Environment at a Glance Indicators

Luxembourg

This country profile features selected environmental indicators from the OECD Core Set, building on harmonised datasets available on OECD Data Explorer. The indicators reflect major environmental issues, including climate, air quality, freshwater resources, waste and the circular economy, biodiversity, and selected policy responses to these issues. Differences with national data sources can occur due to delays in data treatment and publication, or due to different national definitions and measurement methods. The OECD is working with countries and other international organisations to further improve the indicators and the underlying data.

Context

Due to its geographical location and size (2 586 km²), Luxembourg is characterised by strong international interdependence and is a transit country for the transport of goods and people. Cross-border workers are a major pillar of the labour force. Luxembourg’s economy is dynamic, dominated by services. Apart from forests, Luxembourg has few exploitable natural resources and depends on external markets for its energy and raw material supplies. Until the COVID-19 pandemic, economic growth has been sustained. Gross Domestic Product (GDP) per person is well above the OECD average. Population density is high largely due to immigration: almost half of the residents are born abroad. This goes with high levels of consumption, and growing mobility and infrastructure needs.

While agricultural and forest land represent more than half and more than a third of the territory respectively, artificial areas have been expanding and Luxembourg’s landscapes are strongly fragmented.

The Grand Duchy of Luxembourg is a small unitary state with a centralised system of environmental governance. However, its 102 municipalities have a large degree of autonomy including in land-use planning and delivery of environmental services.

Climate change

CO₂ emissions from fuel combustion per person are high due to the historically low taxation of road fuels, which has encouraged cross-border workers and drivers of vehicles in transit to fill in Luxembourg. Demand-based CO₂ emissions (footprint) per person that account for all carbon emitted anywhere in the world to satisfy domestic final demand are however higher than the OECD average, reflecting the Luxembourg’s import dependency to satisfy domestic final demand.

Trends in CO₂ emissions from fuel combustion after the financial and economic crisis (2008-2010) reveal an absolute decoupling from total energy supply and real GDP growth. This is mainly due to a higher road fuel prices and a reduction in road fuel sales that are the largest source of greenhouse gas (GHG) emissions. Other sectors (except agriculture) contributed to the decline, in particular energy-producing industries and manufacturing. Total GHG emissions increased again between 2017 and 2019 due to increased emissions from transport, manufacturing and industrial processes, while those from the residential sector and agriculture stabilised. In 2020 GHG emissions declined by 15.5%, due to the Covid-19 pandemic and the associated restrictions put in place to contain its spread.

Energy mix

The energy mix is dominated by oil, mainly road fuels. Luxembourg imports most of its energy; its domestic production is very low compared to demand and to final energy consumption. National production is mainly based on renewables such as wind, solar photovoltaic, biogas and, more recently wood waste whose share in power generation is rising.

The low share of renewables in electricity production between 2002 and 2012 is explained by the operation of a large gas fired combined heat-power turbine that started around 2002 and closed in 2016, and which represented 66% of the electricity produced in 2015. Since then, the share of renewables in electricity production quadrupled.

Air quality

Air emissions

Emissions of most major air pollutants have decreased. This is due to the effects of the economic crisis, resulting in less road transport (following a decrease in international trade); a higher price for road fuels (leading to a decrease in fuel sales to non-residents); and the continuous renewal of the car fleet. Other factors that play a role include industry’s introduction of catalytic converters and limits for solvents; more efficient technologies (particularly in combustion and processes in the metallurgical industry); as well as reductions in the sulphur content of petroleum products and fuels; and the substitution of coal with natural gas in the energy mix. Although decreasing, road transport remains by far the largest source of nitrogen oxides (NOx). Luxembourg reached its 2020 Gothenburg Protocol objectives for sulphur dioxide (SO₂), NOx, non-methane volatile organic compounds (NMVOCs) and ammonia (NH₃) emissions.

