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Luxembourg carbon tax

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Overview
Type: Carbon tax
Status: Implemented
Jurisdiction covered: Luxembourg
Allocation: Set price 
Price Setting: Set price trajectory 
Covered Gases:
  • Co2 
Covered Fuels:
  • Diesel
  • Other oil products
  • Gasoline
  • Kerosene
  • Lpg
  • Natural gas
  • Coal 
Point of Regulation: Upstream 
Offsets: Not permitted 
Description

Luxembourg implemented its carbon tax (taxe CO2) on fossil fuels as a way to create a minimum carbon price similar to those in neighboring countries. Luxembourg's carbon tax policy complements the EU ETS, which does not cover emissions from transportation, buildings and shipping. Imposition of the tax was accompanied by increased social support for low-income earners. Some of the revenues accrue to a climate and energy fund.

Recent Developments

As of 2025, the national carbon tax remains set at €40 per tonne CO2. The government has rolled out a new social-compensation mechanism alongside the carbon tax – under its draft Social Climate Plan – to offset the burden on lower-income households.

Coverage

Luxembourg's carbon tax applies to direct (scope 1) CO2 emissions from fossil fuels used for transportation and heating (gasoline, diesel, fuel oil and natural gas). Fossil fuels used for electricity generation are exempt from the carbon tax. Fuels used in industrial processes are also exempt.

Pricing and Allocation Approaches

Set price 

Compliance Approaches

Monthly 

Relation to Other Compliance CPIs

Not Specified

Covered Sectors
COVERED
Industry Industry
Mining and extractives Mining and extractives
Transport Transport
Buildings Buildings
Covered Emissions
72% Jurisdiction Emission
0.01% Global Emission

Covered : Uncovered:
Price
US$46 (€40)
US$40.1 - US$58.5 Range
15.69% Up Arrow Change

Government Revenue
US$318M (€282M)
2025 Year
23.27% Up Arrow Change