Luxembourg to deploy carbon tax from 2021

Claude Turmes, in Luxembourg, 9 October 2018. [Photo: EPA-EFE/JULIEN WARNAND]

Luxembourg will implement a levy of €20 per tonne of carbon from 2021, as part of its efforts to slash greenhouse gas emissions by 55% by the end of the next decade.

According to the outline of the Grand Duchy’s energy and climate plan (NECP), the tax will increase to €25 in 2022 and €30 in 2023, generating up to €150 million in additional revenue. 

Energy Minister Claude Turmes, a former Green MEP, and Environment Minister Carole Dieschbourg said on Friday (6 December) that half the money would be used to help poorer households adapt.

Luxembourg will be keen to avoid any kind of backlash similar to France’s gilets jaunes protest movement, which was sparked in part by rising fuel prices.

The remaining money will be distributed among green projects. Government estimates suggest that motorists stand to pay an extra €70 per year, while home heating systems that run on oil will have to fork out around €80.

If officially adopted by the government during the week leading up to Christmas, the carbon tax will operate in conjunction with the EU’s bloc-wide emissions trading scheme (ETS), which does not cover emitters like road transport, buildings or shipping. The price of carbon is currently trading at around €24, down from a peak of €29 in July.

Implementing a carbon tax is the latest in a series of additional measures the EU microstate is considering. In November, Luxembourg urged the new European Commission to start taxing aviation more.

Nine EU countries urge new Commission to tax aviation more

A coalition made up of Belgium, Bulgaria, Denmark, France, Germany, Italy, Luxembourg, the Netherlands and Sweden urged the next European Commission on Thursday (7 November) to propose new measures on aviation pricing.

According to the mission letter of Transport Commissioner Adina-Ioana Vălean and a draft version of the upcoming European Green Deal, aviation could be hit with new levies but there have been no tangible commitments to a fuel tax or extra ETS coverage.

The Green Deal will be published after midday on Wednesday (11 December) and although changes to the draft are expected, EURACTIV understands that the proposals on plane travel will not alter significantly.

Planning for the future

Under its so-called NECP, Luxembourg should hit a 55% overall climate goal, increase energy efficiency to around 44% and boost renewable energy levels to 25%. Most of that clean energy should be produced in-house but roughly 5% will be imported.

Every member state is obligated by new energy rules to produce an in-depth climate plan for 2030. Draft roadmaps were submitted in January and final versions are expected by the end of this month.

Luxembourg Prime Minister Xavier Bettel will on Thursday (12 December) be one of the 25 leaders hoping to convince the Czech Republic, Hungary and Poland to back an ambitious strategy aimed at decarbonising the EU economy by 2050.

That plan needs the unanimous agreement of all 28 member states to enter into force at the beginning of 2020 but the Commission has confirmed it will push ahead even if there is no consensus, although that plan B option would mean a significant time delay.

(Edited by Benjamin Fox)

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