Executive summary

Hungary needs to speed up transition to a low-carbon economy

Hungary has made significant progress in decoupling its output growth from main environmental pressures, largely due to implementing requirements of European Union (EU) directives. The country has gradually reduced its reliance on coal and natural gas in favour of low-carbon energy sources. However, fossil fuels still make up about 70% of the energy supply. The recent rebound of economic activity and energy consumption is intensifying pressures on the natural environment.

The share of renewable energy sources in gross final energy consumption is likely to exceed the national 2020 target of 14.7%. As the renewable energy supply relies heavily on biomass, the country should consider focusing on developing other renewable sources such as solar or geothermal energy.

Hungary’s total gross greenhouse gas emissions have decreased by 35% since 1990. Yet emissions have recently started to increase, driven by transport and agriculture. Hungary was the first EU member state to ratify the Paris Agreement. However, its National Climate Change Strategy does not manifest climate policy ambition beyond EU requirements. According to government projections, the country is on track to reach its 2020 and 2030 targets for sectors outside the EU Emissions Trading System with existing measures. However, further progress in energy savings, development of renewable energy resources and sustainable transport is needed in the context of economic recovery.

More needs to be done to address air and water pollution

Local air quality has not improved significantly, making Hungary’s mortality rates due to air pollution exposure among the highest in the OECD. The average exposure of Hungarian citizens to fine particulate matter is more than double the annual guideline limit set by the World Health Organization. The government needs to do more to address particulate emissions and meet the respective EU targets for 2020 and 2030.

EU funds have helped increase wastewater infrastructure investment. As a result, the share of population connected to wastewater treatment reached 78% in 2016. However, this share remains one of the lowest in the OECD. Most rivers have a bad to moderate ecological status due to pollution from agriculture and wastewater discharges.

Environmental authorities should be strengthened and encouraged to adopt best regulatory practices

Over the last decade, Hungary has undergone a broad, multi-phase, administrative reform that has consolidated central and territorial government bodies. This process has had an impact on the institutional capacity in the environmental domain. The recent changes in the institutional framework, including the elimination of environmental inspectorates, have created challenges that impede more effective implementation of environmental law and uptake of good international practices. Environmental authorities should introduce risk-based planning and targeting of environmental inspections, and promote compliance and green business practices through sector-specific activities.

Legal provisions for environmental democracy need better implementation

Despite Hungary’s strong legal guarantees on access to information, public participation in decision making and access to justice on environmental issues, regress has occurred in these domains. Public consultation in environmental law-making and environmental impact assessment of large government-sponsored infrastructure and industrial projects is insufficient. Access to justice is complicated by restrictions on legal standing of individuals and non-governmental organisations, and the high cost of administrative and judicial appeals. Hungary’s environmental democracy practices must comply with its constitutional requirements and international commitments.

Green taxes could provide additional revenue for much-needed investment

Hungary has long applied a wide range of environmentally related taxes and charges and has further extended their use. However, their design needs to be improved, and their rates should be better aligned with environmental costs. Rates should also be regularly increased to provide stronger incentives for sustainable consumption, resource efficiency and pollution abatement, as well as to maintain revenue.

The country needs significant investment in residential energy efficiency, renewables, and sound waste and material management. To meet these needs, it should make better use of economic instruments and scale back state aid to environmentally harmful sectors. At the same time, it could improve efficiency in using the EU structural and investment funds to extend access to basic services, better leverage investment in the business sector, invest in research and development and education, and better target social programmes.

Progress in municipal solid waste management, but resource efficiency and recycling need further improvement on the path to a circular economy

Hungary has achieved decoupling of waste generation from economic growth, especially for municipal waste. In another achievement, the rate of recycling and recovery has increased since 2006, although it remains low compared to neighbouring EU countries. Landfills not complying with EU standards were closed by 2009. However, most waste (54%) still ends up in landfills. The country should reinforce incentives, including economic instruments, for municipalities to strengthen waste management performance.

Hungary has taken steps to improve the resource efficiency of its economy. There are ongoing efforts to include resource efficiency and circular economy considerations into some sectoral policies. However, the Hungarian government perceives the transition to a circular economy as an aspect of waste management. There is limited consideration of other circular economy aspects such as sustainable material management. A whole-of-government approach would help Hungary to steer the transition to a circular economy.

The expansive network of protected areas requires better management and financing

Hungary has surpassed the Aichi target, with protected areas covering over 22% of the territory. It was one of the first EU member states to have its Natura 2000 network of protected areas declared complete. However, work remains to complete management plans for all the protected areas: only 10% of protected areas had binding management plans in 2016. The most significant issue is the lack of public financing for National Park Directorates, which are driven to raise money from ecotourism and organic farming in protected areas to fund operations. Hungary should provide dedicated budgets for the management of protected areas to maintain biodiversity conservation priorities.

Biodiversity concerns are well integrated in some sectors, but there is room for improvement in others

Hungary has done well at mainstreaming biodiversity into the strategic plans for agriculture, forestry and fisheries sectors. These sectors are included in the National Biodiversity Strategy and managed under the same Ministry of Agriculture. In the agricultural sector, for example, implementing this strategy requires additional measures to curb pesticide use, limit cultivation of flooded land and significantly increase the share of organic farming. Hungary needs to do more to integrate biodiversity considerations into sectoral strategies for energy, transportation, tourism and industry. It should also improve the effectiveness of spatial planning policies and instruments by developing regional-level biodiversity indicators and using biodiversity experts to support informed decisions.