energy‑price crisis. Although support declined as emergency measures were phased out, OECD (2025[58]) estimates it at 0.5% of GDP in 2024 – more than twice its historical average. Recent changes to commuting allowances and company-car taxation introduced incentives for low-emission company cars, biking and public transport commuting. However, tax rules still overly encourage car ownership and use, long-distance commuting and urban sprawl, with negative environmental impacts (Kletzan-Slamanig et al., 2022[40]). They also burden the public budget and disproportionately benefit higher-income earners (OECD, 2024[18]). Reducing commuting subsidies is necessary but politically difficult. The 2025/26 budget increased support for commuters despite fiscal constraints and risks to climate objectives.

The government should move quickly from analysing environmentally harmful subsidies to reforming them. Phasing out “climate-counterproductive incentives” is a core measure of the 2024 NECP. Under the plan, Austria aims to eliminate such incentives from the federal budget by 2030, reducing GHG emissions by at least 2 MtCO₂eq annually. An interministerial working group was tasked with identifying subsidy removal options, but its work needs to accelerate. Delays risk undermining emission reduction efforts and wasting public resources at a time of tight budgets and high investment needs.

The eco-social tax reform is a major achievement that can pave the way for a broader use of environmental pricing instruments

In a major step forward, Austria implemented the eco-social tax reform in 2022. The reform established a national ETS (NEHG) for fossil fuels used outside the EU ETS. Initially functioning with fixed-price allowances under a rising price schedule, the system will transition to market-based price formation and integrate into the EU ETS2 in 2028.7 As part of the eco-social tax reform, the government recycled the NEHG revenue to lower personal income and corporate tax rates. It also provided a “climate bonus” to all residents to offset the increase in energy costs resulting from carbon pricing: a lump sum adjusted based on public transport availability. While this design means low-income households receive more than they pay in carbon pricing (IMF, 2024[17]), the bonus remains untargeted and was eliminated as from 2025. Linking the bonus to income would be a better option to support households hit hardest by higher energy and transport costs. More targeted fiscal incentives for cleaner vehicles and heating systems could also help address the distributional impacts of carbon pricing (OECD, 2024[18]).

While the NEHG has contributed to reducing emissions, current carbon pricing levels are likely insufficient to achieve the ESR target (OECD, 2024[18]). In its first two years, the NEHG helped raise Austria’s average effective carbon rate (ECR) to EUR 97/tCO₂eq in 2023, one of the highest in the OECD (Figure 5, panel A). In the same year, fuel excise taxes and the national and EU ETSs together covered nearly 80% of GHG emissions, well above the OECD average of 51.5%. However, energy tax concessions and temporary measures introduced during the energy price crisis (see above) weakened the overall price signal. Moreover, only 29% of Austria’s emissions were priced above EUR 120/tCO₂eq (Figure 5, panel B) – the midpoint estimate of carbon prices needed by 2030 to stay on the net-zero pathway (OECD, 2024[59]). While the ECR has likely risen since 2023 with a higher NEHG allowance price and the gradual removal of energy crisis measures, maintaining sufficiently high carbon prices will be essential to meet the 2030 and 2040 climate targets.

Figure 5. Carbon prices have increased with the eco-social tax reform
Copy link to Figure 5. Carbon prices have increased with the eco-social tax reform

The NEHG has narrowed the gap with average EU carbon rates for road fuels. Austria has had historically low petrol and diesel taxes compared to international levels and to neighbouring Germany and Italy. This disparity encouraged “fuel tourism”, increasing emissions (see above). Austria’s carbon pricing has helped reduce this practice, but diesel remains taxed below petrol, despite its higher local air pollution cost. In addition, fuel excise rates have not been adjusted for inflation for more than a decade, resulting in weaker price signals and lower revenue.

Austria has advanced in linking vehicle and road tolls to environmental criteria, but there is room to strengthen incentives for low-emission vehicles and discourage private car use. Vehicle taxes are now based on CO₂ emissions, although widely used diesel vans were newly exempted from the registration tax in 2025. Tolls for heavy goods vehicles are distance based and include a CO₂ charge. Road tolls apply nationwide on motorways, but tolls for cars and vans remain purely time-based. Austria would benefit from extending the distance- and emission-based road pricing system to all vehicles. This will also help maintain revenues as proceeds from fuel taxes and NEHG allowance prices decline with the transition to electromobility (van Dender, 2019[60]; OECD, 2024[59]). Some states and Vienna enforce low-emission zones for trucks and, in some case, vans. Introducing congestion charging in major cities would better reflect the social costs of driving. Parking management also needs improvement. Large cars such as sport utility vehicles represent a growing share of the vehicle fleet, yet parking fees in large cities remain low and do not vary by vehicle type (Kletzan-Slamanig, Köppls and Schratzenstaller, 2024[15]).

Despite progress, taxation and pricing remain a relatively minor component of Austria’s environmental policy mix and tax structure. Environment-related taxes accounted for 1.9% of GDP in 2024 and 4.4% of total tax revenue, slightly below the respective EU averages. This suggests that a further shift from labour taxation to environmental taxes is both possible and desirable. Most revenue comes from energy and vehicle taxes, while taxes on pollution and resources are negligible. Opportunities exist to introduce or redesign economic instruments, particularly for biodiversity, land use and the circular economy, while further improving vehicle taxation and carbon pricing.

Further mobilising investment is key to meet Austria’s environmental and climate goals and unlock significant economic opportunities

Austria’s environmental protection investment increased between 2015 and 2022, reaching 0.5% of GDP – among the highest shares in the EU (Eurostat, 2025[61]). Corporations, particularly specialist providers of environmental services such as waste and water companies, are the main investors. Austrian firms rank among the EU leaders, with around 3% of their total investment dedicated to environmental protection. National public and private funds are the primary financing sources, except for biodiversity, where EU funds cover over 60% of related investment in Austria (EC, 2025[7]) (see above).

The business sector has invested significantly, and increasingly, in climate mitigation. In 2023, business investment in climate mitigation represented 0.9% of Austria’s GDP – compared to the EU average of 0.8%. The electricity and gas supply sector invested the most, with spending increasing substantially over the last decade. This has contributed to reducing GHG emissions from the sector (Section 1.1). In contrast, the manufacturing sector has invested less in climate mitigation, which is reflected in its more moderate progress on emission abatement (Section 1.1) (Eurostat, 2026[19]).

