Carbon tax is paid for consumption of fossil fuels and the incineration of combustible organic substances and charged proportionally to the units of CO2 emissions caused by fuel use or combustible organic substances burnt. The following fuels and uses are exempted from tax payment: biomass use; gaseous fuels, liquid petrol gas and kerosene used as a propellant. Measure is in force from year 1997, and was changed several times in order to complement the other policy measures in the best way. The tax was revised as a response to introduction of auctioning system in the EU-ETS, to avoid double payment for carbon dioxide emissions, for installations in EU-ETS –from 2010 energy intensive industry is exempt from the tax payments (under certain conditions related to monitoring of energy use). The tax level is changed over time in order to support fulfilment of national emission reduction targets. The Ministry of the Environment and Spatial Planning imposed that the equivalent measure for excluded installations from EU ETS the payment of environmental tax due to CO2 (CO2 tax), taking into account that the respective tax is not paid to the level of free-granted emission allowance. If the average price of allowances is more than 30% higher than the environmental tax, the operator must pay the environmental tax in the amount of the average price of allowances. These excluded installations are the small installations with emissions less than 25,000 tons of carbon dioxide equivalent with a rated thermal input power of 35MW during combustion without emissions from biomass in each of the previous three years prior to the next period (2016-2018 for 2021-2025 period). The unit of air pollution with CO2 emission remains €17.3 per ton of CO2e. It is planned that CO2 tax will increase (atleast 5% per year) and approach the ETS coupon price by 2030.

Import and sale of vehicles powered by electric motors has been fully exempted from VAT until January 1, 2022 starting from July 1, 2019.

To induce sustainable production and consumption patterns, fostering more sustainable behavior, promoting eco-innovation and resource efficiency, fostering entrepreneurship and job creation, reducing energy dependence from abroad, the efficient achievement of targets and international objectives and diversification of revenue sources. Positive discrimination on motor vehicles taxes trough a CO2 Component on Motor Vehicles Taxes (2009): 1) CO2 component on registration tax; 2) CO2 component on the annual circulation tax; 3) Exemption of registration and annual circulation taxes for electric vehicles. Tax Incentives for Efficiency and Low Carbon Options (2015), namely Plug-in hybrid and LPG/NGV vehicles, Renewables in urban buildings and other low-carbon products and services, with certification or incorporation of recycled material.

The EU Biofuels Directive provides indicative targets for the use of biofuels in the transport sector. In November 2004, the directive was transposed into Austrian law through an amendment to the Fuel Ordice. This amendment stipulates that all companies that put fuels in circulation must, from 1 October 2005, replace 2.5% of the total energy quantity put in circulation with biofuels. From 2007, this percentage increased to 4.3%, and in 2008, the target of 5.75% has been achieved, two years in advance with respect to the EU deadline. The latest amendment of the Fuel Ordice, which defines the maximum share of biodiesel as of 7%, took place in 2009. The use of biofuels is done in Austria primarily through blending of biodiesel with diesel (since October 2005) and blending of bioethanol with petrol (since October 2007). Together with the amendment to the Fuel Ordice, the Mineral Oil Act has been revised to provide for tax concessions for fuels with a biofuel share of at least 6.6% for diesel and 4.6% for petrol. To be able to profit from the tax concessions, the fuel must also be sulphur-free (less than 10 mg sulphur per kg of fuel). The use of pure biofuels is completely exempt from tax.

The legal act defines the procedure for importing, registering and operating electric vehicles, as well as tax benefits in respect of such vehicles.

Pure electric cars, cars partially rechargeable on electrical networks, and zero-emission cars are exempt from motor vehicle tax, company car tax and registration tax. The rate of motor vehicle tax levied on buses, trucks and lorries is also determined by the environmental classification of the vehicle. Lorries are eligible for additional tax advantages when carrying out combined goods transport. The environmental classification of motor vehicles also determines the rate of the company car tax and registration tax.

New fiscal incentives for zero and low emission vehicle were introduced in 2017. A return of tax of 5,000 euro for zero-emissions vehicles; - battery electric vehicles (BEV) and fuel cell-electric vehicles (FCEV) - on the annual tax declaration for private car owners has been created. For company cars the deductibility from corporate income of expenses related to the use of company cars will be calculated on the basis of CO2 emissions. Zero emission vehicles benefit to the highest degree.