OECD Environmental Performance Reviews: Austria 2026

Report

22 May 2026

Chapter 1. Towards the green transition

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Abstract

Austria has made notable environmental progress over the past decade, yet significant challenges remain in achieving its climate and environmental objectives. This chapter reviews Austria’s performance in key areas including climate mitigation and adaptation, biodiversity conservation, sustainable land use, water resource management and air quality. It assesses the environmental effectiveness, economic efficiency and coherence of the country’s policy mix, with particular attention to fiscal and economic instruments. The chapter concludes with an assessment of how well Austria’s financial policy aligns with climate objectives.

1.1. Setting the scene

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1.1.1. Austria’s socio-economic context

The small, open economy of Austria is deeply integrated into European Union (EU) markets and industrial supply chains. It has a strong manufacturing base, exports high-value goods and is home to a growing cleantech sector. Significant iron ore reserves support the country’s strategic, carbon-intensive steel industry. Austria’s agriculture and forestry provide significant employment and support rural livelihoods, while positioning the country as both a major timber exporter and a leader in organic farming.

After steady growth in the 2010s, the Austrian economy contracted sharply during the COVID-19 pandemic. Following a short-lived rebound, the surge in energy prices triggered a recession in the second half of 2022. Recovery began in 2025, but growth is projected to remain below pre-pandemic trends and the performance of the Euro area (OECD, 2025[1]). Despite the economic downturn, per capita gross domestic product (GDP) continued to rank among the highest in the EU in 2024, and inequality and poverty remained comparatively low. Fiscal pressures intensified in 2024, prompting a medium-term budget consolidation plan that also affected environment-related spending (OECD, 2026[2]) (Section 1.3.1).

1.1.2. Decoupling environmental pressures from economic growth

Austria’s land-locked territory is characterised by predominantly mountainous landscapes and extensive forests, with a mix of dispersed rural settlements and densely populated urban centres. About 60% of the country’s land is mountainous and 47% is covered by forests – one of the highest shares of forested land in the OECD (OECD, 2025[3]). Settlements and infrastructure are mostly located in river valleys and basins, which tend to be prone to natural hazards, notably floods (Section 1.2.7). Population growth has increasingly centred on large and mid‑sized metropolitan areas (OECD, 2024[4]), contributing to urban sprawl, while much of the country remains sparsely populated. The combination of dispersed rural settlements and expanding suburban areas has increased car dependency, despite a well‑developed public transport system (APCC, 2025[5]). Meanwhile, Austria’s location as a freight transit corridor adds further environmental pressure (Sections 1.2.2 and 1.2.4).

With a largely renewable-based power sector, Austria’s economy is less carbon intensive than the OECD and EU averages (OECD, 2025[3]). Abundant water resources underpin hydropower generation, while forests have traditionally supported biomass use for heating (Section 1.2.2). However, the country depends on fossil-fuel imports, despite having some domestic oil and gas reserves.

Between 2010 and 2024, Austria decoupled some environmental pressures from economic growth, with faster declines in the 2020s partly reflecting the COVID-19 pandemic and the economic slowdown (Figure 1.1). While the economy expanded, energy supply, greenhouse gas (GHG) emissions and major air pollutants either declined or grew more slowly than real GDP (Sections 1.2.1, 1.2.2 and 1.2.3). However, domestic material consumption remained closely linked to economic performance until recent years, and total waste generation increased faster than GDP. This highlights the need to strengthen circularity (Chapter 2). Nitrogen surplus started to decline in the mid-2010s, likely due to improved nutrient management. Water is generally of good chemical quality, but some areas face scarcity risks and many surface water bodies are in poor ecological condition (Section 1.2.6). Hydrological changes, agriculture, forestry, landscape fragmentation and soil sealing continue to exert pressures on Austria’s rich biodiversity (Section 1.2.5).

Figure ‎1.1. Environmental decoupling from economic performance has accelerated in recent years but is uneven
Copy link to Figure ‎1.1. Environmental decoupling from economic performance has accelerated in recent years but is uneven

GDP and selected environment-related indicators, Austria, 2010‑2024

1.1.3. Key elements of environmental governance

Stronger multi-level co‑ordination is needed to ensure environmental policy coherence

Austria has comprehensive environmental legislation and a good record of implementation. As a federal country with nine states (Bundesländer) and some 2 100 municipalities, responsibilities for climate and environmental policy are shared across national, state and local governments. Federal states hold significant authority over areas such as land-use planning, infrastructure development, building regulations, public transport, waste management and nature conservation.

For most of the period since 2000, environmental and climate responsibilities at Austria’s federal level have been combined with agriculture within a single ministry, with occasionally different institutional arrangements.1 Since March 2025, environmental and climate policies have been under the purview of the Federal Ministry of Agriculture and Forestry, Climate and Environmental Protection, Regions and Water Management (BMLUK). As in other countries, strong co‑ordination is needed with ministries responsible for energy, transport and industry to avoid fragmented climate action. Measures are in place to promote inter-institutional co‑ordination and policy coherence towards achieving the Sustainable Development Goals (SDGs) (OECD, 2024[6]). However, passing legislation in some environmentally relevant domains, such as climate and energy, requires a two-thirds majority, which can lead to political deadlock.

Austria has made efforts to align national, regional and local policies for sustainable development and the green transition. It has supported subnational governments in the development of plans and actions for implementing the SDGs at local level (OECD, 2024[6]). However, state and local competences can directly or indirectly conflict with national environmental and climate objectives, slowing overall progress. Diverging priorities between federal and state levels often result in environmental agreements with weak targets, unclear responsibilities and no enforcement mechanisms (APCC, 2025[5]).

Despite a tradition of social dialogue and a well-informed population, Austria could improve stakeholder engagement in environmental decision making

Social dialogue is institutionally recognised and part of policymaking in Austria through the country’s unique “social partnership” (Sozialpartnerschaft), which provides recognised organisations of enterprises, employees and farmers with formal access to decision making. The partnership system aims to achieve consensus in practically all policy areas, including environmental policy (OECD, 2013[7]).

While not part of the social partnership, active and relatively well-resourced environmental non-governmental organisations (NGOs) have opportunities to contribute to decision-making processes and be consulted, in some cases based on explicit legal provisions. However, legal requirements for the recognition of environmental NGOs are restrictive, and organisations must undergo verification every three years to maintain their status (EC, 2025[8]).2 This creates administrative burdens and may limit the capacity of NGOs to engage consistently in environmental decision-making processes.

Stakeholder engagement in policymaking could be strengthened. There is scope to improve the transparency, oversight and quality of public consultations on both primary and secondary legislation. Similar improvements are needed for environmental impact assessment (EIA) of projects and strategic environmental assessment (SEA) of plans (EC, 2025[9]; EC, 2025[8]). Only 25% of Austrians believe their government would act on opinions expressed in public consultations, compared to the OECD average of 33% (OECD, 2022[10]). Recent measures aim to foster participatory policymaking, including publishing a practical guide for organising participatory processes in the digital age and launching a website to encourage public involvement in decision making. Austria also advanced participatory democracy in climate policy in 2021‑2022 through the Citizens’ Assembly for Climate Action. Bringing together 100 randomly selected citizens, the Assembly delivered 93 recommendations aimed at achieving Austria’s 2040 climate-neutrality goal, although few have been implemented (Klimavolksbegehren, 2023[11]).

Austria has made remarkable progress in providing environmental information, and Austrians are generally well informed about environmental issues. The federal legislation on access to environmental information aligns with EU legislation and the Aarhus Convention. High-quality data and reports on environment and climate are widely available. A large majority of Austrians support the EU-wide goal of climate neutrality by 2050 and believe climate action brings economic and social benefits. However, Austrian respondents are slightly less likely than other Europeans to support climate action (EC, 2025[12]). They consider promoting the circular economy as the most effective way of tackling environmental problems (EC, 2024[13]) (Chapter 2).

Progress has been made in reviewing access-to-justice provisions in environmental matters, as recommended by the 2013 OECD Environmental Performance Review, but significant barriers remain. In the absence of a comprehensive law implementing Aarhus Convention requirements, several federal environmental acts grant the rights to judicial review of environmental decisions (e.g. EIA, air pollution, waste, water, environmental liability). Länder have introduced access to justice provisions, but these vary considerably (EC, 2025[9]). This fragmentation across environmental areas and government levels effectively limits the ability of citizens and environmental NGOs to appeal. Legal standing is reserved to those whose private interests are at stake. Recognised NGOs lack legal right to challenge plans, programmes or self-executing ordinances, as well as authorities’ omissions (e.g. for failure to conduct inspections or initiate EIA procedures). Austrian administrative courts have increasingly granted access to justice to environmental NGOs, filling some legislation gaps. Nonetheless, the Aarhus Convention Compliance Committee has repeatedly called on Austria – most recently in 2025 – to strengthen access-to-justice provisions (UNECE, 2025[14]).

1.2. Addressing key environmental challenges

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1.2.1. Progress towards net zero

Austria’s climate-neutrality target for 2040 is commendable but lacks clarity, legislative backing and enforceability at subnational level

Austria’s climate-mitigation policy operates within the EU framework and is guided by several GHG emission reduction targets. The country’s long-term strategy commits to achieving net zero by 2050, while the federal government committed to achieving “climate neutrality” by 2040. Austria faces a binding target under the EU Effort Sharing Regulation (ESR) to reduce emissions by 48% by 2030 compared to 2005 levels. The ESR target covers 65% of national GHG emissions (excluding land use, land-use change and forestry, or LULUCF) arising from domestic transport, buildings, agriculture, small industry and waste. The sectors are excluded from the EU Emissions Trading System (EU ETS), which covers energy industries, high-emitting industrial sectors and aviation.3 Most of the ESR emissions are also covered by a new EU-wide ETS, called ETS2, which will become fully operational in 2028.

Austria’s climate-neutrality target to 2040 shows strong commitment but is not legally binding and raises transparency and credibility concerns. The 2024 National Energy and Climate Plan (NECP) specifies that the 2040 target refers to reducing ESR emissions and offsetting remaining emissions through natural and technical GHG sinks. Austria’s rationale is that the climate-neutrality target focuses on the bulk of domestic emissions originating from sectors fully under national jurisdiction – at least until the ETS2 takes effect. However, this approach differs from the EU’s binding, economy-wide net-zero target for 2050. It also differs from commitments by some countries that aim for net zero before 2050, such as Finland, Germany and Sweden. By excluding a significant share of emissions from high-emitting industries under the EU ETS cap, the 2040 target could unintentionally signal to ETS industries that decarbonisation is “not their responsibility”, delaying investment. In addition, without clear rules on allocating removals from LULUCF and potential carbon capture and storage (CCS) between ETS and ESR sectors, the same removals could be counted twice. More broadly, Austria should clarify the role of carbon sinks in meeting its long-term climate goals, making explicit the required reductions in gross GHG emissions. This would help maintain the integrity of national climate targets.

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 a new regulatory framework for climate neutrality, climate change adaptation and the circular economy. The draft law assigns implementation responsibilities, mandates monitoring and reporting requirements, and anchors the new climate assessment of policies (Box 1.1). It also fills an institutional gap by creating an independent scientific advisory council for climate-policy oversight, a mechanism found in a little over half of OECD Member countries (OECD, 2025[15]). The draft law aligns with best international practice in terms of governance and foresees developing a roadmap to outline sectoral emission pathways. However, it focuses on complying with the ESR obligations and omits key elements: the 2040 climate-neutrality goal, annual sectoral targets, adjustment mechanisms and clear timelines – shortcomings already identified in the 2011 Climate Protection Act (Schulev-Steindl, Hofer and Franke, 2020[16]). Legally binding targets are essential to clarify policy intentions, foster accountability and provide certainty for businesses and households. By doing so, they help redirect capital towards green assets (Ciminelli et al., 2025[17]).

Box ‎1.1. The KlimaCheck: A mandatory climate assessment for federal policies

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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 adaptation to climate impacts. A dedicated service unit at BMLUK and digital tool will support implementation. Although the KlimaCheck’s results are not binding – i.e. measures with negative climate impacts may still proceed – it is expected to enhance transparency and help embed climate considerations more systematically into policymaking.

More effective mechanisms are needed to strengthen state-level engagement towards climate goals. Federal-level targets – whether designed to comply with EU requirements or be set independently – are not legally enforceable at the subnational level. Meanwhile, some federal states and Austria’s largest cities (Vienna, Graz and Linz) have adopted climate-neutrality targets. Austria should clarify the role of subnational targets in achieving national goals, while defining binding rules to share fairly the burden of achieving the 2030 and 2040 national targets across Bundesländer. The Austrian Stability Pact – which co‑ordinates budget management across government levels to meet EU fiscal rules – provides a useful model (Austrian Energy Agency/KDZ/WU Wien, 2023[18]). Similarly, the cost of non-compliance with the 2030 ESR target should be allocated more equitably to encourage state-level climate action. This cost is shared between the federal government (80%) and the states (20%), with the state contribution distributed according to population. While simple, this approach overlooks states’ socio-economic differences, emission levels and progress in reducing emissions. Indicators of climate-related performance on, for example, renewables or electric vehicles (EVs) would provide a better basis for allocating both non-compliance costs and federal transfers (Austrian Energy Agency/KDZ/WU Wien, 2023[18]; Kletzan-Slamanig et al., 2023[19]).

The pace of emission reduction has accelerated in recent years

Austria’s GHG emissions have decoupled from economic growth. Between 2010 and 2024, GHG emissions without LULUCF declined by 22%, while the economy grew by 17% in real terms. Total emission reductions were sluggish for most of the past decade, with the sharpest decline occurring since 2021 (Figure 1.2, panel A). This recent decrease was driven largely by the economic downturn (with reduced output from major industries and lower freight traffic), geopolitical tensions affecting energy prices and milder winters. However, climate policies also contributed. In particular, renewables expansion, carbon pricing and subsidies for heating system replacement, public transport and EVs all played a role (Section 1.2.2) (Eibinger, Manner and Steininger, 2025[20]; Umweltbundesamt, 2025[21]).

Emissions declined in all sectors in the last decade, although progress was slower in industry and transport (Figure 1.2, panel B). Despite recent declines, GHG emissions from transport and industrial processes (IPPU) were still above their 1990 level in 2024. When combining emissions from IPPU and fuel combustion, industry is the largest source of Austria’s emissions, followed by transport (Figure 1.2, panel C). Emissions declined steadily in the power generation industry, which is covered by the EU ETS and continued to shift towards less emitting energy sources (Section 1.2.2). With a largely decarbonised power sector, emissions from energy industries were only 11% of total GHG emissions in 2024. Improved energy efficiency and upgraded heating systems helped reduce emissions from households considerably (Section 1.2.2), while a shift away from landfilling lowered emissions from waste management (Chapter 2).