Substantial financial resources from both the public and private sectors will be needed to close Austria’s environmental and climate investment gaps. The European Commission estimates Austria’s investment needs to meet key environmental objectives (excluding climate goals) at about 2.4% of GDP annually for 2021‑2027. Most investment needs relate to the circular economy (Section 2), followed by pollution control, water and biodiversity (EC, 2025[7]). When adding climate objectives, the investment requirements rise sharply: achieving climate neutrality by 2040 will demand some 3-4% of GDP per year until 2030 across energy, industry, buildings and transport (Umweltbundesamt, 2022[62]). Closing Austria’s environmental and climate investment gaps will require clearer long-term signals to mobilise substantial additional public and private resources and deeply engage the financial sector (see below).

Mobilising these additional investments will not only close Austria’s financing gap but also unlock significant economic opportunities. By leveraging its strong industrial base and research capacity, the country can position itself as a leader in clean technologies, expand export potential and create jobs, while reducing reliance on imported fossil fuels, cutting GHG emissions and enhancing resource circularity (Section 2). Austria already ranks third in the 2024 EU Eco-Innovation Index (EC, 2024[63]). Its environmental industry has grown steadily over the past decade and continued to expand despite the recent economic slowdown. In 2023, the sector accounted for about 5% of total employment – among the highest shares in the EU – and nearly 6% of gross value added (EEA, 2025[64]; Statistics Austria, 2026[65]). Employment in the environmental industry is expected to keep growing, spanning both highly skilled and low-skilled workers (Bock-Schappelwein et al., 2023[66]). To fully harness this potential, Austria should continue investing in active labour market programmes to address skill mismatches and support reallocation of workers as the green transition advances (IMF, 2024[17]; OECD, 2024[18]).

Austria has a diverse set of financial sector policies that integrate climate considerations, but more is needed to scale up green finance

Austria has a clear policy strategy for greening the financial sector, supported by a range of EU and national-level initiatives. Building on the EU Sustainable Finance Framework and its own Green Finance Agenda, Austria has made notable progress in integrating climate considerations into financial sector policies.

Austria’s climate-related financial sector policy landscape builds on several instruments, including climate stress tests, an Environmental, Social and Governance (ESG) label and a sovereign green bond framework. Climate-related financial sector policies are mainly developed at the EU level, but Austria has made additional efforts. To strengthen transparency, Austria adopted ESG disclosure requirements for its pension fund in 2005, an ESG label in 2010 and its Sovereign Green Bond Framework in 2022. Initial steps to integrate climate considerations into prudential policies have focussed on risk management and supervision practices. This includes a guide by the Financial Market Authority (FMA) for credit and other financial institutions to consistently address risks related to climate change and other environmental objectives as part of their overall risk management. The central bank and the FMA have also completed stress tests for climate risk in relation to the Austrian banking and financial system. Further stress tests to assess both transition and physical climate risks would support better risk management and could incentivise scaling up green finance.

Available evidence on finance flows and stocks remains partial, but points to a low degree of alignment of finance with climate change mitigation goals.

For listed equity, available evidence shows continued fossil-fuel exposure combined with the absence of exclusively low-carbon listings, pointing to an alignment gap in the Austrian stock market. Around 10% of the Austrian stock market is in fossil-fuel energy companies, a share that has remained stable between 2020 and 2025. Overall, around 80% of the Austrian stock market is in climate-policy relevant sectors (which includes fossil fuels, carbon-intensive industrial activities and utilities), a higher share than European peers and the global average.
For debt instruments, 6% of total corporate issuance was labelled green in 2024, and green lending decreased in recent years. Sovereign green bonds reached 4% of Austria’s total sovereign bond issuance in 2024 and the share of green Austrian treasury bills in total outstanding treasury bills rose more significantly to 39% in 2025. Data to assess debt issuance towards emissions-intensive activities are lacking.
At the level of financial institutions, central bank data on bank holdings reveal larger climate-policy relevant financial flows and stocks than can be identified based on public and commercial data sources. While fossil fuels only represent a small share of total bank bond and loan holdings, climate-policy relevant sectors represent over 50% across types of banks in 2024. Banks that are members of the Austrian government-backed Green Finance Alliance have made additional commitments towards climate alignment (BMLUK, 2025[67]).

Further support is needed to develop green lending practices, especially seeing the high reliance on loans by Austrian enterprises. Further expanding the scale of financial sector participation in government-backed voluntary initiatives could support the implementation of the Austrian Green Finance Agenda.

Capacities and collaboration to assess the climate alignment of finance and associated policy impacts need to be expanded

Despite advances in climate-related disclosure policies and voluntary initiatives by both Austria and the EU, data limitations hinder a robust and policy-relevant assessment of the climate alignment of finance in Austria. Data on real-economy investments supporting or undermining climate goals remain partial. Large blind spots also remain across asset classes. More consistent periodic assessments of the climate alignment of Austrian commercial banks’ assets would help identify misalignment and inform more targeted actions.

Assessment capacities need to be expanded including through systematic data collaboration among policy authorities and with private institutions; private sector reporting on quantitative indicators with reproducible templates; and pilot data collection on “green” finance in national accounts. Collaboration could explore synergies between the granular data that underpin climate-related stress tests by the central bank or financial supervision authority, and similar data needed for climate alignment assessments.

Government-backed voluntary initiatives have brought some evidence on the climate alignment of Austrian financial institutions, but more consistent and comprehensive information and analysis are needed. Information relevant to climate-alignment performance of financial institutions could be collected through ESG Surveys by the FMA and shared with other Austrian authorities. Such surveys could request data from financial institutions on more quantitative indicators in relation to climate-(mis)aligned investments and activities, climate-related engagement, governance or strategy.

Building on internationally and EU-coordinated 2025 updates to the System of National Accounts, the Austrian central bank could collect and report on “green” finance more systematically as early as end 2026 or 2027. It could start with bonds and expand to loans, equity and investment fund shares. Further, it could collaborate with the national statistical office to provide more transparency on how climate-aligned investments in the real economy are financed.

