They have become the first country to make public transport entirely free throughout the country.
Currently, commuters pay just £1.78 for two hours of travel - but even this low fare will be scrapped under the plan. Last summer, the government provided free public transport for every child and young person under 10, while free shuttle services were made available to secondary school children travelling between home and school.
It's understood abolishing all public transport fares will save the government money on the collection and processing of fares.
Mr Bettel's Democratic party is to form a government with the left-wing Socialist Workers' party and the Greens after he secured a narrow victory in October.
Traffic congestion is a major problem in Luxembourg, which receives approximately 170,000 cross-border commuters from neighboring France, Belgium and Germany on a daily basis.
Around 110,000 people live there but another 400,000 commute in for work every day, while almost 200,000 cross the border from neighbouring France, Belgium and Germany.
Apart from providing free public transport, Bettel's coalition government also intends to legalise cannabis and introduce two new public holidays.
The transport policy was formulated in response to the traffic congestion being experienced in landlocked Luxembourg.
A study suggested that drivers in the capital spent an average of 33 hours in traffic jams in 2016. The introduction of free public transport is hoped to reduce this, by encouraging a shift away from commuting in private in private cars. For example, a decision still needs to be taken on what to do with first- and second-class compartments on trains.
Luxembourg Prime Minister Xavier Bettel promised to prioritise the environment. The result gave the coalition 31 seats in the 60-seat chamber.