Figure ‎1.2. GHG emissions declined, but emissions from transport and industry remain high
Copy link to Figure ‎1.2. GHG emissions declined, but emissions from transport and industry remain high

The 2030 and 2040 GHG emission reduction targets seem out of reach

Existing and planned policies are insufficient to achieve the 2030 ESR and 2040 climate-neutrality targets. Achieving the 2030 ESR target requires cutting emissions by an additional 31% from 2024, compared to a 14.6% reduction observed over the previous six years (2018‑2024). The NECP forecasts a 41% reduction in ESR emissions by 2030 from 2005 levels with the full implementation of existing and planned policies (“with additional measures” or WAM scenario) (Figure 1.3). Planned policies include the greater expansion of renewable energy sources, the faster switch to low-emission heating systems and the significant expansion of public transport.

Figure ‎1.3. Austria is off track to meet its climate targets to 2030 and 2040
Copy link to Figure ‎1.3. Austria is off track to meet its climate targets to 2030 and 2040

Historic and projected GHG emissions

The NECP proposes other measures in addition to the WAM scenario, notably phasing out harmful subsidies (Section 1.3.3) and CCS projects, that could bring reductions close to 46%. However, these measures face major implementation challenges, and even if fully realised, Austria would still need to use LULUCF and ETS flexibilities to meet the target (Umweltbundesamt, 2025[22]).4 In addition, some measures in the NECP are being scaled back or repealed in the context of fiscal consolidation, putting compliance with the target at risk unless alternative policies are introduced. Looking ahead, meeting the 2040 climate-neutrality goal will be even more challenging (Figure ‎1.3), demanding a faster structural transformation of the economy and a substantial expansion of carbon sinks (Umweltbundesamt, 2025[22]).

Fluctuating emission removals from forests and climate-related disturbances could reduce the availability of LULUCF credits for complying with the ESR target, thereby increasing the need for deeper GHG emission abatement (Figure ‎1.3). Forecasts show the country will overachieve its 2030 LULUCF biding target under EU legislation. However, forest carbon removals have been declining and exhibit considerable year‑to‑year variability (Umweltbundesamt, 2025[22]). In some years, forests have become a net source of emissions (Figure ‎1.3), driven by severe pest epidemic, storms, unusually large fires and lower forest growth caused by drought (Umweltbundesamt, 2025[22]). As a result, GHG emissions with LULUCF were higher in 2024 than in 1990 (Figure ‎1.2).

Failure to meet the 2030 ESR target would expose Austria to significant fiscal risks, as the country will have to purchase emission allocations from overachieving countries to offset its excess ESR emissions. Fiscal cost estimates for the 2021-2030 period vary considerably – from EUR 1.6 billion or 0.3% of 2023 GDP (Fiscal Advisory Council, 2025[23]) to EUR 5.9 billion or 1.2% of 2023 GDP (KPC, n.d.[24]). Meanwhile, credits may be in short supply by the end of the decade (KPC, n.d.[24]). With the anticipated tightening of emission targets in line with EU climate ambitions, costs of non-compliance may rise to EUR 9.5 billion in 2031‑2040 (Fiscal Advisory Council, 2025[23]).

Austria should accelerate and strengthen emission reduction measures

Austria needs a more comprehensive, balanced and cost-effective climate policy, backed by significant investment, to meet its targets. 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, increased household incomes and reduced inequality (Kettner et al., 2025[25]). Public and private investment needs are sizeable, estimated at about 3-4% of GDP per year until 2030 to remain on a credible path towards climate neutrality by 2040 (Umweltbundesamt, 2022[26]) (Section 1.3.5).

The country’s climate-policy mix is broad but skewed towards direct subsidies (Kletzan-Slamanig, Köppls and Schratzenstaller, 2024[27]), while harmful incentives persist. In line with the EU framework, Austria has adopted a wide range of policy measures, including pricing, bans, subsidies and standards. Historically low fuel taxes have offered weak incentives for energy savings and contributed to fuel tourism, making the recent introduction of explicit carbon pricing for emissions outside the EU ETS particularly welcome (Section 1.3.4). In line with its traditional approach to environmental policy, Austria continues to rely heavily on subsidies to promote climate‑friendly investment and behaviour, often through the Environmental Support Act (Section 1.3.2). Recent examples also include the KlimaTicket and financial support for replacing fossil-fuel heating systems (Section 1.2.2). At the same time, subsidies and incentives that discourage emission abatement remain in place. The 2024 NECP proposes gradually eliminating the “climate-counterproductive incentives and subsidies” from the federal budget by 2030, aiming to reduce GHG emissions by at least 2 MtCO₂eq per year (base year 2022) (Section 1.3.3).

1.2.2. Accelerating the clean energy transition in all sectors

Renewables have expanded, but reforms are needed to unlock their full potential

Austria has made significant progress in its clean‑energy transition, although fossil fuels still cover most of its energy needs. Energy intensity has continued to fall and remains well below the OECD average (Figure 1.4, panel A). Electricity generation is largely decarbonised: coal‑fired power was phased out in 2020, and renewables reached 86% of electricity production in 2024 – far above the OECD average. Hydropower dominates the renewable mix, while photovoltaics (PV) and wind power have continued to expand (Figure 1.4). GHG emissions from energy industries declined by 47% between 2010 and 2024 (Figure ‎1.2, panel B), driven by the shift away from coal and oil towards more efficient gas‑fired plants and the expansion of renewable energy (Umweltbundesamt, 2025[22]). The share of fossil fuels in total energy supply declined to about 60% in 2024 – still a majority, but well below the OECD average (Figure 1.4, panel B). Fossil fuels are primarily imported and used in transport and industry. Austria also has a long tradition of using biomass, primarily for heating. Biofuels and waste make up half of renewable energy supply (Figure 1.4, panel D). Biomass supplies 36% of individual heating systems (IEA, 2025[28]) and, along with waste incineration, over half of district heating.

Further increasing renewable power capacity is needed to support electrification across sectors, thereby reducing fossil-fuel use in transport, buildings and manufacturing. The 2021 Renewable Energy Expansion Act provides the regulatory and funding framework to scale up renewables in line with the national target of 100% renewable electricity supply (on an annual net basis) by 2030. The act promotes investment grants for PV systems, wind turbines and electricity storage. It also replaces the feed-in tariff with a more cost-effective, auction-based market premium (OECD, 2024[29]). The government plans to further develop hydropower, but this raises concerns about the potential impacts on water ecosystems and biodiversity (Section 1.2.6).

Figure ‎1.4. More renewables and lower energy intensity drive Austria’s clean-energy transition
Copy link to Figure ‎1.4. More renewables and lower energy intensity drive Austria’s clean-energy transition

Increasing renewable electricity generation will require addressing administrative barriers, as well as expanding storage capacity, improving the power system flexibility and upgrading the grid (EC, 2025[8]). The authorities have taken steps to accelerate permitting, including establishing one-stop shops and streamlining EIAs. However, complex and differing zoning and permitting requirements across states, along with staff shortages, result in long permitting times (IMF, 2024[30]; EC, 2025[8]). Only a few states have designated renewable acceleration areas with simplified permitting procedures, as required by the 2023 EU Renewable Energy Directive (RED III).5 The permitting process for wind energy infrastructure takes five to six years on average, which is well above the two-year objective of the RED III and longer than European peers. In addition, Austria faces higher costs and longer times for grid access and expansion than other European countries (OECD, 2024[29]). At the time of writing, legislation on renewables was under development to remove regulatory barriers and simplify permitting procedures. Its swift adoption will be critical to meeting Austria’s 2030 renewable electricity target.

Industrial decarbonisation is progressing slowly

Manufacturing, which includes several energy‑intensive industries, is a major source of emissions in Austria. In 2024, it accounted for 36% of the country’s GHG emissions, mostly from IPPU. IPPU are the single second‑largest source of emissions, and their levels remain above those recorded in 1990 (Figure ‎1.2). Emissions are heavily concentrated in iron and steel, cement and lime production. Iron and steel production alone represents 17% of national GHG emissions (Umweltbundesamt, 2025[22]). As of 2022, more than 90% of Austria’s steel was produced in blast furnaces – a highly emission-intensive technology – compared with just over 50% in the EU.

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. The country’s manufacturing sector has invested a lower share of its gross value added in climate mitigation than the EU average (Eurostat, 2026[31]). The carbon intensity per tonne of steel produced in Austria has declined. However, it remains higher than in other countries such as Italy, where 85% of steel is produced in electric-arc furnaces (Somers, 2022[32]; IEA, 2025[28]). Austria is a leading innovator in steel decarbonisation, accounting for 13% of related EU patents and ranking second only to Germany (53%) (Somers, 2022[32]). However, additional support for low‑carbon technologies, sustainable supply chains and circular‑economy practices is needed to ensure that innovation translates into industrial deployment (EC, 2025[8]).

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.6 The 2024 Hydrogen Promotion Act aims to expand renewable-based hydrogen production (excluding biomass), offering subsidies and support for infrastructure. In 2024, the government 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. Given Austria’s limited geological storage potential, cross-border carbon transport infrastructure will be essential (OECD, 2024[29]).

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

Transport is Austria’s second largest source of emissions, accounting for 29% of total emissions in 2024 (Figure ‎1.2, panel C). Suburban sprawl, car dependency, rising mileage and fuel exports to freight transit drove emissions up for most of the 2010s, despite improved vehicles’ fuel efficiency (APCC, 2025[5]) (Umweltbundesamt, 2025[22]). Transport emissions have fallen since 2021 but remain well above 1990 levels (Figure ‎1.2, panel B). 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 (Box 1.2), EV incentives and higher biofuel blending quotas also contributed (Umweltbundesamt, 2025[22]). Emissions from fuel exports have also fallen as diesel price gaps with neighbouring countries narrowed due to national carbon pricing as from 2022 (Section 1.3.4).

Austria has well-developed transport infrastructure and public transport services. The railway network is extensive and mostly electrified. The freight transport mix is more balanced between rail and road than in most EU countries. Road haulage accounts for 68% of inland freight transport, compared to over three-quarters on average in the EU (Eurostat, 2025[33]). Austrians use public transport more frequently than EU peers for both urban and longer trips (Figure 1.5, panel A). Public passenger transport (in passenger-km) has grown since 2021 (Figure 1.5, panel B), driven by expanded rail services, the KlimaTicket (Box 1.2) and higher fuel costs (Umweltbundesamt, 2025[21]).

Figure ‎1.5. Public transport use is high and has increased in recent years
Copy link to Figure ‎1.5. Public transport use is high and has increased in recent years

Share of public transport (bus, metro, trams, trains) in total land passenger transport

Box ‎1.2. The KlimaTicket: Effects on mobility choices and GHG emissions

Copy link to Box ‎1.2. The KlimaTicket: Effects on mobility choices and GHG emissions

To encourage public transport use, in 2021 Austria introduced a national “climate ticket” (KlimaTicket), offering nearly unlimited public transport use across the country with a single ticket for a full year. Eight regional climate tickets complement the offer for regional public transport use. As of September 2024, over 300 000 national KlimaTicket and nearly 1.3 million regional ones were in use, representing about 20% of the Austrian population. Most KlimaTicket users live in Vienna and the surrounding state of Lower Austria.

The KlimaTicket has contributed to substituting some car journeys with public transport, while also encouraging mobility. Two-thirds of ticket holders declared using more public transport than they did without the ticket. In 2023, estimates indicate that 22% of KlimaTicket users’ trips would otherwise have been made by car, while 8% represent entirely new trips that would not have occurred without the ticket. A customer survey shows that 11% of ticket holders have already given up a car, and an additional 9% are planning to do so. Overall, the KlimaTicket helped reduce about 65 ktCO₂eq in 2022 and 105 ktCO₂eq in 2023. These reductions correspond to about 5.6% of the year‑on‑year decline in total transport emissions observed in 2022, and roughly 11% of the decline recorded in 2023.

In the context of fiscal consolidation, the 2025/26 budget increased the price of the KlimaTicket, while also eliminating free passes for those under 18 years. This may have an impact on new subscriptions and public transport use.

Source: BMIMI (2025[34]), KlimaTicket-Report 2023/24.

However, cars dominate overall travel and access to public transport could be improved, especially in rural areas. Car ownership is high in Austria (see Basic Statistics), with a relatively large share of heavy, powerful vehicles in the fleet (Eurostat, 2026[35]). Considerable tax incentives continue to over-encourage car ownership and use, while road pricing and parking fees provide little incentive to limit driving (Sections 1.3.3 and 1.3.4). Large gaps in public transport access persist between urban and rural areas – where 40% of the population live – generating car dependency. More than half of rural residents report problems in public transport access compared to 8% for urbanites, and distances to public transport stops are significantly higher for rural residents. As a result, more than a third of households in small cities have more than one car compared to 9% in Vienna (OECD, 2024[29]). Addressing these disparities requires better spatial planning and more extensive shared mobility and demand-responsive transport services. The government plans major investments in public and sustainable transport and electric mobility, including to better connect rural areas.

Facilitating the uptake of EVs among residents in car‑dependent rural areas could also help reduce GHG emissions. Generous incentives have spurred strong EV sales growth, which has helped lower the average CO₂ emission levels of newly registered cars (Figure 1.6, panel A). In 2025, over 30% of new cars sold were electric (including battery electric and plug-in hybrid electric vehicles, or BEVs and PHEVs), above the EU average. With 5% of passenger cars and vans being electric in 2024, Austria ranks among the top ten EU countries with the highest shares of EVs in the vehicle fleet (Figure 1.6, panel B and C).

Figure ‎1.6. Deployment of electric vehicles has accelerated
Copy link to Figure ‎1.6. Deployment of electric vehicles has accelerated

Like other countries, Austria should carefully manage the cost effectiveness, fairness and fiscal implications of EV purchase incentives. These incentives mainly benefit households that would purchase such cars regardless and disproportionately favour higher-income groups. Consequently, they are generally a costly and regressive way to abate CO₂ and air pollutant emissions from transport. In 2025, as part of its fiscal consolidation efforts, the government phased out direct EV subsidies for cars, retaining them for trucks, buses and charging infrastructure. Meanwhile, value-added tax and ownership tax exemptions for EVs continue to apply to cars. EV support should prioritise low-income buyers or residents in sparsely populated rural areas, where public transport provision is economically unviable. They should be progressively replaced by higher taxes on fossil-fuel powered cars to narrow the cost gap.

