Captured green aims: The case of Hungary

Abstract

The article aims to shed light on the environmental risks of the Hungarian autocratic economic policy coupled with increased state interventionism and the revival of industrial policies. Green economic strategies proliferate in democratic countries, but we know less about contemporary hybrid regimes. In the case of Hungary, we show that the pillars of green industrial policy do not exist in practice. There is however a façade and rhetoric of green aims which serve only as one tool among others to rent-seeking and keep the ruling power. By several illustrative cases, we describe the mechanisms of hollowing out, capturing environmental institutions, instrumentalising green aims and repressing civil initiatives as systemic characteristics for illiberal hybrid regimes.

Keywords

environmental protection Hungary hybrid regimes industrial policy

Introduction

Climate change has brought environmental protection and green policies to the forefront all over the world. Studies and governmental strategies on green industrial policy have been prepared also in the European Union. At the same time during the past decade, the political system of certain EU members has shifted towards an autocratic direction. Therefore, we aim to discover whether and how green policies are applied in one openly illiberal EU member state: Hungary.

The handling of climate policies in democracies and autocracies is discussed in the literature. Bättig and Bernauer (2009) argue that democracies put more effort into climate change mitigation than authoritarian regimes for several reasons. Democracies usually provide relatively large amounts of public goods to survive politically. In autocracies, loyalty to incumbents is necessary and this motivates autocratic leaders to deliver more private goods to the circle that keeps them in power (see also Bueno de Mesquita et al., 2003). Democracies provide greater freedom to research, communication of environmental risks, activity of NGOs, increase public awareness on environmental problems and their mitigation. Furthermore, greater pluralism in advanced democracies decreases corruption and the effectiveness of lobbying by polluting industries. Povitinka (2018) demonstrates that democracy is associated with lower CO2 emissions only in low-corruption contexts, if corruption is high, achievements are similar to authoritarian regimes. Biswas et al. (2012) showed that corruption can influence the effect of the shadow economy on pollution and less corruption can mitigate the destructive impacts of the shadow economy on environmental quality. Bernauer and Koubi (2009) show that the degree of democracy has a positive effect on air quality but point out that empirical evidence on the connection between democracy and environmental quality depends on several factors. Neither Kammerlander and Schulze (2020) find consistent effects of democracy on pollution levels. Mittiga (2022) states that climate emergency may legitimize certain authoritarian measures, for example, to force citizens to make lifestyle changes, media censorship to prevent climate denialism or disinformation, and not allowing public officers to have ties with climate-harming industries. These steps harm individual autonomy, media freedom or other liberal principles but can help to maintain the political legitimacy of democratic regimes ensuring the security of the citizens. Nevertheless, both democracies and hybrid regimes often export polluting activities to less developed or looser regulated countries.

In more general terms, however, in hybrid regimes green policies can be captured to serve other economic or political priorities. Different internal dynamics of hybrid regimes might lead to different positions on the green development spectrum as well. Singapore is on the one extreme where the aspects of economic growth and green development are part of a coherent economic policy, while eg. Brazil under Bolsonaro can be mentioned at the other extreme with an explicit anti-climate and anti-environmentalist rhetoric and subsequent extractivist policy practice.

In our article, we present the example of Hungary, qualified by the European Parliament in 2022 as a hybrid regime of electoral autocracy. It is a special case, where the democratic EU has facilitated to develop an autocracy and to misuse “green” financial resources. In the Hungarian case (contrasted to the more explicit Brazilian stance), green principles exist as a rhetoric and in the forms of some national regulations and strategies, thus the green façade is maintained, yet the implementation and economic policy practices show a totally different, anti-climate and anti-environmentalist attitude and reality. Green industrial policy and state interventionism have strengthened all over Europe, but in countries where the rule of law is distorted, institutions are captured and corruption is high, these do not serve the common good and harm nature. Our contribution to the literature is that we provide evidence on the capture and instrumentalisation of green principles in a hybrid regime and illustrate some mechanisms of that in detail. This paper adds a further dimension (environmental sustainability) to the analysis of contemporary hybrid regimes and statist experiments.

We support our argument methodologically with document and literature analysis of international and Hungarian sources and interviews with representatives of NGOs, and academic experts. Between November 2022 and September 2023 we prepared seven semi-structured interviews of, 40–80 min on Skype, telephone or personally. Anonymity is provided to the interviewees (referring to them with capital letters) who were selected according to the topics of our thematic cases.¹

The structure of the article is the following: first, we provide a short overview of hybrid regimes, to understand the general background. In the second section, we describe the principles and pillars of green industrial policy existing in several economies worldwide. Next, we discuss whether such a policy is applied in Hungary providing an overview on several mechanisms in various fields. The final section concludes.

Contemporary hybrid regimes: Hungary in focus

Two important trends have dominated the global political economy over the last decades: democracy has been backsliding globally and state involvement in the economy has been on the rise worldwide. In some latecomer economies, the rise of state interventionism dates back even earlier, as well as competitive authoritarianism has long historical precedents. What is more surprising however, that even on the eve of the third decade in the new Millennium ongoing tendencies show towards rising illiberalism both in the political and economic realms in many parts of the world. Along with the rise of political populism and illiberalism, we can observe a tendency towards heterodox economic policy answers, revealing unique specificities and characteristics in different countries, demonstrating however a common tendency towards attacking institutional checks and balances, restraining the autonomy and independence of core agencies and institutions, as well as attacking market coordination mechanisms and micromanaging some (strategic) economic sectors. The term “hybrid regime” reflects these real-world changes.

