In a Nutshell

  • Luxembourg is aiming for zero net greenhouse gas (GHG) emissions by 2050. As a secondary objective, Luxembourg is also pursuing a 55% decrease by 2030, compared to 2005 levels, in sectors not covered by the European Emissions Trading System. A 20% reduction had been achieved as of 2021 and the government has set out a timeline for expected reductions by sector. 
  • Achieving these objectives requires a drastic acceleration in the pace of reductions, which will be made even more challenging by a continuously growing population. 
  • The high level of climate ambition is at odds with the near absence of governmental support for novel carbon dioxide removal (CDR) methods in Luxembourg. To achieve net zero emissions, the country is implicitly relying on the trading of GHG emissions credits, with soil- and forestry-based CO2 removals on its own territory expected to only play a marginal role (0.4 Mt CO2e / year). 
  • A bill to foster the development of novel CDR methods was presented to parliament in late 2022 by the Pirate Party, a party outside of the ruling coalition. The bill puts forward the concept of a negative emissions tariff. It is unlikely to make progress in this legislative period, which ends in October 2023. 

Role for carbon removal in national climate policy

Until 2022, carbon removal played virtually no role in Luxembourg’s climate policy, as it is focused on emissions reductions. The 2020 National Energy and Climate Plan (NECP) made no mention of CDR. By contrast, the current draft NECP includes 16 measures (out of 197) where carbon removal and/or sequestration are up for consideration. Only one of these measures relates to “novel” CDR methods, and it remains at a preliminary stage. The only carbon removal pathway that currently benefits from a regulatory framework and associated incentives is forestry (with a marked emphasis on “storing” carbon in dead wood), alongside existing incentives for low-till farming. 

 

Below is an overview of relevant measures in the draft NECP from Luxembourg. 

  DAC  Forestry  Wood products  Dead wood  Soil  Biochar 
Implemented    808, 809    805, 808, 809  815, 816   
Planned    806  807  803, 804  811, 812   
Considered / in analysis  522  810      817, 818  819, 821 

 

Woody biomass is now subject to a hierarchy/ sequence of uses: 1) wood products, thereby promoting material durability, 2) reuse, 3) recycling, 4) use as an energy source and 5) disposal. 

 

The lone “novel CDR” measure in this list relates to a yet-to-be-established public-private working group to explore the role that DAC and CCS could play in decarbonising the Luxembourg economy. 

 

In short, Luxembourg has not yet positioned itself in any of the promising roles it could play in the emerging CDR ecosystem, although in many respects it is uniquely positioned to do so: 

  • While Luxembourg cultivates an extensive network of partner countries (both in the EU and in the developing world) that it leverages to source renewable energy through cooperation mechanisms and statistical transfers, it has not started to do so for carbon removal. The country’s opposition to geological storage is premised on the fact that its territory is unsuitable for it, but ignores the fact that geological storage can be performed in a partner country. 
  • The Luxembourg economy is dominated by its thriving and diverse financial ecosystem which covers many aspects that are essential to CDR (insurance, reinsurance and venture capital are needed immediately while some custody, settlement and post-settlement infrastructure will be needed if carbon removals are to attain institutional maturity). However, there has yet to be any public discussion on how this financial sector could promote CDR. 
  • Likewise, the Grand Duchy’s financial sector has led to a strong risk management culture that emphasises robust governance, checks and balances, multiple lines of defense against failure and other aspects of creating public trust. This collective mindset is directly transferable to the CDR sector, where public acceptance still needs to be earned. 
  • While Luxembourg has historically promoted circular economy strategies in the EU, the current formulation of its own strategy only tangentially mentions the reuse of CO2 emissions (through its participation in the GROOF project). 

Support for R&D and Innovation

The 2017 R&D&I law (Loi du 17 mai 2017 relative à la promotion de la recherche, du développement et de l’innovation), is technology-neutral and lays out various subsidy programmes, which may in principle support CDR projects. Among the research directions currently supported, the most relevant ones are “wood” and “low-carbon-footprint construction materials”, which potentially could include, for instance, concrete enriched with captured CO2. 

 

Likewise, the “Environmental Sensing & Modelling” unit of the Luxembourg Institute of Science and Technology may potentially find applications in various CDR pathways such as enhanced weathering, forestry or ocean alkalinisation enhancement. 

On the horizon

Bill n° 8096, also known as the Luxembourg Negative Emissions Tariff (L-NET), was introduced on 9 November 2022 to create a financial aid for investments in projects related to negative emissions technologies. If adopted, it would create direct subsidies for mid-size projects in two categories: CO2 air capture and reuse, and CO2 sequestration in durable materials or geological or marine reservoirs. Inspired by the feed-in tariffs that have accelerated the spread of renewable energy in many countries, its subsidy calculation formulas include a degressive factor to boost adoption and development by rewarding early movers. 

 

Whilst the national government has not yet given the bill much attention, the bill has garnered significant attention in CDR circles, generating both high expectations and goodwill towards the country. Its promoters now need to translate this reaction into domestic support while aligning the bill with EU state aid rules. These efforts are likely to extend beyond the current legislative period, which ends in October 2023. 

Contributors

Targets

  1. Net zero target: 2050
  2. Net Negative Target:

    No

  3. First interim target: 2030
  4. Type of interim target: Emissions reduction target
  5. GHGs covered: Carbon dioxide and other GHGs
  6. Separate target for emission reduction and removals: No
  7. Comprehensive CDR Target: no
  8. CDR Target for Conventional Removals: yes
  9. CDR Target for Novel Removals: no
  10. Historical emissions: No
  11. Annual reporting mechanism: Annual reporting

CDR Plans

  1. Plans for carbon removal (CDR): Yes (unspecified)
  2. Planning to use external carbon credits: Yes
  3. Conditions on use of carbon credits: a

Public consultations and upcoming policies

  • No climate-related public consultation is currently planned as the country just closed its consultation on the upcoming draft update of the National Energy and Climate Plan (NECP). Similar consultations are organised on average about every other year: 
    • on land use in 2018, 
    • Luxembourg in transition / Biergerkommitee in 2020, 
    • Klima-Biergerrot in 2022, which informed the current draft PNEC. 

Key stakeholders