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UPDATE: Austria launches national ETS with fixed price during initial phase

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This article was updated 20 July 2022 to reflect the temporary suspension of the obligation to surrender allowances until 1 October 2022. Originally published 1 July 2022.

On 1 July 2022, Austria launched a national ETS (nationaler Zertifikatehandel) covering CO2 emissions from fossil fuels used in the buildings, transport, small industry, waste and agriculture sectors. However, the obligation to surrender allowances was temporarily suspended as part of an energy price relief package of the Austrian government and will apply only from 1 October 2022.

Introduced as part of the Ecological Tax Reform Act, Austria’s new carbon pricing mechanism takes the form of an ETS with a gradually increasing fixed price and without trading until 2026, before transitioning to a market phase thereafter. As GHG emissions from Austria’s energy, industry, and domestic aviation sectors are already covered by the EU ETS, the introduction of the new national ETS means that all major sectors in Austria now face a carbon price.

The carbon price will be charged upstream to fuel importers, and apply to petrol, diesel, heating oil, LPG, natural gas, coal, and kerosene. In the first phase, from 2022 to 2026, the government will start with a fixed price on emissions, issuing allowances for EUR 30/tCO2 (USD 32) in 2022. This price will increase to EUR 35/tCO2 (USD 37) in 2023, and to EUR 45/tCO2 (USD 47) in 2024, before reaching EUR 55/tCO2 (USD 58) in 2025. The government has not set a maximum number of allowances for issue (“cap”), and trading is not yet allowed. Regulated entities have until the end of June each year to surrender allowances to cover the reported emissions of the previous year. The system will be managed by the competent authority, the Office for National Emissions Trading, an independent unit within the Austrian Customs Office.

From 2026 onwards, the system will transition to a market phase. The exact design of the market system will be developed based on a cross-ministerial evaluation that will take place in December 2024.  According to the Ministry of Finance, more detailed regulations cannot yet be included in the Act, as developments in the context of the ‘Fit for 55’ package at EU level may lead to the establishment of an European-wide ETS for buildings and road transport, which would impact the design of the Austrian ETS.

Austria’s national ETS has strong similarities with the German national ETS that started operating in 2021. The German ETS is also currently operating with an increasing fixed price on CO2 emissions for fuels used in the building and transport sectors until 2025, with the introduction of auctions and trading planned thereafter.