Hybrid regimes in a very general sense oppose the simplistic dichotomies of either political or economic regime typologies and are used as a third category between dictatorship or democracy on the one hand, and liberal market economy versus centrally planned socialist regime on the other hand. Thus, in the political realm, hybrid political regimes combine autocratic features with democratic ones, for example, they can simultaneously hold political repressions and regular elections and are labelled as competitive authoritarianism (Levitsky and Way, 2010, 2020) or autocracy (Kornai, 2016). Hybrid regimes in the political realm have long been considered as an intermediate phase from democracy to dictatorship. According to other conceptualisations, hybrid regimes exist parallel to democracies and authoritarianism (Bogaards, 2009; Gilbert and Mohseni, 2011), as a steady and stable model variant on its own (Levitsky and Way, 2020). Hybrid regimes strongly restrict pluralism and autonomy and at least one of the four basic conditions of democracy is missing² (Morlino, 2021: 145).

Likewise, in the economic arena, the hybrid regime can be contrasted to the two great ideal types of economic systems (capitalism and socialism), and can be interpreted as a third great economic system category, called state capitalism (Bremmer, 2009; Kurlantzick, 2016; Nölke, 2014; Nölke et al., 2020). Along with many tensions and controversies in state capitalism research (Alami, 2023) two basic approaches can be delineated. The rather narrow interpretation of state capitalism focuses primarily on the extended state ownership (and other indirect channels of government impacts on the corporate sector), and looks primarily at the microeconomic level and efficiency impacts of state ownership, state subsidies and the performance of the so-called “national champions” (Musacchio and Lazzarini, 2014; Nölke, 2014). In the broader interpretation (the one which we also rely upon in our research) state capitalism is understood as a special (real) type of economic system, where the state plays a leading role in the economy with the explicit aim to actively influence the long term development path of the country. State capitalist regimes show an inherent tendency towards rising state (political) control over the economy leading to distorted and constrained market forces, and opening ways to non-market types of coordination mechanisms. Government practices to own, guide or even micro-manage the economy differ from case to case (Szanyi, 2019), yet the scale of state intervention in the economy is incomparably larger than in most developed market economies - the so-called regulatory states-, as in state capitalist regimes economic state functions significantly go beyond addressing areas of market failures (Bałtowski et al., 2022). In the following, we stick to the notion of the hybrid regimes to apply a systemic approach and focus on changes in both the political and economic arena.

After the fall of the communist regimes, the CEE countries built democratic institutions and market economies. In the past decade, a large number of studies discuss the dismantling of these institutions and the rule of law in Poland and Hungary, but the literature is more limited concerning their economic policy changes. Recent literature argues that not only democracies but also autocracies can achieve substantial economic growth by facilitating foreign and domestic investments (Long, 2019; Moon, 2019).

The Hungarian illiberal transformation has been analysed from several aspects (see eg. Bárd and Pech, 2019; Bozóki and Hegedűs, 2018; Csehi, 2019; Greskovits, 2015; Szanyi, 2017; Toplišek, 2019). According to some main indicators of economic development (growth, investment, unemployment) Hungary has been quite successful during the Orbán governments, however mainly driven by foreign sources, while social inequalities increased, the health and education system deteriorated, and corruption has been institutionalized. During the recent decades the Hungarian GDP has been boosted by incoming FDI and EU funds, but a major part of the latter is captured by political cronies via various channels. The profits of crony businesses are usually not reinvested, the government and its cronies use EU and domestic development programs for resource extraction (Csanádi et al., 2022). The domestic bourgeoisie is mostly not a victim of illiberalism but participates in Hungary’s autocratic regime in various ways (Scheiring, 2020). The wealth of the crony segment depends on public procurement and political connections. Others are ideological supporters of conservative right-wing politics, emerging entrepreneurs or co-opted former left-wing businesspersons. There is a large group of passive entrepreneurs also who accept the regime because of the high costs of dissenting and lack of alternatives.

Regarding foreign investors, multinational companies often have direct access to the government or even to the prime minister (Panyi, 2020; Szelényi and Mihályi, 2020). The activities of the export-oriented foreign firms – mainly in the automotive, electronics and pharmaceutical industries – enjoyed not just political but also substantial financial support (such as in the form of tax havens and individual government subsidies). The Hungarian investment climate is considered stable, violations of the rule of law, erosion of media freedom or corruption do not hinder export-oriented foreigners from doing their business. (In some domestic market-oriented sectors, however, foreign owners are restricted, punished with taxes or bought out). Political considerations also tend to play a role in attracting foreign investments, especially from Asia (Szunomár, 2020).

Nevertheless, the environmental consequences of the Hungarian growth trajectory have been barely accounted for, and this is where we aim to contribute to academic debates. While the mentioned studies look at the sustainability (in terms of durability or longevity) of the Hungarian economic model, these tend to remain silent on its environmental consequences, which is the focus of our study. The combination of the FDI-led, dependent economic development model with an illiberal political rule has led to substantial (though often hidden) environmental costs, which are not yet properly analysed in related literature and are underrepresented in academic debates.

Features of green industrial policy

The relevance, success and necessity of industrial policies have been subject to long-lasting debates among economists and social scientists. Before the global financial crisis of 2007–2009, industrial policy was generally considered an outdated concept among the representatives of mainstream economics. The recent multiple crises, however, have led to a renaissance of state interventionism in the economy throughout the world. Consequently, industrial policy got back – again – to the agenda of academic and policy debates (Chang and Andreoni, 2020), though with a rather extended concept and scope (Ferrarinni et al., 2021; Szalavetz, 2015).

One commonality in the renascent industrial policy literature is, that new industrial policies are needed to address the global and intensifying challenges of sustainable development (see among others: Aiginger and Rodrik, 2020; Bulfone, 2022; Chang and Andreoni, 2020). This re-designed and re-conceptualized industrial policy aims to “steer a sustainable structural change of our economies and societies towards sustainable human development…. in the post-covid19 era” (Ferrarinni et al., 2021: 1). It is not just that the boundaries of the industrial sector got more blurred (reaching far beyond manufacturing, and inclining into services and even agribusiness), and its geographical relevance goes beyond the “special cases” of latecomer economies, but also its objectives got much more complex. Beyond the economic aims of structural transformation, upgrading and increasing productivity, the new industrial policy contains the aspects of social inclusion and sustainable development too. Our focus is on the latter, as we consider the potential and risks of green industrial policies in the context of hybrid regimes.

