Study: Climate Neutrality in Austria by 2040 – Economic Challenges

The study “Climate Neutrality in Austria by 2040: Economic Challenges,” commissioned by the Upper Austrian Federation of Industry, examines the economic impacts of Austria unilaterally achieving climate neutrality by 2040. Austria has already reduced its greenhouse gas emissions by 28 percent since 2005, while real gross domestic product has risen by 25 percent over the same period. Energy consumption has fallen by seven percent. For Upper Austria, an industry- and export-oriented region, the next stage of decarbonization is nevertheless particularly challenging because energy-intensive production, international competitiveness, and high investment requirements are directly intertwined.

The model calculations show that in the baseline scenario—which assumes the EU climate targets will be met—net emissions of around eight million metric tons of CO2 equivalents will still remain in 2040. To achieve net-zero by 2040, Austria needs additional reductions on this scale. According to the study, this would require an additional greenhouse gas price of just under 400 euros per metric ton of CO2 equivalents. At the same time, the analysis points out that it is currently unclear whether more ambitious greenhouse gas reductions in Austria would reduce the EU’s overall emissions.

The economic effects of bringing forward the date for achieving climate neutrality at the national level are significant. In the central scenario, real GDP in 2040 is 1.7 percent lower than in the baseline scenario for the EU climate targets. Relative to 2024 nominal GDP, this corresponds to an economic output that is 8.5 billion euros lower. Employment is 0.7 percent lower, or about 30,000 people. In the more ambitious scenario, the decline in economic output rises to 2.6 percent, or just under 13 billion euros.

These findings are particularly relevant for energy-intensive and export-oriented companies. Additional national CO2 costs affect not only individual companies but also directly impact the industrial heart of the region. If climate-friendly alternatives are not available in a timely manner, in sufficient quantities, or at competitive prices, the risks of production declines and relocations abroad increase. This raises the central question of how climate policy can be designed to reduce emissions without driving industrial value creation and employment out of Austria.

EcoAustria derives clear economic policy recommendations from this: Austria should coordinate its climate policy more closely at the European level and avoid going it alone at the national level, which places an additional burden on companies in international competition. In addition, there is a need for technology-neutral framework conditions, faster approval procedures, rapid expansion of energy infrastructure, grids, storage facilities, and production plants, as well as better conditions for investment in climate-friendly production. Furthermore, EcoAustria recommends prioritizing market-based instruments over regulatory requirements and pushing for stronger global coordination of climate targets at the European level as well.