Recommendations on the green transition

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Reducing GHG and air pollutant emissions

Enshrine the 2040 climate neutrality target in legislation, along with interim targets, mandatory review, adjustment mechanisms and an independent oversight authority; clarify the required reductions in gross GHG emissions and the role of carbon sinks in achieving climate goals; define transparent rules for allocating emission removals between sectors covered by the 2040 target and those excluded; and define clear rules and indicators to ensure fair burden-sharing across Bundesländer.
Assess how changes to the measures in the 2024 National Energy and Climate Plan affect progress towards the 2030 target, identify necessary adjustments and revise the plan in a transparent manner.
Reform energy tax refunds and exemptions that benefit heavy industries to strengthen the carbon price signal provided by the EU ETS.
Address suburban sprawl and car dependency through co‑ordinated spatial and mobility planning; improve availability of shared mobility and demand-responsive transport services in rural areas; expand and upgrade public transport, as well as EV charging, walking and cycling infrastructure.
Focus fiscal support for low-carbon heating and energy efficiency renovations on heat pumps and comprehensive retrofits; reserve grants for vulnerable households, while providing concessional loans to others; restrict the use of wood-fired heating systems in urban areas.

Reducing land take and soil sealing

Enshrine the national land-take target in legislation and encourage Bundesländer to adopt binding targets coherent with the national objective.
Improve use of fiscal mechanisms to curb land take and soil sealing; reform and increase taxes on immobile property and extend the taxation of vacant property.

Halting biodiversity loss

Extend the network of Natura 2000 sites and the area under strict protection and integrate them into a comprehensive network of biodiversity-friendly agricultural, forest and water areas; adopt and systematically update the management plans of protected areas and Natura 2000 sites.
Explore institutional arrangements to strengthen co-ordination of biodiversity and nature conservation policies across states and with the federal government.
Develop a biodiversity financing framework that identifies potential sources of finance and mechanisms to leverage private funding, including through partnership with landowners.
Scale up biodiversity-positive incentives and eliminate harmful subsidies and regulatory measures, guided by a comprehensive national study.

Improving water resource management

Strengthen abstraction planning and control: expand metering of groundwater abstractions and digital technology for water demand monitoring; shorten the duration of water abstraction permits and related exemptions, and introduce water abstraction charges, prioritising regions at risk of water scarcity.
Address the impact of structural alterations of rivers and lakes: strengthen compliance of existing hydropower plants with ecological flow standards; and make hydropower permits conditional on contributions to mitigate ecological impacts.
Improve water tariff design by aligning tariffs with actual costs and incorporating the principles of resource conservation and polluter-pays, while addressing municipal disparities and affordability risks.

Strengthening resilience to climate impacts

Further encourage municipalities to invest in climate resilience, reduce soil sealing and factor climate risks into zoning and building permits, including by conditioning federal fiscal transfers.
Expand the use of insurance to cover climate-related risks and consider introducing a public-private mandatory insurance system for households and businesses.

Enhancing policy coherence for the green transition

Condition federal fiscal transfers to Bundesländer on the achievement of specific environment- and climate-related outcomes and establish clear consequences for underperformance.
Review all environmentally motivated transfers and tax incentives against their objectives, and co‑ordinate them with related policy measures across government levels, to reduce overlaps and inefficiencies and ensure a coherent, cost-effective policy mix.
Swiftly develop and implement a plan to reform identified environmentally harmful subsidies in the energy, transport and housing sectors; extend the subsidy assessment to agriculture and other land-use sectors.
Strengthen energy taxes and carbon pricing: consider raising the NEHG carbon price and introducing a national floor price when the EU ETS2 enters into application; increase the diesel tax rate to at least match that of petrol; and systematically adjust excise duties for inflation.
Strengthen incentives for low-emission vehicles and discouraging driving: reform the tax treatment of company cars and the commuter allowances; reconsider the exemption of vans from the registration tax; extend the distance- and emission-based road tolling system to all vehicles; consider introducing congestion charges in major cities alongside improved parking management.
Review provisions for access to justice in environmental matters to remove barriers for citizens and non-governmental organisations to challenge decisions or omissions that breach environmental legislation in an effective manner.

Aligning finance and investment with climate goals

Expand capacities and establish a co‑ordinated approach among ministries and agencies, as well as with private institutions, to improve the coverage, quality and availability of data to more consistently assess the climate alignment of financial flows and stocks in Austria.
Develop and test data collection approaches to collect and progressively report statistics on green debt securities, loans, equity and investment fund shares, as proposed by the 2025 System of National Accounts and seventh Balance of Payments Manual and piloted under the voluntary G20 Data Gaps Initiative starting end 2026.
Significantly increase the scale of financial sector participation in government-backed voluntary initiatives, as well as support development of lending practices for climate solutions.
Review the effects of financial sector policies on climate and financial policy goals: evaluate the implementation and effectiveness of the Austrian Green Finance Agenda; and identify financial sector policies that may undermine climate goals and inadvertently incentivise financial flows and stocks in climate-misaligned activities.

2. Promoting the circular economy

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2.1. Setting a sound policy and governance framework for the circular economy

Austria’s Circular Economy Strategy is a catalyst for accelerating the transition to a circular economic model

The 2022 Circular Economy (CE) Strategy sets out an ambitious vision to attain a climate-neutral and sustainable circular economy by 2050. It aims to further develop high value-added, resource-efficient industry in the country, while clearly recognising the role of the circular economy in achieving climate objectives. The CE Strategy brings together national policies, such as those for waste management and prevention, with circular economy goals. Indeed, Austria’s advanced waste management system, and strong environmental goods and services sector, provide a strong basis for work on the circular economy. The CE Strategy was prepared with participation from the business sector, research organisations and non-governmental organisations (NGOs) and highlights their roles in implementation.

The CE Strategy outlines four overarching objectives for 2030 and 2050: reduction of resource consumption, increase in resource productivity, increase in the circularity rate and reduction in the material consumption of private households (Figure 6). It identifies seven priority sectors for initial action: construction and demolition waste (CDW), biomass, electrical and electronic goods, mobility, plastics and packaging, textiles and waste management. While it sets out a range of measures, the strategy does not set clear timelines and budgets, undermining certainty and commitment for their implementation.

Austria has taken a leading role among OECD Member countries in moving towards a circular economy. At the same time, its actions interact closely with EU legislation and policy initiatives. As an advanced but comparatively small economy, Austria will need to build on its leading work, while co‑operating with other EU countries to meet national and EU goals. Austria’s CE Strategy, for example, describes synergies with the national Raw Materials Action Plan of 2021. However, further action will be needed to support the goal set in the EU’s 2024 Critical Raw Materials Act to source 25% of EU consumption of 17 strategic raw materials from recycling. More generally for the circular economy, national policy should aim to go beyond EU requirements.

