On 16th August 2023, Luxembourg Commissioner of Maritime Affairs and the Minister of Economy Franz Fayot held a press conference introducing Luxembourg’s “green shipping” initiative to support the shipping industry’s green transition within the European and international regulatory framework.
Following a brief review of the Luxembourg Maritime Registry’s development since its establishment in 1990, the conference recalled both the European and IMO objectives to reach climate neutrality by 2050[1], as well as the Emission Trading System (ETS) coming into force in 2025.[2]
Two key incentives to advance shipping sustainability on a national scale were announced (i) adaptation of registration fees and (ii) increased tax credit for investment in “green” ships. They will apply as follows:
- Registration fees: ships reducing their greenhouse gas emissions (e.g. ships predominantly using biofuel or gas propulsion) will benefit from a gradual reduction rate of their registration fees up to a maximum of 80% (for e.g. ships with electric, sail or hydrogen propulsion that emit zero emissions). Luxembourg flagged vessels will be divided into category A, B and C, depending on the type of propulsion and consequent polluting emissions;
- Tax credit: as part of the general reform project of the investment tax credit applicable at company level approved in July 2023, a credit equal to 12% will apply to investments made by Luxembourg companies in the context of the ecological and energy transition. This tax credit may be increased by 2% in specific cases.
Both measures will be premised on the “polluter pays” principle.
A “Green Shipping” bill detailing these measures will be submitted to the Council of Government in October 2023. The bill will also include the transfer of competencies for the Ship Register and In Rem Right Register from the Luxembourg Mortgage Registrar Office to the Luxembourg Commissioner of Maritime Affairs.
The Luxembourg Stock Exchange, global leader in sustainable bonds through its Luxembourg Green Exchange established in 2016 (LGX), also attended the press conference to express its support of the green shipping governmental initiative. Arnaud Delestienne, member of the LGX executive committee, indicated that achieving the long-term objectives set by international environmental frameworks, namely to develop low-carbon fuels, adopt energy-efficient technologies and accelerate the green transition, will require the involvement of long-term private capital alongside traditional bank financing.
[1] UE objectives: Greenhouse Gases (GHG) emission reduction by 55% across all sectors in 2030 and climate neutrality in 2050 compared to the reference year 1990;
IMO objectives (as of July 2023) for the maritime sector: reduction of GHG emissions by 20% in 2030, 70% in 2040 and reaching net zero by 2050 compared to the reference year 2008.
[2] The ETS will apply in a first phase to vessels above 5000 GT (gross tonnage). All types of vessels will be covered by the ETS by 2030, providing €100 per ton of CO2 emitted in excess of European regulations in 2023.