FAQ regarding the national emissions certificates trading law 2022 (NEHG 2022)
Why is the introduction of CO2e pricing necessary?
The increasingly perceptible effects of climate change pose great challenges for our society. At both the EU level and the national level, therefore, climate change mitigation goals have been put into place to curb global warming. The central focus of these measures is the aim of the European Union to reduce its net emissions by at least 55 per cent by 2030 in comparison to 1990 and to become the first climate-neutral continent by 2050. The key climate preservation instrument within the electricity and heat generation sectors as well as energy-intensive industry sectors (oil refineries, steel works, etc.) is the European emissions trading system (EU-ETS). As part of the European Commission's Fit for 55 package presented in July 2021, the EU-ETS is intended to be expanded to cover the building and transport sectors from 2026 onwards. Until an agreement on the expansion of the EU ETS can be reached, however, the Member States in particular are requested to ensure the reduction of greenhouse gas emissions in the sectors of buildings, transport, agriculture, waste and small industrial plants (= non-ETS sectors) by means of national measures. This task is set to be fulfilled by the introduction of the national commercial law on emissions certificates 2022 (NEHG 2022).
Will prices for refuelling and heating increase as a result of the NEHG 2022?
The NEHG 2022 is initially being applied to the energy sources petrol, gasoil, heating oil, natural gas, liquefied petroleum gas, coal and jet fuel. The NEHG 2022 is primarily concerned with the act of placing these substances into free circulation and not the actual consumption by the consumer. The costs for the national emissions certificates are therefore borne directly by the entity placing the substances into circulation (= the "trading participant", e.g. the manufacturer of the substances; energy supplier, mineral oil company). Although the law does not explicitly stipulate that these trading participants must pass on their costs directly to the consumer (e.g. to the person filling up their car) and indicate this on the invoice, the costs can nevertheless be passed on to the consumer as is also customary in commercial trade and in compliance with consumer regulations. The aim of the CO2e pricing is to take a further step towards cost transparency. At the same time, , extensive relief measures have been established to ensure overall financial relief for the population in spite of this price increase.
How does the introduction of CO2e pricing fit with the goal of reducing the tax and contribution ratio?
A significant aim of the current Federal Government is to reduce the tax and contribution ratio in Austria (for more information, see the Government Programme 2020–2024 "Out of a Sense of Responsibility for Austria"). The eco-social tax reform with its CO2e pricing in the form of the NEHG 2022 should not stand in the way of this goal, however, but rather support it. It is therefore not the aim of the eco-social tax reform to create additional tax burden for the population, but rather to reflect cost transparency in relation to greenhouse gas emissions within the tax system, thus establishing incentives to deter environmentally harmful behaviour and providing overall financial relief for the population in doing so, e.g. through reducing income tax. Consequently, the overall package does not just comprise CO2e pricing in the form of the NEHG 2022, but also consists of numerous compensation and relief measures.
Which relief measures are implemented?
The eco-social tax reform includes a wide range of compensation and relief measures for citizens and companies, such as a reduction in the second and third tariff levels of income tax, an increase in the tax allowance for pensioners and in the so-called Family Bonus Plus, a reduction in the corporate tax rate, and many other measures (for more information, see Eco-Social Tax Reform Law 2022 Part 1. One of the most prominent relief measures, however, is the regional climate bonus, which is intended as lump sum compensation to cover the financial burden incurred by the CO2e pricing. The amount of this climate bonus is based on a person's place of residence and the public transportation connections that are available at this location. Depending on location, a bonus of EUR 100–200 is available for each person. In total, this measure alone results in total financial relief for the population in the amount of EUR 1.25 billion in 2022 – for comparison: The anticipated revenues from the CO2e pricing are estimated at EUR 500 million in 2022.
Moreover, the NEHG includes some relief measures for companies that are significantly burdened by the introduction of the NEHG 2022, including:
- Agriculture and forestry: Diesel that is used in agricultural and forestry vehicles in connection with the core agriculture and forestry activity may be subject to relief.
- Carbon leakage: Relief is provided to significantly affected economic sectors where there is a particular risk that these sectors will relocate their production to countries with less stringent climate-policy-related measures. The economic sectors in question and the amount of relief provided are based on Annex 2 of the law.
- Hardship cases: Relief is provided to companies for which the share of costs for energy sources that are subject to the NEHG 2022 is particularly high.
Where can I find the costs incurred as a result of the NEHG on my fuel bill?
The NEHG 2022 is primarily concerned with the act of placing energy sources into free circulation and not the actual consumption by the consumer. The costs for the national emissions certificates are therefore borne directly by the entity placing the substances into circulation (= the "trading participant", e.g. the manufacturer of the substances; an energy supplier, mineral oil companies). However, the NEHG 2022 does not stipulate that these costs must then be explicitly charged onto the consumer and consequently indicated on the invoice. Since it can naturally be the case in commercial trade that these costs are indeed charged onto the consumer, in compliance with consumer regulations, the NEHG 2022 does have an effect on prices (see also the question "Will prices for refuelling and heating increase as a result of the NEHG 2022?").
What obligations exist for consumers?
The NEHG 2022 is primarily concerned with the act of placing energy sources into free circulation and not the actual consumption by the consumer. The obligations in connection with the NEHG 2022 are therefore borne exclusively by the entity placing the substances into circulation (= the "trading participant", e.g. the manufacturer of the substances; an energy supplier, mineral oil companies). These obligations cover, for example, the submission of the greenhouse gas emissions report (= report on the quantity of greenhouse gas emissions placed into circulation) or the procurement of the necessary quantity of emissions certificates. The NEHG 2022 does not stipulate obligations for consumers.
What is expected to be the impact on the climate?
The introduction of a CO2e price is suitable means of creating incentives to deter environmentally harmful behaviour and to increase the appeal of using innovative, low-emission technologies. The following reductions in greenhouse gas emissions can be expected for the year 2025:
- Reduction in the buildings sector: 0.4 million tonnes CO2e
- Reduction in the transport sector: 0.9 million tonnes CO2e
- Reduction in the energy and industry sector (non-ETS sector; for more information, see the question "Why is the introduction of CO2e pricing necessary?"): 0.2 million tonnes CO2e
For the year 2025, this consequently results in a total reduction of 1.5 million tonnes of CO2e in comparison to a scenario where CO2e pricing is not implemented.