OECD Environmental Performance Reviews: Austria 2026

Executive summary

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

Austria has made considerable environmental progress over the last decade but will still need major investment to meet its environmental and climate goals. Environmental outcomes have improved, but significant challenges persist in strengthening climate mitigation and resilience, halting biodiversity loss and improving resource circularity. Addressing them will require substantial public and private resources, while Austria needs to support recovery from its early-2020s recession and ensure fiscal stability. Closing the investment gap will, therefore, require more efficient public spending, clearer long‑term signals to mobilise private investment and stronger engagement with the financial sector. Doing so can unlock significant economic and job opportunities by building on the country’s industrial and research strengths.

Stronger alignment across levels of government is essential to achieve national objectives. While Austria has robust institutions and co-ordination mechanisms, divergent priorities between the federal government and the nine states (Bundesländer) often result in weak agreements and limited enforcement. Linking a greater share of fiscal transfers to measurable environmental and climate outcomes would improve accountability and support more coherent action across the country.

Austria needs a more cost‑effective and better‑balanced policy mix to advance the green transition. Recent reforms, including green budgeting and a national emissions trading system, have strengthened the policy framework. Carbon prices now rank among the highest in the OECD; maintaining strong and predictable price signals will be essential to meet climate targets. However, environmental policy remains reliant on green subsidies, which should be streamlined and better targeted. At the same time, several harmful incentives are still in place, especially in the energy and transport sectors. Phasing them out would reinforce policy effectiveness and fiscal discipline.

Deeper engagement of the financial sector is critical to scaling up finance for climate action. Austria has advanced its Green Finance Agenda, yet available data suggest a low degree of alignment of financial flows with climate goals. The Austrian banks’ holdings and stock market are still concentrated in climate-policy relevant activities. Strengthening data collection, analytical capacity and public-private collaboration would enable Austria to better assess the impact of financial policies and steer capital towards climate‑aligned investments.

Environmental pressures have eased, but important challenges remain

Fragmented governance and conflicting incentives continue to drive unsustainable land use. Land take and soil sealing have declined but still cause significant environmental harm. The federal government has set an ambitious 2030 land‑take target. However, this is not enforceable across states. Although most states have introduced measures to curb soil sealing, fiscal and regulatory incentives still encourage municipalities to zone excessive land and contribute to urban sprawl. Stronger use of fiscal tools, including property taxation, could help discourage new land development.

Despite extensive protected areas and eco-friendly farming, biodiversity remains under pressure. Austria is an OECD leader in organic farming, and its protected areas cover nearly 30% of the country. However, many habitats and species still show poor conservation status. The new biodiversity strategy has strengthened the national framework, but Austria needs a more co‑ordinated and coherent approach to setting conservation objectives and managing protected areas across states. The Biodiversity Fund provides more stable funding, yet resources remain insufficient. Reforming harmful subsidies and expanding nature-related levies would support more sustainable biodiversity use and help mobilise additional funding.

Austria has abundant, good-quality water resources, with localised scarcity and pollution pressures. Advanced wastewater treatment has reduced chemical pollution, but ecological conditions are poor in about half of rivers and lakes, largely due to hydropower and flood protection infrastructure. Stronger compliance with ecological flow standards, tighter control of water abstractions and greater water efficiency are essential. Significant investment is also needed to renew ageing infrastructure and strengthen climate resilience. This calls for greater engagement of the private sector, including through better designed water tariffs.

Austria has built strong capacity to manage rising climate impacts, but broader adaptation efforts are needed from local authorities, businesses and households. The national climate adaptation framework is well developed, and a robust disaster‑management system has helped limit losses from recent severe floods – the country’s most significant climate‑related hazard. The federal government provides local authorities with technical and financial support, yet stronger financial incentives and better integration of climate risks into spatial planning are needed to encourage municipalities and households to invest in resilience. Expanding insurance coverage for climate‑related risks would also enhance protection and ease pressure on public budgets.

The clean energy transition is advanced, but climate targets appear out of reach

Emissions need to fall much faster for Austria to meet its climate targets. GHG emissions have decreased since 2010, with more recent declines reflecting both economic conditions and policy action. However, meeting the EU-set 2030 target will demand cutting emissions from 2024 levels at more than twice the pace achieved over the past six years. Current and planned policies will not close this gap, while recent rollbacks and weakening forest carbon sinks further jeopardise progress. Missing the 2030 target would create considerable fiscal risks. Looking ahead, achieving the national 2040 climate‑neutrality goal will require swiftly implementing a coherent package of regulatory, subsidy and pricing measures, alongside support for vulnerable households. Legislative clarity is needed to provide certainty to households and businesses. This includes enshrining the 2040 target in law, defining the respective roles of emission abatement and carbon sinks, and setting clear rules for fair burden‑sharing across states.

Austria has made strong progress in decarbonising the power sector but must tackle high emissions from industry, transport and heating. Renewables already make up 86% of electricity generation, yet achieving 100% by 2030 will require faster and more consistent permitting and zoning procedures. Biomass plays a major role in heating but, to limit particulate emissions, it should be restricted to advanced systems in efficient buildings. Home-heating energy intensity remains high. Government grants have encouraged the uptake of cleaner heating and energy efficiency measures, but they should prioritise more cost‑effective upgrades and vulnerable households. Curbing industrial emissions – especially from steelmaking – will require higher effective carbon prices and greater support for low-carbon technologies.

Cutting transport emissions will require reducing car dependency and accelerating electrification through targeted investment and incentives. Public transport is well developed, and the KlimaTicket has increased ridership. However, uneven service provision and suburban sprawl continue to encourage car ownership and long‑distance commuting. Fiscal incentives such as commuting allowances and company‑car taxation further reinforce car use and should be reformed; distance‑ and emission‑based road tolling could also be expanded. Purchase incentives have spurred high sales of electric vehicles; support should be better targeted to reduce fiscal cost and regressivity. Raising taxes on fuels and conventional cars would also promote electric vehicle uptake more effectively.

Austria has made important steps towards the circular economy

Austria’s Circular Economy Strategy is ambitious and enjoys broad support. While it identifies clear areas for action, the strategy would benefit from defined timelines, better monitoring and improved co‑ordination across levels of government. The federal government supports research related to the circular economy, and Austrian industry has pioneered innovative business models such as chemical leasing. Public awareness of circular‑economy benefits is also strong. Austria is on track to meet several 2030 targets. However, achieving the strategy’s long-term goal of reducing the material footprint will require much deeper changes in consumption and production patterns.

An advanced waste management system provides a solid foundation for Austria’s transition to a circular economy. More than 60% of municipal waste is recycled or composted, among the highest shares in the OECD, with most of the remainder incinerated with energy recovery. This performance reflects long‑standing policies, including widespread pay‑as‑you‑throw charging systems, and high‑quality collection and treatment infrastructure. However, municipal waste generation remains the highest in the EU and needs to decline. Raising incineration taxes would strengthen incentives for recycling, especially of plastics.

Austria has taken important steps to improve circularity in key material and waste streams, but further efforts are needed to meet national and EU objectives. Austria has met the EU’s recycling target for construction and demolition waste, supported by policies such as landfill bans and end‑of‑waste criteria. As this is the country’s largest waste stream, additional measures such as a virgin‑material tax on aggregates could accelerate progress. Austria has also stepped up actions on plastic packaging and textile waste to address their low recycling rates. Recent measures, such as the deposit‑return system for single‑use beverage containers and repair vouchers for electrical goods, are promising. Extended producer responsibility systems are in place for several waste streams but can play a stronger role in driving waste reduction, re-use and recycling.