Since almost all climate bonuses for the year 2022 have been paid out, the national emission trading system (Nationales Emissionszertifikatehandelsgesetz 2022, NEHG 2022), which was introduced as part of the eco-social tax reform (Ökosozialen Steuerreformgesetz 2022), entered into force on October 1st, 2022. The NEHG 2022 covers greenhouse gas emissions from fossil fuels and provides for an additional pricing of CO2 on top of already existing energy taxes in those sectors that are not yet subject to the European Emissions Trading System (EU ETS). Thus, the new NEHG 2022 covers the sectors of buildings, transport, agriculture, waste management and parts of industry, already implementing future EU plans to extend the existing EU ETS by including the sectors of buildings and transport.
With the NEHG 2022, a national emissions trading system will be implemented in Austria. After a simplifying introduction and transition phase with fixed prices, it will move into a market phase at the beginning of 2026, taking future European developments into account. In contrast to the EU ETS, there are no free allowances, which means that the new system is in effect a CO2 tax.
CO2 Pricing Austria: NEHG Areas of Application
The NEHG focuses on introductions to the market, i.e. the production or first import of certain fossil fuels in Austria, and is closely linked to the existing regulations of energy taxes such as the fuel tax. The taxable event equals the one for existing energy taxes (fuel tax, natural gas tax and coal tax), which is why companies that have not yet fallen under the scope of existing energy taxes will in principle not fall under the scope of the NEHG 2022.
In the future, a trading participant that introduces a fossil fuel to the market will have to purchase emission certificates for it. Depending on the energy source, a certain CO2 emission factor is provided for, which is required in order to determine the greenhouse gas emissions and consequently the number of certificates that have to be acquired. One certificate must be surrendered for each ton of greenhouse gas emissions. So far, the following seven fossil fuels are covered by the NEHG:
- petrol
- diesel
- heating oil
- natural gas
- liquefied petroleum gas
- coal
- kerosene
The introduction of the national emissions trading system is planned in several stages, with a fixed price phase with annually increasing prices until the market phase starts in 2026. Accordingly, CO2 pricing in Austria will be as follows:
Fixed price phase – October 1st, 2022 to December 31, 2025
The fixed price phase, which is divided into an introduction phase and a transition phase, is intended to facilitate the transition to a new system for market participants. In the introduction phase of the national emissions trading system, which will last at least until January 1st, 2024, a simplified registration procedure is planned in addition to the fixed prices. Only at the beginning of 2024 or 2025, if the technical requirements for the start of the transition phase are not yet in place, is it planned to expand the system by introducing a monitoring plan and creating a national emission certificate trading registry. Until the market phase, the following fixed prices are envisaged:
| Year | Fixed price per ton of CO2 |
| 2022 | 30 Euro |
| 2023 | 35 Euro |
| 2024 | 45 Euro |
| 2025 | 55 Euro |
During the fixed-price phase, market participants must purchase emission certificates and return them to the authority set up for this purpose in the following year in accordance with the actual volume of emissions. If certificates are not used, they can be returned for a refund of the purchase price.
To cushion strong developments in energy prices, a price stability mechanism was introduced, regulating the annual increase of the fixed price. If energy costs rise (fall) by more (less) than 12.5% in the period under review compared to the previous year, the amount by which the price of certificates is increased in the following year is halved (increased by 50 percent).
CO2 pricing Austria as of January 1st, 2026: Market phase
In the market phase, the national emission certificates are to be traded on the free market. In this respect, the NEHG 2022 does not yet provide any specific information, but rather an evaluation obligation in which a possible design of the market phase is to be examined, in accordance with future European developments.
Exemptions and relief measures
The NEHG 2022 distinguishes between exemptions and relief measures. While exemptions are generally aimed at trading participants, the relief measures provide reimbursements for selected companies/sectors that are not burdened directly but indirectly due to an increased price (passing on of costs).
To prevent a possible double burden, installations subject to the EU ETS are exempted from the NEHG 2022. An additional exemption exists for trading participants that only introduce one ton of CO2 emissions in a calendar year (exception for minor cases). To ensure consistency between the national emissions trading system and the existing energy taxes, the exemption provisions of the energy taxes have also been incorporated into the NEHG 2022.
In addition to the exemption provisions, the NEHG provides for special (pro rata) relief measures for affected businesses, which are intended to maintain the competitiveness of companies and prevent cases of hardship and carbon leakage, i.e. the shifting of greenhouse gas emissions out of Austria. To ensure the effectiveness of the compensatory measure, the relieved companies must invest at least 80% (in the introductory phase at least 50%) of the reimbursements in climate protection measures within the company. In the fixed-price phase, the reimbursement amount of the relief measures is capped, which is why the relief measures are reduced on a pro rata basis if the annual cap is exceeded.
| 2022 | 2023 | 2024 | 2025 | |
| Agriculture and forestry | 15 m euro | 35 m euro | 40 m euro | 45 m euro |
| Carbon leakage Non-ETS energy and industry | 37,5 m euro | 100 m euro | 125 m euro | 150 m euro |
| Hardships | 37,5 m euro | 100 m euro | 100 m euro | 100 m euro |
While the carbon leakage provision affects specific economic sectors listed in Annex 2 of the NEHG 2022, the hardship provision can in principle affect any company for which the share of costs for energy sources subject to the NEHG 2022 is particularly high in relation to total costs. A case of hardship exists if
- the actual costs for energy sources subject to the NEHG amount to more than 15 % of the total business costs (energy cost dimension) or
- the additional costs arising from the introduction of the NEHG amount to more than 15 % of the gross value added (additional cost dimension).
In this context, the NEHG 2022 provides that
- in the case of a share of between 15 % and 20 %, a maximum of 50 % of the additional burden is reimbursed, and
- for a share of more than 20 %, the additional burden is reimbursed by max. 95 %.
TPA tip: When planning costs, it is important to bear in mind that the budgetary cap may result in a lower (proportional) relief. For example, although the hardship provision may provide for 95% of the additional burden to be reimbursed, there may be a lower percentage relief in 2022 due to the maximum 37.5 m euros provided for such reimbursements.
TPA tip: For additional information on relief measures, click here, or contact our tax experts. In connection with increased energy costs, please also refer to the energy cost allowance.
Summary
On October 1st, 2022, the “Nationale Emissionszertifikatehandelsgesetz 2022” (NEHG 2022) will come into force, which will bring about an additional CO2 pricing in Austria. The NEHG 2022 focuses on fossil energy sources in the sectors not (yet) covered by the European Emissions Trading System (EU ETS) (in particular transport and buildings). In this context, the focus is not on the consumers, but on the distributors of the energy carriers (so-called market participants). For the building sector it is likely that most companies will not fall under the scope of the NEHG 2022 and will therefore only be indirectly affected by the higher prices for energy sources. Since landlords, for example, do not usually produce energy sources or import them into Austria for the first time, but purchase them from manufacturers or distributors, they do not have to purchase CO2 certificates. However, they do have to expect increased costs. In particular, energy sources that have not been covered by the EU ETS to date will experience a price increase as a result of the NEHG 2022.
In the fixed price phase, which is planned until the end of 2025, market participants will have to pay an annually increasing fixed price, starting at EUR 30 in 2022, for emission certificates per imported ton of CO2 emissions. From 2026, the fixed price phase is to be replaced by a market phase in which national emission certificates are to be traded on the free market.
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