State interventions are not only justified to promote economic growth via structural transformation but this should be pursued by taking ecological aspects into account. Green growth is defined by Rodrik (2014: 469) “as a trajectory of economic development that is based on sustainable use of non-renewable resources and that fully internalizes environmental costs, including most critically those related to climate change”. Green industrial policy shall contribute to the double challenge of reducing CO2 emissions and increasing the resource efficiency of the industry at the same time.

Consequently, during the process of defining green growth and green industrial policies, one has to combine productivity and resource efficiency to achieve sustainable development. While higher productivity can be achieved through economic restructuring to increase economic growth and improve social well-being, the latter aims to decouple economic development and human well-being from resource depletion and waste production (UNEP, 2011). Green industrial policies (GIP) can be defined “as including any government measure aimed to accelerate the structural transformation towards a low-carbon, resource-efficient economy in ways that also enable productivity enhancements in the economy” (Altenburg and Assmann, 2017: 11).

Green transition is largely driven by political actors and their commitments, as well as the pursued policies (Allan et al., 2021; Pegels and Altenburg, 2020). Such a policy-driven process, however, has its own risks and downsides in the context of hybrid regimes.

Risks and downsides were also present in conventional industrial policies and were criticised for misallocation of resources (such as in the case of picking winner strategies) and the risk of political capture (leading to corruption and rent-seeking activities). However, according to the proponents of industrial policies, these can be mitigated by proper policy design and implementation (Rodrik, 2014) along the principles of embeddedness, discipline and accountability. If there is any lesson to learn from the classical experiences of the East Asian developmental states, then this is related to developmental structures and roles (Vu, 2007). The former refers to high levels of state capacity and autonomy to be able to carry out development programmes, while the latter means, that a vision or guiding ideology exists to identify leading development priorities and secure the coherence in policy paradigm.

In fact, it is the development vision where we see the main difference regarding green industrial policies in hybrid regimes. Even if strong state capacities and some autonomy exist in contemporary illiberal state capitalist regimes, the political will and priorities might considerably differ from those of the classical developmental states driven by systemic vulnerabilities of the postwar era (Doner et al., 2005). As the leaders of contemporary hybrid regimes face basically different external and internal contexts, leading to different internal dynamics of input and output legitimacies (Győrffy and Martin, 2022), their commitment to any development objectives might be weak or overridden by political ones.

Another typical characteristic of contemporary hybrid regimes is the deviation of political rhetoric and policy practices (Bohle and Greskovits, 2019), this is also present in relation to green growth and development. While green commitment (often reduced to climate-related issues, such as CO2 emissions) exists in political discourse, related strategies and regulations, these merely aim to maintain the façade towards outer actors – such as the global or regional community –, but economic policy practices deviate significantly as these are “optimized” to serve political power and not green aims. In the variety of contemporary illiberal regimes it is not even economic growth per se that is prioritized, but the maintenance of political power (often coupled with building and strengthening a politically loyal national business elite).

The boundaries of new industrial policies have been considerably extended (both in their scale, scope and geographical relevance) and this leads to intensified risks of misuse via enabling contemporary hybrid regimes to increase state interventionism into new areas and legitimize these extensive state interventions by for example a green rhetoric. The fact that green industrial policies became an element of hybrid regimes’ operation requires systematic analysis. The risk that green rhetoric and related institutions and regulations might merely serve as a pretext for further state interventionism is substantial. This might even contribute to the spread of unsustainable policy and business practices and might hurt both the natural environment and the climate significantly, as illustrated by the case study analysis on Hungary.

Industrial policy and environmental protection in Hungary

Hungary’s turn towards deploying active industrial policies in the mid-2010s has coincided with its democratic backsliding. We focus on the green aspects of these complex changes, and highlight the contradictions between green principles, strategies, implementation and practices.

The Hungarian government several times opposed global measures concerning climate protection while blaming for example multinational companies for their polluting operation. But, as we will see later in the case of the giant battery factories, the practice of Hungarian authorities contradicts the opinion of Orbán expressed in 2021³: “the bill of climate protection must be footed by climate destroyers, meaning that the price must be paid by large corporations.” The by then Hungarian minister of justice wrote about “Christian-conservative green politics” and argued that: “In contrast to Green liberalism, a conservative approach to the environment rests on the belief that only local solutions, not vague, unenforceable global commitments, will lead to effective improvements in environmental protection” (Varga, 2020). However, as we will see, local efforts, civil organisations and protests are ignored or suppressed. Similarly to other areas, there is no consultation with civil or professional organisations before any decision or new legislation. Hungary is ranked at 50th place among 59 countries in the Climate Change Performance Index 2023. Waste burning in households is illegal, but it is tolerated and extremely widespread. It emits up to 40 times more black carbon than wood burning per unit of weight (Burck et al., 2022).

The rhetoric of the government and its close circle is officially climate protective but often intends to relativise climate change, its effects are considered exaggerated and climate protection is portrayed as a tool of global powers. This position is thus similar to that of other European right-wing populist parties (Huber et al., 2021; Ruser and Machin, 2019; Żuk, 2023) and confirms the findings of Kulin et al. (2021) about nationalist ideology positively associated with climate change scepticism. Hoerber et al. (2021) describe the Hungarian position as “ego-ecology” pointing out that it does not deny climate change, adopts climate-improving targets, but links climate change with migration, and applies a nationalistic tone. During 2020–21 Orbán hindered decision-making at the EU level on climate targets for 2030 declaring that these endanger Hungary and lead to increased energy prices.

