Austria has one of the most ambitious climate and energy targets in the world; achieving them requires actionable delivery strategies and adequate funding. The country’s commitments to climate neutrality by 2040 – a full decade ahead of the European Union (EU) – and a 100% renewable share in the national annual electricity balance by 2030 are bold. These goals are underpinned by a large hydropower fleet (accounting for around 60% of electricity generation), including 5.6 gigawatts (GW) of pumped hydro storage and a nationwide smart meter roll-out. Austria has the highest share of renewable energy in electricity consumption in the European Union and is the first European country to develop a pioneering approach to integrated energy system planning. However, the gap between ambition and delivery is widening. While economy-wide greenhouse gas (GHG) emissions have fallen by 16% since 1990, emissions including land use, land-use change and forestry (LULUCF) have increased by 13%. In other words, Austria’s forests are losing their ability to absorb carbon, emphasising the urgent need for strengthened mitigation efforts across sectors. Austria must revisit and realign its delivery mechanisms and available financial resources to help close the gap to reach its targets. This report provides timely advice on how Austria can achieve its policy goals with particular focus on two areas: energy system flexibility and industrial competitiveness and decarbonisation.

Energy affordability and industrial competitiveness are under pressure. Austria’s industries – which contributed 22% of gross domestic product (GDP) and employed 26% of the workforce in 2024 – face challenges from high energy prices, competitive pressures and the need to decarbonise. In response to the energy crisis in 2021-2022, the government introduced tax relief, direct grants and targeted support measures for industry and households, including measures to promote energy efficiency and electrification. Many of these measures have been recently scaled back or cancelled. The Electricity Market Act (ElWG) adopted in December 2025 is overhauling electricity market design in a bid to reduce energy costs, improve system flexibility, empower consumers and protect low-income households. However, further actions are needed, including strengthening competition in the electricity market (less than 5% of consumers switch suppliers) and enhancing regulatory oversight of district heating, which accounts for around 20% of all heating demand in buildings. The new Industrial Strategy 2035 provides a clear vision and new funding support for boosting Austria’s industrial productivity, attractiveness for investment and economic success. This includes providing subsidised electricity prices for energy-intensive industry, compensation for indirect CO2 costs and investments in innovation, and support for the market uptake of new technologies. For consumers, energy communities offer a new path to improve affordability: over 11 000 were operating at the end of 2025. Further legal and regulatory improvements can unlock the significant potential of energy communities to provide system-level benefits.

Accelerating legislative and regulatory reform can create a lower cost, flexible energy system. Long delays in enacting legislation – including the ElWG and the still pending Renewable Energy Expansion Acceleration Act (EABG) – have created uncertainty and slowed progress. Swift enactment and implementation of relevant primary and secondary legislation is needed to empower consumers, unlock system flexibility and accelerate the deployment of utility-scale renewables, especially wind. The regulator E‑Control and other pertinent institutions must be adequately resourced to effectively implement new legal provisions. Consolidating oversight at the federal level and updating governance structures through a new Climate Protection Law could facilitate rapid infrastructure deployment through streamlined planning, permitting and policy implementation. The Integrated Network Infrastructure Plan (ÖNIP) is a positive move towards integrated planning that takes advantage of synergies across the electricity, gas and hydrogen sectors. However, further action is needed to co‑ordinate the decommissioning of gas networks, expansion of district heating and thermal storage, and alignment of hydrogen and heating strategies.

Building on Austria’s successful “solar boom”, wind deployment must accelerate, with a focus on system-friendly integration. In 2024, renewables accounted for 90% of Austria’s electricity demand, with variable renewables accounting for 23%. Solar photovoltaic (PV) has grown rapidly, reaching 11.3% of electricity supply in 2024. Wind deployment must expand to help address seasonal demand and balance solar output, but Austria is not on track to meet its target to add around 10 terawatt hours (TWh) of yearly generation by 2030, due to permitting barriers and governance challenges. Full use of legal mechanisms to designate wind zones, transparent long-term leases on public land, co‑ordinated spatial planning, streamlined permitting and proactive stakeholder engagement are needed. Making better use of data and digital technology, enabling more actors to take part in flexibility services and reforming grid connection processes will ensure renewables contribute to system stability and cost-effectiveness. This needs to be supported and accompanied by a comprehensive modelling of the energy system.

