Climate-counterproductive subsidies in Austria - an economic and legal assessment of the status quo and reform options

Discussions about the reform of subsidies with negative climate impacts have been going on for decades in policy and research. Such subsidies counteract climate protection efforts, contradict the polluter-pays principle, and reinforce market distortions and the carbon lock-in. Based on a literature review, the chapter summarizes the results of a comprehensive bottom-up analysis of direct subsidies and fiscal measures (indirect subsidies) that are granted at the federal level in Austria. The analysis considers energy generation and use, transport, and agriculture and assesses the subsidies’ legal foundations and original motivations, the subsidy volumes and identifies the beneficiary groups. The quantification of the subsidies results in a range of €4.1-5.7 billion p.a. In addition, relevant regulatory provisions that have a subsidy character are examined. Considering the environmental effectiveness, economic criteria (like distributional impacts) and potential legal constraints reform suggestions are developed for the support measures.