Driven by targeted policies, the EV public charging network has expanded considerably (Figure ‎1.6, panel D). The authorities have provided substantial financial support for private charging and the installation of company and public chargers. Austria is also one of the few European countries with a credit system that lets electricity used for charging EVs be sold as renewable credits to fuel suppliers. As a result, the density of charging stations is relatively high compared to other European countries, with around one charging point for every 10 EVs, above the EU average of about one charging point per 12 EVs (EAFO, 2026[36]). A federal funding programme targeted to deploy fast‑charging stations in underserved areas led to an increase in fast‑charging points. By 2025, these accounted for one‑quarter of all public charging points, exceeding the EU average of 18% (EAFO, 2026[36]). These efforts should continue, as further expanding fast‑charging availability, particularly in rural regions, would help accelerate the uptake of EVs.

Despite progress, heating energy use is high and the pace of building retrofits still slow

GHG emissions from fossil-fuel use in residential, commercial and institutional buildings declined considerably. In 2024, these emissions were 43% below their 2010 level and about 9% of Austria’s emissions. However, emissions remained largely stable for most of the past decade (Figure ‎1.2). Recent declines have been driven primarily by mild winters, high natural gas prices and subsidies for replacing heating systems based on fossil fuels with cleaner ones (see below). Improved energy efficiency of buildings, as well as increased use of renewables and district heating have also played a role, while the number and size of homes have risen (Umweltbundesamt, 2025[22]).

Heating represents over two-thirds of residential energy use and CO₂ emissions in Austria. The energy intensity of space heating per floor area declined between 2010 and 2023, and the carbon intensity dropped even more (Figure 1.7, panels A and B), reflecting a shift to more efficient and less carbon-intensive heating systems. Nonetheless, Austria still shows higher energy intensity of home heating than the EU average and even than some colder countries (Figure 1.7, panel C). This is also the consequence of the large share of single-family homes in Austria, which account for over 80% of all residential buildings and are more difficult to heat efficiently (EC, 2025[37]; Umweltbundesamt, 2025[22]).

Austria has made strides to reduce the carbon intensity of space heating. It banned fossil-fuel boilers in new buildings as from 2024 and provided substantial financial support for replacing them with low-carbon options (e.g. district heating, heat pumps and modern wood-fired boilers) for existing buildings. The ban on fossil-fuel heating systems could be gradually extended to existing buildings, with adequate financial support for vulnerable households (OECD, 2024[29]). Subsidies under the 2023‑2024 “Away from Oil and Gas” (Raus aus Öl und Gas) programme have led to an impressive shift in heating systems from fossil-fuel boilers to modern, efficient biomass systems (e.g. pellet boilers) (Umweltbundesamt, 2025[22]). However, wood-based systems emit GHGs and air pollutants during combustion and can entail significant lifecycle CO₂ emissions depending on the biomass source (Section 1.2.3). Financial support for heating system replacement should prioritise heat pumps, as Austria lags behind leading European countries, such as Finland and Norway, in their uptake (EHPA, 2025[38]). Large-scale heat pumps can also be used to decarbonise district heating, which relies heavily on wood-based biomass and fossil fuels (OECD, 2024[29]).

Figure ‎1.7. Energy use and GHG emissions from space heating have declined but remain high
Copy link to Figure ‎1.7. Energy use and GHG emissions from space heating have declined but remain high

Austria needs to accelerate the pace of energy‑efficiency building retrofits. The National Building Renovation Plan was under development at the time of writing and will set renovation targets for 2030 and 2040, aiming to convert all existing buildings into zero‑emission buildings by 2050.7 Many buildings are old and poorly insulated: three‑quarters of residential buildings date to before 1990 (EC, 2025[37]), before stringent energy‑performance standards were in place. As such, they hold substantial potential for emission reductions. Austria has long supported energy‑efficiency renovations under the Renovation Offensive (Sanierungsoffensive). However, renovation rates remain low at around 1.5% per year – only half of the estimated 3% needed to upgrade all thermally inefficient housing by 2040 (OECD, 2026[2]). Deep renovations declined by more than half between 2010 and 2022 (Umweltbundesamt, 2025[22]).8

As in most EU countries, several obstacles hinder the energy renovation of buildings. High upfront costs with delayed returns, combined with the complex co‑ordination among multiple stakeholders (owners, tenants and shared‑property arrangements), are major barriers. In addition, while EU-aligned performance standards for buildings apply, inconsistent building codes and standards across states hinder both construction and renovation projects (EC, 2025[8]). Structural and cost difficulties lead many households to opt for single measures such as window or boiler replacement instead of comprehensive renovations. This piecemeal approach often results in lower‑than‑expected energy savings (Umweltbundesamt, 2025[22]). Authorities should consider giving priority to deep renovations in the design of financial support programmes.

Efficiency and targeting of public financial support could be improved. Austria channels much of its assistance for energy renovations and boiler replacement through universal flat‑rate grants differentiated by technology. However, Bethge et al. (2025[39]) found these grants provided excessively high subsidies per tonne of CO₂ emissions saved. In addition to being fiscally costly, grants potentially subsidise investments that would likely occur without support (OECD, 2024[29]). While some investment grants target low-income households only, public authorities should reserve grants for vulnerable households and rely more on concessional loans for others.

Improving the monitoring of renovation activity and quality would support better design and more effective targeting of incentives. The Building and Housing Register (GWR) contains structural data on buildings and construction projects, including energy‑performance indicators. However, local authorities – who are responsible for populating the GWR – do not add data consistently, which limits the reliability of information. Austria needs to better track renovation measures across all types of buildings, regardless of whether the works have been subsidised (Umweltbundesamt, 2025[22]). This would allow to determine the contribution of retrofits to GHG emission reductions and, in turn, to assess the cost effectiveness of support measures. Austria could build on the GWR to establish such a comprehensive monitoring system.

1.2.3. Tackling air pollution

Austria met most air pollution targets and plans extra measures to cut ammonia

Air emissions have declined significantly, but reducing ammonia emissions remain challenging. Emission of nitrogen oxides (NOx), sulphur oxides (SOx), non-methanic volatile organic compounds (NMVOCs) and fine particulate matter (PM_2.5) continued to fall over the past decade. However, ammonia emissions – mostly from agriculture – decreased only marginally (Figure 1.8, panel A). By 2023, the country met or exceeded all 2020 targets under the EU National Emission Ceilings Directive. It has already achieved its stricter 2030 targets for NMVOCs and SO₂ and is on track for NOx and PM_2.5. However, meeting the 2030 ammonia objective will require higher reduction rates than in the past decade. The 2023 Ammonia Reduction Ordinance introduces stricter requirements on fertilisers and manure management in farming. Implementation of the ordinance is also expected to indirectly contribute to reduce nitrates pollution of water (Umweltbundesamt, 2025[40]) (Section 1.2.6).

Air quality has improved, but particulate matter pollution remains high

Overall air quality is good, although with local variations. Air emissions from traffic (NOx and PM), building heating (PM) and agriculture (ammonia) contribute to localised pollution in urban areas and valleys. In 2023, there were no exceedances of the limit values set by the EU Ambient Air Quality Directive. In 2022, 27% of the population was exposed to ozone concentrations above EU target values – a significant decline from 73% in 2018 (EEA, 2024[41]).

Curbing PM pollution should remain a priority. Mean average exposure to PM₂.₅ has declined in all regions (Figure 1.8, panel C), and no measuring points have exceeded the PM_2.5 limit value for of 25 μg/m³ (annual average) in recent years (Umweltbundesamt, 2025[40]). However, as in most OECD Member countries, exposure remains well above the World Health Organization guideline value of 5 μg/m³ throughout the country, although with significant regional variations (Figure 1.8).9 Between 2021 and 2023, population exposure to PM_2.5 averaged 9.9 μg/m³, ranking among the ten highest levels in European countries that are members of the OECD (Figure 1.8, panel B). The OECD estimates that welfare costs of PM-related mortality amount to 2.5% of GDP in Austria (OECD, 2025[3]).

Figure ‎1.8. Air emissions and pollution have declined, but exposure to fine particulates exceeds recommended health thresholds
Copy link to Figure ‎1.8. Air emissions and pollution have declined, but exposure to fine particulates exceeds recommended health thresholds

Transport and inefficient heating plants based on biomass and fossil fuels are the main source of PM_2.5 emissions. Public authorities have provided substantial subsidies to replace heating systems based on fossil fuels with cleaner alternatives, including modern wood-fired boilers (Section 1.2.2). While supported wood-fired systems must comply with strict emission standards, they still emit considerable amounts of particulates. Biomass heating should be restricted in urban areas to minimise PM concentrations. It should be limited to efficient, automated systems in energy-efficient buildings, and promotion criteria should favour best available technologies for biomass heating (Umweltbundesamt, 2025[40]). Electrification of buildings and transport will help further improve air quality.

1.2.4. Controlling the expansion of artificial surfaces

Progress has been made in controlling land take and soil sealing

Land take and soil sealing exert significant pressures on the environment.10 They contribute to biodiversity loss, while soil sealing exacerbates urban heat and flood risks by accelerating rainwater runoff. Austria’s urban areas are among the most sprawled in the OECD, with high fragmentation and relatively low population density, and are expected to continue growing (OECD, 2018[42]; ÖROK, 2021[43]). Suburban sprawl is a key driver of high transport-related GHG emissions (Section 1.2.2).

After a period of sustained growth, the annual rate of land conversion more than halved between 2013‑2016 and 2022-2025 (Figure 1.9). Socio-economic factors – such as increasing land prices and migration to dense urban areas – drove this trend in the 2010s (Getzner and Kadi, 2019[44]), while the economic slowdown has likely contributed in recent years. In 2025, 6.8% of the national territory had been converted from mainly arable land and grassland to settlements, transport infrastructure and other facilities. Of this surface, 53% was permanently sealed, with large variations across states (ÖROK, 2025[45]). If the pace of decline continues, the government 2030 target of 2.5 hectares per day (about 9 km² per year) appears attainable (Figure 1.9). However, land conversion could accelerate again as economic conditions improve.

Figure ‎1.9. Annual land take has declined and is nearing the end-of-decade target
Copy link to Figure ‎1.9. Annual land take has declined and is nearing the end-of-decade target

Land-take increase, three-year periods

Fragmented governance and conflicting incentives encourage unsustainable land use

Austria’s land-use target is stricter than in some neighbouring countries (Alpine Convention, 2022[46]),11 but it lacks consensus and enforceability at subnational level due to fragmented spatial planning responsibilities. Bundesländer set their own spatial planning and regional development legislation – which differs significantly across the nine states – while municipalities are responsible for land-use planning within state frameworks. The Austrian Conference on Spatial Planning (ÖROK) has co‑ordinated and monitored spatial planning since the 1970s – one of the few organisations of its kind in the OECD (OECD, 2017[47]).12 The ÖROK develops ten-year spatial development concepts (ÖREK) to provide shared strategic objectives and guidelines for spatial development. The last such concept (ÖREK 2030) focuses on climate-friendly spatial developments. However, like previous concepts, it does not include land-take and soil-sealing targets and remains non-binding. The ÖROK’s 2023 National Soil Strategy, adopted by all Länder, calls for a feasibility assessment of the government’s land-take target. ÖREK 2030 acknowledges that any national target should be embedded into legislation at state and municipality levels. It rightly proposes developing an ÖROK recommendation to define specific targets for each state and differentiated guidelines for various spatial types (ÖROK, 2021[43]). The guidelines should consider the inherent conflict between densification of residential areas and integration of green and blue infrastructure, which helps mitigate heat islands and regulate water cycles (Umweltbundesamt, 2025[40]).

Local political dynamics and conflicting policies hinder sustainable land-use policy. Inconsistent application of SEA to local land-use plans further undermines effective implementation (Getzner and Kadi, 2019[44]). Local governments often zone more land for construction than needed, especially for commercial activities. Austria’s national average of 0.50 m² of commercial/retail surface per capita is significantly higher than the European average (RegioData Research, 2024[48]). This tendency is partly driven by municipalities’ reliance on revenue from local business taxes and property taxes, which fuels competition to attract businesses and residents (Ehrlich, Hilber and Schöni, 2018[49]). Länder should further promote inter-municipal co‑operation agreements, which have proven effective in several OECD Member countries to mitigate competition for locations and not-in-my-backyard dynamics (OECD, 2017[47]). While local authority associations and the merging of municipalities into higher-level entities (“territorial municipalities” or Gebietsgemeinden) are legally possible, they remain rare (OECD, 2024[29]).

Austria needs to investigate and reform the fiscal incentives and regulations that encourage unsustainable land use. Housing subsidies fuel soil sealing, while commuter allowances, company car benefits and parking space requirements encourage longer commutes and, ultimately, urban sprawl (Schratzenstaller and Sinabell, 2024[50]) (Section 1.3.3). Fiscal equalisation transfers should be linked to municipal efforts to reduce soil sealing; transfers based solely on population size incentivise settlement and infrastructure expansion (Jandl et al., 2024[51]; OECD, 2024[29]).

More effective policy instruments are needed to curb land take

All Länder have introduced spatial planning measures and building regulations to promote densification, brownfields redevelopment (Box 1.3) and use of vacant property. Measures include issuing time-limited building zoning or permits; restricting new building zones to primary residences; relaxing building height and density restrictions; and limiting retail space development. Some states have also improved monitoring and spatial information systems to support planning. However, these new measures apply only to newly zoned land, while a large share of land already designated for construction remains unused, creating pressure for additional zoning (Getzner and Kadi, 2019[44]). The design, enforceability and effectiveness of the measures vary considerably. Many of these measures were recently introduced and lack nationwide coverage and strong ambition, with unclear impacts (Arnold et al., 2023[52]).

There is scope to complement spatial planning regulations with appropriately designed incentives. Austria should raise property taxes while updating property values (OECD, 2024[29]), and remove the temporary exemption for new constructions, to encourage land conservation or urban densification (Arnold et al., 2023[52]). It should also consider moving towards a split-rate system that taxes land at a higher rate than structures. Empirical evidence suggests that such a system encourages higher-density developments and the use of vacant or underused land in suburban areas (Taranu and Verbeeck, 2022[53]). In addition, taxation of vacant property – now in place in some Länder – could be extended to increase housing supply without new developments. More Länder could also impose development impact fees on developers to help pay for the capital costs of providing public infrastructure to new developments. The feasibility of tradeable development rights (TDRs) is also worth exploring, as recommended by ÖREK 2030. TDRs allow property owners to transfer the right to build from one parcel of land where development is restricted (to preserve open space, farmland or environmentally sensitive areas) to another parcel that is zoned for higher-density growth (OECD, 2018[42]). Länder could also look at introducing compensation arrangements in areas under pressure, restricting new land conversion unless offset by equivalent land de-sealing or ecological enhancements (ESPON, 2024[54]). Austria should consider the impact of measures to reduce land take on land values and housing supply and, in turn, social and territorial equity (ESPON, 2024[54]).

