OECD Inventory of Support Measures for Fossil Fuels: Country Notes

Austria

Energy resources and market structure

In 2021, renewable energy accounts for about 31% of Austria’s total energy supply (TES), most of it is in the form of hydropower, biofuels, and combustible wastes. Seventy-seven per cent (77%) of the country’s electricity is generated using renewables, mostly though hydropower (58%).

The largest Austrian petroleum company, OMV AG, is 31.5% state-owned and forms the single biggest integrated petroleum company in Central Europe. It undertakes petroleum exploration, production, refining, as well as wholesale and retail sales on a domestic and international level. OMV also operates — together with Rohöl Aufsuchungs AG (RAG) — Austria’s only refinery, in Schwechat, and three natural-gas-storage facilities. In 2021, the two companies supplied about 7% of Austria’s oil and 13% of Austria’s natural-gas inland consumption.

 

Source: IEA (2022), "World energy statistics", IEA World Energy Statistics and Balances (database).

Oil is primarily imported from Kazakhstan while natural gas is mostly purchased from Russia, even after the February 2022 large scale aggression over Ukraine. Major contracts for imports of natural gas into Austria are held by EconGas and Russian Gazexport. EconGas is the largest Austrian gas supplier and OMV owns 50% of the company. Following the shutdown of the lignite power plant, Voitsberg III, Austria’s production of coal has completely ceased while demand is essentially met through imports from the Czech Republic, Poland, and the United States. The last coal-fired power plant ceased using coal in the first half of 2020, after which coal was only to be used in industry.

Austria occupies a central position in the electricity network within the European Union due in part to its geographical location. The country is connected to all of its neighbouring countries, with the exception of the Slovak Republic. The electricity market was liberalised in 2001, way ahead of the EU regulation, but it remains in the hands of a few large suppliers. Verbund, the largest electricity supplier and generator, of which 51% is state-owned, accounts for approximately half of all electricity production in Austria. In total, electricity generation in Austria rely mainly on renewables (78%), with hydro power and wind accounting for respectively 58% and 10%.

Energy prices and taxes

Prices for electricity and natural gas in Austria are set freely by the wholesale and retail markets. Competition is regulated by the federal agency, Energy-Control. Taxes applicable to fossil fuels and electricity are set by the Federal Ministry of Finance. Since 1996, when the first law on taxation of natural gas and electricity was implemented, the Federal Government has included environmental objectives in its taxation policy. In general, all energy policies are set jointly by federal and state level government entities, as stipulated by the Federal Constitution.

Figure 2. Total tax rebates and support for fossil fuels in Austria

 

 

1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports). Support measures for which such information is not available are excluded from the aggregate amount reported in this table. In addition, support measures in certain countries may not have been exhaustively identified.

2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.

3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.

4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.

Source: OECD Inventory of support measures for fossil fuels (2023).

Recent developments and trends in support

In the wake of the financial crisis that brought the Eurozone economy to a halt, Austria took steps to improve its fiscal outlook through the Stability Act of 2012 (Stabilitätsgesetz 2012). Among other features, the Act eliminated several support measures benefitting the consumption of fuels in various sectors, such as targeted relief from energy tax for LPG used in public transport, and diesel fuel used in railways and farming operations. As from 1 January 2013, farmers in Austria now face the same rate of excise tax on their consumption of diesel fuel as other final users (EUR 0.4/litre as of 2022)1. The removal of these measures accounts for the notable decline in consumer support observed between 2013 and 2021. An EU-approved tax reimbursement scheme for certain energy-intensive industries is, however, still in operation and accounts for the persistent support for natural gas and coal.

Nevertheless, the Austrian government reimplemented some consumer support measures in response to the rising energy prices following the large-scale aggression by Russia over Ukraine in 2022. These measures include tax reductions, energy vouchers, a price cap and a postponement of CO2 pricing measures. They are benefitting both firms and households and are supporting the consumption of natural gas, fuels, and electricity.

Interestingly, Austria also has a target of 100% renewable electricity supply by 2030. Austria’s Renewables Expansion Law (EAG), adopted in 2021, aims to replace fossil fuels that supplied 22% of the electricity market in 2022. The fiscal cost of support measures for fossil fuels in Austria was estimated at EUR 2.48 billion in 2022 (Table 1). Forty per cent (40%) was directed at end user beneficiaries, as opposed to 60% directed to firms. Support was mainly given out in the form of direct transfers (EUR 1.49 billion) accounting for 60% of the total fiscal cost of support measures. Tax expenditures amounted to EUR 0.98 billion.

The fiscal cost of support measures for fossil fuels has increased by 225% since 2017. Since last year, tax expenditures have increased by 91%, from EUR 0.54 billion to EUR 0.98 billion and direct transfers increased from EUR 0.00 billion to EUR 1.49 billion. All growth rate percentages above are expressed in terms of nominal national currency amounts.

Table 1. Fiscal cost of support measures for fossil fuels (in billions of national currency)

	2017	2018	2019	2020	2021	2022
Tax expenditures	0.761	0.784	0.869	0.482	0.542	0.983
Direct transfers	0.000	0.000	0.000	0.000	0.000	1.495
Total	0.761	0.784	0.869	0.482	0.542	2.478

1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports). Support measures for which such information is not available are excluded from the aggregate amount reported in this table. In addition, support measures in certain countries may not have been exhaustively identified.

2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.

3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.

4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.

Source: OECD Inventory of support measures for fossil fuels (2023).

Table 2 highlights a selection of support measures associated with a large fiscal cost. A description of these measures is provided in Table 3.

