Net Zero Readiness Index: Hungary

Having started a green program in 2019, in March 2021, the country's central bank, Magyar Nemzeti Bank (MNB), published its first green report in which it said that the financial sector should do more to integrate environmental and sustainability considerations with regulation now allowing use of the EU's green taxonomy.² It has also issued green guidelines for banks, among the first regulators in the EU to do so. These include rules that require banks to nominate responsible persons for managing sustainability risks or amending ESG factors at the credit approval process. It followed this in July with measures to promote green mortgage lending.³ MNB plans to introduce a discounted interest rate program for buying or building energy efficient residential properties. Szabó says the central bank's stance is likely to encourage progress, adding: “If the financial sector is supporting the green transition, the real economy will move in that direction.”

However, there are challenges to tackle in the real economy. Around 40 percent of Hungary's electricity is generated by the Paks nuclear power plant, whose first unit started generation in 1982, with four now in operation.⁴ A 2014 intergovernmental agreement with Russia agreed construction of two new units which would start generation in the early 2030s, which if it goes ahead, would support Hungary in moving towards Net Zero.

Gas is currently the main alternative source for electricity production, although solar power generation capacity is increasing. Given the dominance of nuclear, which typically generates steady levels of power, and daily fluctuations from solar, grid management organization Mavir has seen issues in balancing supply and demand. As part of a new energy efficiency obligation scheme launched in 2021 targeting electricity, natural gas and transport fuel, the energy regulator has introduced penalties for electricity, gas and fuel providers who are not able to generate sufficient energy efficiency investments.

On buildings, Hungary is ranked 10th due to factors including the use of heat pumps, mandatory building energy certification and incentives to retrofit, some of which are EU measures. Szabó says that new developments tend to be built to high levels of energy efficiency but retrofitting existing ones can be a significant challenge.