Factsheet for measure
LU-2021-1/3428
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Updated
– measures in Luxembourg
Carbon tax
Taxe carbone
Background information
The law of 15 December 2020 on the climate, amending the amended law of 31 May 1999 establishing an environmental protection fund, introduces a carbon tax. This tax is part of the first integrated national energy and climate plan, designed to combat global warming more aggressively.
The political objective is to reduce greenhouse gas (CO2) emissions by 55% by 2030, improve energy efficiency by 40-44% and produce 25% renewable energy.
Content of measure
The CO2 Tax came into force on 1 January 2021. It sets a minimum carbon price that applies to motor fuels (petrol and diesel), heating oil and gas. By taking into account the cost to the climate of fossil fuels, this tax will help accelerate the switch to CO2-free mobility and heating systems powered by renewable energies, in order to speed up the ecological transition and improve air quality. The ‘polluter pays’ principle, which underpins this step forward, establishes a system whereby the costs resulting from measures to reduce pollution are borne by the polluter. The starting price will be €20 per tonne of CO2 emitted. For diesel, for example, this represents around 5 c per litre. The rate will rise gradually over the next few years, reaching €25 per tonne of CO2 emitted in 2022 and €30 per tonne of CO2 emitted in 2023.
The revenue from this tax will be distributed in a balanced way to finance concrete measures to combat climate change and tax and social measures that, in the interests of social equity, will directly target low-income households: tax credits for employees (CIS), pensioners (CIP) and the self-employed (CII) will rise from €600 to €696 from 1 January 2021. In addition, the cost-of-living allowance will be increased by 10% from the same date.
Updates
The following updates to this measure have been made after it came into effect.
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28 July 2023
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At its meeting on 28 July 2023, the Council of Government approved a bill and a Grand Ducal regulation providing for an annual increase in the price of carbon of €5 per tonne of CO2, reaching €45 per tonne in 2026. This is in line with the decision by the Council of Government on 21 July 2023 to update the integrated national energy and climate plan (PNEC). These actions are in line with the government's climate policy, which aims to achieve the targets for reducing greenhouse gas emissions by 2030
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03 March 2023
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Price inflation led to the granting of tax credits for employees, pensioners and self-employed workers of €96 in order to offset the impact on these taxpayers. Following the agreement reached between the Government, the Union des Entreprises Luxembourgeoises and the trade unions OGBL, LCGB and CGFP at the meeting of the Tripartite Coordination Committee on 3 March 2023, the sum of 96 euros allocated to compensate for the CO2 tax was dissociated from the CIS, CIP and CII to form a fully-fledged CO2 tax credit. The Act of 5 July 2023 increased the CO2 tax credit by a further 48 euros, representing a 50% increase, giving an overall CO2 tax credit of 144 euros from 1 January 2024. This applies to a gross salary, a net profit of €936, or a pension of €300 up to an annual income of €40,000. With the entry into force of the new law, this amount will be increased to 168 euros. The tax credit is gradually reduced up to an annual income of €80,000, after which it is no longer applicable
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Use of measure
No information available.
Target groups
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Workers
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Businesses
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Citizens
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Applies to all workers
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Applies to all businesses
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Applies to all citizens
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Actors and funding
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Actors
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Funding
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National government
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No special funding required
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Social partners
Social partners' role in
designing the measure
and form of involvement:
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Trade unions
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Employers' organisations
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Role
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No involvement
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No involvement
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Form
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Not applicable
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Not applicable
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Social partners' role in the
implementation, monitoring and assessment phase:
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Only trade unions
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Main level of involvement: Unknown
Involvement
The trades union have had a role in the measure only within the framework of the Tripartite of 3 March 2023, aimed in particular at reducing the impact of price trends on workers and households.
Social partners had no role in drafting the text of this specific measure.
Views and reactions
Social partners believe that the carbon tax measures are not necessarily relevant, or that their effectiveness is overestimated, and they call into question the principle of social justice in the context of the ecological transition.
In addition, they question the "polluter-pays" principle, which can be applied to individuals without any financial, ideological or political consequences for those who, in their view, are really responsible, i.e. the groups and holders of capital in the fossil fuel and related industries (http://www.ogbl.lu/taxe-sur-le-co2-et-principe-pollueur-payeur/)
Sources
