The final set of carbon price scenarios used in FARECarbon includes two main scenarios for the evolution of carbon pricing in Austria and five options for revenue recycling.
Both pricing scenarios share the assumption that the assessment basis is fossil fuel use in sectors not covered by the EU emission Trading Scheme (EU ETS). The carbon price hence applies primarily to transport and buildings as well industry not included in the EU ETS. Pricing scenario A illustrates a moderate price development. A carbon price level as defined by the Austrian government is assumed for the period 2022 to 2025 (see Table 1); afterwards the price is assumed to linearly increase to 90 € per ton of CO2 (in current prices). This increase between 2025 and 2030 amounts to approximately 10% p.a. The more ambitious pricing scenario B starts with a price of 50 € per ton of CO2 – i.e. the average price level observed in the EU ETS between January and October 2021 – which is then linearly increased to 156 € per ton in 2030. This price increase corresponds to the increase of the carbon price for current Non-ETS sectors up to 2030 as assumed in the ‘Mix-CP’ scenario in the Impact Assessment of the ‘Fit for 55’ Package of the European Commission.
| Non-ETS price scenario A: nominal | Non-ETS price scenario A: real | Non-ETS price scenario B: nominal | Non-ETS price scenario B: real | |
| 2022 | 30 | 27 | 50 | 46 |
| 2023 | 35 | 31 | … | … |
| 2024 | 45 | 40 | linear increase | linear increase |
| 2025 | 55 | 48 | … | … |
| 2026-2029 | linear increase | linear increase | … | … |
| Target 2030 | 90 | 73 | 156 | 127 |
The following recycling options are simulated in FARECarbon:
1. Non-Targeted Recycling (NTR): Use of revenues to increase the provision of public goods without any specific earmarking.
2.a Climate Bonus Recycling (CBR): Revenue recycling via equal per capita payments to all Austrian households.
2.b Climate Bonus Recycling for low-income households (CBRlow): Revenue recycling via equal per capita payments to low-income households.
3. Non-wage Labor Cost Reductions (LCR): Use of revenues to reduce employers’ non-wage labor costs, whereby labor costs are assumed to become cheaper for employers, but wages remain the same for employees.
4. Value Added Tax Reductions (VTR): Revenues are used to further decrease the value added tax on basic necessity goods currently covered by reduced rates (e.g. food and beverages, books, etc.).
5. Combination of Reductions in Non-wage Labor Costs and Climate Bonus Payments (MIX, MIXlow).
For all recycling scenarios revenue neutrality is assumed, i.e. all revenues generated by carbon pricing are used for the recycling measures.