Recent populist economic measures to gain votes harmed the environment and energy efficiency. Utility (energy, water, garbage collection) prices were administratively cut by the government in 2013–2014, and this increased Orbán’s popularity. Utility price caps and the following losses of utility companies were an incentive for foreign firms to leave these sectors and state-owned companies have taken over their positions. Revenue losses hindered the renovation of obsolete pipe infrastructure in water and heating public utilities. “Six years ago, the national water management plan indicated severe problems of the water basis and pipelines but nothing happened, a replanning and finance plan should have been taken place” (Interviewee G). Energy price cuts have had other negative climate consequences: they increased energy consumption, slowed transformation to sustainable energy forms, while most vulnerable groups (heating with wood and coal) were not really helped and energy-efficient building renovations were not prioritised (Weiner and Szép, 2022). The government put a price cap for households on transport fuels from November 2021 until 6 December 2022 (at around half of the market price). This has led to a considerable increase in fuel consumption. However, municipalities with scarce resources (especially in Budapest) struggle to maintain public transport services. The Hungarian government, in addition to the corruption mechanisms, has also neglected an important condition of green energy policy described by Pegels et al. (2018): the use of market mechanisms and competition.

The greening of industrial policy should refer to all areas of economic activities, including construction and energy, while it should be coordinated with other economic areas and with the protection of the environment. Environmental considerations should be an inevitable part of any developmental intervention, so the range of illustrative examples is wide. Due to space constraints, we illustrate the Hungarian case in the post-2010 era by some examples, that all seem to point into the same direction: towards the divergence of rhetoric and practice.

Downsizing environmental institutions and civil efforts

During the communist period, environmental aspects were disregarded and forced industrialisation resulted in the pollution of air and water. Towards the end of communism a strong environmental movement, the Danube Movement was created in 1984 opposing the plans of the Hungarian and the Czechoslovak government to build the Gabčikovo-Nagymaros Dam on the Danube. Liberal democrats and conservatives joined forces in demonstrations and the Hungarian government stopped construction in 1989. This act can be considered the start of a new era, with the systemic change a turn towards a more environmentally sensitive and conscious governance was expected and partially also realised. During the 1990s and later, consecutive governments adopted comprehensive environmental legislation and strengthened institutional frameworks according to international standards. Ministries and local administrations regularly consulted with environmental NGOs. In 2005–2006 a successful protest campaign against a NATO-radar to be built on a hill in Southern Hungary was an important step for the entire environmental movement. The campaign’s success contributed to the establishment of the country’s first successful green party (LMP), which gained parliamentary seats in the European Parliament in 2009 and entered the national parliament in 2010. Later the party was weakened by internal conflicts (Buzogány et al., 2022).

In 2010, as Orbán (re-)gained power (following two terms in opposition), the Ministry for Environment and Water was closed, and its tasks were transferred to the Ministry for Internal Affairs. The competencies of environment and nature conservation efforts were significantly reduced and transferred to the Ministry for Agriculture. The issue of environmental protection was managed only at the state secretary level (Kiss and Fazekas, 2019). In 2015, regional environmental agencies (responsible for monitoring industrial plants and factories and initiating on-site inspections) were deprived of their organisational autonomy and were integrated into county-level government offices. This meant the downgrading of the regulatory power of the environmental sector and a decrease in expertise, as county office managers were politically appointed, often without environmental qualifications, expertise or experience (Krasznai Kovács and Pataki, 2021).

Financial resources for nature protection have been constantly reduced. There are ten national park directorates organised regionally across the country that used to hold state legal authority (implementation power) for nature conservation. The tasks and financial necessities of these national parks have increased significantly after the EU accession, but the state financial support has not followed suit. The growing expenditure on personnel costs was due to the increased number of public workers, while the number of professionals almost stagnated (Kovács, 2017). Natural conservation projects today are almost entirely financed by European Commission grants. All revenues from environmental charges have been redirected to the central government budget from the environmental agencies (in line with the overarching centralisation tendencies of the Orbán government). In 2018, 44% of nature conservation experts at the Ministry of Agriculture were dismissed, thus there is no longer a Natura 2000 task force and a management group at the national level (Krasznai Kovács and Pataki, 2021). However, as our interviewee “A” explained, the downsizing of employees was even harsher, close to 60%, because some days after the 44% dismissal became public, there were further layoffs. Now “a heroic little group holds the edge of the carpet, that is dragged by politics (agricultural interest groups) on the other side. In each department, there is somebody who very cautiously tries to get through certain things, by risking a lot.”

The misuse of EU Funds is common in the field of environmental protection too (Fülöp, 2022). As climate protection and renewable energy became increasingly important in the EU’s policy and funding, the Orbán government seized the possibility of rent-seeking and enriching the cronies. For afforestation, the son-in-law of Orbán, and his father together have received more than 2,5 m. USD) (along with other, even more EU money for rural and agricultural development). Also they and their friends together with Orbán’s Turkish oligarch friend got billions of EU money to establish solar parks.

Civil societies, including those for environmental protection have been under constant attack by the Orbán government.⁴ At the beginning of 2017 the Parliament passed a law on NGOs that received foreign financial support of over EUR 1600, forcing them to register in a special registry and label themselves as a “foreign-funded organization” on their website and publications (MKOGY, 2017). In 2020 the EU Court of Justice’s decision qualified this measure against the EU law (CJEU, 2020). It took 1 year for the Hungarian government to withdraw the old and pass a new law requiring random annual auditing inspections.

“On paper” similar to any normal democracy, the Fundamental Law of Hungary (p5, article P/1) states that “natural resources, particularly arable land, forests and the reserves of water; biodiversity, in particular native plant and animal species; and cultural artefacts, shall form the common heritage of the nation, it shall be the obligation of the State and everyone to protect and maintain them, and to preserve them for future generations”. The II/201/2019 declaration of the Constitutional Court also points out that the State should take care of the natural resources of the next generations, the present generations cannot use them without limits.

