Press releases

Luxembourg, which holds the EU’s rotating presidency, is responsible for the EU’s highest per-capita level of fossil fuel subsidies. At €3,415 per person every year, Luxembourg’s fossil fuel subsidies are nearly one thousand euro higher than the next worst country, Bulgaria, at €2,479 per person, according to a recent IMF study [1].

€3,415 a year: Luxembourg’s level of fossil fuel subsidies per person

Drawing attention to the data, Green Budget Europe is urging Luxembourg to reform its transport fuel subsidies in advance of climate change negotiations this December. “To retain its credibility, and maintain that of the EU, Luxembourg needs to cut its fossil fuel subsidies before it enters December’s climate change negotiations holding the EU Presidency”, said James Nix, Director of Green Budget Europe.

Luxembourg’s ultra-low taxation of transport fuel is its single highest fossil subsidy, the IMF study shows. Domestic transport only accounts for 20% of Luxembourg’s total fuel sales [2]. “Luxembourg continues to use ultra-low fuel taxes to attract traffic from a very wide catchment”, James Nix said, adding that: “trucks criss-crossing Europe are travelling significantly longer distances in order to pass through Luxembourg because its low tax rates draw them there to fill up”.

“Luxembourg is unjustly enriching itself: in fuel tax alone, Luxembourg accumulates an additional €1,400 per citizen every year because of low fuel tax rates, revenue that is then denied to its neighbours.” Luxembourg takes significant revenue from Belgium, France, Germany, Italy, the Netherlands and the UK, Nix said.

“Luxembourg has been urged to raise its fuel taxes in a string of reports for more than 10 years now, from the OECD, the European Commission, the IEA and others. Luxembourg fails to tax coal (and coke), applies discount rates to LPG, and only taxes about 40% of its natural gas use. “Unless it undertakes reform, the Luxembourg Presidency will remain a worst case example going into the Paris negotiations”, according to GBE.

“Luxembourg is relying on revenue that is unstable in the long term. This creates internal risk. Luxembourg politicians also face external risk because the longer inaction persists, the greater the risk of Luxembourg being seen as a fuel tax haven”.

Luxembourg’s low fuel taxes are a key reason for the Duchy being Europe’s worst performer on carbon emissions. [3]

Luxembourg is off target by some 23 percentage points. Instead of cutting emissions by 20% before 2020, Luxembourg is on course to increase them by 3 per cent. “Luxembourg has made no progress with respect to taxation on energy products for transport” and this is a key reason for very high climate emissions according to the Commission. [3]

“The period of its EU Presidency is a time for reform, a period Luxembourg can turn from a laggard to a leader”, James Nix concluded.

Notes to Editors

The Member States with the next highest subsides after Luxembourg are Bulgaria, Czech Republic, Poland and Denmark.

Bulgaria has an annual fossil fuel subsidy level of €2,480 per person in 2015. The lion’s share of these subsidies are the enormous incentives to coal plants – about €16 billion annually – or €2,213 per person. These massive coal subsidies have contributed to make Bulgarian electricity prices the lowest in the EU (€0.090 per kWh), while making its level of energy use one of the highest.

Annual fossil fuel subsidies in the Czech Republic (€1,522 per person) and Poland (€1,299) are the third and fourth highest in Europe respectively. Both countries heavily subsidise coal. Fossil fuel subsides in the Czech Republic have risen sharply, going from €250 per person in 2011 to €1,522 in 2015.

Denmark, fifth worst in the EU, stands out for its disproportionate subsidisation of petroleum. Crude oil subsidies cost the Danish government almost €4 billion in 2015, amounting to €692 person of the total €936 per capita.

Sixth-worst is Belgium (€828), followed by Lithuania (€697) and Romania (€645). Please see table below.

According to a recent Oxford paper, fossil fuel subsidies have been a major contributor to at least one quarter of climate warming pollutants emitted in the 30 years to 2010, if not directly responsible for this 25% [4].

Media coverage

Luxembourg urged to radically slash fossil fuel subsidies: NEWS: Tiny country one of EU's largest per capita s… http://t.co/3KavMHLJMK

— Climate Home (@ClimateHome) September 22, 2015

Luxembourg under fire for high fossil fuel subsidies while leading EU #climate talks http://t.co/HTFmv3qQuC #COP21 pic.twitter.com/KglNftyVHM

— EurActiv Energy (@eaEnergyEU) September 22, 2015

References

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63 policy makers, leading academics, businesses and civil society call for an innovative reform of the EU budget Member States discuss harmful subsidies on Mon 26 Oct – but none are meeting their commitments

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