A key measure in Luxembourg’s integrated national energy and climate plan (PNEC), the carbon tax applies to fuels, heating oil and gas, and imposes a tax on CO2 emissions. On Friday 28 July, the government decided to gradually increase the tax each year. “The government council has approved a bill and a grand ducal regulation providing for an annual increase in the price of carbon of €5 per tonne of CO2,” said a press release.

The aim is to achieve a tax of €45 per tonne of CO2 emitted by 2026. This decision is part of the climate policy aimed at achieving the targets for reducing greenhouse gas emissions by 2030.

To mitigate the impact of this increase on low-income households, the bill also provides for “an increase in the additional CO2 tax credit of €24, bringing it up to a ceiling of €168.” Finance minister (DP) explained, “I am keen to further mitigate the impact of the carbon tax increase on low-income households, in parallel with our national strategy to meet our environmental targets. That’s why, in the next few days, I will be tabling this bill in the Chamber of Deputies, which will further increase the CO2 tax credit to €168.”

The Act of 5 July 2023 introduced an overall CO2 tax credit of €144, effective from 1 January 2024. “This is applicable for a gross salary income, 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. The tax credit will gradually decrease up to an annual income of €80,000, after which it will no longer apply,” said the press release.

This story was first published in French on . It has been translated and edited for Delano.