Impact of climate policy on real estate regulations  – ban on oil and gas heating systems

Austria is pursuing the ambitious goal of achieving climate neutrality by 2040. This results in the acute challenge and responsibility to implement measures to increase thermal-energy efficiency at all levels. 

The building sector is considered one of the main contributors to global warming. Oil heating systems have been used in Austria for over 70 years. In the 1950s, heating with oil boilers became incredibly popular because of favourable raw material prices. Compared to all other heating alternatives, oil heating systems have the highest CO2 emissions. The building sector in particular needs to be strengthened in its efforts to integrate renewable energy sources.

The Austrian government has taken numerous initiatives to promote the transition from fossil fuel to renewable energy sources. In addition to promoting the implementation of photovoltaic systems, Austria’s new Renewable Heat Package (EWP) law, adopted in December 2023, is expected to have a positive impact on the real estate sector. A distinction is being made between new buildings and existing properties. The EWP includes certain legal prohibitions for new buildings (coal, oil and gas heating), and subsidies for thermal renovation and the replacement of existing heating systems. The following legal provisions are relevant:

Effective in 2024, gas heating systems will no longer be installed in new buildings in Austria. There are exceptions for buildings that have already been approved, are planned, or are under construction. With respect to oil, there has been a ban on installing oil heating systems in new buildings since 2020.

Regarding existing properties, the original draft law provided for a mandatory complete phase-out of oil and gas heating systems by 2035, and gas heating systems by 2040. The government has now abandoned this outright ban. Instead of time limits, the government is relying on incentives in the form of increased subsidies for the phase-out of fossil fuel heating systems. On average, 75% of the costs for a new heating system will be covered by federal and state subsidies. The higher the investment costs for a climate-friendly heating system, the higher the subsidy.

Critical voices consider the success of the heat energy transition to be unrealistic without a clearly defined time-bound, phase-out plan for fossil fuel heating systems. The main concern is not new buildings – over 900,000 gas heating systems and 500,000 oil heating systems are currently in use across the country. Austria therefore needs legal regulations for existing buildings. 

The federal states could control the mandatory ban on oil and gas heating systems in different ways within their competencies (construction law, spatial planning competence, and incorporated programmatic provisions). It remains to be seen whether, or to what extent, the individual federal states will take appropriate legislative steps in this regard.

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Mario Kapp was the sole founder of the law firm in 2006. He is also the Managing Partner and specialises in bankruptcy law, corporate law, and business restructuring.

Raffaela Lödl-Klein is a partner of KAPP & PARTNER Rechtsanwälte GmbH, and specialises in real estate and corporate law. She joined the firm in 2013.