Figure 6. Despite progress, achievement of the CE Strategy 2030 and 2050 targets is uncertain
Copy link to Figure 6. Despite progress, achievement of the CE Strategy 2030 and 2050 targets is uncertain

Implementing the CE Strategy depends on broad government and stakeholder involvement

The CE Strategy rightly recognises the importance of interministerial and stakeholder co‑operation, as moving towards a circular economy will affect all areas of the economy. The Federal Ministry of Agriculture, Forestry, Climate and Environmental Protection, Regions and Water Management (BMLUK) leads policy on waste management and the circular economy. A Task Force brings together other federal ministries (including those responsible for economy, labour and research), as well as enterprises, universities and civil society to advise BMLUK on circular economy and implementation of the strategy. The Task Force provides a good basis for policy integration: it will be important to ensure that circular economy objectives – such as the development of high value-added, resource-efficient industry – are incorporated across government policy, including Austria’s upcoming industrial strategy.

The federal government publishes regular progress reports on the CE Strategy. The first such report, in 2024, highlighted the need for a more detailed monitoring framework (BMK, 2024[68]). This was also a recommendation of the Task Force, which called for development of indicators in areas such as waste reduction and product redesign. It would be valuable for future monitoring to track the results of funding, investments and other policy initiatives to help assess how effectively they support CE objectives and targets. Improved monitoring will be needed for the planned evaluation of the CE Strategy in 2027.

Several states have taken initiatives for the circular economy, including via their waste management plans. Vienna (both a state and city) provides a leading example within Austria and at EU level. It sets out ambitious long-term objectives to reduce its local material footprint and increase recycling in its 2022 Smart Climate City Strategy and details related actions in its 2025 CE Strategy. Federal, state and local initiatives on waste management already interact closely: the federal government sets overall legislation and policy, while in most areas state and local governments lead on implementation. However, commitment to circular economy objectives has been uneven across state and local levels, and co‑ordination mechanisms should be strengthened to catalyse action, share results, scale up good practices and ensure policy coherence.

A broad policy mix promotes circularity goals

Regulatory and economic instruments for waste management have played a major role for the circular economy in Austria. Extended producer responsibility (EPR) for packaging, electrical and electronic equipment, and batteries has been a key mechanism to improve waste management and recycling. Under 2025 EU legislation, EPR will also be established for textile waste (see below). EPR requires producers and importers to finance the collection and treatment of waste arising from their products, either directly or via membership in a producer responsibility organisation (PRO). Austria has set up offices that oversee and co‑ordinate the EPR programmes and PROs.

The role of EPR could be further expanded. For packaging waste, Austria has considered “advanced fee modulation” that would provide incentives for circular packaging designs and methods. However, it has waited for upcoming EU action, delaying progress at national level. PROs could extend their financing and activities for public awareness campaigns. Introducing EPR for waste streams not mandated at EU level will strengthen re-use and recycling: this should be explored for construction materials, as this is the most material-intensive sector of the economy. Other new areas could include mattresses, extending the scope of EU requirements for the upcoming EPR on textiles.

Government subsidies have also played a significant role. Among federal initiatives, a 2024 circular economy funding programme under the Environmental Support Act (Section 1.2) has provided EUR 41 million for various activities, including support for circular product design; for waste re-use and repair by social enterprises; and for expansion of recycling capacity. Austria has also drawn on EU funding programmes: the EU Recovery and Resilience Facility (RRF), for example, has financed automated return machines for single-use beverage containers and recycling facilities for plastic packaging waste, thus supporting the introduction of a deposit-return system (DRS), described below.

2.2. Strengthening progress towards waste management and circular economy objectives

Material consumption and material footprint have fallen…

Progress towards the CE Strategy’s targets has been uneven. In the trend from 2021 to 2023, domestic material consumption (DMC) per capita appeared on track to meet its 2030 target, a 25% reduction in resource consumption compared to 2018 (Figure 6, panel B). Material footprint is also moving towards the target, an 80% decrease from 2017 to 2050. This long-term goal will, however, require major shifts in production and consumption patterns, including in imported goods. This remains a major challenge as Austria generates 40% of its material footprint outside the country. Moreover, while domestic resource productivity has increased, the trend through 2023 indicates that Austria may not reach the CE Strategy’s 2030 target (a 50% increase compared to 2015) (Figure 6, panel C). The circularity rate also increased from 2021 to 2023, moving towards the 2030 target of 18% (Figure 6, panel D). Austria’s 2023 rate was above the EU average but remains below that of the leading EU Member States, such as Belgium, Italy and the Netherlands. Moreover, the EU has recently set a higher target – 24% in 2030 – although this will be difficult for Austria and the EU as a whole to achieve.

…although waste generation is high

Austria continues to generate high levels of waste. Total waste generation rose 31% from 2014 to 2022, an increase driven largely by CDW (including excavated soils). CDW increased by 39%, making up four-fifths of total waste. The generation of CDW is closely linked to construction; Austria has one of the highest levels in the EU. The high levels of construction waste are due in part to large, ongoing infrastructure projects (as well as the inclusion of a high share of excavated soils in national statistics, greater than in most other OECD Member countries). After 2022, both value added in the sector and waste generation decreased slightly alongside an economic recession. As the largest source of material use and waste generation, decoupling in the construction sector will be vital for achieving circular economy goals.

In 2023, Austria generated 782 kg of municipal solid waste (MSW) per capita. This is the highest level in the EU (although there are statistical differences among countries), reflecting Austria’s high level of income and consumption patterns. Both household waste and total MSW per capita decreased between 2021 and 2023, due in part to the economic recession. If trends continue, Austria will be on track to meet its 2030 target under the CE Strategy – a 10% reduction in MSW compared to 2020 (Figure 6, panel A). Reducing MSW is an important goal, but Austria should develop a target more closely related to the CE Strategy’s objective of reducing household material consumption.

