Initial information on the national emissions certificates trading law (NEHG 2022)

The 2022 eco-social tax reform law represented a further important step along Austria's path to establishing cost transparency of CO₂e emissions. The national emissions certificates trading law is intended to make a decisive contribution to achieving climate-related goals, by inducing an environmental incentive effect and increasing the appeal of using innovative, low-emission technologies.

CO₂e pricing is set to begin on 1 July 2022.

Subject matter and scope

The NEHG 2022 covers energy-related greenhouse gas emissions that have been produced especially by the non-ETS sectors (buildings, transport, agriculture, waste and small industrial plants). This essentially concerns the following fossil energy sources which are covered under the scope of the NEHG 2022: Petrol, gasoil (diesel), heating oil, natural gas, liquefied gas, coal and kerosene (Annex 1 of the law). Most of the greenhouse gas emissions emitted in the sectors electricity and heat generation, energy-intensive industry sectors including oil refineries, steel works, etc., are subject to the EU emissions trading system (ETS sectors).

The scope of the NEHG 2022 is limited to placing energy sources into free circulation; it does not concern the actual use of the specified energy sources by the consumer. The decisive factor is therefore not the emission itself (the actual production of the greenhouse gas emissions from the specified energy sources by the consumer), but rather the act of placing it into circulation. This considerably reduces the administrative effort involved.

Example

When filling up a car with petrol, it is not the driver at the fuel pump who bears the responsibility as the emitter for the submission of emissions certificates, but rather the company that manufactured the petrol or brought it to Austria and, in doing so, ultimately placed it into free circulation under tax law.

By linking the responsibility to the entity placing the energy source into free circulation, conformity with the energy taxes (= mineral oil tax, natural gas tax and carbon tax) is achieved. This entity bearing responsibility for circulation is referred to as the "trading participant" (Handelsteilnehmer) in the NEHG 2022.

Trading participants are obliged by the NEHG 2022 to acquire emissions certificates for the energy sources placed into circulation. An emissions certificate corresponds to one tonne of CO₂e. The procurement of a national emissions certificate is a requirement for energy sources to be placed into circulation.

Trading phases

In contrast to the existing EU emissions trading system, the NEHG 2022 is not initially intended solely for the trading of certificates, but rather as a system that will gradually develop into a trading system. This is primarily evident in its intended phases:

• Fixed price phase (1 July 2022–31 December 2025)

In this phase, the emissions certificates will be assigned a specific price.

During this time, the NEHG 2022 will closely follow the energy tax system. To ensure that integration into the system is as smooth as possible, the fixed price phase is divided into two further phases:

• Introduction phase (expected to be 1 July 2022–31 December 2023): This period will involve a simplified procedure for trading participants with regard to reporting greenhouse gas emissions.
• Transition phase (expected to be 1 January 2024–31 December 2025): During this phase, the standard regulation system for trading participants will be applied, which is intended to facilitate the transition to a pure emissions trading system.Market phase (from 1 January 2026)

Once the market phase comes into effect, the national emissions certificates are intended to be traded on the free market. Since this phase is dependent on developments at the EU level, more detailed regulations will only be established at a later date in time. In particular, developments as part of the Fit for 55 package at the EU level may lead to a possible expansion of the EU-ETS to include the building and transport sectors, which have been considered non-ETS sectors up until now. This would in turn have consequences for the configuration of the market phase of the NEHG 2022.

Calculation

One national emissions certificate must be submitted for each tonne of CO₂e.

The calculation of the CO₂e emissions is based on the emissions factors defined in Annex 1 of the NEHG 2022, which determine the CO₂e emissions of an energy source per unit (e.g. for petrol, 2.38 kg per litre). By multiplying these emissions factors by the quantity of the energy sources placed into circulation, the trading participant obtains the total quantity of CO₂e emissions that are relevant for the certificate submission.

Exemptions and relief measures

The NEHG 2022 makes a distinction between exemptions and relief measures.

The exemption measures concern the trading participants themselves and cover the following points:

•  Plants that are subject to the EU emissions trading system: To avoid unnecessary duplication of effort, plants that have already submitted emissions certificates for their greenhouse gas emissions in accordance with the EU-ETS are set to be exempt from the obligation to submit national emissions certificates in accordance with NEHG 2022. As a rule, the exemption is intended to be granted in advance, although it will also be possible to make a subsequent correction.
• Negligible cases: Trading participants that place less than one tonne of CO₂e emissions into circulation are exempted from the obligations in accordance with the NEHG 2022.
• Exemptions in accordance with the energy taxes: In order to achieve conformity with the energy taxes for the introductory phase in this regard as well, the exemptions in accordance with these taxes are also to be applied to the NEHG 2022. See also the exemptions of the respective energy taxes in the Business Service Portal.

The relief measures, in contrast, concern other companies that are not trading participants. The aim of these measures is to relieve companies of certain key additional burdens that have come about as a result of the NEHG 2022. In the fixed price phase, these relief measures are guaranteed as a whole up to a budgetary upper limit. It must be pointed out that the application of the relief measures is subject to the reservations of the approval of the European Commission with regard to state aid law and is not yet applicable for the time being. Provisions are made for the following relief measures in the NEHG 2022:

• Agriculture and forestry: Diesel that is used in agricultural and forestry vehicles in connection with a principal activity concerning agriculture and forestry may be subject to relief.
• Carbon leakage: Relief is provided to significantly affected economic sectors where there is a particular risk that these sectors will relocate their production to countries with less stringent climate-policy-related measures. The economic sectors in question and the amount of relief provided are based on Annex 2 of the law.
• Hardship cases: Relief is provided to companies for whom the proportion of costs for energy sources that are subject to the NEHG 2022 is particularly high.

Jurisdiction

Due to the existing close links with the energy taxes, the execution of the NEHG 2022 falls under the responsibility of the tax administration. The responsible entity is the Office for National Emissions Certificates Trading (Amt für den nationalen Emissionszertifikatehandel) as an independent unit within the Customs Authority Austria, under the specialist supervision of the budgetary and taxation sections.

Further links

Eco-social tax reform 2022

national emissions certificates trading law 2022 (NEHG 2022)

Mineral oil tax (Business Service Portal)

Natural gas tax (Business Service Portal)

Coal tax (Business Service Portal)