Country profile (Luxembourg)
What distinguishes the country?
A small country, a small, but very dynamic, economy and a location at the heart of the main western European transit routes for both goods and passengers are key drivers to a very particular country profile. Important demographic growth, the even more significant increase in the number of cross-border commuters, the increasing national and international traffic, the continuous urban sprawling are key factors acting on the environment. Besides their impacts on landscapes and nature, these factors also explain the biggest environmental challenge Luxembourg has to face for the moment: reducing its greenhouse gas emissions through national policies and measures.
With 2 586 km², Luxembourg is the second-smallest Member State of EU, after Malta. The country is located at the heart of the main western European transit routes for both goods and passengers and has direct borders with Belgium, Germany and France. The maximum distance from the northern to the southern borders is some 82 km and from west to east about 57 km.
Luxembourg is mainly covered by agricultural and forest land. In 2009, 86 % of the territory fell in these two categories. The built-up areas occupied about 9 % of the country, whereas water and transport infrastructure represented about 5 % of the total surface.
The north of Luxembourg is part of the Ardennes and is called ‘Ösling’. Its altitude is on average 400 to 500 metres above sea level. The ‘Ösling’ landscape is characterised by hills and deep river valleys. In the South of Luxembourg lies the region ‘Gutland’. This area has higher population and industrial densities than ‘Ösling’. The lowest point in the country (129 m above sea level) is located at the confluence of the Moselle and the Sûre rivers.
Luxembourg has a moderate oceanic western European climate with mild winters and comfortable summers. As shown by the long-term annual averages (WMO reference period from 1961 to 1990) measured at Findel Airport meteorological station, temperatures have a unimodal distribution, with the lowest long-term mean values occurring during January (0.0 °C) and the highest air temperature in July (16.9 °C). Absolute minimum and maximum air temperatures in the reference period 1961-1990 reach from –17.8 °C in January (1979) to 35.1 °C in July (1964).
What have been the major societal developments?
For many years, Luxembourg has been characterised by high economic and demographic growth rates.
Over the period 1995-2009, the economy grew strongly, with GDP at constant price increase by 75.6 % for an average of 4 % per year [Notes 1 and 2]. This spectacular growth – compared to EU15 – was the result of an economic model based on attractive fiscal rates and good infrastructures that allowed a smooth transition from an agricultural and heavy industries (steelworks) economy to an economy mainly driven by the tertiary sector. Nowadays, Luxembourg is the richest country in the EU as well as in OECD – when looking at GDP per capita expressed in purchasing power parities. Its gross value added is largely generated in the financial and corporate service sector. The share of total gross value added in this branch has increased from about 39 % in 1995 to 48 % in 2009. While the commercial sector has maintained a constant share at about 20 to 22.5 %, the share of the industry sector has decreased significantly from 15 % in 1995 to slightly less than 8 % in 2009. Other service activities ranged between a share of 15 to 17.5 % and construction kept a constant share in total gross value added at a low level of about 5.5 % to 6 %. The contribution of the agricultural sector is negligible with less than 1 % [Figure 1].
Luxembourg’s economic model attracted numerous investors, which in turn created new high-profile jobs that were, and still are, mostly taken on by foreigners. Some of them are settling in the country and others commute from abroad [Note 3]. As a result, Luxembourg has experienced dramatic demographic changes over the last 20 years.
Since 1990, the resident population has increased by slightly less than 31 %, to reach 502 100 inhabitants end 2009 [Note 4]. This represented an average annual growth rate of 1.4 % over the period. As stressed above, this demographic growth is dominated by immigration. At the end of 2009, about 43 % of the resident population did not have citizenship of Luxembourg. Nationals themselves saw their number stagnating, and without immigrants taking the citizenship of Luxembourg they would even have fallen [Figure 2].
In addition to the population growth, at the end of 2009, 145 250 cross-border commuters from neighbouring regions were working in Luxembourg: just under 50 % of the commuters came from France and the remaining half is almost equally distributed between Belgium and Germany. In total, in 2009, the commuters accounted for 43.5 % of all paid workers in Luxembourg and for about 30 % (i.e. almost a third) of the residential population. Since 1990, cross-border commuters have increased by almost 340 % [Figure 3].
Figure 1 - Sectoral gross value added at current prices: 1995 and 2009
Source: STATEC, Statistical Yearbook, Table E.2304.
Figure 2 - Population growth on 31st December: 1960-2050
Sources: STATEC, Statistical Yearbook, Table B.1100 and projections prepared for the EU Economic Policy Committee's Working Group on Ageing Populations and Sustainability.
Figure 3 - Cross-border commuters growth: annual cumulative averages 1980-2009
Source: STATEC, Indicateurs rapides, Série L.
What are the main drivers of environmental pressures?
This section covers both 'Drivers and impacts' and 'Future developments'.
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.
a) building stocks: estimates calculated by the Department of the Environment;
b) GHG emissions and final energy consumption: 2009 data are provisional.
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.
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).
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.
Since 1960, the growth is 59.4 % !
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.
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.
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.
Other interesting linkshere (in French, German and English).
The Luxembourg economy. A kaleidoscope 2008: click here (in French and English)Second, Third, Fourth and Fifth National Communication of Luxembourg under the UNFCCC – Chapter II: click here.
Luxembourg’s National Inventory Report 1990-2008 – Section 2.1: click here.
What are the foreseen developments?
Presented together with the 'Drivers and impacts'.
This document is part of the SOER 2015 product.