Box ‎1.3. Promoting use of brownfields to reduce land take

Copy link to Box ‎1.3. Promoting use of brownfields to reduce land take

Brownfield development promotes more efficient use of existing infrastructure and can help reduce land take. In a positive step, the government completed the first national map of potential brownfield sites for redevelopment in 2025. Using artificial intelligence to analyse aerial photographs, the map identifies 3 800 sites extending over 1 700 hectares.

Austria introduced funding programmes to promote brownfield redevelopment. The 2022-2027 Land Recycling Funding Scheme supports projects that develop underused or misused properties in town centres. The 2024 amendment to the Contaminated Sites Remediation Act established a fund for investigations and remediation of old sites that do not qualify as contaminated. This reduces liability risks associated with acquiring such sites, removing one key barrier to investment on used land.

The Brownfield Dialogue is a central hub for land recycling activities in Austria. It offers an annual specialist event (Brownfield Summit); quarterly webinars on specific aspects of land recycling; and working groups. All activities, along with technical papers, funding information and good practice examples, are published on its website.

Source: BMLUK (2025[55]), Erste bundesweite Potenzialflächenkarte zeigt 1.700 Hektar ungenutztes Potenzial für Bodenschutz; Umweltbundesamt (2025[40]), 14. Umweltkontrollbericht. Umweltsituation in Österreich.

1.2.5. Halting biodiversity loss

The policy framework is comprehensive, but biodiversity knowledge could be improved

Austria has strengthened its policy framework for biodiversity conservation and sustainable use. In 2022, it adopted the Biodiversity Strategy Austria 2030+ to achieve objectives that align with both the EU Biodiversity Strategy for 2030 and the Global Biodiversity Framework (Box 1.4). This overarching strategy is complemented by sector-specific strategies, such as those for peatland conservation and floodplain restoration.

While Austria produces a wide range of biodiversity-related data and indicators, there is room to improve their quality, completeness and accessibility to better support decision making. In 2019, the Austrian Environment Agency conducted a nationwide assessment of 15 key ecosystems services. However, further work is necessary to develop accounts of ecosystem services and assess the country’s natural capital. In addition, data on species and habitats are often outdated or not collected using standardised methods, which may affect consistency and comparability.13 It is welcome that the Biodiversity Strategy foresees the establishment of a national biodiversity information platform to provide harmonised data.

Box ‎1.4. The Biodiversity Strategy Austria 2030+

Copy link to Box ‎1.4. The Biodiversity Strategy Austria 2030+

Developed through a broad participatory process and adopted by the National Biodiversity Commission, the Biodiversity Strategy Austria 2030+ is structured around a ten-point action programme, outlining 100 objectives and over 400 measures. Among the key targets to be achieved by 2030 are: reducing the number of threatened species and habitats by 30%; expanding protected areas to 30% of the national territory, with 10% of the territory under strict protection; restoring 30% of wetlands; and creating 1 000 km of ecological connectivity for aquatic habitats.

The strategy addresses key challenges identified in the mid-term evaluation of the previous strategy (Umweltbundesamt, 2018[56]), including improving the conservation status of species and habitats; ensuring ecosystem connectivity and effective conservation in protected areas; restoring critical ecosystems; reducing land use and habitat fragmentation; and mainstreaming biodiversity across all sectors. To achieve these goals, the strategy aims to improve the biodiversity legal framework, ensure adequate and stable financing, establish a comprehensive national biodiversity information system and raise awareness. The strategy also identifies key implementation actors and establishes reporting requirements, with a mid-term review scheduled for 2026 and a final evaluation for 2030. The National Biodiversity Commission – composed by representatives of the federal and state governments and other stakeholders – reviews implementation of the strategy.

Source: BMK (2022[57]), Biodiversitäts-Strategie Österreich 2030+.

The country’s rich biodiversity and ecosystem services are under threat

Austria’s high alpine regions, Pannonian plains, wetlands and forests host a wide diversity of vegetation, wildlife and ecosystem services. Forests are the main ecosystem found in the country, followed by agroecosystems (38% of land area) (EC/EEA, 2025[58]). Austria’s economy relies on ecosystem services more than the EU average, with 46% of its gross value added highly dependent on them. Mountainous hydrology supports hydroelectric power, while sectors such as agriculture, fisheries and construction are fully dependent on ecosystem services (EC, 2025[8]).

Despite continuous conservation and restoration efforts, the status of many habitats and species is relatively poor. Hydrological changes, agriculture, forestry, landscape fragmentation and soil sealing are the main pressures on Austria’s biodiversity. In addition, invasive species and climate change are increasingly affecting habitats and species (BMK, 2022[57]). About 68% of habitats and 75% of species of EU conservation importance14 were in a poor or bad state in 2013‑2018, the latest assessment period (Figure 1.10). While a higher share of habitat assessments show a good status than the EU average, the conservation status of Austrian freshwater habitats, wetlands and grasslands is of particular concern. Some forest habitats are also under significant pressure, with only 12% of Austria’s forest habitats of EU interest in good conservation status, one of the lowest shares among EU countries (EEA, 2023[59]).

The share of species in good conservation status is well below the EU average. The conservation status of amphibians, reptiles and freshwater fish species is particularly poor (Figure 1.10). Several known species living in Austria are threatened, including 29% of bird species and 26% of mammal species (OECD, 2025[60]). Illegal poaching is more frequent than in other EU countries (EC, 2025[9]). Most Austrian states allow hunting of strictly protected species (beavers, otters and wolves)15 when they cause economic damage, but the number of kills compared to populations seems excessive (WWF, 2024[61]). In line with EU legislation, Bundesländer should more strictly regulate hunting permits to ensure they do not jeopardise species that have yet to reach favourable conservation status (EC, 2025[9]).

Figure ‎1.10. Large shares of habitats and species show a poor conservation status
Copy link to Figure ‎1.10. Large shares of habitats and species show a poor conservation status

Percentage of assessed habitats and species, 2013-2018

Restoring ecosystems in line with the 2024 EU Nature Restoration Regulation will be an institutional and financial challenge. The European Commission estimates that Austria may need to restore habitats of EU importance covering nearly between 1.7% and 6.7% of its territory (EC, 2022[62]). It must submit a National Restoration Plan to the European Commission by September 2026, outlining the most urgent restoration measures along with their implementation timetable and associated financial needs and sources. The plan is to be developed jointly by the federal government and the federal states, with the participation of relevant stakeholders. However, there are concerns about lack of transparency, insufficient inter-institutional co‑ordination and financial resources for implementing the regulation (Österreichischer Biodiversitätsrat, 2025[63]).

Protected area coverage is extensive, but management gaps remain

Austria has expanded its network of protected areas (PAs). The share of protected territory grew from 26% in 2010 to 29.5% in 2024, close to the 30% goal set by the Global Biodiversity Framework for 2030 (Figure 1.11). However, less than 3% of the country’s area is under strict protection compared to the target of 10% by 2030 (Box 1.4). Forests and agroecosystems are the most represented ecosystems in PAs, reflecting their prevalence in the country’s territory. More than half of PAs are either Natura 2000 sites or overlap with them (EC/EEA, 2025[58]). The Natura 2000 network also expanded, but it still covers a smaller share of Austrian territory (15.4%) than the EU average (18.6% in 2024) (EEA, 2025[64]). As of early 2026, Austria had no areas under Other Effective area-based Conservation Measures (OECMs) registered in the global OECM database (UNEP-WCMC, 2026[65]).

Concerns remain regarding the ecological coherence, representativeness, connectivity and management effectiveness of the PA network. The network includes, mostly partially, about 68% of Austria’s Key Biodiversity Areas, which are sites contributing significantly to global biodiversity (CBD/UNDP, 2021[66]). It offers limited coverage to several species and habitats in unfavourable conservation status, while Natura 2000 sites are often too small and disconnected to ensure effective conservation (EC, 2025[9]). Austria lacks a uniform approach to setting conservation objectives and measures for Natura 2000 sites, as nature conservation is an exclusive competence of the Länder (see below), which makes assessing effectiveness difficult. The management effectiveness of PAs varies across regions and types of areas, with national parks generally better managed with more up-to-date management plans. More broadly, PA management suffers from a lack of human resources. As of early 2026, less than 1% of Austrian PAs have completed Protected Area Management Effectiveness (PAME) assessments reported in the global PAME database (UNEP-WCMC, 2026[65]).

Figure ‎1.11. Much of Austria’s territory is protected, but areas under strict protection are limited
Copy link to Figure ‎1.11. Much of Austria’s territory is protected, but areas under strict protection are limited

Terrestrial protected areas, top ten OECD Europe countries, 2024

Austria is a leader in the implementation of agri-environmental measures

Efforts have been made to reduce the pressures of agricultural intensification and land abandonment on agroecosystems. Austria has long promoted organic farming, which has expanded to 27% of agricultural land, the highest in the OECD and the EU (Figure 1.12, panel A). The national 2023‑2027 Strategic Plan of the EU Common Agricultural Policy (CAP) aims to reach 30% and to extend biodiversity-friendly agricultural practices to at least a fifth of the agricultural area (EC, 2025[67]). 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 (Figure 1.12, panel B) (Umweltbundesamt, 2025[40]).

Austria has strengthened the environmental component of the 2023‑2027 CAP Strategic Plan. Its financial allocations to the landscape and biodiversity objective (44%) are well above the EU average (31%) (EC, 2025[68]). Farmers need to meet tighter “good agricultural and environmental conditions” compared to the previous period to benefit from the full CAP income support. In addition, about EUR 500 million or 15% of the national CAP budget for income support to farmers (direct payments) is earmarked for the eco‑schemes – a form of payments for ecosystem services (Jandl et al., 2024[51]). Included in the long-standing agri-environmental programme (ÖPUL), the eco-schemes support the voluntary adoption of environmental and climate-related practices that go beyond legal requirements. More than 80% of utilised agricultural areas participate in the ÖPUL (BMLUK, 2025[69]).

Figure ‎1.12. Growing organic farming has helped slow the decline of farmland bird populations
Copy link to Figure ‎1.12. Growing organic farming has helped slow the decline of farmland bird populations

Reaching biodiversity goals will require more effective institutional arrangements

Fragmented institutional responsibilities for nature conservation and biodiversity policy undermine effective implementation and hinder their integration with other sectors. Austria lacks a national legislation setting framework conditions for biodiversity and nature conservation across the country. While the federal government oversees biodiversity policy, Länder have exclusive competence on nature conservation and spatial planning (see above). As for other policy areas, co‑ordination across Länder and with the federal government is ensured through the Conference of Regional Environment Ministers (OECD, 2013[7]). Nonetheless, Länder’s autonomous powers can lead to policy capture by local vested interests and, ultimately, to weak goals and implementation gaps (Ferraro and Failler, 2024[70]; Pröbstl, 2025[71]). Uneven financial resources and technical capacity across states and municipalities undermine consistent PA management and nature restoration. As in other policy areas, the federal government could link its transfers to Länder to the achievement of certain biodiversity targets and co-financing requirements to foster state-level engagement (Schratzenstaller and Sinabell, 2024[50]) (Section 1.3.4).

The Biodiversity Strategy Austria 2030+ acknowledges the governance challenge and aims to initiate an inter-institutional dialogue to address it. For example, the strategy proposes to task the federal government with harmonised reporting obligations and monitoring programmes. Austria would benefit from establishing a central institution to co‑ordinate implementation of biodiversity policies across government levels, support PA management, facilitate stakeholder engagement, and ensure consistent monitoring and reporting. Such a central structure could help improve policy coherence and efficiency, while supporting the development and implementation of regionally tailored approaches. Countries such as France, Germany and Spain, among others, have agencies dedicated to PA management and other aspects of biodiversity. The ÖROK also provides a model of institutional co‑ordination and monitoring arrangements that could be applied to biodiversity and nature conservation (Section 1.2.5).

Funding for biodiversity has increased in recent years but remains insufficient

Several funding instruments are available to support biodiversity conservation and sustainable use. The EU CAP accounts for 56% of total biodiversity financing, mostly delivered through agri-environmental measures (EC, 2025[9]). The federal government provides funding for biodiversity within the framework of the Environmental Support Act (Section 1.3.2), as well as through part of the Forest Fund and the Biodiversity Fund.

The establishment of the Biodiversity Fund in 2021 has narrowed a long-standing financing gap (Österreichischer Biodiversitätsrat, 2025[63]). With an annual allocation of EUR 5 million, the Biodiversity Fund provides stable support for nature restoration and conservation projects, research, monitoring and awareness raising. In 2021-2026, the Fund benefitted from considerable additional funding (EUR 50 million) from the EU’s Recovery and Resilience Facility. Between 2022 and 2024, the Fund supported more than 200 private and municipal projects leveraging investment for EUR 135 million.

However, available funding is insufficient to meet substantial investment needs. EC (2025[9]) estimates biodiversity-related investment needs at EUR 1.3 billion per year in 2021‑2027. Current public and private funding is estimated to cover 30% of this amount. Austria’s Biodiversity Strategy 2030+ neither quantifies the financing needs to implement its measures nor specifies funding sources, beyond the Biodiversity Fund and the CAP Strategic Plan. Responsibility for identifying the necessary budget lies with the institutions in charge of implementation. The strategy should be complemented by a financing framework that also sets out mechanisms to leverage private funding. Schratzenstaller and Sinabell (2024[50]) suggest developing partnerships with landowners to jointly implement biodiversity conservation and restoration projects, as well as the use of green bonds.

There is scope to reform harmful subsidies and scale up biodiversity-positive incentives

Reforming harmful subsidies and incentives would encourage more sustainable use of biodiversity, while freeing financial resources. Studies on environmentally harmful subsidies in the country rarely address biodiversity and provide only limited data on agriculture and forestry (Matthews and Karousakis, 2022[72]). Some studies suggest that several subsidies can have a negative impact on biodiversity, such as lower value-added tax on meat and dairy products (which are nitrogen intensive); some agricultural subsidies; and housing subsidies, commuter allowances, company car benefits and parking space requirements (Kletzan-Slamanig et al., 2022[73]; Schratzenstaller and Sinabell, 2024[50]) (Section 1.3.3). A study that examines subsidies and incentives that harm biodiversity at all levels of government would help prioritise subsidies for reform.

