Hungary: Selected Issues

This Selected Issues paper presents a model-based analysis to study factors required for promoting energy security in Hungary. Strengthening Hungary’s energy security require a comprehensive domestic reform agenda. A state-of-the-art global computable general equilibrium model is employed to assess Hungary’s energy security risks relative to other EU economies. A few of the key model equations—that are directly relevant for our analysis have been summarized in this paper. While EU-wide initiatives such as deeper electricity market integration and higher carbon pricing through the European Union Emissions Trading System can support resilience, their full benefits depend on complementary national actions. Domestic policies will be critical to reap energy security gains. Targeted domestic measures—enhancing energy efficiency, accelerating renewable permitting, phasing out fossil fuel subsidies, and tightening building standards—can significantly reduce Hungary’s energy security risks and energy expenditure while advancing decarbonization goals. Seizing these opportunities will be critical to building a more resilient, sustainable, and competitive economy.