Luxembourg Adopts Law Establishing An Aid Scheme For Businesses To Support Transition To Net-zero Economy

On 3 July 2025, after obtaining EU Commission approval, Luxembourg adopted a law establishing an aid scheme for the transition to a net-zero economy.

The new law creates a national legal basis for public funding to support businesses in their transition to a net-zero emissions economy. It allows for the financing of two different measures:

1. Aid to decarbonise industrial production processes (Article 4).
2. Aid for investments in sectors strategic to the transition towards a net-zero economy (Article 5).

Who can benefit from these measures?

• Decarbonisation of industrial processes (Article 4): aid is available to businesses in the manufacturing industry that operate industrial installations in Luxembourg and whose projects have been selected via a competitive procedure.
  
  Applications must include technical, financial and environmental documentation proving eligibility and effectiveness.
  
  Projects will be ranked based on the lowest aid amount requested per ton of CO₂ equivalent eliminated.
  
  The maximum aid per business is 200 million euros.
  
  The investments must lead to a minimum 40% reduction in direct greenhouse gas emissions compared to historical emissions, through the electrification of production processes. The reduction is calculated over a ten-year period using verified historical and forecast data, including emissions from biomass combustion.
  
  The project financed by the aid must be completed and operational within 36 months of the aid decision, or penalties will apply.
• Investments in production in strategic sectors (Article 5): aid may be granted to businesses making investments in the production in Luxembourg in strategic sectors essential for transitioning to a net-zero emissions economy. These are businesses producing key equipment such as batteries, solar panels, wind turbines and heat pumps, or producing essential components or critical raw materials required for the production of such equipment.
  
  Eligible costs include investments in tangible and intangible assets tied to production.
  
  Aid covers up to 15% of eligible costs (20% in assisted zones), with increases of up to 20 percentage points for small and medium-sized enterprises.
  
  The maximum amount of aid is 150 million euros per business (or 200 million euros in assisted areas).
  
  The submission deadline for applying for aid under this measure is 15 October 2025.

For both measures, the Minister of the Economy must make a decision on the subsidy request by 31 December 2025 at the latest.

With the Clean Industrial Deal State Aid Framework (CISAF) replacing the Temporary Crisis and Transition framework as of 25 June 2025, an extension of the current deadline beyond 31 December 2025 appears likely. However, this will require an amendment to the law and fresh approval from the EU Commission.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.