There is also potential to extend the use of economic instruments to support biodiversity objectives and mobilise financing. State-level, nature-related levies include hunting and fishing duties, landscape protection levies and a tree protection tax in Vienna.16 However, their revenue averaged only EUR 34 million in 2020‑2024 or well below 1% of revenue from environment-related taxes (Section 1.3.4). Beyond raising these taxes, Austria could reform current levies to provide stronger incentives for biodiversity sustainable use. For example, municipalities could apply wastewater charges based on pollution load more systematically. Land and property taxes could be re-designed to encourage preservation of farmland and forestland, while discouraging soil sealing (OECD, 2018[42]) (Section 1.2.4). New instruments could also be explored, such as a pesticide tax, which could help reduce biodiversity loss and water pollution from farming (OECD, 2025[74]). Austria should also consider expanding the use of payments for ecosystem services, which are limited to agricultural eco-schemes (see above).

1.2.6. Managing water resources

Water is abundant, but investment and reforms are needed to address localised stress

Austria has abundant freshwater resources, but climate change, population growth and rising irrigation needs could create local water stress. The country uses less than 2% of its freshwater renewable resources, far below the 20% stress threshold (Eurostat, 2025[75]). Groundwater, which supplies irrigation and drinking water, can sustainably cover current water demand, but is unevenly distributed. A large share of the country experiences increased drought frequency and intensity (OECD, 2025[76]). Recent dry periods have led to local bottlenecks, especially in East Austria where irrigated farmland concentrates. The intensity of water use is projected to increase by 2050, remaining within available resources under a favourable scenario. However, under an unfavourable climate and socio-economic scenario, available groundwater resources could decline by up to 23% by 2050, with considerable regional variability. In this scenario, water-use intensity could exceed available resources in eastern areas, potentially leading to water-use conflicts (BMLRT, 2021[77]).

The government has taken steps to ensure future water security. In 2023, the federal government and Bundesländer adopted a joint five-point plan to secure drinking water supply. The plan focuses on improving water forecasts, conducting research on efficient use, and investing in expansion and renovation of infrastructure and adaptation. To safeguard water availability, the government has prioritised measures to reduce water consumption and improve water retention. If these efforts prove insufficient, plans include increasing abstractions from the Danube. However, this could have long-term consequences for river-dependent ecosystems, including those in downstream countries (EC, 2025[78]). Such plans should be carefully assessed in co‑ordination with transboundary river basin authorities.

Austria has not developed a national drought management plan but should consider developing regional plans in areas where groundwater is under pressure. These plans would help enhance resilience and preparedness (OECD, 2025[76]). They should focus on reducing water use and strengthening resilience of water management to drought, including through improving soil management, increasing use of nature-based solutions to retain water, prioritising less water-intensive crops and promoting water re-use (EC, 2025[78]).

Improving water allocation arrangements and monitoring would help address future scarcity challenges. Consistent sectoral water-use data are lacking. While water users need a permit, with some exemptions, they are not charged for water abstraction. Regional abstraction permit registers are often incomplete and not digitalised, and metering is limited (EC, 2025[78]). Permits are granted for long periods (25 years for irrigation and 90 years for other purposes), with several old irrigation permits granted for an unlimited time. Long permit duration, incomplete permit registers and limited metering make it difficult to establish the total water balance, and to grant or review permits based on water availability as required by EU legislation (EC, 2025[78]).17 A central register of water abstractions is planned for 2026 – a welcome step. However, Austria should reduce permit duration and phase out unlimited irrigation permits and exemptions, especially in regions at risk of water scarcity. More comprehensive metering would help review and issue permits in line with effective water balance management.

Despite improvements, the ecological conditions of surface waters remain unsatisfactory

Hydromorphological modifications for hydropower and flood protection are the main pressures on surface water bodies (EC, 2025[78]). These changes to the physical shape of water bodies alter river continuity and flow conditions, cause sediment pollution and interrupt fish migration. As of 2021, according to the assessment of the third and latest of Austria’s river basin management plans (RBMPs), about half of the country’s surface water bodies in its three river basin districts (Rhine, Danube and Elbe, all three transboundary) have at least good ecological status or potential, slightly improved from the previous RBMP (2015) (Figure 1.13).

Austria has taken steps to tackle the ecological impact of structural alterations of water bodies for hydropower generation and flood protection. The federal government allocated, through the Environmental Support Act (UFG) (Section 1.3.2), about EUR 200 million in 2020‑2027 to the renaturation of rivers (EC, 2025[78]). Legally binding standards for ecological flows have been in place since 2010 but do not apply to older water permits, and 80% of the country’s hydropower plants fail to meet them (EC, 2025[8]; EC, 2025[78]). The third RBMP foresees a gradual extension of these requirements to existing abstractions, but this process could be accelerated and strengthened. Water permits should also require hydropower operators to contribute financially to mitigate the ecological impacts on surface water bodies (EC, 2025[8]). This is particularly important in view of the planned extension of hydropower capacity (Section 1.2.2).

Figure ‎1.13. Surface water ecology has improved moderately, while groundwater chemical quality has deteriorated slightly
Copy link to Figure ‎1.13. Surface water ecology has improved moderately, while groundwater chemical quality has deteriorated slightly

Status and pressures in water bodies

Water quality is generally excellent, with localised pressures

Austria has gradually reduced chemical pressures on surface waters. Nearly all surface water bodies meet standards for chemicals, except for two ubiquitous persistent, bioaccumultive and toxic substances or uPBTs (brominated ethers and mercury). These substances reportedly result from atmospheric pollution and deposition in water, and Austria considers that reductions are an international responsibility (EC, 2025[78]). All surface water bodies fail to achieve good chemical status when these substances are considered (Figure ‎1.13).

Groundwater quality is good, although hotspots remain in agriculture-intensive areas. Virtually all drinking water complies with chemicals standards (EC, 2025[9]). Over 95% of groundwater bodies show good chemical status, but pollution has slightly worsened since 2015 (Figure ‎1.13), and 15% of groundwater bodies are at risk of failing to achieve good status by 2027 (the EU Water Framework Directive deadline) (EC, 2025[9]). The government has strengthened its Nitrate Action Programme. It applies countrywide but includes reinforced measures – such as tighter fertiliser restrictions – in areas with higher nitrate concentrations or intensive agricultural activity. As a result, the number of monitoring stations exceeding nitrate quality standards has slightly but steadily decreased in the last decade (BML, 2024[79]). Nonetheless, nitrates and pesticides are the main drivers of water pollution. Thanks to widespread organic farming, the use of pesticides is comparatively low, but it has still grown (Figure ‎1.12). In response, the CAP Strategic Plan 2023‑2027 aims for 56% of agricultural land to adopt practices that protect water quality (EC, 2025[67]).

State-of-the-art wastewater treatment infrastructure has helped reduce pollution from point sources significantly. With 95% of the population connected to tertiary treatment plants, Austria ranks third in the OECD (OECD, 2025[3]). The country fully complies with the EU requirements (Urban Wastewater Treatment Directive) for advanced treatment in urban areas of more than 10 000 people (EC, 2025[9]). This has virtually eliminated the impact of urban wastewater on the quality of freshwater bodies, with only 0.3% of river water bodies significantly affected (EEA, 2025[80]).

Austria must mobilise additional financing to meet its high water-investment needs

Austria’s large investment in water infrastructure over the last decades has enabled provision of high-quality water supply and sanitation services to over 90% of the population. The federal government has subsidised these investments within the UFG framework. As connection rates approached full coverage, federally funded investment gradually declined over time. They increased again in 2023-2024, with a growing focus on water supply (Figure 1.14, panel A). In 2024, water supply and wastewater infrastructure represented about half of government water-related transfers. Flood protection and restoration of heavily modified water bodies absorbed the remaining half (Figure 1.14, panel B), reflecting the government focus on climate adaptation and improving the ecological status of rivers and lakes.

Figure ‎1.14. Federal funding has leveraged substantial water-related investment, with increasing focus on restoration and flood protection
Copy link to Figure ‎1.14. Federal funding has leveraged substantial water-related investment, with increasing focus on restoration and flood protection

Investment needs in water infrastructure and climate resilience of water services remain high. About one-third of the country’s public drinking water pipelines and 13% of public sewers are over 50 years old and require renovation. Upgrades of wastewater treatment plants are also necessary, and the current renovation rate is too slow to maintain the functionality and value of the infrastructure. Investments are also needed to ensure drinking water security and improve stormwater management (BMLUK, 2025[81]). The European Commission estimates that Austria will need to invest EUR 1.5 billion (in 2022 prices) annually between 2021 and 2027 in the water sector (EC, 2025[9]). This figure is about 30% higher than the investment of EUR 965 million for water infrastructure, protection and management supported by federal funding (BMLUK, 2025[81]).

With limited scope to expand public funding, Austria needs to mobilise additional finance. It would benefit from developing a comprehensive financing strategy to meet water management and flood protection goals, including the mobilisation of private finance and the financial sector. Instruments such as infrastructure development impact fees and stormwater taxes on developers of impermeable surfaces would help raise finance while discouraging soil sealing (OECD, 2020[82]) (Section 1.2.4).

There is scope to increase and redesign water tariffs to better reflect the costs of service provision and encourage water-use efficiency, as affordability risks appear to be limited in Austria (OECD, 2020[82]). Public water supply and wastewater treatment are directly or indirectly managed by the public sector. Municipalities set water and sanitation tariffs, generally based on water consumption. Tariff levels and cost recovery rates vary substantially across the country, with infrastructure investments often supported by federal and state transfers and loans (Kletzan-Slamanig, Kettner-Marx and Sinabell, 2021[83]). Austria could better align tariffs with actual costs and incorporate the principles of resource conservation and polluter-pays, while addressing disparities across municipalities and affordability risks. It could also introduce water abstraction and pollution charges to better apply the polluter-pays principle (Sanchez Trancon and Leflaive, 2024[84]).

1.2.7. Enhancing resilience to the impact of a changing climate

Climate change is generating growing environmental and economic impacts in Austria

Climate change impacts have intensified in Austria. Over the past four decades, temperatures have risen at about twice the global average (Umweltbundesamt, 2025[40]). Between 2019 and 2023, the average annual surface temperature was 1.5°C higher than in the reference period 1980‑2010; Austria had the highest average temperature increase in the OECD (IEA/OECD, 2025[85]). Rising temperatures have far-reaching consequences: heightened health risks, particularly in urban areas; more frequent and intense floods; reduced natural snow cover; and glacier retreat affecting water balance (Umweltbundesamt, 2025[40]). Agriculture and forestry, tourism, water management and hydropower are among the sectors most directly affected by climate change.

Economic losses from extreme weather events – mainly floods – have been substantial. Weather-related damages in Austria amount to at least EUR 2 billion per year (0.5% of 2020 GDP). Projections indicate annual losses could rise to EUR 3‑6 billion by 2030 and EUR 6‑12 billion by mid-century (BMK, 2021[86]). These trends pose growing budgetary risks, driven by higher adaptation costs, infrastructure repair and maintenance, increased healthcare spending and slower economic growth (Köppl and Schratzenstaller, 2024[87]).

The flood risk prevention and management system is robust and advanced

Floods are the most significant climate-related hazards in Austria. With large parts of the territory mountainous and forested, a quarter of the population is estimated to live in flood-prone areas. This is among the highest such shares in the OECD (Figure 1.15). Austria’s 2021 flood risk management plan (FRMP) indicates that about 3‑14% of the population could be affected by floods, depending on their likelihood and intensity.

Austria has implemented robust prevention measures and maintains a comprehensive, effective and well-funded system for managing flood consequences. The FRMP is based on flood hazard and risk maps and provides clear objectives and concrete measures (EC, 2025[78]). Large investments have helped limit the damage of severe floods in recent years, such as the September 2024 floods in Central Europe caused by Storm Boris (Friesenbichler et al., 2024[88]). In 2023‑2024, federal funds contributed to leveraging annual flood‑protection investments of more than EUR 200 million (BMLUK, 2025[89]). Part of these investments have focussed on ensuring that flood-protection infrastructure meets ecological requirements (BMLUK, 2025[81]), as historical reliance on such infrastructure has heavily modified the country’s water bodies (Section 1.2.6).

Figure ‎1.15. A large share of the population lives in areas potentially exposed to river flooding
Copy link to Figure ‎1.15. A large share of the population lives in areas potentially exposed to river flooding

Percentage of population potentially exposed to river flooding with a ten-year return period, OECD Members, 2020

More recently, flood prevention efforts have increasingly focussed on nature‑based solutions and on keeping flood‑prone areas free of development. In addition to being generally less costly than grey infrastructure, nature‑based solutions can deliver multiple benefits, such as restoring aquatic ecosystems, improving water quality and contributing to climate mitigation (OECD, 2021[90]). Measures to prevent development in flood-prone areas include better designating floodplains and hazard zones in spatial planning and building regulations, alongside efforts to raise public awareness (BMLUK, 2025[81]). However, further action is needed to curb land artificialisation (Section 1.2.4).

Several initiatives support adaptation efforts, but financial incentives could be stronger

Adaptation to climate change has gained momentum in Austria, with more activities being implemented, but stronger mainstreaming is needed (BMK, 2021[86]). The country adopted its national adaptation strategy and action plan in 2012, most recently updated in 2024, while several regional adaptation plans are also in place. The latest national strategy is comprehensive and includes over 120 specific recommendations across 14 sectors. It calls for stronger mainstreaming of adaptation across all political levels and sectors, in line with findings from the 2021 progress report (BMK, 2021[86]). This broader integration is necessary to address persistent gaps in legal enforceability, resource allocation and long-term planning (APCC, 2025[5]). Progress is monitored through regular reporting cycles, with the next assessment scheduled for 2026, along with a revised analysis of climate vulnerabilities and impacts.

The federal government provides financial and technical support for local adaptation efforts. Being responsible for territorial development, municipalities play a crucial role in building climate resilience but often lack the technical and financial capacity to do so (OECD, 2023[91]). To assist them, the federal government launched the KLAR! Programme (Climate Adaptation Model Regions) in 2016. KLAR! has provided funding for adaptation plans, along with a technical support platform, to over 800 municipalities, reaching nearly a quarter of the population (2.2 million inhabitants) (Umweltbundesamt, 2025[40]).

Several initiatives have helped raise awareness of climate-related hazards and adaptation practices. These include mapping tools such as CLIMA-MAP to show local climate impacts; the Preparedness Check to help municipalities identify climate-related threats and define precautionary measures; and the Network for practitioners to share knowledge and best practices. 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[91]). Austrian citizens seem more informed about the risks of climate change than the average European citizen (EIB, 2025[92]). They are more likely to consider exposure to floods and other climate-related hazards in deciding where to live. A rising share of respondents report feeling personally exposed to environmental and climate-related risks (EC, 2025[12]).