The government has tried from time-to-time to legally facilitate the hollowing out of nature protection. In 2014 the T/2366 draft law would have transferred the control of natural protection areas from the national parks to the National Land Management organisation. In 2015 the Constitutional Court qualified parts of the law unconstitutional. Smaller legal modifications acted against NGOs. From March 2020 the possibility of appeal against administrative decisions was abolished (including natural and environment protection cases) and only judicial lawsuits remained (at eight assigned courts), which is very costly and time-consuming (Pánovics, 2020). The grants available for environmentalist NGOs are continuously significantly shrinking. In December 2023 the government adopted a “Protection of Sovereignty Act”⁵ to create the Sovereignty Protection Office tasked with monitoring media outlets, NGOs and any other actors, issuing public reports from time to time. The office has unhindered access to sensitive data, including confidential contracts, client information, and even private medical records being kept by any organization subjected to an investigation.

At the same time, as in other areas, parallel institutions are being created, into which substantial public funding is being channelled, while governments are seeking to squeeze out genuine civil society activity. The President of the Hungarian Republic founded the Blue Planet Climate Foundation in 2016, which receives yearly HUF billions of state grants, spends money on real estate purchases, conference organisations, media campaigns among others. As another “loyal” organisation, the Climate Research Institute functions under a government-sponsored elite-forming college.

Regarding climate change, nicely elaborated (often 100–300 paged) governmental strategies do exist in Hungary. There is a National Energy and Climate Plan concerning decarbonisation, a National Climate Change Action Plan I–II, a National Clean Development Strategy concerning energy saving and GHG emissions. Hungary has a National Environmental Protection Basic Plan, a National Landscape Strategy, Biodiversity Strategy and a National Water Strategy. These documents contribute to the “image” of a climate and environment-protective ruler, but the practice of industrial and construction policy shows a very different reality. For example, numerous cases illustrate how in the case of projects that may endanger nature, the government qualifies constructions as “priority investments significant for the economy.” In this case, the investor is exempted from many legal regulations, the authorization procedures are simplified, and the otherwise required environmental impact assessment can be skipped, as well as other local-level regulations. With this national priority entitlement, investors can bypass local government interventions in any related issue (such as land use, taxes and environmental issues). There are numerous further “creative” mechanisms– as shown in the next sections – that can be classified as “ruling by cheating” (Sajó, 2021).

Energy policy controversies

Theoretically, green governance strategies should be consistent with the development of renewable energy sources. In 2022 the share of renewables in the Hungarian energy consumption was 16%, rather low in European comparison. In 2016 the governmental decree 277/2016. (IX. 15.) prohibited the construction of wind turbines within a 12 km range from settlement borders, making the construction practically impossible in the densely inhabited country. The National Energy and Climate Plan (NECP) made in 2020 also predicted the decrease and termination of wind energy for 2035–2040, while envisaged the increase of solar energy. Our interviewee “E” explained this by “personal aversion at a very high level against windmills”. To attract funds from the EU’s Recovery and Resilience Fund (RRF), in December 2023 the conditions for establishing windmills were eased (range from settlements was decreased to 700 m). In early 2024, a wind-energy investment plan of over 2500 MW was submitted by companies, of which 670 MW will be allowed by the government, but only if they are concentrated in a single grid node. NECP was modified in 2023 and the EU’s recommendations suggested for Hungary to significantly raise the ambition to a share of renewable energy sources of at least 34% instead of 29% for 2030.⁶

Solar energy, however, has been widely supported by the state since 2016 and the government cronies discovered the solar park business. (Some farm owners were threatened with expropriation to cede land.) Not transparent state renewable energy support tenders (with gratis credits) have been won by firms bound to the prime minister’s son-in-law (SZGK, 2021). The company EcoSolifer was also suspicious for OLAF (the European Anti-fraud Office), it received EUR 6 million in EU funds to build a solar panel factory in Csorna. It was built in 2015, but production began only in 2020 and despite receiving generous state loans, after heavy loss-making it went bankrupt in May 2024. Regarding solar panel tenders in 2023, the Integrity Authority has found that several companies had engaged in collusive practices, probably leading to the misuse of EU funds.⁷ Recent years were marked by a photovoltaic power plant boom in Hungary, which challenged the public grid and has led to capacity constraints.

Around the end of 2021, the conditions changed radically in favour of biomass producers, that belong in Hungary to another crony business group, unsurprisingly winning all the tenders (which were open only for 1 day). As our “E” interviewee said, biomass is problematic, as the origin of domestic use has been uncertain for years, with official statistics showing a use far exceeding resources. Although the legislation requires stricter sustainability certification for biomass power plants from the beginning of 2022, there is much uncertainty regarding the ways how the new system works. Since 2003, the 5 biomass power plants (with very low, 28% efficiency) have received three times more state support than solar and wind energy together, although they cover only 3% of total electricity consumption. Around 20% of the trees cut (also from natural forests) go to biomass plants.⁸

At the same time, the achievement of climate targets is being hampered by increased deforestation, also backed by state regulations. Following the energy price increase, in 2022 the Hungarian government issued a decree 287/2022 (VIII.4) concerning the rules to meet firewood demand suspending the ban on felling in protected state forests. Trees can be cut up to 20 years earlier than the cut-off date set in the forest plan and cutting can also take place during the nesting season of birds. Forests do not have to be restored with the care previously expected, logging roads can be built without a permit, and the Minister of Agriculture can decide without restriction that any forest can be cut outside the forest plan. As our interviewee “A” pointed out, several private forests are owned by political cronies and woodcutting has been going on already for years, the new decree only legalised the already existing practices. Finally as another populist measure, from September 2022 a price cap was also put in force for firewood in Hungary.⁹ Following public protests, the Minister of Agriculture issued an order to reassure the public about the firewood regulation, but this did not override the law. The officially priced firewood programme was a political marketing tool, but its environmental impact - especially if the measure is maintained for years - is extremely damaging to forests.

