Luxembourg Seeks To Become Europe’s Green Finance Hub

By Paola Tamma

(EurActiv) — At the COP23 summit in Bonn, Luxembourg’s finance and environment ministers joined with directors of the European Investment Bank to launch a de-risking mechanism that will allow financing of climate-friendly projects.

Luxembourg is a tiny state but a big polluter. Only slightly bigger in size than Malta, it is the EU country with the highest per capita emissions: 21.85 tonnes per person per year, against the EU average of 8.72, according to a 2016 report by the European Environment Agency.

But it is striving to do better. “We stick to our commitment on renewables but also on emission reductions. At the moment, we will be able to meet our objectives to be coherent with the objectives of the Kyoto protocol for the emission reduction. We are on track,” Minister of the Environment Carole Dieschbourg told EURACTIV.com.

Under the EU’s renewable energy directive, countries came up with their own renewable energy objectives. Luxembourg decided that by 2020, 11% of all energy consumed should come from renewable sources.

Luxembourg recently entered an agreement with Lithuania to buy the Baltic state’s surplus wind power data and count it towards its own target.

“We looked very carefully at the characteristics because we need to be very careful about the deal we make in order not to have adverse effects on biodiversity or other things. If we won’t be able to reach our targets, we set out a clear set of criteria. We have been in touch with the colleagues in Lithuania to speak about this deal and to make it the most robust possible,” Dieschbourg explained.

This has attracted interest from states that already met their renewable targets, like Estonia, which is looking for buyers. On the other hand, it risks discouraging countries from investing in renewables.

But the land-locked Luxembourg is doing what it can to go green – investing heavily in solar and wind-power and hoping to become a green-finance hub for Europe.

It certainly has the right assets: 140 banks, €400 billion in assets under management, and the headquarters of the European Investment Bank (EIB) – the world’s largest issuer of green bonds.

“We want to position ourselves as the green financing centre in Europe”, Pierre Gramegna, the finance minister in the Grand Duchy and a candidate for the Eurogroup presidency, told EURACTIV.

He announced a joint venture in which Luxembourg and the EIB will provide seed money to leverage funds from multilateral development banks and private investors. The first project will receive €5 million in seed funding and support energy efficiency and renewables in the North Africa & Middle Eastern region.

Renewable is an obvious choice: the sector has been growing at the staggering rate of 72% per year for the past 10 years.

Asked if he would treat green finance as a priority as president of the Eurogroup, Gramegna quipped:

“We are not there for the Eurogroup yet, but I think that green bonds and green finance are key topics that all countries should be interested in. And by having the European Investment Bank on board, we already have a very important European touch to the whole initiative.”

His candidacy has raised eyebrows in France, which thinks that a state that was exposed for shady tax practices (LuxLeaks scandals in 2014, Panama Papers in 2016, and more recently in the Paradise Papers) could hardly be a credible leader for the Eurogroup.

But Gramegna is optimistic: “I think Luxembourg has come a long way since a couple of years. We have abandoned the bank secrecy to allow automatic exchange of information. Under the presidency of Luxembourg, and my own presidency of the Ecofin [council of finance and economy ministers] we set up the automatic exchange of information on [bank] rulings.

“We are implementing together with other European countries all the anti tax-avoidance measures which are called for by the OECD. I think we’re a very good student now and therefore we mustn’t look at the past but how we stand today.”

Luxembourg may gain in image and status from this venture. But will it work?

The EIB has a track record of multiplying funds. Under the Juncker plan, from initial seed funding of €10bn, it was able to attract €180bn of additional investments to kick-start the European economies. The shift from grants to loans has been a focus of the Juncker presidency.
EU bank invests in Mongolia’s green future

The European Investment Bank (EIB) has agreed to help finance a large-scale wind farm in Mongolia, as part of the East Asian country’s plans to embrace renewable energy.

Jonathan Taylor, vice-president of EIB in charge of environmental and climate action investments, agrees: “The key is the leveraging. If we are going to shift the billions to trillions, public money isn’t going to be enough.

“The important thing is to shift climate funds into sound investments, green investments, climate-friendly investments. Once you look at this in the long term, it multiplies up over time.”


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