The government could strengthen financial signals for local adaptation and ensure that spatial planning and permitting fully consider climate risks. Länder have the primary responsibility for repairing damages from natural hazards, while the federal Catastrophes Fund (Katastrophenfonds) provides compensation for private and municipal damages. Standard compensation rates cover up to 20‑30% of losses for households and businesses and up to 50% for municipal assets. In theory, this partial coverage encourages local investment in resilience. In practice, however, local authorities often expect additional post‑disaster support from federal or state governments, as demonstrated when the federal government expanded the Catastrophes Fund and delivered immediate aid following the 2024 floods. This expectation, combined with financial and technical constraints, weakens incentives for proactive adaptation – a challenge observed in many countries (OECD, 2023[91]). Adjusting fiscal equalisation transfers or Catastrophes Fund compensation rates to reflect municipal adaptation investments could help strengthen local action (OECD, 2024[29]).

Low awareness of risks, along with unclear benefits and high upfront costs of preventive measures, limits adaptation efforts of households. Policy options include subsidised loans, requiring flood risk disclosure during property transactions, and introducing certifications similar to Germany’s “flood passport” (Hochwasserpass), which could be combined with Austria’s existing mapping tools (OECD, 2024[29]).

Austria needs to reduce its climate-related insurance gap

Given pressures on public finances and rising climate-related budgetary risks, Austria should explore greater use of insurance markets and public-private partnerships. Progress has been limited since the 2013 OECD Environmental Performance Review, which recommended increasing private finance involvement and expanding insurance coverage (OECD, 2013[7]). Private insurance against climate-related risks – primarily flooding – remains low. Between 1980 and 2024, only 19% of economic losses from extreme weather events were insured in Austria (EEA, 2025[93]).

Low insurance uptake in Austria is driven by two main factors. First, basic flood insurance is voluntary and offered only by private insurers as part of standard household policies. Premiums are risk based and indemnity limits are generally low, partly because adequate coverage would result in unaffordable premiums for many households (Friesenbichler et al., 2024[88]). Second, Austria is the only European country that provides certain and predictable ad hoc disaster aid through the Catastrophes Fund, even though compensation is not legally guaranteed (Bock et al., 2024[94]; Friesenbichler et al., 2024[88]). The expectation that government support will cover at least part of the damages – combined with behavioural biases that lead individuals to underestimate low‑probability, high‑impact events – reduces incentives to purchase private insurance. As recommended by OECD (2024[29]), Austria should consider mandating comprehensive insurance for climate-related risks in homeowners’ policies and reorienting the Catastrophes Fund to serve as a public reinsurer.

There is also a need to strengthen the role of insurers in communicating long‑term climate risks, available adaptation options, and potential premium reductions linked to risk‑mitigation measures. Results of a survey of policyholders indicate that Austrian households that received information on flood‑risk reduction strategies and related premium discounts were more likely to invest in such measures. However, only 20% of households reported receiving information on risk‑reduction options from their insurer, and few were aware that premium discounts were offered for implementing such measures (OECD, 2023[95]).

1.3. Enhancing the cost effectiveness of the policy mix

Copy link to 1.3. Enhancing the cost effectiveness of the policy mix

1.3.1. Aligning fiscal decisions with environmental and climate goals

Austria has made strides in assessing the environmental dimensions of fiscal policy by adopting green budgeting practices. With high public expenditure and tax burden (see Basic Statistics), it is essential to ensure that fiscal decisions are aligned with environmental and climate goals, and the SDGs. Austria integrated green budgeting into its budget law. Beginning in 2025, a Green Budgeting Supplement has accompanied the federal budget, outlining the environmental impact and associated fiscal risks of budget provisions. The methodology is based on a six-level scorecard applied to all budget items, ranging from intended “productive” to “counterproductive” impacts (BMF, 2024[96]). The scorecard focuses primarily on climate and energy objectives and helped identify the potentially climate‑counterproductive tax measures (Table 1.1).

Tax / national ETS	Negative incentive measures	Green budgeting score	Target/impact
Energy Tax	Manufacturer privilege for producers of energy products	-2	Fossil-energy production
Energy Tax	Energy tax exemption for the non-energy use of fossil fuels	-2	Resource consumption
Energy Tax	Energy tax reimbursement (electricity tax, natural gas tax, mineral oil tax, coal tax) for energy-intensive industries	-2	Fossil-fuel use
Mineral Oil Tax	Mineral oil tax concession for diesel fuel	-2	Fossil-fuel use in transport
Mineral Oil Tax	Mineral oil tax exemption for kerosene	-2	Fossil-fuel use in transport
Mineral Oil Tax	Mineral oil tax exemption for inland shipping	-2	Fossil-fuel use in transport
National ETS	Hardship regulation	-2	Fossil-fuel use
National ETS	Carbon leakage	-2	Fossil-fuel use
National ETS	Refund in the agricultural sector	-2	Fossil-fuel use
Value added tax	Exemption for international air transport	-2	Fossil-fuel use in transport
Income Tax	Commuter allowance	-1	Fossil-fuel use in transport
Income Tax	Benefit in kind for private use of company cars (excluding zero-emission vehicles)	99	Encourage/discourage fossil-fuel use in transport
Property Tax	Property tax exemption for traffic areas	99	Encourage/discourage fossil-fuel use in transport
Land Value Tax	Land value tax	-1	Building development

Note: A tax measure is climate counterproductive if it results in higher GHG emissions levels, a lower share of renewable energy in gross final energy consumption, and/or a decline in energy efficiency. Intended adverse (counterproductive) impact (Score: “-2”); adverse impact as a side effect (Score: “-1”); no impact (Score: “0”); positive impact as a side effect (Score: “+1”); intended positive impact (Score: “+2”); unclear impact (Score: “99”).

Source: BMF (2024[96]), Counterproductive Measures.

Nonetheless, Austria could improve the environmental assessment of its spending across jurisdictions. Green budgeting reports are public, but Austria lacks independent oversight and co‑ordination mechanisms across government levels (OECD, 2024[97]). Coherence of data about spending and associated climate impact at the subnational levels is insufficient (OECD, 2024[29]). To address these issues, Austria could build on its remarkable Transparency Database, which collects information on direct subsidies and tax incentives for households, businesses, non-profit organisations and public institutions.

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 – from around 11% in the 2022 budget to about 8% in the 2025/26 budget – while the revenue share has remained roughly unchanged at 11% (BMF, 2024[96]; BMF, 2025[98]). This suggests 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 (Section 1.3.4).

Fiscal consolidation and structural reforms are needed to address long-term costs linked to population ageing and support the transition to a net-zero, circular and climate-resilient economy (OECD, 2026[2]). The additional fiscal costs linked to climate-related factors are estimated at 0.4% of GDP by 2040 (Fiscal Advisory Council, 2025[23]). In 2025, the government launched a medium-term budget consolidation plan amid a weak economy and deteriorating fiscal conditions. As a result, federal environmentally motivated subsidies faced considerable cuts (Section 1.3.2). All this calls for improving efficiency of public spending, including for environmental and climate purposes, and mobilising private investment through well-designed regulations and incentives. Removing and repurposing environmentally harmful fiscal measures and expanding the use of environment-related taxes can help in this respect (Sections 1.3.3 and 1.3.4).

1.3.2. Better targeting environmentally motivated incentives

Direct subsidies constitute a central element 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[7]). Environmental subsidies and similar transfers (ESST) increased to 1.4% of GDP in 2022, the highest share in the EU (Figure 1.16, panel A).18 Households were by far the major receivers of support, contrary to trends observed in most other EU countries where businesses were the largest beneficiaries. This likely reflects the large support provided to energy efficiency measures in residential buildings (Section 1.2.2; see below). More than half of ESST target resource management, notably energy (Eurostat, 2025[99]). Other areas, such as the circular economy and biodiversity, remain comparatively underfunded (Kletzan-Slamanig, Köppls and Schratzenstaller, 2024[27]).

The federal government provides fiscal support through various measures. Recent initiatives include the KlimaTicket (Box 1.2) and tax incentives for EVs, renewable electricity and companies’ environmental investments. Tax incentives are a relatively novel policy approach, as grants continue to dominate the support system (Kletzan-Slamanig, Köppls and Schratzenstaller, 2024[27]). The main instrument remains the Environmental Support Act (UFG), which has guided federal environmental grants since 1993 (OECD, 2013[7]). 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. Most funding targeted building energy efficiency and cleaner heating systems, alongside industrial decarbonisation, circular economy projects (Chapter 2), biodiversity and brownfield redevelopment (Figure 1.16, panel B). These investments are estimated to save over 1 Mt of GHG emissions per year and secure about 28 000 jobs (BMLUK, 2025[100]). In addition, in 2024, the UFG provided over EUR 300 million to support investment in water management and flood protection (Section 1.2.6).

Figure ‎1.16. Environmental subsidies grew, with building energy efficiency as the main focus
Copy link to Figure ‎1.16. Environmental subsidies grew, with building energy efficiency as the main focus

Increasing green subsidies and incentives have supported environmental progress in recent years, but questions remain regarding their cost effectiveness and co‑ordination across government levels. Some benefits go to households and businesses that do not need them and create risks of technology lock-in or rebound effects. Data on subnational subsidies are incomplete. Many local instruments provide only small-scale contributions, and there are risks of overlaps and double funding (Kletzan-Slamanig, Köppls and Schratzenstaller, 2024[27]). A comprehensive review of all green subsidies against their objectives, along with their interactions with related policies such as tax incentives, pricing instruments and regulations, would support the transition towards a more balanced and coherent policy mix.

Rising fiscal pressures make maintaining current levels of support increasingly difficult. As part of fiscal consolidation efforts, the 2025/26 budget downsized several programmes, including the federal Climate and Energy Fund and subsidies for energy renovations, clean heating and electric cars. Others, such as incentives for small PV systems, were repealed. As these subsidies are part of the NECP suite to achieve the 2030 ESR target, reducing them could jeopardise progress towards that goal (Section 1.2.1). Rather than eliminating support, reforms should focus on streamlining and improving targeting and cost effectiveness. To this end, the environment and energy ministries commissioned an assessment of selected federal climate and energy subsidies in 2025, which identified potential to increase effectiveness while lowering fiscal costs (Bethge et al., 2025[39]).

1.3.3. Removing environmentally harmful subsidies

Environmentally harmful subsidies are well understood and need urgent reforms

Austria has made progress in identifying subsidies that may harm the environment, with a focus on subsidies in the energy and transport sectors. Comparatively limited attention has been given to agriculture and forestry. Subsidy estimates vary widely due to differences in scope and methodology. The BMF estimates that climate‑counterproductive tax measures (Table ‎1.1) and transfers amounted to about EUR 2.8 billion in 2024, or nearly 0.6% of GDP and 2.4% of total government expenditure (BMF, 2025[98]). Kletzan-Slamanig et al. (2022[73]) identified a wider set of potentially environmentally harmful subsidies, including support for fossil‑fuel use, housing subsidies, commuter allowances and company‑car benefits. They range between EUR 4.1 and 5.7 billion per year on average over 2016‑2020 (1.1‑1.5% of GDP during that period), with most benefits accruing to the transport sector. Statistics Austria, the national statistical institute, also produces data on potentially environmentally damaging subsidies as part of a voluntary data collection for Eurostat. However, these data were not publicly available at the time of writing.

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 (from 2022). An interministerial working group has been set up to assess the contribution of subsidy removal to climate targets, but its work needs to accelerate. The government should swiftly develop and implement a plan to reform identified environmentally harmful subsidies. Delays risk undermining emission reduction efforts and wasting public resources at a time of tight budgets and high investment needs.

Austria’s fossil‑fuel support surged during the energy‑price crisis

Support to fossil fuels is mostly provided through tax exemptions and discounts for the use of energy products across various sectors (Figure 1.17). An EU-approved tax reimbursement programme for certain energy-intensive industries that have invested in energy efficiency improvements, along with tax exemptions on fuels used for commercial aviation, has traditionally accounted for the bulk of support (OECD, 2023[101]).

Figure ‎1.17. Support to fossil fuels remains high in the wake of the 2022 energy price crisis
Copy link to Figure ‎1.17. Support to fossil fuels remains high in the wake of the 2022 energy price crisis

Fossil-fuel support by fuel type in Austria, percentage of GDP, 2015-2024

Austria’s fossil‑fuel support has increased in recent years, as in many OECD Member countries, driven by the government’s response to rising energy prices following the Russian Federation’s war of aggression against Ukraine. According to OECD estimates, support peaked to 0.7% of GDP in 2023 (Figure ‎1.17). Austria implemented one of the largest support packages in the OECD (Castle et al., 2023[102]). Beyond income support, the package included multiple measures subsidising the use of natural gas, electricity and motor fuels, such as tax reductions, energy vouchers and a price cap (OECD, 2023[101]). As in many other countries, most emergency measures were universal rather than targeted at the businesses and households most in need (Castle et al., 2023[102]).

OECD estimates indicate that fossil‑fuel support declined in 2024 as emergency measures were partly phased out. However, at 0.5% of GDP in 2024, it remains more than twice its historical average (Figure ‎1.17) – a pattern observed across many OECD Member countries (OECD, 2025[103]). National estimates show a similar trend up to 2022, the latest available year, but are consistently more than three times higher than OECD estimates because of their broader scope (Statistics Austria, 2025[104]). A major source of this discrepancy is the valuation of free allocations of EU ETS allowances to the industrial sector.

Tax rules for company cars and commuting continue to encourage car dependence

Austria has long provided favourable tax treatment of company cars and subsidies for travelling to and from work, which encourage car ownership and use, long-distance commuting and urban sprawl (Kletzan-Slamanig et al., 2022[73]). They result in increased fuel consumption and GHG emissions, as well as higher emissions of local air pollutants and greater risk of noise, congestion and accidents. In addition to having negative environmental effects and being a cost to the public budget, these forms of subsidy disproportionately benefit higher-income earners (OECD, 2024[29]). Some progress has been made in implementing the recommendation of the 2013 OECD Environmental Performance Review to “reduce perverse incentives for car use by revising the tax treatment of company cars and the commuting allowance” (OECD, 2013[7]), but more could be done.

The tax rules for company cars were updated to encourage the purchase of low‑ and zero‑emission vehicles. Since 2016, the taxable benefit in kind for the private use of a company car decreases when the vehicle’s CO₂ emissions fall below a specified threshold, while zero‑emission vehicles generate no taxable benefit (OECD, 2024[29]). The green budgeting score classifies the taxable benefit for private use of company cars as having an unclear impact (Table ‎1.1). This measure could be further “greened” by strengthening incentives to choose low‑emission vehicles (OECD, 2024[29]) and extending it to bikes. Employees also receive a per‑kilometre reimbursement for using their private vehicle on business trips. Although cycling qualifies for this reimbursement, this measure primarily incentivises business travel by car. The kilometre allowance should be reduced, while increasing the relative advantage for biking.

