Austria's Successful Green Budgeting and Emission Reduction Efforts

PeopleOther ♦ Published: July 30, 2023; 12:02 ♦ (Vindobona)

The Climate Team, newly established in the Austrian Ministry of Finance, has presented essential results and analyses in recent months to bring Austria closer to the goal of a cost-effective and socially acceptable transformation in climate protection. In fact, the European Commission, OECD, and World Bank have all recognized Austrian green budgeting as a best practice.

Seat of the BMF in the former city palace of Prince Eugene. / Picture: © Wikipedia / Thomas Ledl

The three key results of the Climate Team include, first, the development of a new Green Budgeting System that acts as a link between budget and climate policy for the federal government. The second outcome is the successful implementation of the National Emission Allowance Trading Scheme and the associated Austrian CO2 pricing, which was carried out in close cooperation with the Tax Section and the Austrian Customs Office. The third result is the publication of a novel analysis of the costs and risks of climate change as part of the Long-Term Budget Forecast.

Finance Minister Magnus Brunner emphasizes the importance of linking budget and tax policy with climate, environmental, and energy policy and stresses common sense in climate protection. He emphasizes openness to different technologies and innovations as an alternative to bans. The climate team in the Ministry of Finance makes an important contribution to the implementation of the federal government's climate goals, he said. The results of the Long-Term Budget Forecast show that Austria is successfully meeting its legally binding 2030 climate target with existing measures, but that further emission reductions are needed. However, a market-based, technology-open, and budget-friendly transformation could significantly reduce greenhouse gas emissions in all sectors and achieve the climate policy goals without putting a heavy burden on public finances.

The climate team's green budgeting is recognized as best practice and provides the methodological framework for linking budget and climate policy. The methods are being further developed in close cooperation with the World Bank and the EU Commission, with the EU Commission funding a BMF project under the "Technical Assistance Instruments" program with 820,000 euros. The Austrian approach to green budgeting is now recognized as best practice by the European Commission, the OECD, and the World Bank.

At the national level, green budgeting is being progressively developed in intensive exchange with specialized ministries. A Spending Review currently underway is examining the potential synergies between the federal and state governments to facilitate the application of green budgeting at the state level as well.

Another successful outcome is the introduction of the National Emission Allowance Trading Scheme in February 2023. This system for CO2 pricing was implemented smoothly and confirms the BMF's successful work in this area. At the same time, the BMF is preparing for the implementation of the Carbon Boundary Adjustment Mechanism (CBAM), which will also be handled by the National Emissions Trading Office.

The Climate Team at the Ministry of Finance acts as a coordinating body for all green budgeting issues and serves as an inter-institutional point of contact and internal coordination. It consists of an interdisciplinary group of experts from the budget section with expertise in economics, econometrics, and climate policy, including greenhouse gas inventories.