Regulatory and economic instruments support recycling and composting

The CE Strategy calls for higher levels of re-use and recycling. A high share of CDW (not including excavated soils) is already recycled. This is the case also for metals, and paper and cardboard (across all waste streams); however, recycling rates are lower for wood waste, plastics and textiles (Figure 7, panel A). For most of these waste streams, except for CDW, Austria’s exports and imports are high compared to domestic generation. Nearly all waste trade is with other EU Member States. This trade is important for economies of scale; moreover, imports from neighbouring countries demonstrate the strength of Austria’s waste treatment industry. Although the network of waste collection and treatment facilities is extensive, it needs further investments in collection, sorting and recycling, including for CDW and textile waste. More cross-country co‑ordination is needed to ensure efficient investments: for example, for textile waste, nearly all recycling is undertaken outside of the country (see below).

Figure 7. Recycling and composting are at high levels, except for plastics and textiles
Copy link to Figure 7. Recycling and composting are at high levels, except for plastics and textiles

Austria shows a strong level of MSW recycling and composting. It has met the EU target of at least 55% recycling and preparing for re-use of MSW by 2025 and is close to the 2030 target of 65%. Only 2% of Austria’s MSW is sent to landfill, one of the lowest levels among OECD Member countries. Recycling and composting together accounted for just over 60% of MSW treatment in 2023, a level exceeded only by Germany and Slovenia among OECD-Europe countries (Figure 7, panel B). This share has remained largely stable over the past decade, reflecting long-standing investments in waste infrastructure. However, the move to a circular economy will require an increase in MSW recycling, re-use and composting – and a corresponding decrease in the share of incineration. Preparing waste for re-use, a key element of circularity, has been a small share of MSW treatment, reaching 1% in 2023. While higher than in most other EU Member States, this area of treatment will need to increase in areas such as textiles (see below) to be consistent with CE objectives.

The charging systems for municipal waste services encourage separate collection. “Pay-as-you-throw” systems – which charge for the volume of MSW generated – are in place across the country, although approaches differ among states. Charges cover nearly all collection and treatment costs. Since 2023, Austria has also required door-to-door MSW collection for mixed waste, paper and cardboard waste, plastic waste and bio-waste in nearly all locations. This national policy replaced differing state approaches, strengthening separate collection as a basis for recycling. Private operators play an important role in managing MSW under contract to municipalities, investing in and operating treatment facilities. They also manage industrial and commercial waste.

Landfill bans, along with taxes on landfilled and incinerated waste, have created incentives for recycling. Austria has had a landfill ban since 2004 on untreated waste and organic waste in MSW and on a range of other waste streams. The country has also established a EUR 29.8 tax per tonne on landfilling waste and an EUR 8 tax per tonne on waste incineration. The tax rates have not changed since 2012, however, undermining price signals. Leading EU countries such as Denmark and the Netherlands apply significantly higher incineration tax rates. Rate increases, especially for incineration, would strengthen incentives for recycling, including for waste streams such as plastics and textiles. This, in turn, would complement the actions of the DRS for plastic beverage containers and the upcoming EPR for textiles (see below).

Littering remains a concern, although potentially a smaller one than in many OECD Member countries. Single-use plastics such as take-away beverage cups are one important source: one solution pioneered in Graz is a city-wide system of reusable cups and containers. Cigarette butts are another key source to be tackled: for this and other littering problems, further campaigns should seek to raise public awareness.

A new deposit-refund system is increasing the recycling of packaging waste

In 2023, the recycling rate for total packaging waste nearly met the EU target for 2025 (Table 1). Most types of packaging met the targets at least two years ahead of schedule. However, in 2023, the recycling rate for plastic packaging was just above half the 2025 target of 50% (Table 1). This was due in part to a low level of door-to-door separate collection of plastic (until recently), as well as sorting plants for mixed MSW that did not separate plastic waste (Blasenbauer et al., 2024[70]). Moreover, most recycling rates slightly decreased between 2015 and 2023; while this is partly due to statistical changes, it indicates that Austria’s initial progress on packaging waste was not sustained.

Type of packaging	Recycling rate, 2015	Recycling rate, 2023	EU target 2025	EU target 2030
Glass	85.6	79.3	70	75
Aluminium	..	61.9	50	60
Steel	..	97.9	70	80
Paper and cardboard	84.9	79.6	75	85
Plastic	33.6	26.9	50	55
Wood	18.1	29.2	25	30
Overall	67.1	64.6	65	70

Source: Eurostat (2024), Packaging Waste by Waste Management Operations, 2023 (dataset).

A new DRS for single-use bottles and metal cans, introduced in January 2025, is expected to help Austria meet the EU’s 2025 target for plastic packaging waste. By the end of that year, the system appeared to be working well. The collection rate had reached 81.5%, exceeding the annual target of 80% (Recycling Pfand Österreich, 2026[71]).The PRO managing the system reported broad public support.

However, further increasing overall plastic recycling is a challenge for Austria, as it is across the EU and the OECD. About 70% of all plastic waste in Austria is non-packaging waste, which includes many types of plastics with different additives. Often, non-packaging plastic waste is a component of other waste, such as waste electrical and electronic equipment (WEEE) and end-of-life vehicles. The CE Strategy identifies research and ecodesign standards as key instruments to increase the circularity of non-packaging plastic. Under the EU’s 2024 Ecodesign Regulation, rules to improve the recyclability of WEEE will be prepared. In Austria, EPR arrangements for WEEE and end-of-life vehicles could report on the recycling of plastic components to help identify pathways for greater recycling.

Austria can build on its advanced measures for construction waste

Austria has taken a leading role in the EU by establishing a series of “end-of-waste” standards. These standards specify when waste streams such as wood cease to be waste and become classified as secondary materials, facilitating market uptake of secondary materials. Landfill bans also play a role: from January 2024, landfilling of waste asphalt is no longer allowed; this has also been the case for gypsum since January 2026.

Management and information tools are a further element. New buildings must include dismantling plans; waste plans are required for building demolition; and Austria has promoted digital tools that trace construction waste and materials. Moreover, the federal government has funded research into CDW recycling methods. Introduction of a resource tax on key construction materials, along with developing an EPR system, could create further incentives for CDW re-use and recycling, reducing extraction and increasing circularity.

The CE Strategy calls for extending building lifespans through renovation and re-use. This approach will reduce resource use while saving energy and greenhouse gas emissions. So far, this pathway has mainly been followed in cities, where space for new construction is limited. A broader shift would require stronger regulations and fiscal incentive to discourage building on greenfield sites, along with closer alignment between land-use, housing, infrastructure and CE policies (Section 1.1).

