Practical guide

A rundown on all energy crisis subsidies

On 31 March the government released details on the upcoming inflation relief package. Photo: © SIP / Jean-Christophe Verhaegen

On 31 March the government released details on the upcoming inflation relief package. Photo: © SIP / Jean-Christophe Verhaegen

Not all of the support measures announced by the government last week will be available to everyone at the same time. Some can be applied for in the coming weeks, such as the Fit4Sustainability programme, while others will require a bill to be passed first.

On 31 March the government released details on the subsidies package for businesses and households aiming to counteract the rise in prices. Several subsidies will be made available with different possible recipients, time of implementation and application procedure. Here is a breakdown of all the benefits.

Aid to businesses

- State guarantees to facilitate access to bank loans for businesses

This aid replicates the model put in place at the beginning of the pandemic, but this time it will cover “up to 90% of the loan”. The notion of "up to" in the tripartite agreement suggests that a calculation will be made to determine how much of the state guarantee can be covered. “In principle, it will be 90% for everyone,” says Bob Feidt, a civil servant within the economy ministry's aid and financing department. There are no numerical eligibility criteria and it will concern “virtually all companies that can demonstrate that they have liquidity problems following the war in Ukraine”.

A call will be made to banks via the Luxembourg bankers' association (ABBL) and those who wish to participate will be able to do so, as was the case for the state-guaranteed loan linked to covid. Six banks were involved back then: Banque et Caisse d'Epargne de l'Etat (BCEE), BGL BNP Paribas, Banque Internationale à Luxembourg (BIL), Banque de Luxembourg, Raiffeisen and ING. A total of 415 state-guaranteed loans were granted between March 2020 and December 2021 in relation to the pandemic.

In order to be implemented, this aid must be the subject of a draft law and must be validated by the European Commission. The finance and economy ministers are currently working on the text and hope to table it in parliament and in Brussels by the end of this week or early next week. After that, “it will depend on the speed with which the Council of State gives its opinion and the vote in parliament”. The aid should therefore not arrive before the end of the month.

- Aid to compensate for part of the additional costs linked to the rise in electricity and natural gas prices

The support will be “between 30% and 70% of the additional cost exceeding the doubling of natural gas and electricity prices”. In concrete terms, if a price has risen from €10 to €22 per KWh, between 30% and 70%, it will be covered.

Companies whose energy purchases represent at least 3% of their production value/turnover are eligible. Discussions are underway to decide which one it will be.

The aid will go beyond the 30% of the extra cost, exceeding a doubling for companies making a loss and whose eligible costs are at least equivalent to 50% of that loss. They can be from industry, crafts or commerce.

Again, legislation and European validation are needed in the coming weeks.

- Specific aid for transport, construction and food

The government “undertakes to analyse the possibility of opening the scope of application to the road haulage sector, the construction sector and the food industry”, reads the text of the tripartite. This isn't part of the rise in energy prices subsidies because it only concerns electricity and gas. However, the government wants to propose specific aid for transport, construction and food, which are affected by the rise in fuel prices. This does not mean necessarily that they are not eligible for the previous aid for gas and electricity, if they meet the criteria.

The economy ministry is looking into details of the fuel subsidy and cannot yet give a percentage take-up or eligibility criteria.

It is not yet clear whether all the aids will be the subject of a joint bill or whether each will have its own text. However, these two aids to companies to cope with energy costs should be part of the same bill. Due to several outstanding issues for the fuel aid, this could take a little longer than for the state guaranteed loans. In any case, they will have to be applied for in due course on guichet.lu.

- A Fit4Sustainability programme

To support companies in their efforts to reduce their carbon footprint, this programme is to be set up with Luxinnovation. It will allow co-financing of costs related to environmental research. It amounts to 70% for small companies (less than 50 employees and less than €10m in turnover or annual balance sheet), 60% for medium-sized companies (less than 250 employees and less than €50m in turnover or €43m in terms of the annual balance sheet) and 50% for large companies. The amount of aid will be a capped at €100,000 with up to 100% of the cost of the environmental research covered.

