How the new Austrian tax reform can contribute to a greener world“Less dirt in the air, but more money in the wallet,” Werner Kogler, the vice chancellor of Austria, promised at a press conference on October 3, 2021. What was the occasion? The coalition government had just announced an eco-social tax reform, which should bring individuals and enterprises a relief of 18 billion euros by 2025.
One of the key elements of the proposed legislation, which should be passed by Parliament in late fall and take effect in July 2022, is that CO2 emissions will be charged at 30 euros per ton. At the same time, a so-called climate bonus will be introduced to reduce the financial burden the measures will place on the population. Can we really look forward to an “ecological turnaround,” as announced by government officials?
Ecological turnaroundPutting a price on CO2 was long overdue – Finland, the first country in the world to impose such a levy, can already look back on 31 years of carbon taxes. Since then, 18 other European states have followed suit, which makes Austria the 20th country in Europe to introduce a carbon tax. As far as the price per ton is concerned, there are huge differences between the countries. Poland and Ukraine have the lowest carbon tax rates – a measly €0.07 and €0.25, respectively – while at the other extreme, Sweden charges well over €100.
carbon tax rate
Even though the concept is now widely used, most people find the idea of “a ton of carbon-dioxide” an abstract, intangible notion. To help you gain a good understanding of what it means, let us give you a few examples.
But how much is a ton of CO2 and what direct consequences does the introduction of carbon tax have for ordinary people?
co2 emission per person / kilometer
with green electricity
As for what carbon tax means in terms of how deep you must dig into your pocket, at 30 euros per ton, the price of a liter of fuel will increase by around ten cents. So, supposing that your diesel car uses seven liters of fuel for 100 km and you only tank up in Austria, driving 6,000 kilometers will cost you about 42 euros more next year than it would do now. Unfortunately, most of us will feel the impact of the proposed changes much sooner.
The rise in wholesale electricity and, in particular, gas prices will already make heating more expensive this coming winter. The price of gas has increased by a whopping 440% since the beginning of the year, and since gas is not only used for heating but also to generate power, it impacts the price of electricity, too. It is estimated that an average household with an annual consumption of 3500 kWh of electricity and 15,000 kWh of gas will have to pay around 500 euros more. According to Statistik Austria, 40% of households use oil or gas for heating.
how far can you get with one tonne of co2
Environmentalists and economists have voiced their criticism, pointing out that a CO2 price of only 30 euros will not encourage people to become more environmentally conscious, and that there is no clear concept comprehensible to everyone. Many have lambasted the smaller of the two coalition parties, the Greens, not least because they did not manage to have the tax advantage for diesel abolished. Climate expert Helga Kromp-Kolb has said that 30 euros is far too low, calling it a political rather than a science-based price. The question she suggests we should ask is how much it would cost to reduce as much as we can without exceeding the country’s CO2 budget. In that case, we would end up with an entry price of 50 to 160 euros upwards.