The illiberal regime and the environment: the hidden practice

This section illustrates the functioning of the Hungarian hybrid regime concerning the environment, climate and nature protection via diverse topics. In several areas, the practice shows similar patterns: careless decisions, neglected environmental concerns and favouring profits against natural values. The cases also weaken the “greenness” of industry and industrial policy including the construction and manufacturing sector. The destruction of natural values also reduces the possibility to fulfil climate aims. The cases described below show how the business or personal gains of powerful and/or politically connected actors (a broader definition of corruption) and the political interests of the autocratic hybrid regime override environmental and nature conservation considerations and how this is enabled by public authorities and legislation. The Hungarian government has been ruling by overnight decrees for 4 years now. Since the 2010 illiberal turn in Hungary, politics has more and more captured the institutional system for its own interest, violating the rule of law, destroying checks and balances, hurting the separation of powers, overcentralising and –politicising, in fact capturing the institutional system at all levels. From 2010 onwards, Hungarian “crony capitalism” (Székely-Doby, 2021) has been rapidly building up. In consequence, the capturing of green aims became a tool of politics and extractive practices dominate in many segments of the economy. While similar examples might exist in established democracies sporadically, in the Hungarian autocratic regime these became systematised (and centralised) and are the dominant practice, ie. the rule and not the exception.

We present our cases divided into two groups according to the economic actors: in one group the motivation is to obtain material benefits for domestic government-close firms and entrepreneurs, while in the other group the main objective is political gain through the preferences of large foreign investors - but the material benefits of the first group are also present here.

Crony firms and entrepreneurs

We start our illustrations via exemplary cases with the agricultural sector, which provides the food industry’s basis, as any industrial policy aiming to promote green transition should be coordinated with this sector. Indeed, the propagation and support of green and bio-farming is a declared aim of the Hungarian government, the area under organic farming in Hungary increased by two and a half times between 2015 and 2019 (but Hungary is only ranked 21st in the EU, despite the significant EU subsidies). József Ángyán, the then state secretary for agriculture, who promoted and taught organic farming, criticised the distribution of state land (and millions of euros in agricultural subsidies from the EU) to cronies and resigned in 2012. In response to Ángyán’s outspoken criticism of the government, the Kishantos Biofarm, an educational farm promoting sustainable rural development, which had been operating for 22 years, was dismantled by the Orbán government for political and profit-seeking reasons. In 2013, the government awarded a 20-year lease on 452 hectares of their farmland to ten other crony applicants (with no significant farming experience) for for-profit interest. The new tenants (arriving with tractors) ruined the crops of an estimated value of 150 million HUF, barely 2 months before these were ready for harvest. The lawsuit dragged on for 6 years, and although Kishantos and Greenpeace finally won in 2021, the model farm was already ruined. (Ángyán also had a university institute founded in 1990 to research and teach biological farming, which was closed down in 2014 (Krasznai Kovács and Pataki, 2021)). In this case, political revenge was the main motivation in addition to land grabbing by government-appointed actors.

Profit- and rent-seeking motives can be seen also behind the destruction of nature by Hungarian lakes. In 2018, a bill was passed (1861/2016. XII. 27. valid from 2020), concerning the development of the Balaton Lake for about 130 billion HUF public money. The investment plans benefit Orban’s closest friends and his son-in-law owning camping sites and hotels around the lake (Keller-Alant, 2018). The Balaton development program was declared as priority investment, exempting these projects from general rules. Public camps for children’s leisure were sold to build apartments, public beaches were privatized, and free beaches have disappeared. A protected forest was cut down (without prior notice) for the sake of a local mayor’s son and highly protected reeds were removed. Similar destruction occurred on the historical and European-protected Tihany peninsula by privatization and natural habitat destruction for the sake of the political-economic elite (Csanádi et al., 2022). Around Lake Balaton substantial tree cuts, reed destruction and unnecessary constructions in 37 settlements were documented (Horn, 2022)

The government finances a large development project, declaring it a “strategic tourist area” including Lake Fertő (Neusiedler See) on the border with Austria, habited by protected animals and migrating birds. The project plans to build a huge luxury hotel with tennis courts and related infrastructure, a parking place and a yacht bay at the lake’s shore. The investment (by Orbán’s best billionaire friend Meszáros’s company) started despite the local and foreign protests (Erdélyi, 2019). The construction affects the lake bed and shore, which are protected by law, but the local Water Management Directorate and the County Government Office has granted permission several times, which have been sued by environmentalists each time. The court ruled in favour of the NGOs, but despite this, the government office reissued the original investment permits by the end of 2023 (again challenged by NGOs).

The settlements around the Lake Velence have also experienced similar, crony constructions. In one of them a sand beach and plaza were built and in another, a public territory of 237 thousand m² was sold to private hands, lands were requalified and free beaches closed from the public. The water in Lake Velence reached a critically low level for 2021 and would have required HUF 40 billion to save and restore the lake, which the government refused to provide (Inotai, 2021). However, at the same time, there was a decision in 2021 of a 43 billion HUF investment in a giant rowing sport centre by the same lake, to be built by the firm West Hungaria Bau, owned by the friend of Orbán’s son in low (Zsilák, 2021). Such controversial government decisions leading to the misallocation of scarce public resources seem to be “everyday” life in Hungary, with severe environmental consequences.