Separate collection of textile waste provides a strong basis for the upcoming EPR

Austria has a long-standing system for the separate collection of textile waste via collection points, social enterprises and municipal recycling centres, but it has limited capacity for treating this waste. In 2023, about 213 000 tonnes of textile waste was generated, with used clothing and shoes making up about 40% of the total (BMLUK, 2025[69]). Some 22% of this waste was collected separately. Most of this separately collected waste was prepared for re-use, but only a small share of this preparation occurs within Austria (Figure 8). Most textile recycling is carried out abroad. The introduction of EPR for textile waste, as foreseen by recent EU legislation, could strengthen collection, preparation for re-use and resale via social enterprises in the country. However, a broader challenge in Austria and elsewhere is the growth of “fast fashion”, which increases volumes of garments for re-use and recycling and strains treatment capacity. Public awareness campaigns, as well as “advanced fee modulation” in the upcoming EPR to promote durable textiles with recycled content, are among the policy tools that can tackle this issue.

Figure 8. Over half of separately collected textile waste is prepared for re-use
Copy link to Figure 8. Over half of separately collected textile waste is prepared for re-use

Treatment of separately collected textile waste, 2023

Policy initiatives have reduced food waste

Household food waste has declined in recent years, but Austria needs to scale up action to reach new EU targets. Austria’s generation of food waste, 130 kg per capita in 2023, was level with the EU average. Households generate about half of food waste. The federal government launched a series of policy initiatives to reduce food waste, including a “Food is Precious!” action plan in 2013 (most recently renewed in 2023) and the 2021 Food Waste Strategy, which addresses all stages of the value chain. In addition, dialogues with producers and retailers have led to greater donations of unsold, edible food. These initiatives – including related public information campaigns – helped reduce household food waste by about 16% between 2020 and 2023. However, further work will be needed to achieve the 2030 EU targets for food waste reductions in processing and manufacturing, retail and restaurants, and households.

Austria’s innovative repair initiative needs a stable, long-term funding base

The national Repair Bonus has reduced waste by extending product lifetimes. Launched in 2022 and supported by the EU’s RRF and national funds, the bonus applied to electrical and electronic goods and bicycles. This initiative followed state and local programmes, such as the Repair Cafés in Graz. With the introduction of the national programme, these earlier initiatives have shifted to the repair of other products. By mid-2024, over 1 million repair vouchers had been used under the national initiative, and about 3 900 repair companies had participated. Due to the high demand and rapid use of funds, the Repair Bonus programme was paused in mid-2025 and relaunched under a new, more targeted form in January 2026. Stable, long-term funding for this initiative is needed. It should include support from the EPR system for WEEE.

Austria has not met the EU’s 2020 target for the collection of WEEE. In 2023, Austria collected 47% of the volume of electrical and electronic equipment placed on the market in the previous three years: the EU target is 65%. One reason for missing the target is the increased sale of heavier equipment such as photovoltaic panels that last far longer than the three years used in calculating the target. Improving collection and recycling of WEEE will be an important step to improve supply of secondary materials, including to critical raw materials. The introduction of DRS for selected WEEE and battery waste streams should be explored.

Circular procurement can be further strengthened

Austria’s Action Plan for Sustainable Public Procurement includes criteria promoting the purchase of recycled and used products in areas such as stationary, office furniture and construction materials. These criteria are mandatory for the federal government and are recommended for state and local governments, some of which have their own requirements. Vienna, for example, has had a separate EcoPurchase programme in place since 1998. In 2025, the federal government updated the action plan with further requirements for construction. While Austria has taken important steps, public procurement, which is estimated at over 10% of gross domestic product, can play an even stronger role in the circular economy. For example, it can promote greater purchase of services such as rental of repairable equipment. In addition, information on impacts of green public procurement has been limited and could be improved.

2.3. Developing new business models and economic opportunities

Raw materials are a growing priority

Circular economy actions can help supply raw materials in line with the EU’s 2024 Critical Raw Materials Act. In one step, Austria has introduced a requirement for all sewage sludge to be incinerated; the resulting phosphorus-containing ash will be used as fertiliser. This should meet 40% of national demand for phosphate fertilisers (BMLUK, 2025[69]). Austria’s CE Strategy, its 2019 Bioeconomy Strategy and the EU’s 2024 Act call for greater use of bio-based materials. Recent national initiatives have, among others, promoted timber construction. Actions in this area, however, will need to consider potential environmental impacts, including those on land use and biodiversity, as they are not yet systematically addressed in CE planning.

Austria should continue to develop new approaches for waste recycling and preparation for re-use, along with new circular business models that encourage use of secondary raw materials, as envisaged by the CE Strategy. There are several examples of industrial symbiosis, where nearby facilities exchange materials, energy and water for overall savings. The sale of services rather than products can promote circularity by reducing material use and waste generation. Austrian chemical companies, for example, provide metal cleaning as a service rather than selling solvents to the automotive sector.

Government dialogue with the private sector is a key part of Austria’s circular economy approach

At both federal and state levels, forums and networks have promoted dialogue between government and the private sector. The federally funded Climate Lab carries out policy research and dialogue for circularity in areas such as textiles and mattresses, office furniture, construction and wind turbines. In so doing, it explores avenues for policy development and for business action.

A high share of enterprises and facilities are environmentally certified. Moreover, surveys indicate a high level of awareness of the circular economy among private enterprises. However, this has not always translated into actions such as operational changes (EFS, 2022[72]), pointing to a need for further dialogue and incentives to promote business action.

Social businesses are key players of the circular economy and support social inclusion through employment and training of unemployed workers. Social businesses work on the collection, re-use and repair of textiles, electrical and electronic goods, and other products. They do this through the support of federal, state and local programmes such as the national Repair Bonus and Vienna’s Repair Network.

Research funding plays an important role

Austria has been among leading OECD Member countries in terms of technologies for material recovery, recycling and re-use. Building on this research base, national funding sources such as the federal RESET2020 and Ressourcenwende 2025 programmes have supported projects for innovation in areas such as recyclable materials, recycling methods and circular economy modelling. Networks and centres have brought together enterprises and researchers to exchange information and implement new methods. Further national funding is needed to build on results, implement innovations and foster business opportunities.

