Part I — Situation overview

On 25 October the government decree on raising the amount of environmental fines entered into force; it had been promulgated in the Hungarian Official Gazette (Magyar Közlöny) on 9 October. The 16 days between promulgation and entry into force were meant to let companies and authorities prepare. According to the Ministry for the Living Environment (ÉKFM), for businesses with annual net turnover above HUF 100 million, the cap on the fine that can be imposed for activity deviating from the permit rises from HUF 2 billion to HUF 5 billion. The fine is limited to 5 per cent of the previous year’s net turnover. If the company was fined for environmental pollution at least twice in the previous five years, or committed an environment-endangering or environment-damaging violation in that period, the new fine cannot be less than 0.5 per cent of the previous year’s net turnover, and at least HUF 5 million. The general HUF 500 million cap on waste-management fines for legal persons is abolished, while the HUF 50 million maximum for natural persons remains. The ministry’s aim is that it should not pay to budget for the fine in advance as an operating cost, and that compliant companies should not be put at a competitive disadvantage. The tightening may primarily affect battery manufacturing, the chemical industry, the energy industry, and high-capacity agricultural and food-industry facilities (based on 24.hu, Index, MTI).

The step has a precedent: in spring 2025 the previous government raised the cap on fines that can be imposed on companies to HUF 2 billion. MIAK has addressed industrial pollution from several angles. At the end of May it called for independent, public measurement (CATL Debrecen), on 4 September for a performance yardstick for the waste concession (Waste concession), and on 28 September for a bankruptcy-proof environmental financial security deposited in advance (Environmental financial security). At the time of the latter analysis, the Government put out for public consultation the draft of the new national environmental chief authority to be set up from 1 January 2027.

MIAK’s reading: raising the fine is a correct application of the ‘polluter pays’ principle (whoever causes the damage should bear its cost), but the cap describes only the worst possible case. What enters a company’s calculation is the fine it can actually expect: the size of the fine multiplied by the likelihood that the violation is discovered, and by how long it takes for it to become a final, paid amount. Today only the first of these numbers is known.

Part II — Grounding in the literature

Three ideas from the literature provide a framework for assessing the fine increase. Nicholas Stern, British economist and former chief economist of the World Bank, in his report commissioned by the UK Treasury (The Stern Review, 2006), describes pollution as an externality, that is, a cost not paid by the one who causes it. He also stresses that policy credibility has to be built over time. Robert Klitgaard, American economist and researcher of anti-corruption institutional design (Controlling Corruption, 1988), models the offender’s decision as a comparison of gain against the penalty weighted by the probability of detection. Based on research he cites, he concludes that quicker and more certain punishment is often more effective than more severe punishment. According to Elinor Ostrom, Nobel Memorial Prize-winning American political scientist (Governing the Commons, 1990), central regulatory oversight works only if the authority has accurate information, monitoring capacity and a reliable sanctioning practice, and sanctions must be graduated. The detailed discussion of the literature — by author, with quotations — can be found in section 6.4 Literature in detail.

Part III — MIAK’s concrete proposal

MIAK proposes three measurable measures. The first makes fines public, the second makes the probability of detection measurable, and the third ties the fate of collected fines to repairing the damage.

3.1 A public, machine-readable fines register (first publication by 31 January 2027, quarterly thereafter)

One element of the new rule, the repeat-offender minimum, depends on the authority knowing exactly who was fined in the previous five years. The public is entitled to the same data. MIAK proposes that the Government, by amending the rules of the environmental regulatory procedure, require final environmental, waste-management, air, noise and water-protection fines to be entered into a public, machine-readable register. The data set: the company’s name and company registration number, the site, the type of violation, the amount of the fine, whether the repeat-offender rule was applied, the payment status and any judicial review. The register can be built on the National Environmental Information System (OKIR). The first publication should appear by 31 January 2027 and include the final decisions taken since 25 October. From then on, the chief authority set up on 1 January 2027 should update it quarterly. Data on natural persons should appear without names. In this way the condition described by Ostrom (see 6.4.3), accurate information, appears not only at the authority but also in the affected settlements and among competitors. The proposal applies the K3 pollution-monitoring and the A1 public-money dashboard programme points, and complements the 28 September proposal for a register of securities.

