Notably, in July 2025, the government approved a new action framework for deploying carbon capture, utilisation, and storage (CCUS) and carbon dioxide removal (CDR) solutions. The Ministries of the Environment, Climate and Biodiversity, and the Economy announced this initiative as a critical step for Luxembourg to reach climate neutrality by 2050.

The new framework outlines seven key strategic measures to support the responsible and gradual adoption of CCUS and CDR. These measures include establishing a clear legal framework, fostering cross-border cooperation, developing a new technology sector, implementing industrial-scale projects, and involving the financial sector. An inter-ministerial steering committee has been established to oversee implementation and will meet quarterly. To ensure broad stakeholder engagement, the government will launch a national task force, “Taskforce CCUS and CDR,” by the end of 2025, bringing together public and private actors.

While the country’s opposition to geological storage on its own territory persists due to its unsuitability, the new framework recognises the importance of cross-border storage in a partner country. The NECP update is now assessing the potential of CCUS and outlining specific conditions and sectors for deployment.

The country’s regulatory framework and associated incentives for carbon removal currently focus on nature-based solutions. As of May 2025, new subsidy supports for the LULUCF sector are available to private land and forest owners. The Klimabonus Bësch subsidy supports private forest owners, while the Klimabonus Mouer a Wiss provides support to owners of wetlands and grasslands, with the goal of preserving ecosystem services.

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

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. 

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). 

Since the 2020 Climate Law predates the current wave of carbon removal legislation, it only alludes to CDR where it concerns the implementation of EU law. Its article 29 (para. 2) duly implements articles 3d (4) and 10 (3) of the ETS Directive on the use of proceeds from allowance auctions, mostly through the Innovation Fund, including on aspects relevant to carbon removal – except when it comes to geological CO₂ storage. More specifically, article 29 of the Climate Law incompletely implements the sections of the directive relevant to carbon removal, listing among the permissible uses of funds measures that aim to (…) to promote forestry (…) (3°) and forestry-based carbon removal in the EU (5°), but notably excluding the environmentally safe capture and geological storage of CO₂ (…). It is worth noting that the new CCUS/CDR action framework and updated NECP are non-legal policy documents that are expected to guide and influence future legislative changes.