On Wednesday 16 August 2023, Luxembourg's Ministry of the Economy, together with the Luxembourg Stock Exchange, unveiled the new "Green Shipping" principle that has been introduced into the Luxembourg maritime sector.
According to a statement from the ministry, the maritime sector is currently in full evolution. As an essential link in the global logistics chain – more than 80% of trade is carried out by sea – the sector has excellent prospects for the future. However, this sector is responsible for the emission of one billion tonnes of CO2 equivalent per year, or 3% of global greenhouse gas emissions. While the demand for freight continues to grow, pollution from maritime transport could even increase to 17% by 2050 if significant efforts are not made.
As part of the fight against the climate crisis, the maritime sector will therefore have to meet considerable challenges to achieve a substantial reduction in the energy footprint of ships and, ultimately, decarbonise the entire sector. The International Maritime Organization (IMO), a body of the United Nations (UN), and the European Union (EU) aim to achieve zero greenhouse gas emissions by ships by 2050; the EU even aims to achieve this objective more quickly for the European maritime area.
Government measures to engage the national maritime flag in "green shipping"
During Wednesday's press conference, Luxembourg's Minister of Economy, Franz Fayot, presented two government measures aimed at implementing the concept of “green shipping” nationwide:
- The adaptation of registration fees for "green" ships: in application of the "polluter pays" principle, ships which reduce their greenhouse gas emissions (e.g. ships powered predominantly by biofuel or gas) will benefit from a progressive reduction in their registration fees up to max. 80% (for e.g. electric, sail or hydrogen powered vessels that emit zero emissions);
- An increase in the tax credit for investments in "green" ships: as part of the reform of the tax credit for investments applicable at company level, the scope of the tax credit (from 12%) will be extended to investments made by Luxembourg companies as part of the ecological and energy transition. As part of this reform, the tax credit can be increased by 2% through special depreciation. By analogy with the system put in place for the reduction of registration fees, it is planned to submit the granting of the said tax increase (12+2% in total) to the same principle of the polluter-pays.
During the press conference, Minister Fayot said: "The measures are intended to encourage ship owners to invest in modern and more environmentally-friendly technologies and to surpass the existing European and international environmental standards. By introducing the principle of 'green shipping' on a national scale, we are laying the groundwork to ensure the future of the Luxembourg maritime sector and we are helping to position the Grand Duchy as a responsible environmental player on the international maritime scene, which globally aims carbon neutrality by mid-century.”
The Luxembourg Stock Exchange, a pioneer in sustainable finance on a global scale
In recent years, the Luxembourg financial sector has firmly positioned itself as a leader in the field of sustainable finance, in particular through the Luxembourg Stock Exchange. In 2016, the Luxembourg Stock Exchange created the Luxembourg Green Exchange (LGX), becoming the first stock exchange in the world to launch a platform entirely dedicated to sustainable bonds. Today, LGX is the world leader and widely recognized as the place of reference for these instruments, with the display of more than 1,700 sustainable bonds, representing a total value of €910 billion from 270 issuers across 50 countries.
During the press conference, Arnaud Delestienne, member of the Executive Committee of the Luxembourg Stock Exchange, highlighted the importance of this initiative for the transition of the maritime sector, while underlining the expertise of the Luxembourg Stock Exchange in the field of sustainable finance. He said: “We would like to extend our sincere congratulations to the Commissariat for Maritime Affairs for the implementation of this 'Green Shipping' initiative. We fully support this ambitious approach which, coupled with the experience of our LGX platform, will help to strengthen our common commitment to establishing Luxembourg, already a pioneer in sustainable finance, as a central player in the transition of the maritime sector.”
The Luxembourg maritime sector
From the end of the 1980s, in order to support the diversification of economic activities, the Luxembourg government decided to create a shipping register. In the space of 33 years, Luxembourg has managed to forge an excellent reputation in the sector, whether in terms of the quality of registered vessels or favourable social conditions for seafarers, and it has the largest maritime register of all landlocked countries.
Luxembourg has positioned itself in a niche market in the maritime sector and is home to small carriers, dredgers, tugs and supply vessels. Thus, the fleet under the Luxembourg flag has increased from 54 (1993) to 204 ships (2023).
Furthermore, alongside ship owners, many other economic activities, more or less closely linked to the shipping register, have developed in the Grand Duchy. Today, consulting firms, logistics operators, law firms, financial institutes, insurance companies and protection and compensation bodies provide services directly related to the maritime sector.