The scheme operates within the framework of the existing environment act and does not require additional approval. The aid could be applied for by the end of the month.

- A scheme to compensate for the extra costs of the greenhouse gas emission allowance trading system (ETS) for the period 2021-2030

This subsidy aims to avoid “carbon leakage” (when an industry relocates its production outside the European Union to avoid complying with its standards) and thus limit pollution at the global level, Luxembourg is planning to provide aid to compensate for the additional costs linked to the ETS. Their calculation is “complex”, but will depend on the sector of activity, the energy consumption and the additional cost.

The text for this aid is to be tabled within two weeks.

- Setting up a future aid scheme for the acquisition of clean vehicles

In addition to the forthcoming aid scheme for the installation of charging infrastructure for electric vehicles, the government "undertakes to introduce aid to encourage companies to gradually convert their fleets to zero-carbon vehicles”. There are few details available on this at the moment. “These are things we are planning for the medium term, because they depend on a European regulation to be adopted in June.” So the aid is not expected to arrive until early 2023.

The same applies to the other aid measures announced for the medium term, such as the aid to make up the difference in profitability between a carbon-based and a decarbonised project, the aid to facilitate the use of renewable electricity contracts and the risk-sharing mechanism for decarbonisation projects. €35,000 per primary producer to compensate for the additional costs associated with the rising prices of energy, fertiliser and input prices.

Aid to households

- The energy tax credit

This is the main aid for households, both resident and cross-border. If a second index-linked tranche is triggered in August 2022, as planned by national statistics bureau Statec, it will be postponed until April 2023. In the meantime, households will be able to benefit from a tax credit of €84 for salaries and pensions between €936 and €44,000 per year. The same applies to people receiving Social Inclusion Income (SII) or Severely Disabled Income (SDI). From €44,000 per year onwards, it gradually decreases to zero for wages and pensions exceeding €100,000 per year.

To find out exactly how much tax credit in euros you will be entitled to each month, you need to do the following calculation according to the finance ministry:

84 - (applicable income - 3,667)*(84/2,000), if you earn between €3,667 and €5,667 per month.

76 - (applicable income - 5,667) * (76/2,667), if you earn between €5,667 and €8,334 per month.

Below that, it is 84 euros, above that, 0.

The finance ministry confirmed to Delano's sister publication Paperjam that cross-border workers will benefit from this. However, nothing has been said about jobseekers. It also states that it is a net amount that employees will receive in addition each month. There will be no need to request it, it will be done automatically. The sum will be “credited to the employee by the employer if he or she has a tax deduction slip. For Revis recipients, it is paid by the State.”

As for the dates, the tax credit was announced to run from August 2022 to March 2023 inclusive, if the indexation does get triggered in August 2022. But what would happen if that happened earlier or later? “In principle, the tax credit should compensate for the loss of purchasing power over the period of the index,” the ministry replied. It is unclear if an appropriate compensation will be offered in case an indexation is triggered in June or, in the event of a later date, whether the compensation and the deferral of the index would still go until March 2023, or later.

- A reduction of 7.5 cents per litre of fuel (diesel, petrol) and heating oil

This aid will be available until July 2022 for fuel and until the end of 2022 for heating oil. But the finance minsitry hasn't clarified when the subsidy will start being applied as a bill needs to be passed first.

- Support for housing

Resident households will also be able to count on several aids. For example, rents will be frozen until 31 December 2022. A rent subsidy of up to €400 is to be granted to all tenants up to the median standard of living from 1 August 2022. The adjustment of the PRIMe house renovation subsidy scheme, which has already been passed, is to come into force in the next few days with retroactive effect to1 1 January 2022. The additional support for low-income households, or "social top-up", is extended to households in decile 5 and the maximum amount of the improvement premium is increased to 100% of the PRIMe House support.

This story was first published in French on Paperjam. It has been translated and edited for Delano.