Country profile - Drivers and impacts (Luxembourg)

The various characteristics described in the ‘Societal developments’ chapter play a crucial role in the state of the environment and present many challenges for environmental and sustainable development policies.

First of all, the dimension of the country, as well as the size and the structure of its economy, explain why, for example, an industrial project may have a significant impact on the environment [Note 5] or why the use of fiscal instruments to influence behaviour could be limited [Note 6]. Small size also implies that environmental concerns quickly become transboundary issues.

Both the strong population growth as well as the even stronger cross-border commuter growth have led to increasing built-up areas (housing, offices, services, infrastructures) and to ever growing transport flows, mainly by road. Population growth, coupled with the economic development in the tertiary sector, is a key driver of urban sprawling and land fragmentation (Luxembourg is the second-most fragmented country within the EU). Various actions and land planning are undertaken by the authorities to limit urban sprawl. However, the demographic pressure is leading to very high prices for construction (houses, apartments, land) that, in turn, generate social problems such as access to accommodation and the ability to pay. Consequently, there is also a wish for more building land in order to reduce prices.

Population and cross-border growth are also leading to rising energy demand, both for buildings and for transport. Concerning the latter, although Luxembourg invests predominantly and jointly with the neighbouring regions in public transport in order to alter the current modal split of home-work journeys, a vast majority of workers from abroad commute by car (90 % of these journeys according to a study performed in 2007).

The fact that cross-border commuters now represent 30 % of the resident population is generating concerns in both the waste and wastewater sectors (oversize investments with regard to population, high per capita ratios that do not necessarily reflect the average actual use by the resident population).

Finally, one of the biggest challenges for Luxembourg is related to greenhouse gas (GHG) emissions reduction targets. At present, Luxembourg does not have the significant technical potential which exists in other countries where residual ‘old-technology’ industrial and power plants still operate. In Luxembourg, there has been, and there still is almost no reduction potential of GHG emissions stemming from the modernisation or the replacement of existing national industrial or power plants. In fact, with the move from blast to electric arc furnaces in the steel sector during the 1990s, Luxembourg very soon exhausted its only major technical potential for GHG emissions reduction. Therefore, the EU ‘Climate and Energy Package’ adopted in 2008, which intends to contribute to a common energy policy and to combat climate change after 2012, will be highly challenging for Luxembourg since it calls the country: (i) to reduce GHG emissions by 20 % below their 2005 level for sectors outside EU-ETS; (ii) to achieve an 11 % share of renewable energy in total energy consumption by 2020; and (iii) to achieve a 10 % share of biofuels in total transport by 2020.

However, the promotion of renewable energies in the electricity sector, which is associated with major investments and subsidies, is of little interest with regard to Luxembourg’s GHG balance. Indeed, additional capacities based upon renewable energies cannot actually be used to replace any electricity from inefficient existing fossil-fuel plants in Luxembourg. Nor will they substitute the highly efficient national production plants which have recently been constructed. In reality, they will replace imported electricity which does not appear in Luxembourg’s GHG balance according to the IPCC accounting rules.

These accounting rules also require the very high ‘road fuel sales to non-residents’ – almost 75 % of the total road fuel sales due to lower fuel prices in Luxembourg than in the neighbouring countries –  to appear in its GHG balance. Luxembourg's location at the heart of the main traffic axes for western Europe and its economic development have made it a focal point for international road traffic. Therefore, Luxembourg has traditionally had a high volume of road transit traffic for both goods (freight transport) and passengers (tourists on their way to or back from southern Europe). The latter has increased even further due to the high number of commuter journeys observed every working day. In comparison with international traffic, domestic traffic plays a relatively small role since it is responsible for only one-quarter of the total road fuels sold in Luxembourg. As a consequence, in 2009 ‘road fuel sales to non residents’ (transit traffic, commuters and ‘fuel tourism’) represented 38 % of the total GHG emissions [Note 7].

Though price differences with neighbouring countries is reducing over time (notably, through increases in excises), and though Luxembourg committed itself to respect both its Kyoto target (a reduction of 28 % compared to 1990) and the 20 % cutback decided in the framework of the EU ‘Climate and Energy Package’, it cannot be expected that these price differentials will be entirely offset in the coming years. Indeed, that would require aligning prices to those of the most expensive bordering country with a risk of reverse ‘fuel tourism’ due to the size of Luxembourg. Moreover, such a policy will not lead to any substantial reduction of GHG emissions at the European level since ‘fuel tourism’ related emissions are the smallest part of ‘road fuel sales to non-residents’. Hence, emissions will only be transferred from Luxembourg’s balance to those of its neighbours.