The Old Lake of Tata is a natural protected area, a habitat for tens of thousands of migratory birds. The Avalon Park Ltd (belonging to the Hell Energy Group supported by governmental and central bank aids) decided to build a 120-room hotel on the shore, endangering the unique natural place (Zsuppán, 2021). The local population strongly protested against the hotel, but as our interviewee “C” said, Avalon’s representative did not communicate, the mayor supported the construction and Tata’s MP did not even take the petition from the civils. Nevertheless, finally a local referendum was organised and showed the civil rejection of the project.¹⁰

The construction industry is one of the main target areas of Hungarian crony businesses, the profits and rents from construction override any environment-conservation concerns. Most of the investments destructing natural areas in Budapest have been declared by the government as priority investments. Old large trees were cut or ruined despite protests because of the City Park project aiming to build several huge museums and cultural buildings in the park. People protested also against the planned mobile dam at the banks of the Danube in the North part of Budapest that requires the removal of 1500 hundreds-year-old trees. The dam would protect a territory where a building permit was given to one of Orban’s cronies. With the election of the new Mayor of the capital city in 2019, the plan for the mobile dam was abandoned. The construction of office buildings, hotels and condominiums by crony companies proliferated in the past decade, often qualified as priority investments. Wealthy people destroyed forest, green areas in the hilly part of the capital. The protection of historical monuments and local government complaints were not even taken into account in the case of the investments by a Russian oligarch or by a Turkish friend of the Prime Minister.

In several larger or smaller cities, the practice of the local authorities was to sell and/or requalify areas removing them from protection, sometimes modifying regulations (spatial or zoning plans) and giving permissions for constructions.

Apart from constructions by oligarchs, many crony-owned public companies also function irresponsibly in terms of environmental sustainability. The case of the Mátra Power Plant well illustrates this. The German majority owner sold the loss-making company in 2017 for HUF 5.9 billion to a holding partly owned by Orbán’s main friend, Mészáros. The financial reserves of Mátra PP were paid as dividends to the owners and almost no money remained even for the workers’ salaries. In end-2019 the public Hungarian national electricity company bought Mátra PP for HUF 17,4 billion and then spent a further HUF 57 billion on the company. Thus, instead of HUF 5,9 billion (the price in 2017) HUF 74,4 billion from the taxpayers’ money was spent on the company (Magyari, 2020).

In the meantime, in autumn 2019 it was denounced that the workers of the Mátra PP fell ill, because the water reservoir of the plant was filled with poisonous material, which also caused the death of fish in the local creek. For several days the mayor did not react and the government spokesman said that “no irregularities were found.” Months later it turned out that the pollution of the water reservoir had been continuous since the summer, it was well known by the managers of Mátra PP and they had not informed and protected the workers. The pollution came from Virasol, a nearby starch factory of Mészáros. During all the time, authorities and police were reluctant to investigate and documents were kept secret. The police closed the investigation two times and finally the county prosecutor too, stating that there was no irregularity and there is no responsible firm. Local people remained silent because Mátra PP and the starch factory (both owned then by Orbán’s friend) are the main employers in the region. Thus, similarly to the findings of Jia et al. (2018) on the shielding of patronized Chinese firms from regulatory consequences, the Mátra PP case shows that those companies that belong to Hungarian cronies, have no real control or oversight by the authorities if they act irresponsibly.

Interests of foreign investors

Besides the close-to-government domestic firms (cronies), the other large group taking advantage of close links to the Hungarian government, are the large foreign companies that are favoured and supported by the state, while also often posing serious environmental risks. The direct government connections of large German investors are well known (Panyi, 2020). The Hungarian government serves their needs (through rapid legislative changes and decrees) even if this causes environmental and natural harms. For example, in 2010, a Natura 2000 area was reclassified as an investment target area through an accelerated decree procedure in order to expand the Audi factory in Győr. According to our interviewee F, “speed and flexibility are favourable to foreign investors, depending on the size of the deal and the investment”.

One of the most hotly debated topics recently in Hungary (and Europe) relate to the operations of the electric battery companies from Asia with huge energy and water needs and risks of polluting air and soil via emissions (Győrffy, 2024). Between 2018–2025, 40 Asian EV-battery-relatedcompanies operate, are under construction or have been announced to invest in Hungary. In 2022 the giant EUR 7,3 million investment of the Chinese Contemporary Amperex Technology Co. Limited (CATL) was announced in an Eastern Hungarian city (Debrecen). The centrally-made location decisions of these factories are highly contested, not only by residents, but also by respective experts (such as in water and energy issues, as it is also underlined by our interviewees). In the case of Debrecen, the CATL factory is being built on farmland, close to residential areas, with limited water and energy availability. As our interviewee “D” has pointed out, the governmental aim to become globally the second largest battery producer by 2030 is risky, because some firms tend to bring outdated and polluting technology to Hungary, while according to the EU’s extended producer responsibility principle in the post-consumer stage, the producer country has to take care of recycling these batteries. The forced development of this new industry has not been coordinated with agricultural policy, water management, nature conservation and energy policy, among others. The already functioning South Korean battery factories have caused noise, water and air pollution, there are continuous irregularities in work safety and constant complaints from the local population (Éltető, 2023). The reaction of the Hungarian authorities shows five similar patterns in all cases:

1. High direct and indirect state support: on average 10–12% of investment value (often in the form of individual government decision authorised by the EU) as direct aid and further 10–12% is provided as infrastructure, tax allowance.

2. Weakening and hollowing out existing institutions (environmental agencies, NGOs, trade unions), supportive regulation for foreign firms, flexibilization of laws, lax enforcement of existing rules. Between 2018–2023 Samsung SDI and SK ON produced large quantities of EV batteries with the use of plenty of hazardous materials and waste, but authorities required no environmental impact assessment from these firms. During the licencing process, authorities themselves ignored laws or regulations to favour the companies. In 2023–24 the Hungarian government issued new decrees easing the functioning and construction of factories. (E.g the 432/2023. (IX. 21.) Govt Decree allows that instead of a penalty, the authority can enter into an “environmental management contract” with the polluting company, in which the company promises not pollute again).

3. No public consultation and information before and during the investments civil protests are ignored and restrained by orders. Since a Decree of April 2023, public hearings concerning the companies’ documentation can be held without the physical presence of the citizens, so these have taken place online (with pre-selected questions) since then. Legal ways for citizens to challenge the factories’ licences are made more and more difficult, while in the case of trials authorities are on the factories’ side. In May 2024 a court ruling ordered the suspension of the Samsung factory’s environmental permit, but there is no enforcement, the County Governmental Office refused to stop production in the factory.¹¹ As of 1 July 2024, the government has created a new environmental authority within the Ministry of Energy, where appeals must be lodged at a second instance, before the courts. This way, if there are environmental problems with any project, it can be dealt with the given case within the framework of the state administration.