System flexibility must keep pace with rising shares of variable renewable energy (VRE) and electrification to manage supply-demand variability. Austria’s ÖNIP projects electricity demand to grow by 26% by 2030 and more than 75% by 2040 from the 2024 level. To meet the increasing demand, the National Energy and Climate Plan (NECP) cites 35 TWh of new renewable generation is needed between 2020 and 2030. In this context, flexibility is key to enabling the integration of VRE, safeguarding energy security, addressing the evolving demand patterns and improving affordability. The ElWG strengthened the framework for flexibility: it removed double network fees for storage (for both drawing and releasing electricity), introduced dynamic time-of-use tariffs and local flexibility markets, and enforced obligatory measures for grid operators to consider flexibility solutions before investing in network expansion. Further expanding demand-side response measures is essential, including via incentivising smart charging for electric vehicles (EVs). Strengthening market signals and enabling revenue stacking across spot, balancing and ancillary services will unlock the full value of Austria’s flexibility assets.

Austria’s research and innovation ecosystem is a foundation for leadership in hard-to-abate sectors. Public spending on research and development (R&D) exceeded 3.3% of GDP in 2024, a record high. Public spending on energy R&D (EUR 401 million) supports innovation in hydrogen; carbon capture, utilisation and storage (CCUS); energy efficiency; and electrification, among other areas aligned with energy policy. While continued industrial electrification presents a critical source of emissions reduction and productivity dividends, the decarbonisation of many high‑heat processes requires other solutions, including hydrogen and CCUS. Austria’s hydrogen strategy targets 1 GW of electrolysis capacity and at least an 80% replacement of fossil-based hydrogen in industry by 2030. Lifting the ban on geological CO2 storage (under strict conditions) and adapting carbon market mechanisms for new technologies will further support industrial transformation. Temporary, targeted energy cost support for energy-intensive sectors should be linked to clear decarbonisation outcomes and reinvestment in low-carbon technologies. Ensuring that market rules enable greater value of low-cost renewables to benefit end users will help safeguard Austria’s industrial base during the transition. Co‑ordinating with neighbouring countries will help avoid subsidy races.

Decarbonising Austria’s building stock and transport sector is essential for achieving its climate targets. Austria has made significant progress in reducing emissions in buildings through efficiency improvements and the replacement of oil boilers with sustainable alternatives such as district heating and biomass boilers. The share of oil in building energy use dropped from 23% to 8% between 2005 and 2024. However, around 850 000 gas boilers and 450 000 oil boilers are still in operation, and the pace of replacing fossil-based heating systems is insufficient. Integrated heating and cooling plans at national, regional and municipal levels; streamlined permitting for heat pumps and district heating; and targeted incentives for landlords and tenants are needed to accelerate the transition. Austria’s transport sector, responsible for 38% of energy-related emissions, has made progress in reducing emissions and expanding public transport and rail electrification. Light-duty vehicles are the second-largest final energy end use (around 160 petajoules [PJ]), highlighting the continued importance of accelerating EV deployment, yet the pace of transformation towards EVs remains challenging, particularly in rural areas. Key recommendations include enhancing EV support, addressing regional disparities in charging infrastructure and expanding incentives for freight to move from road to rail.

Austria’s energy security landscape has dramatically shifted, demonstrating that climate action and security are mutually reinforcing. Before 2022, Austria imported 80% of its natural gas from the Russian Federation, a dependency that forced a radical shift in strategy following the Russian Federation’s full-scale invasion of Ukraine. The government’s swift response included increasing the Strategic Gas Reserve to 20 TWh; passing the Diversification Act; and prioritising infrastructure upgrades, such as the West Austria Gas Loop 1 pipeline for reverse flows. Austria aims to inject 5 TWh of renewable gas into the grid by 2030 and position itself as a hydrogen hub, leveraging existing pipelines for future hydrogen transport. To enable this, Austria should create bankable demand for low‑emissions hydrogen and sequence infrastructure investments with the development of demand clusters and international corridors, in co-ordination with its regional partners.

By aligning action with ambition, Austria can deliver on its climate and energy goals and reinforce its leadership position. Its largely decarbonised electricity system provides a robust foundation for its energy transition. It also already acts as a “battery” for the region thanks to its pumped hydro storage capacity and strong cross‑border interconnections. However, delivering on the 2040 climate‑neutrality target will require a coherent set of measures across all sectors, supported by timely legislation, accelerated infrastructure development and sustained investment in clean technologies. This will require overcoming federal-regional governance friction, accelerating grid expansion and enforcing stricter measures in the lagging transport and heating sectors. By strengthening legislation and regulation in support of industrial decarbonisation and a flexible, low‑carbon energy system, Austria can lead by example, bolster energy security and advance Europe’s energy transition.