For more information on the GHG and energy challenges, see climate change and mitigation common environmental theme.

All these challenges are well and carefully considered by the authorities through a set of plans such as a cross-sector integrated plan (IVL – ‘Integratives Verkehrs- und Landesentwicklungskonzept für Luxemburg’), various sectoral Action Plans [Note 8] – some of them deriving from the cross-sector integrated plan – as well as Action Plans aiming at fulfilling the objective set to Luxembourg by the EU ‘Climate and Energy Package’, i.e. the Renewable Energy Action Plan – that has been adopted by the Government end July 2010 – and the revised national CO₂ reduction Action Plan due by 2011. Together with the second National Sustainable Development Plan expected by end 2010, the CO₂ reduction Action Plan will be the result of an extensive consultation of stakeholders in the framework of the ‘Partenariat pour l’Environnement et le Climat’ put into place by the present Government – for details, see one of our national and regional stories.

Conclusion: overview of the national circumstances

Key points that play a role in environment issues and policies in Luxembourg in the past and the future are:

• a country characterised by both high demographic and high economic growth in a stagnating region, hence an attractive economic destination;
• strong population growth due to immigration that is expected to continue;
• even stronger cross-border commuter growth that is also expected continue once the financial and economic crisis is over;
• increase of built-up areas (housing, offices, services, infrastructures) as a consequence of the previous statements;
• location at the heart of the main western European transit routes for both goods and passengers;
• increase of transport flows as a consequence of the previous statements;
• small size and open economy: a new industrial project, a technological change, a closure or a breakdown of a production unit might have significant impacts on the GHG and air pollutants emissions and increase the overall uncertainty of emissions projections;
• limitations in taxation policies due to short distances to neighbouring countries;
• a country that needs to cooperate and to interact with its neighbours since environmental issues quickly become cross-border issues;
• limited national GHG and air pollutants emissions reduction potential. [Figure 4]

Figure 4 - Key variables trends: 1990-2009

Sources: STATEC, Statistical Yearbook and Ministry of Sustainable Development and Infrastructure - Department of the Environment.
Notes:
a) building stocks: estimates calculated by the Department of the Environment;
b) GHG emissions and final energy consumption: 2009 data are provisional.

Notes

[1]

Data prior to 1995 have not been converted into the latest system of national accounts to be used at EU level (ESA 95). Hence, the developments could only be calculated from 1995 onwards.

[2]

Percentages would have been 82.3 % and 4.7 % respectively if the calculations were made on the year 2008 rather than 2009: with the financial crisis and the economic downturn that follows, Luxembourg’s economy decreased by 3.7 % between 2008 and 2009 (in 2008, the GDP at constant price – the highest ever recorded – was 1.4 % higher than in 2007. Hence, the crisis is only perceptible in the 2009 results).

[3]

Luxembourg’s enterprises being not able to locally find high profile applicants for the positions they are offering, they attracted non-residents. Hence, in the years 2000s, Luxembourg experienced increasing higher unemployment rates whilst new job creations have never been so high.

[4]

Since 1960, the growth is 59.4 % !

[5]

For instance, in 2002 the construction of a gas and steam power station led to an increase in Luxembourg’s greenhouse gas emissions of 0.9 to 1 million tonnes of CO2-equivalent per year, i.e. around 8 % of the total greenhouse gas emissions attributed to Luxembourg. Another example is provided by the flat glass industry in Luxembourg (two plants): it is the major culprit for NOx emissions outside the road transportation sector.

[6]

Most of the resident population has only to drive 30 km or less to be abroad. Consequently, increasing taxes or excises on some products (e.g. road fuels) will have effects on the whole country and not only at the borders as it is the case in bigger countries. Fiscal incentives could also attract non-resident to Luxembourg. Consequently, tax and subsidies policies are mainly directed towards sectors and activities that are not subject to transboundary effects: e.g. incentives for energy-efficiency and the use or renewable energy sources in the building sector.

[7]

The highest percentage ever recorded was 41.3 % in 2005. See also the ‘State and Impacts’ chapter in the climate change and mitigation common environmental theme.

[8]

Plans or programmes such as ‘transports’, ‘landscape’, ‘rural development’, etc.

Other interesting links

Statistical yearbook: click here (in French) and here (in French).

The Luxembourg economy. A kaleidoscope 2008: click here (in French and English)

Luxembourg’s National Inventory Report 1990-2008 – Section 2.1: click here.