This country note 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, and biodiversity. 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.
Environment at a Glance: Luxembourg
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.
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.
The per person production-based and demand-based (or footprint) greenhouse gas (GHG) emissions remain above the OECD averages, and have started to decline only after 2010.
Trends in CO2 emissions from fuel combustion and total energy supply after the financial and economic crisis (2008-2010), reveal an absolute decoupling from 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 (OECD, 2020[1]). 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.
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 (OECD, 2020[1]). Since then, the share of renewables in electricity production quadrupled, to reach 88.8% in 2023.
Emissions of most major air pollutants have decreased since 2000, except for ammonia (NH3). This is due to the effects of the 2008-09 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 (OECD, 2020[1]). 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 NH3 emissions.
NOx emissions 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. 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 (PM2.5) nevertheless remains above the 2021 guideline value of 5 µg/m3 recommended by the World Health Organization.
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.
Data show a break in time series between 2015 and 2016. 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.
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 the economy’s high level of consumption, and to the consumption in Luxembourg of cross-border workers. 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.
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 (OECD, 2020[1]).
Protected areas in Luxembourg cover almost 40% of the territory. This is well above the OECD average and the 2030 GBF target (under the Convention on Biological Diversity) of protecting 30% of terrestrial and inland water areas. Areas covered by nature parks (IUCN categories V and VI) have increased substantially over the past two decades, and the share of natural monuments and habitat (IUCN categories III and IV) is much higher than the OECD average. 4.5 % 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 and al, 2006[2]).
This section shows selected policy instruments based on data available for most OECD countries and does not provide a complete overview of countries’ policy mix to achieve their environment-related objectives. Interpretation should consider the country specific context.
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 (OECD, 2020[1]).
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 (OECD, 2023[3]).
In total, 87.1% of GHG emissions in Luxembourg were subject to a positive Net Effective Carbon Rate (ECR) in 2023. Explicit carbon prices in Luxembourg consist of emissions trading system (ETS) permit prices and carbon taxes, which cover 86.7% of GHG emissions in CO2 eq. With roughly 72.8% of total GHG emissions, coverage is largest for carbon taxes. Fuel excise taxes, an implicit form of carbon pricing, cover 80.6% of emissions in 2023. About 68% of GHG emissions have a Net ECR above EUR 60 per tonne of CO2 eq., a mid-range estimate of current carbon costs. Net ECRs are highest in the road transport sector, which accounts for 54% of the country's total GHG emissions. The Net ECR is on average zero in the agriculture & fisheries sector. The agriculture & fisheries sector accounts for 0.8% of GHG emissions (OECD, 2024[4]).
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.
Luxembourg’s development co-operation focuses on access to basic social services, humanitarian assistance and sustainable finance. Luxembourg is consistently among the most generous Development Assistance Committee (DAC) members relative to its gross national income (GNI), including in allocating official development assistance (ODA) to least developed countries (LDCs). Furthermore, in-donor refugee costs and climate finance are accounted for outside ODA to avoid a crowding out effect. In 2023, Luxembourg was the DAC member that allocated the highest share of GNI to LDCs. Luxembourg’s total OD) decreased in 2024 to USD 596.6 million (preliminary data), representing 1% of GNI..
In 2022-23, Luxembourg committed 27.8% of its total bilateral allocable ODA in support of the environment and the Rio Conventions, up from 14.8% in 2020-21. The DAC average was 39% in 2022-23. Four per cent of screened bilateral allocable ODA focused on environmental issues as a principal objective, compared with the DAC average of 9.6%. Fourteen per cent of total bilateral allocable ODA focused on climate change overall, up from 4.5% in 2020-21 (the DAC average was 34.8%). Luxembourg had a greater focus on adaptation (13.4%) than on mitigation (7.1%) in 2022-23. Five per cent of screened bilateral allocable ODA focused on biodiversity overall, up from 3.4% in 2020-21 (the DAC average was 7.6%). (OECD, 2025[5]).
References
[2] Hockings, M. and E. al (2006), Evaluating Effectiveness. A framework for assessing management effectiveness of protected areas. 2nd Edition, IUCN, https://portals.iucn.org/library/efiles/documents/PAG-014.pdf.
[5] OECD (2025), Development Co-operation Profiles, OECD Publishing, Paris, https://www.oecd.org/en/publications/development-co-operation-profiles_04b376d7-en/luxembourg_b4df7146-en.html.
[4] OECD (2024), Pricing Greenhouse Gas Emissions 2024: Gearing Up to Bring Emissions Down, OECD Series on Carbon Pricing and Energy Taxation, OECD Publishing, Paris, https://doi.org/10.1787/b44c74e6-en.
[3] OECD (2023), OECD Inventory of Support Measures for Fossil Fuels: Country Notes, OECD Publishing, Paris, https://doi.org/10.1787/5a3efe65-en.
[1] OECD (2020), OECD Environmental Performance Reviews: Luxembourg 2020, OECD Publishing, Paris, https://doi.org/10.1787/fd9f43e6-en.
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
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
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