NOx emissions per person are high due to due to the historically low taxation of road fuels, which has encouraged cross-border workers and drivers of vehicles in transit to fill in Luxembourg. Most other emission intensities are below the OECD and OECD Europe averages.

Emission reductions went on par with air quality improvements. Average population exposure to fine particles (PM_2.5) nevertheless remains above the new guideline value of 5 µg/m³ recommended by the World Health Organization.

Freshwater resources

Use of freshwater resources

Water is abundant in Luxembourg and the country is therefore under low water stress. Since the entry into force of the Water Law in 2008, which imposes water pricing in accordance with the polluter pays principle, water consumption gradually declined. Per person abstractions for public supply is low compared to most other OECD countries.

Since 2011, the network of wastewater treatment plants has been extended and the plants are continuously being modernised. Most wastewater is treated in plants with tertiary (“advanced”) treatment. Only 1.3% of the population is not yet connected to a public wastewater treatment plant; the wastewater from these dwellings is in the majority of cases pre-treated in private septic tanks before discharge into the public sewage network or into the natural environment.

Waste, materials and circular economy

Municipal waste

Luxembourg generates a high amount of municipal waste per person. This is partly due to the waste produced in Luxembourg by cross-border workers, as well as to the economy’s high level of consumption. Since 2000, waste recovery (in particular incineration with energy recovery) has been growing faster than production.

Material consumption

Luxembourg has few natural resources and imports a large share of the materials it consumes (mainly fossil fuels, construction materials and metals). Domestic material consumption declined following the financial and economic crisis (2008-2010), then rose again between 2013 and 2017, but less rapidly than GDP and population growth partly due to the definitive closure of some steel producing installations. Material intensity per person is high, partly due to the consumption in Luxembourg of cross-border workers, and is the source of important amounts of waste. Material productivity is among the highest in the OECD due to the sustained growth of the economy’s high GDP per person.

Domestic consumption of metal products decreased when steel industries experienced a production reduction during years 2006 to 2009, while sand and gravel importation increased between 2015 and 2016, to support the acceleration of construction activities.

Biodiversity

Luxembourg, despite its small size and the fact that it is a landlocked country, stands out because of its geological and landscape diversity and species richness. Demographic growth, economic development and growing numbers of cross-border workers have exacerbated the demand for infrastructure and built-up areas.

About 1 300 vascular plants have been recorded in Luxembourg – a figure that compares with those of much larger European countries. The share of threatened species in Luxembourg is high as is the number of common species in decline. Overall, two-thirds of species in Luxembourg are either extinct or in an unfavourable or poor state of conservation. The main factors in the deterioration of the natural environment are artificialisation of soils, habitat loss and degradation, landscape fragmentation, caused by the intensification of agricultural practices, infrastructure development and urban sprawl, as well as invasive alien species and climate change. Aquatic and open land habitats are in a particularly unfavourable state.

Protected areas

Protected areas in Luxembourg cover about 50% of the territory. This is well above the OECD average and the 2020 Aichi targets (under the Convention on Biological Diversity) to protect at least 17% of land area. Areas covered by nature parks have increased substantially over the past two decades, and the share of protected areas with strict management objectives (IUCN categories I and II) is much higher than the OECD average. A high share (18.7 %) of the country’s land is covered by protected areas that have had management effectiveness assessments. Protected Area Management Effectiveness (PAME) evaluations, can be defined as: “the assessment of how well protected areas are being managed – primarily the extent to which management is protecting values and achieving goals and objectives" (Hockings et al. 2006).

Policy instruments

Environmentally-related taxation

The share of revenue from environmentally-related taxes in GDP have been decreasing considerably since 2010, and are well below the OECD average. Like all OECD countries, Luxembourg collects most revenue from environmentally related taxes through taxes on energy products and, to a lesser extent, on vehicles. Taxes on pollution and resource use are limited to water abstractions and polluting discharges, and generate a negligible revenue. Taxes on transport fuels have traditionally represented an important source of revenue in Luxembourg, due to large amounts of fuel sales to non-residents induced by lower taxes on petrol and diesel than in neighbouring countries, which result in lower fuel prices.

