Austria is already one of the greenest economies in Europe. But, with the Greens now part of the governing coalition, money flowing in as part of the EU’s Recovery and Resilience Facility, and the country issuing green bonds, there are plans to make it greener.
As part of the EU’s €724bn post-pandemic loans and grants facility, Austria, governed by a coalition of the Greens and the dominant conservative Austrian People’s Party, is investing heavily in green initiatives. The European Commission estimates that 59 per cent of the country’s allocation of €3.46bn is earmarked for green investments, far above the EU average of 45 per cent, and behind only Luxembourg, at 61 per cent.
Among other measures, Austria’s plan includes investing €843mn in sustainable mobility to develop zero-emission transport, as well as an additional €543mn to expand the electrified trans-European rail network. In total, Austria’s national plan consists of 32 investments and 27 reforms, supported by the EU grants.
The country is already making progress on renewable energy projects. According to the International Renewable Energy Agency, more than 80 per cent of Austria’s electricity capacity now comes from renewable sources, up from 72 per cent in 2012. It aims to have 100 per cent renewable electricity by 2030.
Hydropower plays a particularly important role in Austria, representing about 60 per cent of electricity generated in the country. In March, it was also announced that the government would provide €250mn in financing to support the expansion of solar and wind power. The country added 740MW of solar power in 2021, more than double any previous year, with solar capacity of 2,783MW at the end of 2021.
Meanwhile, Austria has revamped its renewable heating law, bringing forward the banning of new gas boilers to 2023 from 2025, with broken oil and coal heaters needing to be replaced with green options. An estimated 1mn households are heated with gas — about a quarter of the country’s gas use.
“It’s safe to say some important steps have been [taken] in the last few years,” says Margit Schratzenstaller, an economist at the Vienna-based Austrian Institute of Economic Research. “Austria is investing more in railways, they’re investing in all these programmes to exchange heating systems, to increase thermal insulation. But still there’s a lot more to be done.”
At the municipal level, cities are also pushing green investments. Graz has set up a programme to increase green infrastructure in the city, joining Vienna and Linz in championing green roofs and facades as an environmental solution.
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Progress has not been even across the country, though. “In Austria, you have a lot of wind energy in the eastern part and a lot of [political] resistance in the western part,” says Andreas Treichl, the former chief executive of Erste Group, the Austrian bank, and now chair of the supervisory board of ERSTE Foundation. “But, in principle, you could say that what’s going on in Austria on the municipal and regional level is pretty good stuff.”
“I think we can be relatively satisfied. Also, the incentives being given by the government to private individuals, we are advancing on that, too,” Treichl adds. “Where we are still lagging behind, in my view, compared to other European companies, is waste management.”
Funding channels for green projects are being increased, too. In May, Austria became the latest government to enter the green bond market, selling a 27-year €4bn bond, with the money to be used to fund environmentally friendly projects. The bond attracted €25bn in investor demand, with a yield of 1.876 per cent.
Then, in October, Austria launched a green treasury bill, which made it the first government to issue green short-term government debt, though with expectations that the bills will be rolled over. According to the Treasury, more than 85 per cent of the €1bn in debt was bought by green investors, including money market funds and central banks.
Austria had identified more than €5bn of expenditure to fund through its green bond programme in both 2021 and 2022 — nearly three quarters of it channelled towards clean transportation, according to reports from analysts and data providers.
“If you look at capital markets, you have to look into two different areas,” says Erste’s Treichl. “On the capital markets side, we’re doing a good job and coming up with innovative products, and I think the co-operation between the regulators, the financial services industry, and business is pretty good.
“It’s moving and developing, but that’s only part of the game. On the equity capital markets, very little is being done. That needs to be resolved. That needs to be a European initiative.”
Austria has also pushed back against efforts to broaden the definition of what counts as green, for investment purposes. In October, the country filed a lawsuit against the European Commission over the labelling of gas and nuclear as “green” investments, joining earlier legal challenges by environmental groups Greenpeace and a coalition that includes ClientEarth and the WWF.
“We need to safeguard the trust of consumers and investors,” and ensure that if a product “is labelled green, it’s actually green in content,” said Austria’s minister for climate action, Leonore Gewessler, at the time.
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