LUXEMBOURG Trends and Developments Contributed by: Nathalie Prüm-Carré, Inès Goeminne and Georges Gratia, Elvinger Hoss Prussen
Elvinger Hoss Prussen 2, Place Winston Churchill L-1340 Luxembourg Tel: +352 446644 Fax: +352 442255 Email: elvingerhoss@elvingerhoss.lu Web: elvingerhoss.lu
Climate New emissions trading system (ETS 2)
Eco-Points and Ecological Compensation The Law of 18 July 2018 on the protection of nature and natural resources, as amended, established an ecological compensation system and was recently amended by the Law of 11 July 2025, which has extended the transitional period applicable to com- pensation measures. Ecological compensation system Ecological compensation aims to repair damage caused to nature by development or construction pro- jects. It applies where a project causes the destruction of biotopes, habitats of community interest or habitats of species of community interest. In this situation, the project owner is required to compensate for the eco- logical damage caused by their project. In principle, the project owner is responsible for imple- menting the compensation measures. However, Lux- embourg has put a mechanism in place that allows the project owner to be exempted from this obligation by paying a tax. The implementation of compensation measures is organised by the State and the munici- palities through compensation pools financed by a reimbursement tax paid by the project owner. Compensation is based on an eco-points system, which makes it possible to assess the ecological dam- age caused and set the amount of the correspond- ing tax. A specific register records and accounts for the compensation measures and land relating to the compensation pools in eco-points, as well as the debit corresponding to the reimbursement taxes.
The Law of 24 July 2025 amending the Law of 15 December 2020 on climate came into force on 26 July 2025, with the exception of certain legal provisions that apply retroactively. It is part of the European cli- mate policy and aims to implement several reforms adopted at EU level into national law. The text focuses on the emissions trading system (ETS) – the corner- stone of the climate policy of the European Union and its member states. This reform has implemented Directive (EU) 2023/959 of the European Parliament and of the Council of 10 May 2023, and has introduced a new autonomous emissions trading system applicable to the building, road transport, power, manufacturing and construc- tion sectors in order to ensure reductions in green- house gas emissions in these sectors. The Law of 24 July 2025 has introduced a legal frame- work for the monitoring and reporting of ETS emis- sions. From 2025 onwards, regulated entities will be subject to an annual obligation to monitor ETS emis- sions in relation to the quantities of fuel released for consumption. ETS emissions must then be reported to the relevant minister during the following year, start- ing in 2026. The obligations under ETS 2 apply to sup- pliers (known as “regulated entities”) who supply fuels to the sectors concerned. At the same time, the law also provides for the devel- opment of a “social climate plan”, as required by Regulation (EU) 2023/955. This plan includes a set of measures and investments to address the impact of carbon pricing on vulnerable groups.
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