Government support to fossil fuels and effective carbon rates (ECR)

Luxembourg implicitly supports the consumption of fossil fuels through favourable tax treatments, such as the tax disparity between diesel and petrol. In addition, energy products used in sectors such as farming, electricity generation and heating benefit from total or partial exemptions from excise duties, as well as a reduced VAT rate. During 2022, the government released aid packages in response to high inflation and the global energy crisis.

Like many other EU countries, Luxembourg puts a price on GHG emissions via energy taxes and participation in the EU Emissions Trading System. More than 90% of GHG emissions from energy use (excluding combustion of biomass) are priced and Luxembourg has a high share (63%) of emissions priced above 120 EUR/tonne of CO₂.

Technology and innovation

Luxembourg provides public support for environment-related R&D in the form of grants and tax incentives, as well as financial support to enterprises for improving environmental performance. Luxembourg has developed a specialisation in environmental technology in recent years. Eco-innovation promotion programmes have a strong focus on the circular economy. However, the share of environmentally-related R&D in total public R&D as well as the share of renewables in total energy public R&D remain relatively low.

Luxembourg is a marginal player in environmentally-related inventions, with less than 40 patent applications annually by national inventors in more than two jurisdictions. Their share in total inventions is also in line with the OECD average.

Environment-related Official Development Assistance (ODA)

Luxembourg’s development co-operation focuses on access to basic social services, humanitarian assistance and inclusive finance, and it has the highest share of official development assistance (ODA) allocated to least developed countries. In 2022, Luxembourg was the most generous Development Assistance Committee (DAC) member relative to gross national income (GNI). Luxembourg’s total ODA (USD 530 million) increased in absolute terms in 2022 due to an increase in bilateral grants, mostly for humanitarian aid. ODA continued to represent 1% of GNI, well above many DAC countries. In 2020-21, Luxembourg committed 14.7% of its total bilateral allocable aid in support of the environment and the Rio Conventions (DAC average of 34.3%), down from 24.3% in 2018-19. Three percent of screened bilateral allocable aid focused on environmental issues as a principal objective, compared with the DAC average of 11.3%. Four percent of total bilateral allocable aid focused on climate change overall (the DAC average was 29%), down from 7.1% in 2018-19. Luxembourg had a higher focus on adaptation (7.5%) than on mitigation (4.4%) in 2020-21. Three percent of total bilateral allocable aid focused on biodiversity (compared with the DAC average of 6.5%), down from 3.8% in 2018-19.

References and further reading

CBD (2022), Country profiles: Luxembourg, https://www.cbd.int/countries/profile/?country=lu

IEA (2020), Luxembourg 2020 Energy Policy Review, IEA Energy Policy Reviews, OECD Publishing, Paris, https://doi.org/10.1787/54355dd7-en.

OECD (2023), "Luxembourg", in Development Co-operation Profiles, OECD Publishing, Paris, https://doi.org/10.1787/2dcf1367-en.

OECD (2022), OECD Economic Outlook, Volume 2022 Issue 1, OECD Publishing, Paris, https://doi.org/10.1787/62d0ca31-en.

OECD (2020), OECD Environmental Performance Reviews: Luxembourg 2020, OECD Environmental Performance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/fd9f43e6-en.

MECO (2015), The “Third Industrial Revolution – Lëtzebuerg, Luxembourg.

MECDD (2019), Luxembourg 2030 – 3ème Plan National pour un Développement Durable, Luxembourg.

MECDD and MEA (2020), Integrierter Nationalenergie- und Klimaplan Luxemburgs für den Zeitraum 2021-2030, Luxembourg.

MECDD (2020), Fourth Biennial Report of Luxembourg under the United Nations Framework Convention on Climate Change, Chapter III.

UNEP-WCMC (2024), “Protected Area Profile for Luxembourg”, the World Database of Protected Areas, www.protectedplanet.net