Carbon tax found ineffective in Luxembourg

The tax was introduced in 2021. So far, it has brought in about 279 million euros to the state coffers. The rate of the tax is scheduled to increase until 2026. However, a recent study found that the efficiency of the tax is steadily decreasing. There are several reasons for this.

For example, the fewer motorists use vehicles with a VMT, the less revenue will be collected for the budget. This process has already begun with the strong development of the electric vehicle sector.

Another reason why the tax does not limit CO2 emissions on the territory of the country, although it should do just that — "fuel tourism". Despite price increases, the Grand Duchy's gas stations are still very attractive to its neighbors in the Greater Region. As a result, greenhouse gas emissions remain quite high, even though Luxembourgers are actively adopting electric cars.

At the same time, there is talk of gradually increasing the tax from 30 euros per ton of CO2 to 200 euros per ton. It remains to be seen whether such a project will be realized and whether it will be effective in the fight against emissions into the atmosphere.