Effects of energy price developments on Upper Austria’s economy
The international and Austrian economy is facing challenges due to the economic impact of the coronavirus crisis and Russia's invasion of Ukraine. Prices for energy sources have risen more sharply in Europe than in other regions of the world, which is affecting the competitiveness of European companies. The supply of natural gas is particularly affected due to the dependence on Russia, which has led to massively higher electricity prices.
This study, commissioned by the Federation of Austrian Industries Upper Austria, shows that Upper Austria is more affected by these developments than other federal states due to its energy intensity. The high energy prices have a considerable impact on employment, investment and economic output in the region. In the optimistic scenario, investments and gross regional product would fall by almost 12% and 2.3% respectively in the medium term. If energy prices remain high, companies could consider relocating activities, which could lead to lower value creation in the long term.
It is therefore necessary to develop a strategy that ensures a competitive energy supply in Europe and at the same time mitigates climate change through the transition away from fossil fuels. Measures such as the decoupling of electricity and gas prices, lower levies on electrical energy, adjustment of electricity price zones in Europe or the promotion of innovation and investment in industrial companies could be taken in the short term.
In the long term, further steps are needed, such as the expansion of hydrogen networks, the creation of an efficient regulatory framework, the diversification of hydrogen sources and the promotion of investment in the use of hydrogen as an energy carrier. In addition, the electrification of society requires the expansion of renewable energy sources, a strengthening of the grid infrastructure, a more flexible adjustment of supply and demand as well as ensuring the supply of essential raw materials. Last but not least, financial incentives should be created to promote innovation and investment in new technologies, as many of these technologies are still in the development phase.
