Luxembourg energy policies assessed by IEA

Agency calls on government to introduce energy tax to internalise environmental costs of fuels

Luxembourg should introduce an energy tax to internalise the environmental costs of fossil fuel consumption and reduce market distortions with its neighbours, the International Energy Agency (IEA) has recommended in a survey of the country's energy policies. Luxembourg has the lowest rate of energy taxation in the EU, and a specific energy tax would help the country reach its challenging Kyoto Protocol target of reducing greenhouse gas emissions by 28% from 1990 levels, the agency says.

The possibility of a national energy tax has been floated since 1998 and looked more certain after it was included in Luxembourg's greenhouse gas reduction strategy published in May (ENDS Daily 5 May) and its draft sustainable development plan (ENDS Daily 31 August) distributed to all citizens at the end of the summer.

The IEA review also suggests that the government should ensure that its renewable energy support scheme - updated last month (ENDS Daily 25 September) - promotes a downward trend in renewable energy prices, thereby encouraging the sector's competitiveness. State support for energy efficient buildings should be assessed for its cost effectiveness and consideration should be given to phasing out state support for cogeneration, says the review, since the technology is now "mature".

The review specifically praises the work of Luxembourg's energy agency for its promotion of renewable energy and energy efficiency.

Follow Up:
International Energy Agency, tel: + 33 1 40 57 65 51; Luxembourg review summary.

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