Table 2. Selected support measures for fossil fuels with a large fiscal cost (in billions of national currency

Measures associated with large fiscal cost in 2022		2022	2017	Variation since 2017
Tax expenditures
	Energy Tax Refund for Energy Intensive Industries	0.294	0.291	0.003
	Energy Tax Exemption for Fuels Used in Commercial Aviation	0.286	0.380	-0.094
	Firms tax reduction in electricity and natural gas	0.171	(Started in 2022)	0.171
Direct transfers
	Energy cost subsidy aimed at energy-intensive commercial and non-profit enterprises	0.932	(Started in 2022)	0.932
	Energy voucher	0.367	(Started in 2022)	0.367
	Postponement of CO2 pricing from July to October	0.155	(Started in 2022)	0.155

1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports).

2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.

3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.

4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.

Source: OECD Inventory of support measures for fossil fuels (2023).

Table 3. Description of selected support measures for fossil fuels

Energy Tax Refund for Energy Intensive Industries	An energy-tax refund for energy-intensive industries was introduced in Austria in 1996. As stipulated by the EU Directive 2003/96/EC, EU Member States may, fully or in part, refund energy taxes paid by businesses that have invested in the rationalisation of their energy use. This refund may be as much as 100% for energy-intensive businesses and up to 50% for other businesses. However, energy-intensive businesses in Austria are in practice not granted a complete refund of their energy-tax payments as they have to pay at least the minimum energy-tax rates stipulated by the EU Directive 2003/96/EC. As of 2011, the services sector does no longer benefit from these refunds. The Ministry of Finance has estimated that this will result in a reduction of this tax expenditure by about EUR 100 million per year. This inventory allocates the annual amounts reported by the Ministry of Finance to the different fuels concerned on the basis of the IEA’s Energy Balances for the following industries in Austria: iron and steel; chemical and petrochemical products; non-ferrous metals; non-metallic minerals; food and tobacco; paper, pulp and print; textile and leather; wood and wood products; and commercial and public services (only up to 2011). Payments allocated to solid fuels are only included from 2004 onwards as those fuels were not subject to energy taxation prior to that year.
Energy Tax Exemption for Fuels Used in Commercial Aviation	Commercial air carriers are exempted from the energy tax commonly levied in Austria on the consumption of mineral fuels (§ 4 Abs 1 Z 1 MinStG) as per the Mineralölsteuergesetz 1995 (MinStG).
Firms tax reduction in electricity and natural gas	The electricity tax and the natural gas tax will be reduced to the minimum allowed by the European Union. This benefits both households and businesses in Austria with lower electricity and gas bills. The announced cost split for firms for 2022-2024 is: EUR 325 mn, EUR 272 mn, EUR -122 mn.
Energy cost subsidy aimed at energy-intensive commercial and non-profit enterprises	The energy cost subsidy is aimed at energy-intensive, commercial, and non-profit enterprises and entrepreneurial areas of non-profit associations. The subsidy covers the period 1 February 2022 to 30 September 2022, can be claimed for electricity, natural gas and fuels and is tied to energy-saving measures. The structure is based on the European Temporary Crisis Framework for State Aid to Support the Economy in the Wake of Russia's Aggression against Ukraine (2022/C 131 I/01), which provides four support levels in order to achieve the highest possible degree of targeting. In total, the relief volume amounts to EUR 1.3 bn, of which EUR 0.45 bn still in 2022 and EUR 0.85 bn in 2023. The funding period of Energy Cost Subsidy 1 originally covered the months of February to September 2022. Energy costs remain a heavy financial burden for domestic companies and weaken Austria as a business location. The federal government is committed to continuing to relieve Austrian companies of the high energy costs. In addition to the extension of energy cost subsidy 1 by the fourth quarter of 2022, energy cost subsidy 1 will therefore be relaunched as energy cost subsidy 2 in 2023.
Energy voucher	The Austrian government implemented a one-time lump sum transfers for households with a monthly gross income below EUR 5 760 (roughly, 95% of all households) of an energy voucher of EUR 150 agreed on in Dec 2021, useable for the yearly bill, to fight against the rise in prices following the Russian war invasion of Ukraine.
Postponement of CO2 pricing from July to October	CO2 pricing (“CO2 tax”) is a key element of eco-social tax reform. This pricing was first announced for July 2022, but was postponed to October 2022 due to the very high energy prices. When it was set up in October 2022, CO2 emissions initially cost EUR 30 per tonne. However, the price of CO2 is increasing year by year and is expected to gradually increase to EUR 55 per tonne by 2025. The first increase in the CO2 tax took place on 1 January 2023. In fact, it should have increased from EUR 30 to EUR 35 at this point. However, due to the currently very high energy prices, a price stability mechanism came into play and the price of CO2 only increased to EUR 32.50 per tonne.

Data sources

Country data in OECD.stat

OECD Fossil Fuel Support Portal

National data sources

Note on the Methodology

Aggregate numbers from the Inventory represent the fiscal cost of support measures for fossil fuels. They should not be interpreted as a level of support for fossil fuels, nor as an indicator of the extent to which the considered policies are favourable or unfavourable to climate mitigation.

The Inventory reports tax expenditures as estimates of revenue foregone due to measures that reduce or postpone tax payments relative to a jurisdiction’s benchmark tax systems to the benefit of fossil fuels producers or users. Tax expenditure estimates can thus increase over time due to either an increase in the offered concession (relative to benchmark tax systems) or an increase in the benchmark itself. Cross-country comparisons of tax expenditures can also be misleading due to differences in countries’ benchmark tax systems.

Note

← 1.  There are two different tax rates for diesel: (i) EUR 397/1000 litres if the share of biofuel is more than 66 litres and the sulphur content is not more than 10 mg/kg (corresponding to around 95% of total market share); (ii) EUR 425/1000 litres for the rest (corresponding to around 5% of total market share).