POLITICS & INSTITUTIONS - POLITICS

CO2

Government to incentivise low emissions company cars from 2023



The new benefits calculation rate will apply as of 2023. In concrete terms, this rate will be 0.5% for cars with low electrical energy consumption, less than or equal to 18kWh/100km. Photo: Mike Zenari

The new benefits calculation rate will apply as of 2023. In concrete terms, this rate will be 0.5% for cars with low electrical energy consumption, less than or equal to 18kWh/100km. Photo: Mike Zenari

Transport minister François Bausch (Déi Gréng) presented a draft set of regulations for company car benefit schemes on Tuesday, which will aim to incentivise the use of zero or low CO2 emission vehicles.

The current regime for calculating the benefits will continue to apply for new leasing contracts concluded until 31 December 2021. During 2022 this regime will also apply to all new registered cars and for which a leasing contract has been concluded after the end of 2021.

The new benefits calculation rate will therefore apply as of 2023. In concrete terms, this rate will be 0.5% for cars with low electrical energy consumption, less than or equal to 18kWh/100km. The same rate will be increased by 0.2% for the majority of car categories with CO2 emissions above 80g/km. For cars in emission categories up to 80g/km, there will be no adjustment of the currently applicable rates. The maximum rate of 1.8% will apply to company cars with CO2 emissions above 130g/km (currently 150g/km).

"This maximum rate corresponds approximately to the average threshold from which a company car is no longer financially advantageous for the employee compared to acquiring the car in his or her own name or by private leasing," said Bausch.

Newer regulations in 2025

The regulations will also be adapted for newly registered company cars from 1 January 2025. The flat-rate scheme will therefore be simplified and would be particularly favourable to cars with zero CO2 emissions. The 0.5% rate will no longer apply, so a 1% rate will be set for pure electric cars whose electric energy consumption does not exceed 18kWh/100km and for hydrogen fuel cell vehicles.

“On the one hand, it is a great advantage for people who choose an electric vehicle compared to a diesel vehicle. Going from 0.5% to 1.8% is three times more.”, said Gerry Wagner, spokesman for the House of Automobile.

Wagner highlighted that the government intended to go much further in its first draft but after several talks between state representatives and those from the automobile industry, a compromise was found.

It remains to be seen how this compromise will translate into Luxembourg’s climate targets. The grand duchy has pledged to reduce emissions by 55% by 2030 and become carbon neutral by mid-century. Greenhouse gas emissions in the EU dropped by nearly a quarter between 2008 and 2020, according to Eurostat, but in Luxembourg they were down by a meagre 2%. Transportation and storage was Luxembourg’s biggest climate killer, growing from 3.6m tonnes of CO2 equivalent in 2008 to 5.3m in 2019, dropping to 4.6m tonnes in 2020.

Additional reporting by Jérémy Zabatta