Public awareness appears strong, but further shifts in consumption patterns are needed

Austrians are more aware and supportive of the circular economy than the average EU citizen (EC, 2024[3]). Nonetheless, there are areas where further awareness and action are needed. For example, while household food waste has fallen, about one-third is made up of edible food (Stoifl et al., 2023[73]). Used textiles appear to be purchased by mainly younger consumers and by households facing spending constraints (Richter and Khattab, 2025[74]); as noted above, purchases of cheap “fast fashion” have grown. As a high-income country, Austria has a comparatively high level of private consumption, and it is not clear if circular products are widely adopted. As the economy returns to growth, it will be important to encourage further shifts in consumption patterns.

Recommendations on the circular economy

Reinforcing the delivery of the CE Strategy

Develop an implementation action plan for the CE Strategy with concrete timelines, budgets and allocated responsibilities for the measures. Strengthen the monitoring framework with outcome-oriented indicators to track delivery, identify bottlenecks and measure results.
Deepen vertical co‑ordination across federal, state and local levels to share good practices, scale up successful initiatives and accelerate implementation nationwide.

Strengthening policy instruments to shift incentives

Raise incineration taxes to strengthen incentives for the recycling and re-use of waste and to promote the use of secondary raw materials.
Introduce a virgin material tax on aggregates to stimulate demand for secondary materials and assess the scope for extending such taxes to plastics and metals.
Expand funding for research on new products, recycling methods and other innovations, promoting introduction of research and innovation in the market.
Co‑ordinate investments in recycling and re-use infrastructure with neighbouring countries to exploit synergies, while respecting the proximity principle, including for textiles, where EU-wide EPR requirements will soon come into effect.
Expand and strengthen green public procurement criteria, introducing the new national criteria for construction and strengthening circularity criteria across all procurement areas. Green public procurement criteria should also promote greater purchase of services rather than equipment to encourage development of new business models.

Deepening and expanding EPR initiatives

Introduce advanced fee modulation for packaging to reduce materials, and increase re-use and recycling.
Use the EPR programme for WEEE to provide stable financing for repair and re-use programmes, and consider introducing deposit-return systems for selected WEEE and waste batteries to collect and recycle higher levels of strategic raw materials.
Introduce a robust EPR programme for textiles that expands collection, repair, re-use and recycling, providing support to social enterprises.
Assess the extension of EPR programmes to additional waste streams including construction materials and mattresses.
Expand the activities of all EPRs on public awareness raising to encourage waste reduction, re-use and waste separation, as well as purchases of durable products.

Strengthening synergies with raw materials and bioeconomy policies

Further explore ways of using bio-based products to advance circular economy objectives, while using Austria’s natural resources efficiently.
Develop pathways to increase the recovery and recycling of critical raw materials and continue Austria’s active engagement in EU initiatives on critical raw materials.

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Annex 1. Actions taken to implement selected recommendations from the 2013 OECD Environmental Performance Review of Austria

Copy link to Annex 1. Actions taken to implement selected recommendations from the 2013 OECD Environmental Performance Review of Austria