3.2 Measuring the probability of inspection: an annual enforcement report and a risk-based inspection plan (first report by 30 June 2027)

According to Klitgaard’s model (see 6.4.2), the deterrent power of a fine depends on the probability of detection and the speed of the procedure, not only on the amount. MIAK proposes that the chief authority report publicly every year on four indicators. These are: at what percentage of sites requiring a permit an on-site inspection took place; how much time passed on average from discovery of the violation to the final decision; what percentage of the fines imposed was actually collected; and how many decisions were changed by the courts. The first report should appear by 30 June 2027, covering 2026. The report should be accompanied by a risk-based inspection plan: the plants with the highest environmental risk, including battery factories and chemical sites, should receive at least one unannounced on-site inspection a year. After 18 months, an ex-post impact assessment should measure the effect of the decree according to the G20 Drucker audit, that is, a comparison of the expected and actual results. If the number of fines or the payment rate does not change, raising the cap means tightening only on paper.

3.3 Ring-fencing collected fines: an environmental restoration appropriation (in the 2027 central budget)

Today the environmental fine flows into the general revenues of the central budget, so it is not visible how much of it goes to repairing damage. MIAK proposes that the Government, in the bill on the 2027 central budget, create a separate environmental restoration appropriation into which the revenue from environmental and waste-management fines is paid. The law is adopted by the National Assembly. The appropriation should primarily finance the remediation and environmental improvement of the settlements where the fined violation occurred. An itemised, public annual account of its use should be prepared. In line with the ministry’s justification, paying the fine must not exempt anyone from the obligation to restore: alongside the fine, the authority should also order restoration, with a deadline. According to Stern’s argument (see 6.4.1), pollution is a cost that its cause does not pay. Ring-fencing returns this cost, at least in part, to those who suffered it. The proposal links to the local action element of programme point K3 and to competition-policy programme point G5: a compliant company is not at a competitive disadvantage if the offender actually pays.

A common principle links the three proposals: the deterrent power of a fine comes not from its cap but from its expected value. According to the literature, this is determined by the frequency of inspection, the speed of the procedure and the publicity of decisions, while ring-fencing the amount collected makes it credible that the aim is protecting the environment, not raising revenue.

Part IV — Expected effects and risks

Dimension Expected effect Risk
Economy The competitive disadvantage of compliant companies shrinks, and violations become a less calculable cost Companies respond to fines with legal remedies and cases drag on; investors perceive a stricter environment
Society People living near a site can see who was fined and why; funding for restoration appears locally A public register may cause reputational damage in cases that are not final or are under review
Public administration Enforcement indicators reveal the authority’s capacity shortfall and substantiate staffing and resource needs Without capacity, an inspection target may lead to formal, short on-site visits
Budget The ring-fenced appropriation makes the use of fine revenue transparent Ring-fencing reduces budget flexibility and may encourage a revenue-driven regulatory practice

The most important trade-off lies with proposal 3.1. Publicity is a strong deterrent, but it can only be applied to final decisions, and the status of judicial review must also be shown, otherwise the register may be unfair. The risk of proposal 3.2 is that the indicators measure quantity instead of quality. That is why the share of decisions changed by the courts is among them: if the authority imposes many but unfounded fines, it shows there. The biggest risk of proposal 3.3 is a perverse incentive. If fine revenue funds a favoured goal, the authority may chase revenue. This is counterbalanced by tying the appropriation to the site of the damage rather than covering the authority’s own operations. The new decree also raises a question of proportionality: the repeat-offender minimum is a heavier burden for smaller companies. MIAK proposes examining this as part of the 18-month impact assessment.

Part V — Measurability and summary

5.1 What is worth tracking? (proposed KPIs)

MIAK proposes tracking the following key performance indicators (KPIs):

  • Fines register: whether a public, machine-readable register of final environmental fines appears by 31 January 2027, and whether it is updated quarterly.
  • Inspection rate: at what percentage of sites requiring a permit an on-site inspection took place in 2027, and whether every one of the highest-risk plants received at least one unannounced inspection.
  • Payment rate and processing time: what percentage of the fines imposed was collected, and how many months passed on average from discovery to the final decision.
  • Restoration: whether the environmental restoration appropriation appears in the 2027 budget, and in how many settlements remediation has started from it by the end of 2027.

5.2 Summary

MIAK asks the Government to create, alongside the fine increase, the three conditions of enforcement. There should be a public, machine-readable register of every final environmental fine from early 2027. The new chief authority should report every year on the inspection rate, the length of procedures and payments. And the fines collected should serve to repair the damage, primarily where the damage occurred. The proposals concern two of MIAK’s foundational values. Transparency, because half of a fine’s deterrent effect comes from publicity: neighbours, investors and competitors alike must be able to see who breaks the rules. Data-drivenness, because the effect of raising the cap can only be judged from inspection and payment data, and without them it cannot be determined whether the tightening has actually become stricter in reality.