Recent changes to commuting subsidies were intended to promote use of public transport for travel to work. To this end, since 2021, employers’ contributions to public transport tickets have been exempt from employees’ taxable income. Employees also receive the commuter allowance (Pendlerpauschale) and the commuter euro (Pendlereuro), regardless of their travel mode. The Pendlerpauschale is a flat‑rate tax deduction that increases with the distance between home and the workplace; it is higher when public transport is deemed unreasonable to use. The Pendlereuro is an additional per‑kilometre deduction, so its value also rises with commuting distance. The combined effect of these two allowances still favours longer-distance commuting by car. Most Länder also provide commuting tax breaks, above and beyond the federal allowances. The BMF classifies the federal commuter allowances as indirectly climate counterproductive (Table ‎1.1). Nonetheless, the 2025/26 budget tripled the Pendlereuro (from EUR 2 to EUR 6 per kilometre driven as from 2026) – a decision inconsistent with both fiscal discipline and climate objectives. The government should reconsider this decision and scale back the Pendlereuro, while replacing the Pendlerpauschale with targeted support for employees facing high travel costs relative to their income.

1.3.4. Greening the tax system

Austria should build on recent progress to continue greening its tax system

Austria has made remarkable progress in the use of taxation and pricing instruments for environmental policy, notably with the launch of its eco-social tax reform in 2022. The reform introduced a national carbon pricing system along with tax reductions and other benefits for households and businesses (see below). This is in line with the 2013 OECD Environmental Performance Review recommendation to shift the tax burden from labour to environmentally harmful activities (OECD, 2013[7]).

However, there is scope to further use environmentally related taxes and charges to rebalance Austria’s high tax burden. In 2024, the tax revenue to GDP ratio stood at 43%, compared to the EU average of 40%. The tax structure is skewed towards labour, particularly due to higher-than-average social security contributions, hindering job creation and participation in the job market (EC, 2025[8]). Environment-related taxes play a minor role, representing 1.9% of GDP and 4.4% of total tax revenue in 2024 – slightly below the respective EU averages of 2% and 5.1% (2023) (Figure 1.18).

Figure ‎1.18. Environment-related tax revenue has declined
Copy link to Figure ‎1.18. Environment-related tax revenue has declined

Environment-related tax revenue by tax base, % of GDP and tax revenue

Opportunities exist to introduce or redesign taxes and charges, particularly for biodiversity, land use and the circular economy, while further improving vehicle taxation and carbon pricing (Kletzan-Slamanig, Köppls and Schratzenstaller, 2024[27]). As in most countries, taxes on pollution and resources generate negligible revenue, mostly from the landfill and incineration taxes (Chapter 2) and hunting and fishing duties. Energy taxes are the main source of environment-related tax revenue, followed by taxes on vehicles (Figure ‎1.18). However, fuel excise rates have not been adjusted for inflation for more than a decade, weakening price signals and eroding receipts. Indeed, energy tax revenue as a share of GDP slowly declined between 2010 and 2019 despite increasing road fuel use. Revenue fell more markedly after 2021, reflecting lower fuel consumption amid the economic slowdown. The implementation of the national emissions trading system (see below), which is fiscally equivalent to a carbon tax, contributed to a moderate revenue rebound in 2023 and 2024 (Figure ‎1.18).

Environment-related taxes and charges could be more extensively used at subnational levels, including land-use levies, parking fees and congestion charges (see below). In addition to encouraging sustainable production and consumption, such levies would boost the fiscal autonomy of states and municipalities, which hold significant authority over key environmental policy areas (Section 1.1.3). In 2024, Länder collected only about 2% of total tax revenue, the lowest share among the EU countries with federal systems. Local governments received about 3% of tax revenue, well below the EU average of 9.5% (Eurostat, 2025[105]). As a result, subnational governments rely heavily on federal transfers, which are poorly targeted.

Tying federal fiscal transfers to achieving measurable climate and environmental outcomes would encourage states and municipalities to better align with national objectives (Kletzan-Slamanig et al., 2023[19]). The government has made some attempts to allocate federal transfers for subnational green investments through, for example, the Future Fund. 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[29]).

The eco-social tax reform is a major step towards adequately pricing GHG emissions

GHG emissions in Austria are priced through fuel excise taxes, the EU ETS and a national ETS (see below). Excise duties apply to fossil fuels and electricity, but tax exemptions and discounts weaken the incentive to reduce energy consumption (Table ‎1.1) (OECD, 2023[101]). As in many other countries, diesel is taxed at a lower rate than petrol, despite its higher local air pollution cost. This has contributed to a high share of diesel vehicles in the country. The taxation of diesel should be at least aligned with the taxation of petrol.

In 2022, in a major and welcome development, Austria introduced carbon pricing as part of its eco-social tax reform. Carbon pricing applies through a national ETS (NEHG) for fossil fuels used outside the EU ETS, i.e. in buildings, transport, agriculture, waste management and small industrial facilities. Exemptions or partial reliefs apply to agriculture, forestry, energy and specific industrial sectors to mitigate the risks of carbon leakage. Initially functioning with fixed-price allowances, the NEHG will transition to market-based price formation and integrate into the EU ETS2 in 2028. The allowance price increased from EUR 30/tCO₂eq in 2022 to EUR 55/tCO₂eq in 2025, according to a predetermined schedule.

The eco-social tax reform lowered personal income and corporate taxes. It also provided a “climate bonus” to all residents to offset the increase in energy costs resulting from carbon pricing. The bonus was a lump sum of EUR 110‑220 depending on public transport availability. While this design means low-income households receive more than they pay in carbon pricing (IMF, 2024[30]), the bonus remains untargeted and was eliminated in 2025. Linking the bonus to income would better support households hit hardest by higher energy and transport costs (Kettner et al., 2025[25]). Targeted incentives for cleaner vehicles and heating systems could help further address the distributional impact of carbon pricing (OECD, 2024[29]).

The NEHG helped raise Austria’s average effective carbon rates (ECRs) in most sectors. In its first two years of implementation, the economy-wide ECR increased from EUR 83/tCO₂eq in 2021 to EUR 97/tCO₂eq in 2023, one of the highest in the OECD (Figure 1.19, panel A). In the same year, fuel excise taxes and the national and EU ETSs together covered 79% of GHG emissions, above the EU and OECD averages (74% and 52%, respectively). However, energy tax concessions and temporary measures introduced during the 2022 energy price crisis (Section 1.3.3) weakened the price signal in the industry and building sectors (Figure 1.19, panel B). The ECR has likely risen since 2023 with a higher NEHG allowance price and the gradual removal of energy crisis measures.

The NEHG has narrowed the gap with average EU carbon rates for road fuels. Historically low petrol and diesel taxes compared to international levels, as well as to neighbouring Germany and Italy, have encouraged “fuel tourism”, increasing emissions. Austria’s carbon pricing has reduced this practice and related GHG emissions.

Figure ‎1.19. Effective carbon prices have risen
Copy link to Figure ‎1.19. Effective carbon prices have risen

While the NEHG has contributed to reduce emissions (Section 1.2.1), current price levels are likely insufficient to achieve the ESR target (IMF, 2022[106]; OECD, 2024[29]). Only 29% of Austria’s emissions were priced above EUR 120/tCO₂eq – the midpoint estimate of carbon prices needed by 2030 to stay on the net-zero pathway (OECD, 2024[107]). Several European countries price a larger share of emissions at higher levels (Figure ‎1.19, panel C). Austria should consider raising the NEHG carbon price and introducing a national floor price when the EU ETS2 enters into application.

Transport taxes and charges better align with environmental criteria but could go further

Austria has advanced in linking car taxation to environmental criteria, as recommended by the 2013 OECD Environmental Performance Review. Both the registration tax (NoVA) and the annual tax on vehicle insurance are based on CO₂ emissions, while exemptions apply to EVs. However, widely used diesel vans were newly exempted from the NoVA in 2025. The government should reconsider this exemption to align with climate mitigation and air pollution control objectives.

Progress has also been made in road pricing, but there is scope to strengthen environmental incentives and increase revenue. Road tolls apply nationwide on motorways. Tolls for heavy goods vehicles are distance-based and include a CO₂ charge, with zero-emission trucks benefitting from a 75% reduction. However, tolls for cars and vans – which account for a large share of freight traffic – remain time-based (ticket for a day, ten days, two months or one year) and do not vary with a vehicle’s emissions. Extending distance- and emission-based charging to all vehicles would enhance environmental effectiveness and help offset declining revenues from fuel taxes and the NEHG as electrification progresses (van Dender, 2019[108]; OECD, 2024[107]).

City road pricing and parking management could help reduce congestion and pollution at local level, while encouraging sustainable mobility. Some states and Vienna restrict access to trucks and, in some cases, vans above certain emission levels in designated low-emission zones. Introducing congestion charging in major cities would better reflect the social costs of driving. Parking fees in large cities remain low and do not vary by vehicle type, despite the growing fleet of large cars such as sport utility vehicles (Kletzan-Slamanig, Köppls and Schratzenstaller, 2024[27]).

1.3.5. Investing in the green transition

Further mobilising investment is key to meet Austria’s environmental and climate goals

Austria’s environmental protection investment more than doubled between 2015 and 2022, reaching 0.5% of GDP – among the highest shares in the EU (Eurostat, 2025[109]).19 Corporations, particularly specialist providers of environmental services such as waste and water companies, account for most capital spending. Meanwhile, the government remains a key source of financing (Section 1.3.2). Austrian firms dedicate around 3% of their total investment to environmental protection, among the EU leaders (Eurostat, 2025[109]). National public and private funds are the primary financing sources, except for biodiversity, where EU funds (mostly from the CAP) cover over 60% of related investment (EC, 2025[9]).

The business sector has invested significantly in climate mitigation. After a decline in the first half of the 2010s, business investment in climate mitigation increased steadily to reach 0.9% of Austria’s GDP – slightly above the EU average. However, this is still below its level in 2010 (Figure 1.20). The electricity and gas supply sector invested the most, with spending increasing substantially over the last decade. In 2023, climate change mitigation investment in electricity and gas supply amounted to around 20% of the sector’s gross value added, compared to 15% on average in the EU (Eurostat, 2026[31]). This has contributed to reducing GHG emissions from the sector (Figure ‎1.2). In contrast, the manufacturing sector has contributed less to climate-mitigation investment, which is likely reflected in moderate progress on emission abatement (Section 1.2.2). Manufacturing accounted for only 5% of climate investment in Austria in 2023, half the EU average and among the lowest in the EU (Figure 1.20).

Substantial public and private financial resources 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 EUR 11.3 billion annually for 2021‑2027, or about 2.4% of 2022 GDP. This implies a funding gap of EUR 2.9 billion (2022 prices) per year compared to current investment levels. Most investment needs relate to the circular economy, followed by pollution control, water and biodiversity (EC, 2025[9]). When adding climate objectives, the investment requirements rise sharply: achieving climate neutrality by 2040 will demand EUR 14‑18 billion per year (some 3.4‑4.4% of 2021 GDP) until 2030 across energy, industry, buildings and transport (Umweltbundesamt, 2022[26]). 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 (Section 1.3.6). It will also require addressing several cross-cutting barriers to investment, such as complex and fragmented regulations, lengthy permitting procedures, shortages of skilled labour, limited access to risk financing and high production costs (EC, 2025[8]).

Figure ‎1.20. Investment in climate change mitigation has risen, especially in the energy sector
Copy link to Figure ‎1.20. Investment in climate change mitigation has risen, especially in the energy sector

Business investment in climate change mitigation, Austria and EU-27 average

The green transition will help unlock significant economic opportunities.

By leveraging its strong industrial base and research capacity, Austria can position itself as a leader in clean technologies and expand growth and employment potential, while reducing imports of fossil fuels, GHG emissions and materials use. Austria is already among the EU’s top investors in eco-innovation and ranks third in the 2024 EU Eco-Innovation Index (EC, 2024[110]; EC, 2025[8]). The digital and green transitions are key priorities of the Research, Technology and Innovation Plan for 2024‑2026.

Austria’s environmental industry has expanded steadily over the past decade and continued to grow despite the economic slowdown. In 2023, the sector generated nearly 6% of gross value added, with energy resource management as the largest field (Statistics Austria, 2026[111]). In the same year, it employed 232 000 people – about 5% of total national employment and one of the highest such shares in the EU (EEA, 2025[112]; Statistics Austria, 2026[111]). Employment in the environmental industry is expected to keep rising across both high‑ and low‑skilled occupations (Bock-Schappelwein et al., 2023[113]). Strong job creation potential is expected in firms offering innovative environmental products and services, in organic farming and in the construction sector.

To fully unlock this job‑creation potential, Austria must prepare workers for the low‑carbon and circular transition and address skill mismatches. As in many countries, this shift will alter skill needs and contribute to reallocating workers across sectors and regions in Austria (Borgonovi et al., 2023[114]). As energy- and pollution-intensive industries are geographically clustered, the social and employment impact will be regionally uneven. Upper Austria and Styria, for example, are among the European regions most exposed to the green transition due to the larger presence of pollution‑intensive sectors such as basic metals and paper (OECD, 2024[29]). Austria has invested in active labour market programmes to support worker reallocation and environmental upskilling, along with better informing jobseekers about green jobs and skills (IMF, 2024[30]; OECD, 2024[29]). It should continue these efforts while removing barriers to worker mobility, enhancing labour market flexibility and fostering overall economic dynamism (OECD, 2024[29]).

1.3.6. Aligning finance and investment with climate goals

Finance plays a key role in achieving Austria’s climate policy objectives. Meeting investment needs (Section 1.3.5) requires mobilising finance for climate solutions and redirecting finance to support the climate transition of GHG-intensive sectors. More generally, it requires aligning finance with a low-GHG pathway and climate‑resilient development, as per the goal set by Article 2.1c of the Paris Agreement. While carbon pricing, subsidies and regulations steer investments towards climate goals, financial sector policies contribute to driving capital allocation. The alignment of finance with climate goals should, therefore, be assessed across real‑economy investments, financial assets and financial institutions (OECD, 2024[115]).

Austria has a diverse set of financial sector policies that integrate climate considerations but needs to better track their effects to inform updated and additional policies

Austria has a clear plan to support the greening of its robust and well-diversified financial sector. The Green Finance Agenda, developed by the BMLUK in co‑operation with the BMF, focuses on mobilising capital for climate protection and a sustainable economy, managing climate-related financial risks, and promoting transparency and long-termism in the capital market (BMK and BMF, 2023[116]). The government established an expert group to support its implementation. The agenda covers a wide range of solutions and collaborations, but could further expand on adaptation-related investment opportunities, address disincentives to climate-aligned investments and clarify sectoral priorities. More thorough reviews of its effectiveness need to inform future iterations of the agenda.