Recommendations	Actions taken
Addressing key environmental challenges
Develop a national spatial development strategy involving all levels of government with a view to striking a better balance between new development activities involving additional land conversion and achieving the objectives of the National Biodiversity Strategy.	The Austrian Conference on Spatial Planning (ÖROK) develops ten-year spatial development concepts to provide shared strategic objectives and guidelines for spatial development. The last Austrian Spatial Development Concept (ÖREK 2030), adopted in 2021, focuses on climate-friendly spatial developments. In 2024, all federal states adopted the National Soil Strategy developed by the ÖROK. The Biodiversity Strategy Austria 2030+ is structured around a ten-point action programme. It outlines 100 objectives and over 400 measures.
Further mainstream climate change adaptation into government policies – for example, by incorporating the effects of climate change into ex ante assessment procedures such as environmental impact assessment and strategic environmental assessment.	A 2018 amendment to the environmental impact assessment (EIA) legislation strengthened the EIA focus on climate change and disaster risks, among others. A mandatory climate assessment (KlimaCheck) will apply to all new federal laws, regulations and major projects from 2026 onwards, as part of the regulatory impact assessment framework. Each federal ministry must assess how its initiatives affect greenhouse gas emissions and resilience to climate impacts.
Systematically monitor and evaluate progress in implementing the National Adaptation Strategy, on the basis of concrete targets, criteria and a clear allocation of responsibilities.	Austria revised its national adaptation strategy and action plan in 2017 and 2024. The latest strategy includes over 120 specific recommendations across 14 sectors. Progress is monitored through regular reporting cycles. The last assessment was in 2021; the next one is scheduled for 2026, along with a revised analysis of climate vulnerabilities and impacts.
Allocate sufficient financial resources for climate change adaptation, taking account of costs and benefits, and explore the potential for increased involvement of private finance, as well as recourse to insurance markets and public-private partnerships.	The Catastrophes Fund allocates about three‑quarters of its resources to preventing natural hazard damage – mostly floods and avalanches – and to paying insurance premiums for crop losses. The rest finances compensation for damage to private property and local authorities’ assets. The fund is financed mainly by a percentage of household and corporate income taxes. In 2024, the federal government increased its budget to EUR 1 billion following the damage caused by Storm Boris. Basic flood insurance is voluntary and offered by private insurers as part of standard household policies. Premiums are risk‑based, and indemnity limits are generally low.
Strengthening environmental governance for policy coherence
Review provisions for access to justice in environmental matters to ensure consistency with the Aarhus Convention.	The 2018 Aarhus Participation Act improves access to justice in environmental matters for organisations and individuals in waste, water and air quality. States have also expanded access to justice in nature protection, including species protection, hunting and fishing. Administrative courts increasingly grant environmental NGOs standing even where national law does not explicitly provide for it.
Apply integrated assessment and permitting procedures to federal transport projects; assess how the environmental impact assessment process could be further strengthened, taking account of the recommendations made in independent evaluations; identify ways to streamline and reduce the costs of permitting procedures.	In 2018, Austria amended its EIA Act to strengthen attention on biodiversity, land use, climate change and disaster risks. A 2023 amendment streamlined and accelerated permitting procedures for renewable energy projects.
Review the procedures for strategic environmental assessment and regulatory impact assessment to ensure that the results of studies can make a useful and timely input to decision making; further develop supporting tools and guidance, including examples of good practices, and provide training to practitioners.	Austria has transposed the EU directive on strategic environmental assessment (SEA) of plans and programmes by integrating its requirements into relevant federal and provincial laws. It operates a public website with extensive SEA information, including guidelines and a database of completed procedures. Twice a year, the environment ministry brings together SEA experts from all administrative levels and the environmental ombudspersons to discuss practical issues, completed procedures and new tools. Summaries of these discussions are published on the website to support practitioners. Most states also publish and update SEA guidelines for specific fields such as spatial planning.
Enhancing the cost effectiveness of the policy mix
Extend the use of environmentally related taxes in the framework of a comprehensive “socio-ecological tax reform” that i) establishes an effective carbon tax on fuel used in the sectors not covered by the EU Emissions Trading System; ii) further restructures vehicle taxes so that they better reflect the environmental cost of vehicle use; iii) ensures that other, non-carbon-related externalities are adequately priced; and iv) reduces the tax burden on labour.	In 2022, Austria introduced the eco-social tax reform. The reform includes a national emissions trading system (NEHG) that covers fossil fuels used outside the EU Emissions Trading System. During the initial phase, allowance prices are fixed – rising from EUR 30/tCO₂eq in 2022 to EUR 55/tCO₂eq in 2025. The system will shift to market‑based pricing and join the EU ETS2 in 2028. The tax reform also lowered personal income and corporate taxes and introduced a “climate bonus” of EUR 110-220 per person depending on public transport access. The bonus was repealed in 2025. Vehicle registration and annual insurance taxes are based on vehicles’ CO₂ emission levels, with exemptions for electric vehicles. Other environmental pricing measures include taxes on landfilling and waste incineration.
Analyse the potentially negative environmental impacts of existing subsidies and tax benefits, possibly in the context of the annual government review of budgetary support; reform environmentally harmful subsidies such as housing subsidies and energy tax exemptions granted to energy-intensive industry.	Several studies assess environmentally harmful subsidies in Austria, particularly in the energy and transport sectors. As part of its green budgeting process, the Federal Ministry of Finance identifies and evaluates tax measures and transfers that undermine climate objectives. Statistics Austria also reports fossil-fuel subsidy estimates to monitor progress towards SDG Target 12.c on rationalising inefficient fossil-fuel support. It also provides data on potentially environmentally damaging subsidies to Eurostat as part of a voluntary data collection.
Reduce perverse incentives for car use by revising the tax treatment of company cars and the commuting allowance; consider extending the distance-based road toll system to light commercial vehicles and passenger cars, and to the secondary road network; consider implementing pollution and/or congestion charges in cities suffering from high concentrations of traffic-related emissions.	Since 2016, the taxable benefit in kind for private use of a company car decreases as the vehicle’s CO₂ emissions fall below a set threshold, with zero‑emission vehicles generating no taxable benefit. Employees may also receive per‑kilometre reimbursement for using their private vehicle – including bicycles – on business trips. Since 2021, employers’ contributions to public transport tickets have been exempt from employees’ taxable income. Employees can claim the flat‑rate and per‑kilometre tax deductions for commuting expenses regardless of their mode of travel.
Systematically evaluate the cost-effectiveness of environmental support measures at the federal and subnational levels; streamline the financing mechanisms that support environment- and climate-related investment (including renewables feed-in tariffs) with a view to reducing overlaps and potential windfall profits.	The environment ministry reports annually on the use of funds under the Environmental Support Act (UFG) to finance climate, environmental and water‑related investments. The reports detail fund disbursements, leveraged investment, and associated environmental and employment impacts. In 2025, the environment and energy ministries commissioned a cost-effectiveness assessment of selected federal climate and energy subsidies.
Circular economy
Strengthen the incentive function of municipal waste charges so that they better encourage waste prevention at household level.	The Waste Management Act mandates “pay-as-you-throw” charging systems for municipal solid waste. These systems, established by the federal states, are based on the volume or weight of residual waste generated and the frequency of collection.
Develop a coherent, integrated approach to chemicals and waste management.	Austria’s 2022 Circular Economy Strategy highlights the need to better integrate chemicals management with waste policy. An expert platform was created and has developed a green chemicals action plan, with the aim of strengthening circularity in chemicals production and use.
Continue to promote chemicals leasing and examine the barriers to its wider application.	The Austrian government officially recognises chemical leasing as a viable circular‑economy business model in chemicals management and supports its adoption across industries. In cooperation with the United Nations Industrial Development Organization, the government has carried out several awareness‑raising initiatives to inform businesses about the model’s benefits and practical implementation. Austria has also supported pilot projects to demonstrate the effectiveness of chemical leasing in real‑world applications.

Note: Selected recommendations from OECD (2013), OECD Environmental Performance Reviews: Austria 2013, OECD Environmental Performance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264202924-en.

Source: Based on country submission.

Notes

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← 1. The EU ETS covers emissions from energy production and carbon-intensive industries. ESR emissions are those arising from domestic transport, buildings, agriculture, small industry and waste.

← 2. Austria’s Hydrogen Strategy defines “climate‑neutral” hydrogen as hydrogen produced either from renewable energy sources or from fossil gas, provided that the associated CO₂ is completely captured through separation or pyrolysis. When hydrogen is generated from fossil gas, no GHG emissions should be produced during generation, CO₂ capture and at any point along the supply chain.

← 3. The ÖROK defines land conversion or land take as the alteration of agricultural, forest or otherwise naturally vegetated land for building settlements, transport infrastructure and other facilities. Soil sealing is the destruction or covering of the ground by a fully impermeable material to water and air. Land take can include sealed, partially sealed or unsealed areas (e.g. gardens, parks, sports fields).

← 4. The Habitats Directive (92/43/EEC) protects habitats and species of Community interest, i.e. which are threatened to disappear in the EU, have a small natural range or present outstanding examples of typical characteristics of Europe’s biogeographical regions.

← 5. The European Commission opened an infringement procedure in 2024 for Austria’s failure to comply with the Water Framework Directive regarding the surveillance of water rights (EC, 2024[75]).

← 6. Data available for 19 EU countries. Environmental Subsidies and Similar Transfers (ESST) aim to protect the environment or manage natural resources, such as subsidies for installing cleaner energy or for keeping nature reserves, or for research on environmental issues. ESST include financing received for environmental purposes by corporations, households, non-profit institutions serving households or other countries and paid by the general government of each country or from abroad (including EU funds) (Eurostat, 2025[56]).

← 7. The ETS2 covers emissions from buildings, road transport and additional sectors (mainly industry not covered by the current ETS).

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