The Austrian Freedom Party and the People’s Party pledged cuts in “climate subsidies” to curtail Austria’s ballooning budget deficit.
The two parties – currently in government coalition talks – made the announcement in Vienna January 16.
The previous coalition government, led by the Austrian People’s Party and the centre-left Green party, introduced “green” subsidies including a VAT exemption for solar power, and a “climate bonus” to offset the costs of a new carbon tax on fossil fuels.
However, Austria has now been in the throes of a budget deficit crisis.
After the September 2024 election, it emerged the previous government had covered up the true extent of the budgetary shortfall–which in 2025 is expected to come to €20 billion, over 4 per cent of Austria’s GDP.
In order to avoid a EU deficit procedure, the coalition negotiators had to send plans to the European Commission by mid-January on how they intended to cut approximately €6 billion in government spending.
One of the biggest cuts came from abolition of the so-called “climate bonus”.
In 2022, Austria’s previous government introduced a CO2 tax on fossil fuels, including gasoline, diesel, and coal.
As an offsetting measure, the government instituted new a annual payment of several hundred euros to each resident.
Critics at the time argued the bonus also offered Green environment minister Leonore Gewessler an opportunity to win political points with the public.
The cost of the “climate bonus”, approximately €2 billion a year, actually exceeded the income from the CO2 tax, estimated at €800 million.
The CO2 tax itself was to remain under the new government.
The coalition parties also planned to abolish a 2024 VAT exemption on solar power, and to make electric vehicles subject to the same annual taxes imposed on vehicles with combustion engines.
Previously, even heavy electric cars were exempt from the vehicle tax which could exceed €900 per year.
Also to be cut, by 75 per cent, was a €0.50/kilometre allowance for people commuting to work by bicycle.
Generous subsidies for climate-friendly heating systems and photovoltaics – where previously the government paid up to 100 per cent of the cost of new “sustainable” heating systems – would be scaled back, yielding €500 million in savings.
The FPÖ and ÖVP also announced plans to reduce the possibilities for people to receive unemployment or social benefits while working.
While green NGOs criticised the cuts, “much bigger steps are needed”, said the think tank Agenda Austria. “The big hit is missing” in order to save Austria as a place for business, it concluded.