4. The government qualifies the constructions of these battery factories as “priority investments significant for the economy” and the municipalities do not have any say. Further on, in 2020 the Hungarian government created a Special Economic Zone for the Samsung battery factory. The second such zone was founded in 2021 including four settlements in Fejér county. In one of them, the Korean SK Innovation has built its third battery factory in Hungary. Granting the permission and the building process are rapid, authorities are under severe pressure.

5. In case of problems, factories and authorities restrain or delay information, and examinations if any, are not implemented thorough enough. Factories are rarely punished, if yes with small sums of money (non-enforcement of existing regulations). Samsung SDI and SK ON, have several times violated environmental and industrial security regulations without any serious consequences. Our interviewee “B” highlighted that the local governmental office offered the Samsung battery factory two times 1,5 years to make noise reduction plans In 2022 civils found toxic solvent usually used in battery factories at 14 m deep in soil water, but the civil denunciation was rejected by the water authority stating that civils had no proof that the poison stemmed from Samsung. However, in spring 2024 Greenpeace’s analysis revealed that wastewater from the local sewer system, spilled onto farmland, contained high concentrations of this teratogenic solvent used by Samsung SDI.

Besides environmental risks, these investments require a significant (30%) increase in Hungary’s energy production capacity in the coming years. There are also concerns about the local water supply, connected to the Chinese giant factory being built in Debrecen. However, for this ‘flagship investment’, the previously prepared environmental impact assessment is rather symbolic, according to our interviewee ‘D', and does not fulfil its original function. The director of the local water management company was sacked after calling for caution and replanning. CATL has been granted permits from the disaster management and the environmental authority. The buildings, logistic infrastructure and pipeline networks for battery factories are being built by companies close to the government, from taxpayers’ money and sometimes even damaging Natura 2000 areas.

The political objective of becoming a battery manufacturing superpower therefore seems infringing the right of the population to a liveable environment and the protection of the environment.

Conclusions

This article analysed the nexus between contemporary hybrid regimes and green policies. We hypothesized that green rhetoric and policies are applied in these, highly corrupted regimes only as one tool among others to serve the interests of the ruling power – to maintain political power and rent-seeking. Consequently, political aims are prioritised, and environmental protection and green policies are often neglected or even worse, captured and used to enrich cronies.

The Hungarian practice illustrated with several cases that the principles of green industrial policy do not apply. There are no developmental structures and roles, no vision, no coordination and no accountability. We do not find any coherent economic policy that would respect sustainability or climate aspects. The prepared strategies aim to fulfil EU requirements and to attract EU financial resources (window dressing), whereby the primary motivation is to make private fortunes. Central regulation and governmental decrees are shaped to be favourable for polluting foreign firms or domestic crony companies.

The case of Hungary highlights, how the risk of green industrial policies getting captured, misused or hollowed out is considerably more present in the distorted institutional settings of hybrid regimes than in established democracies with fully operating checks and balances, and having a vivid civil society to keep incumbent governments honest about their developmental vision and strategies.

The main mechanisms of neglecting green aspects were the same in all areas under examination, and consisted of the following major steps: 1. No public consultation and participation, no transparency or information; 2. Centralization of decision-making, (eg. classification as “priority investments significant for the economy”); 3. Political capture and/or hollowing out of related agencies and regulations; 4. Repression of civil initiatives and organizations; 5. Politicization of communication and overwhelming propaganda (if necessary double talk, using different rhetoric towards the international arena and the domestic constituency).

Having concluded these findings, one should usually offer some policy recommendations on what to do to improve the situation. Climate lawsuits against governments can be one way, but it would require strong local NGOs and a proper legislative system. NGOs should receive finance for environmental aims directly from EU or international funds. However, in Hungary, the government-created parallel NGOs can misuse this possibility. Natura 2000 areas should be better monitored by the EU – although national legislation can overwrite the protection of these areas. The education of people would be essential, but this is not in the interest of the ruling power either (and amidst the heavy centralization drive and serious underinvestment into education in Hungary, this seems to be less viable).

All in all, it is very difficult to find a way to protect the environment in illiberal hybrid regimes that compromise green growth and sustainable development. Green transition can be delayed both directly (as the aim to maintain political power, and enrich cronies might overwrite any other developmental priorities, including green ones), and indirectly (via the oppression of free media, civil sector and autonomous education, which therefore cannot demand and drive more environmental-friendly policies). Green outcomes might differ from one illiberal hybrid regime to the other - requiring further investigation and comparative analysis -, nevertheless, the logic of instrumentalization of green aspects and policies is conspicuous in the case of Hungary.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Hungarian National Research, Development and Innovation Office (NRDIO/NKFIH) (Grant ID: FK_124573 and FK_135342).

ORCID iDs

Andrea Éltető

Judit Ricz

Notes

Author biography

Andrea Éltető is a Senior Research Fellow at the Institute of World Economics, HUN-REN Centre for Economic and Regional Studies, in Budapest, where she is the leader of the Integration Research Group. Her fields of research are foreign direct investment in Central Europe, global value chains, industrial policy, foreign trade, EU integration, the development of Spain and the political economy of Hungary. She regularly publishes and reviews articles for higher-ranked international and local economic journals. She has coordinated several international and national research projects.

Judit Ricz is senior Research Fellow at the Institute of World Economics, Centre for Economic and Regional Studies HUN-REN and Associate Professor at the Department of World Economy, Institute of Global Studies, Corvinus University of Budapest in Hungary. Her research focuses on development studies, international and comparative political economy, with special focus on developmental states, comparative capitalisms as well as on (green) industrial policy.

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