Part VI — Reasoning and further sources

6.1 Press framing by spectrum

Liberal-left band. In the material processed, Telex, HVG and 444.hu did not focus on the decree’s entry into force. The topic was a Sunday news item based on an official announcement, and on that day it received no analytical treatment in this band.

Public-affairs band. 24.hu and Index reported the rules based on news-agency material, with strong headlines: 24.hu wrote about a “giga-fine”, Index about a “brutal fine” for polluting companies. Both outlets adopted the ministry’s justification about competitive disadvantage and that the fine is not a tax. 24.hu also recalled that the previous government had already raised the cap to HUF 2 billion in spring 2025. ATV covered a related circular-economy topic: the Association of Conscious Consumers (Tudatos Vásárlók Egyesülete) proposes, on the Austrian model, a 50 per cent state repair subsidy of up to HUF 50,000 for having household appliances repaired. The outlet quoted a statement given to Pénzcentrum. None of the outlets discussed the question of enforcement, that is, who inspects and how often.

Economic band. In the material processed, Portfolio did not deal with the decree, even though the turnover-proportionate limit and the repeat-offender minimum are a business issue for battery-industry and chemical-industry investors.

Conservative band. In the material processed, Magyar Nemzet did not cover the topic, and Mandiner’s material was not in the processed set. The precedent of the tightening, the 2025 increase, was the previous government’s decision, so the topic is not very divisive in party-political terms.

6.2 Facts and data

Item Value Source
Promulgation of the government decree 9 October 2026, Hungarian Official Gazette ÉKFM, quoted by 24.hu and Index
Entry into force 25 October 2026 ÉKFM, quoted by 24.hu and Index
Cap on the fine for activity deviating from the permit (companies with turnover above HUF 100 million) HUF 5 billion instead of HUF 2 billion, with a limit set at 5% of the previous year’s net turnover ÉKFM, quoted by 24.hu and Index
Repeat-offender minimum (at least two pollution fines within 5 years, or an endangering or damaging violation) 0.5% of the previous year’s net turnover, but at least HUF 5 million ÉKFM, quoted by 24.hu and Index
Waste-management fine for legal persons the general HUF 500 million cap is abolished ÉKFM, quoted by 24.hu and Index
Waste-management fine for natural persons at most HUF 50 million, unchanged ÉKFM, quoted by 24.hu and Index
Precedent in spring 2025 the cap on fines that can be imposed on companies rose to HUF 2 billion MTI, quoted by 24.hu
Most affected sectors battery manufacturing, chemical industry, energy industry, high-capacity agricultural and food-industry facilities 24.hu and Index
New national environmental chief authority from 1 January 2027; the draft was put out for public consultation on 23 September MIAK, 28 September 2026
Proposed repair subsidy 50%, up to HUF 50,000 (Austrian model) Association of Conscious Consumers, quoted by ATV

6.3 Policy dimensions

  • Environment and climate (programme points) — public measurement of pollution and publicity of fine data (K3), encouraging the circular economy, including the right to repair (K4);
  • Economy (programme points) — eliminating the competitive disadvantage of compliant companies (G5), ex-post impact assessment of the decree (G20).

6.4 Literature in detail

6.4.1 Nicholas Stern: The Economics of Climate Change: The Stern Review

The Stern Review builds the economics of climate change on the concept of externality. Emitters — those who generate electricity, run a factory or drive a car — do not pay the cost of the damage they cause. In the report’s words:

“Climate change is the result of the externality associated with greenhouse-gas emissions – it entails costs that are not paid for by those who create the emissions.” (MIAK’s own translation from the Hungarian rendering)

The report derives the ‘polluter pays’ principle from both efficiency and legal considerations, and, following Pigou, writes that a tax or charge can align the polluter’s marginal cost with the damage caused by the pollution. In the section on policy instruments it also warns that “the credibility of policies is crucial; it has to be built over time” (MIAK’s own translation from the Hungarian rendering). Applied to the Hungarian fine increase: the fine prices in, after the fact and at the offender’s expense, the damage that would otherwise be borne by people living nearby. And credibility is born not at promulgation but in enforcement that is visible year after year. That is why the amount collected must visibly go to repairing the damage (3.3).