Austria made progress in integrating climate considerations into financial sector policies, building on and, in some areas, going beyond EU-level requirements (Box 1.5). It adopted a range of climate-related transparency and prudential policies. Although Austria has a more limited number of climate-related financial sector policies than European peers, it has a higher share of prudential policies. Austria has, so far, not embedded climate considerations into monetary policies (Figure 1.21). Overall, Austria’s policy mix relies more on voluntary measures and focuses primarily on the low-carbon transition rather than on climate resilience. Efforts linked to managing physical risks and supporting climate-resilient investment could be expanded. Financial sector policies that may undermine climate goals and their effects have not yet been reviewed.

Climate-related disclosure policies are mainly developed at the EU level, but Austria has made additional efforts to enforce transparency and provide green finance frameworks and guidance. For example, the Austrian government established mandatory Environmental, Social and Governance (ESG) disclosure requirements for its pension fund in 2005. This approach is similar to additional policy efforts in other EU countries, such as Germany, Belgium and the Netherlands. Other countries, such as France, have adopted additional transparency policies (D’Orazio, 2023[117]). Austria also adopted a sovereign green bond framework in 2022, facilitating the issuance of several green debt securities such as treasury bills. Furthermore, Austria’s eco-label for sustainable financial products adopted in 2010 is one of the few ESG labels developed globally.

Austria has a higher share of climate-related risk management and supervision practices in its policy mix than most European peers (Figure 1.21). However, it needs to comply with more ambitious EU-level initiatives regarding both prudential and monetary policy frameworks (Box 1.5). The Austrian financial market authority has developed a guide to address climate risks as part of risk management by credit institutions and other financial institutions (FMA, 2025[118]).20 The central bank and financial market authority have developed several top-down climate risk stress tests, focussed on transition risks (OeNB, 2021[119]; OeNB, 2024[120]; FMA, 2024[121]). While there are ongoing efforts at the EU level, more comprehensive and consistent climate stress tests with supervised entities covering both transition and physical climate risks have not yet been carried out at the national level.

Figure ‎1.21. Austria has a higher share of climate stress tests than European peers
Copy link to Figure ‎1.21. Austria has a higher share of climate stress tests than European peers

Mix of climate-related financial sector policies in selected OECD jurisdictions, 2000-2025

Estimates of listed equity and corporate bonds show limited finance flowing to climate-aligned activities, but large blind spots remain across asset classes

Austria’s financial system consists of a relatively small stock market and limited levels of private equity but a high reliance on loans and bonds. Austria’s stock market represents just 1% of EU market capitalisation (Platform on Sustainable Finance, 2025[122]) and has relatively low liquidity compared to larger EU markets. Outstanding corporate debt in Austria is larger than in Belgium and Finland but smaller than in Sweden and Luxemburg (OECD, 2025[123]).

Available evidence on finance flows and stocks across financial asset classes remains partial. However, it points to a low degree of alignment of finance with climate change mitigation goals – a pattern observed on average at the global level. Building on internationally co‑ordinated 2025 updates to the System of National Accounts, Austria could collect and report on green finance more systematically in the context of national financial statistics. To that end, it could start with green bonds and listed equity, progressively expanding to loans and investment fund shares. Connecting these data to a comprehensive analysis of Austrian real-economy investments that support or undermine climate goals enables a more robust and policy-relevant assessment (OECD, 2024[115]).

Box ‎1.5. EU Sustainable Finance Framework

Copy link to Box ‎1.5. EU Sustainable Finance Framework

The EU Sustainable Finance Framework aims to steer capital towards climate and broader sustainability objectives, while managing risks from environmental and social factors. The EU Taxonomy Regulation, Corporate Sustainability Reporting Directive (CSRD) and the Sustainable Finance Disclosure Regulation (SFDR) are cornerstones of this framework, bringing transparency on climate-relevant activities:

The EU Taxonomy defines what counts as an environmentally sustainable economic activity.
The CSRD requires large and listed companies to disclose sustainability data using the European Sustainability Reporting Standards.
The SFDR requires asset managers, insurers and financial advisers to disclose sustainability risks and impacts at entity and product level.

Climate considerations are increasingly integrated into prudential supervision policies in the EU. For example, banks under the Single Supervisory Mechanism must integrate climate and environmental risks into governance, risk management and disclosures. The European Central Bank (ECB) has done several climate stress tests since 2022. The European Insurance and Occupational Pensions Authority has run stress tests on European insurers, examining physical and transition risks to both sides of the balance sheet.

More recently, the ECB also took steps to adapt collateral framework to address climate-related transition risks (ECB, 2025[124]). The ECB’s Governing Council has decided to introduce a “climate factor” that could reduce the value assigned to eligible assets pledged as collateral, depending on the extent to which an asset can be affected by climate-related uncertainties.

Continued fossil-fuel exposure combined with the absence of low-carbon listings point 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 2019 and 2024 (Figure 1.22, panel A). At the same time, there are no exclusively low-carbon companies listed on the Austrian stock market yet compared to a European and global average of around 4%. On average over this period, around 80% of the Austrian stock market was in climate-policy relevant sectors, a higher share than European peers (Figure 1.22, panel B) and the global average (OECD, 2026[125]). This includes 17% in carbon-intensive and energy-intensive sectors. Financial companies, whose climate classification depends on how much of their investments are in clean or fossil-fuel energy, represent around 30% of the market.

Green corporate and sovereign bond issuance is emerging but at a low speed and scale, and issuance by carbon-intensive activities cannot yet be tracked consistently. In 2024, 6% of corporate bond issuance was labelled green, up from 5% in 2022. Less than 4% of bond issuance went to traditionally carbon-intensive sectors, including energy, manufacturing and transport. Around 85% of corporate bond market consists in issuance of traditional bonds by financial services, an intermediary from which flows can still go to climate-relevant activities, but cannot be tracked at this stage. Further, the Austrian government has made efforts to increase green financing since the issuance of its first green bond in 2022. Sovereign green-labelled bond issuance had risen to 4% of total issuance by 2024, broadly in line with the European average (OECD, 2026[125]). Moreover, the share of green Austrian treasury bills in total outstanding Austrian treasury bills was 23% at the end of 2024 and rose to 39% in 2025 (OEBFA, 2026[126]).

Figure ‎1.22. Austria’s stock market retains fossil-fuel exposure but no exclusively low-carbon listings
Copy link to Figure ‎1.22. Austria’s stock market retains fossil-fuel exposure but no exclusively low-carbon listings

Listed corporate equity in low-carbon energy, fossil-fuel energy and climate-policy relevant sectors

Similar to bonds, loans towards carbon-intensive sectors cannot yet be tracked, although this is an important asset class in Austria. Green syndicated loan provision in Austria peaked at USD 1.2 billion in 2022 with a large individual green loan for Burgenland Solar & Wind backed by the European Investment Bank. In 2023, six lenders extended green loans, mainly for renewable energy projects. Real estate loan portfolios data are scarce and need to be built up by financial institutions (Meyer, Payami and Glas, 2024[128]).

Government-backed voluntary initiatives helped increase the climate transparency of financial institutions, but more consistent information is needed

Across Austrian financial institutions, initial analysis and government-backed voluntary initiatives find that Austrian financial institutions are taking steps to transition, but more efforts are needed to align with climate goals. As of 2025, Austria’s six “significant” (as per ECB classification) banks and five additional Austrian banks that are members of the Green Finance Alliance (GFA) have published a climate strategy and integrated climate into risk management (BMLUK, 2025[129]). However, the “significant” banks have no commitment to align their portfolios with a 1.5°C target and no restrictions on new financing of fossil fuels, while all GFA banks do (BMLUK, 2025[129]). A 2021 analysis finds that 54 Austrian financial institutions have a higher share of investments in renewable energy in their equity and corporate bond portfolios than Swiss financial institutions for which similar analysis was conducted (Sustainable Finance Observatory, 2021[130]). However, these investments remain small and need to be significantly increased to align with Paris Agreement benchmarks.

Data and analysis are improving to track the climate performance for Austrian banks but not for other types of financial actors such as institutional investors.21 Several ad hoc case studies and analyses of assets of commercial banks highlighted their lack of climate alignment. A 2020 study (OeNB, 2020[131]) found that the assets of Austrian banks are in high-emissions sectors for about 5% of bonds, 30% of loans and 18% for other asset classes. A 2022 study of the 14 large Austrian banks found that only 3 had systematically incorporated climate targets and criteria into their procurement processes for suppliers and purchases (WWF, 2022[132]).

Central bank data on bank holdings reveal larger climate-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-relevant sectors represent over 50% across types of banks in 2024 (Figure 1.23). Raiffeisen credit co‑operatives provide large volumes of bonds to transport companies and loans for buildings, while joint stock banks have larger volumes of bond holdings in the utility sector. These central bank data provide crucial insights for climate-alignment assessments of finance. Sharing such data in a consistent repeated manner with climate policymakers can unlock crucial insights to inform more tailored policies.

Figure ‎1.23. Central bank data on bank holdings reveal large climate-relevant financial stocks
Copy link to Figure ‎1.23. Central bank data on bank holdings reveal large climate-relevant financial stocks

Austrian banks’ assets by bank size, climate-policy relevant sectors (CPRS), location and instrument, 2024

Despite climate-related disclosure policies and voluntary initiatives by Austria and the EU, data limitations hinder a robust and policy-relevant assessment of the climate alignment of finance in Austria. Improved transparency by borrowers and investees (notably companies) is a prerequisite for improving transparency of financial institutions, which will depend on both EU and national measures. Expanding assessment capacities and establishing a co‑ordinated approach among ministries and agencies, as well as with private institutions, can improve data availability and quality. Collaboration among Austrian authorities 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. The financial market authority could also undertake more frequent and comprehensive ESG surveys of financial institutions, collecting data on quantitative indicators in relation to climate-(mis)aligned investments and activities, climate-related engagement, governance or strategy. Such surveys could provide more comparable information across institutions and be shared with other Austrian authorities to inform wider climate-related financial sector policies. Increasing the scale of financial sector participation in government-backed voluntary initiatives, such as the GFA could further inform climate assessments and best practices.

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[22] Umweltbundesamt (2025), Klimaschutzbericht 2025, [Climate Protection Report 2025], Umweltbundesamt, Vienna, https://www.umweltbundesamt.at/studien-reports/publikationsdetail?pub_id=2613&cHash=8eeac146a3142f796d355043bb0c5dc9.

[21] Umweltbundesamt (2025), Nahzeitprognose der Österreichischen Treibhausgas-Emissionen für das Jahr 2024, [Short-term Forecast of Austrian Greenhouse Gas Emissions for the Year 2024 ], Umweltbundesamt, Vienna, https://www.umweltbundesamt.at/fileadmin/site/publikationen/rep0992.pdf.

[26] Umweltbundesamt (2022), “Investitionspotenzial der Klimatransformation”, [Investment potential of climate transformation], Press release 17 May 2022, Umweltbundesamt, Vienna, https://www.umweltbundesamt.at/news220517 (accessed on 15 November 2025).

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Notes

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← 1. For example, climate and environmental policies (excluding water) were the responsibility of the Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology in 2020‑2024.

← 2. To be recognised as an environmental NGO, an organisation must have been a non-profit organisation for at least three years, have at least 100 members and have environmental protection as its main objective. A list of recognised environmental NGOs is available on the BMLUK’s website.

← 3. The EU ETS covers maritime transport as well, which Austria does not have.

← 4. Provided that the LULUCF target is met and there is a surplus, Austria can offset up to 2.5 Mt CO₂eq from balanced LULUCF credits over 2021-2030. It can also offset 2% of ESR emissions per year by deleting ETS allowances (up to 11.4 Mt CO₂eq in 2021‑2030) (Umweltbundesamt, 2025[22]).

← 5. At the time of writing, an infringement procedure against Austria was ongoing for failure to transpose the permit-granting provisions of the RED III.

← 6. 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.

← 7. The 2024 EU Energy Performance of Building Directive requires EU Member States to submit a draft plan by end-2025 and a final plan by end-2026.

← 8. The Austria Environment Agency defines deep renovations as those combining at least three energy efficiency measures among replacement of external windows and doors, thermal insulation of the façade, thermal insulation of the top floor ceiling and boiler replacement (Umweltbundesamt, 2025[22]).

← 9. In 2024, the EU updated its Ambient Air Quality Directive to adopt stricter standards aligned with World Health Organization guidance. PM_2.5 limits will be lowered from 25 µg/m³ to 10 µg/m³ by 2030, and to 5 µg/m³ by 2035.

← 10. 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).

← 11. Germany: below 30 ha per day; France: about 27.5 ha per day; Switzerland: 3.7 ha per day; and Slovenia: 6.7 ha per day.

← 12. The Federal Chancellery hosts the ÖROK secretariat and the Federal Chancellor chairs the organisation’s decision-making body, which gathers federal ministers, state leaders and local government associations.

← 13. For example, data on bird species of EU significance are largely gathered by volunteers, and most of the country’s 32 National Red Lists are over 15 years old.

← 14. The Habitats Directive (92/43/EEC) protects habitats and species of Community interest, i.e. which are threatened to disappear in the European Union, have a small natural range or present outstanding examples of typical characteristics of Europe’s biogeographical regions.

← 15. A 2025 amendment to the EU Habitat Directives changed the level of protection of the wolf from “strictly protected” to “protected” to align the directive with the updated Bern Convention, the international agreement for the protection of wildlife and habitats in Europe. Member states must, however, continue to ensure the wolf’s favourable conservation status.

← 16. The landscape protection levy targets quarrying or removal of soil materials, extraction of gravel, sand, crushed stone, stone, clay and peat. The Vienna tree protection charge is a compensatory levy paid if trees are removed and no corresponding replacement plantings or replanting can be carried out.

← 17. 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[133]).

← 18. Data available for 19 EU countries. 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[99]).

← 19. Environmental protection expenditure aims to prevent, reduce and eliminate pollution and any other degradation of the environment. It covers pollution abatement (air, water, soil and noise), waste and wastewater management, protection of biodiversity, as well as related research and development, education and training activities.

← 20. Entities supervised by the Financial Market Authority include credit institutions, insurance undertakings, investment fund management companies, alternative investment fund managers and investment firms, as well as Pensionskassen (pension companies) and occupational severance and retirement funds. The guide was first published in 2020 and revised in 2025.

← 21. Institutional investors are a diverse set of financial sector actors, including pension funds, sovereign wealth funds, insurance companies, asset managers and endowments, among others.

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