📖 Source: Nicholas Stern: The Economics of Climate Change: The Stern Review (HM Treasury / Cambridge University Press, 2007)

6.4.2 Robert Klitgaard: Controlling Corruption

Klitgaard describes the corrupt decision as a simple economic balance. The offender weighs the expected gain against the penalty multiplied by the probability of detection and the moral cost, and breaks the rule if the balance shows a profit. Using the example of the Philippine tax authority, he shows that the reforming head could not change the statutory level of penalties. By extending inspections, reviewing cases and using publicity, however, he still increased the actual effect of punishment, because staff knew their work could be scrutinised at any time. According to criminological research cited in one of the book’s notes, for actors who give little weight to the future, quicker and more certain punishment can be more effective than more severe punishment. Applied to the environmental fine: the HUF 5 billion cap increases one factor of the balance, but not the probability of detection or the speed of the procedure. That is why the chief authority must also measure and publish the inspection rate and the processing time (3.2).

📖 Source: Robert Klitgaard: Controlling Corruption (University of California Press, 1988)

6.4.3 Elinor Ostrom: Governing the Commons

In her seminal work on managing common-pool resources, Ostrom starts from the premise that an external, central authority could in principle solve the problem of overuse. To do so, however, it would need to know the state of the resource precisely, monitor the behaviour of every actor, and sanction rule-breaking reliably and without error. According to Ostrom, these conditions are rarely met in reality: it is hard for a central authority to gather enough local information to set the appropriate fine. Durable institutions are therefore built on mutual monitoring and graduated sanctions: a first violation carries a milder consequence, repeated ones increasingly severe consequences. The repeat-offender minimum in the Hungarian decree is the legal form of this graduation. To work, however, it needs accurate and accessible historical data, which the public register provides (3.1). And measuring the frequency of on-site inspections shows whether Ostrom’s second condition is met (3.2).

📖 Source: Elinor Ostrom: Governing the Commons — The Evolution of Institutions for Collective Action (Cambridge University Press, 1990)

6.5 International comparison

European Union: turnover-proportionate caps. The European Union’s directive on the protection of the environment through criminal law, renewed in 2024, requires the maximum fine for legal persons to be at least 5 per cent of total worldwide turnover or EUR 40 million for the most serious offences, and at least 3 per cent or EUR 24 million in other cases. The revised Industrial Emissions Directive expects a cap of at least 3 per cent of annual EU turnover for the most serious violations. The turnover-proportionate limit of the Hungarian administrative fine follows the same logic: the fine is adjusted to the size of the company.

United States: a public enforcement database. The US federal Environmental Protection Agency (EPA) publishes, site by site, inspections, violations found and fines imposed. Based on the data, residents and investors alike can compare a plant’s track record. Proposal 3.1 is the domestic counterpart of this practice.

United Kingdom: enforcement reports. The Environment Agency in England regularly publishes its enforcement actions and the sanctions imposed. Here the publicity of enforcement data also serves the authority’s accountability, which is what proposal 3.2 aims at.

Environment and climate

  • K3 — Pollution monitoring
  • K4 — Encouraging the circular economy

Economy

  • G5 — Competition policy and anti-monopoly
  • G20 — Economic-policy impact assessment system (Drucker audit)

Transparency and anti-corruption policy

  • A1 — Public-money dashboard

Proposed new programme point: Environmental enforcement report and public fines register — annual inspection, processing-time and payment indicators, and a quarterly updated, machine-readable register of final fines — for the Environment and climate area.

6.7 List of sources

Press sources (MIAK press monitor, 25 October 2026 — topic 10):

Knowledge-base references (literature):

  • 📖 Nicholas Stern: The Economics of Climate Change: The Stern Review (2007)
  • 📖 Robert Klitgaard: Controlling Corruption (1988)
  • 📖 Elinor Ostrom: Governing the Commons — The Evolution of Institutions for Collective Action (1990)

MIAK internal materials:

  • MIAK policy area: Environment and climate (programme points; programme point ID: K3, K4)
  • MIAK policy area: Economy (programme points; programme point ID: G5, G20)
  • MIAK policy area: Transparency and anti-corruption policy (programme points; programme point ID: A1)
  • MIAK press monitor, 25 October 2026 — topic 10, score: 64/100

Supplementary public data sources:

  • Hungarian Official Gazette (Magyar Közlöny), 9 October 2026 — government decree on raising the amount of environmental fines
  • National Environmental Information System (OKIR)

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