The Ministry of the Economy of Luxembourg developed a vision for the country’s economy til 2050. With that Strategy, it became the first government which acknowledges that environmental rebounds are a serious issue when pursuing environmental and social objectives.
The Luxembourg Strategy 2050 aims to preserve and improve the resilience, inclusiveness and competitiveness of the economy, and face the societal and environmental transitions that lie ahead. The strategy describes how the country wants to face risks and threats posed by rising inequality, slower growth relative to the eurozone, and the crossing of biogeochemical limits.
A few highlights which make the Strategy 2050 stand out:
- Circularity and sufficiency is listed second out of ten building blocks of the vision. It is defined as “Circularity and sufficiency contribute to greater autonomy in production and consumption, as well as to decarbonisation and efficiency in the use of resources.” Most Visions stop there but the Ministry understands that efficiency alone is not enough.
- “The rebound effect occurs when more of a good or service is consumed because its production has become more efficient. Whenever an innovation deceases the energy or material footprit of a product, it’s costs go down which could drive an increase in its consumption. Willian Stanley Jevons desribed this effect 2.5 centuries ago, which we now know as The Jevons paradox. This occurs “when the rebound effect is so strong that it offsets the energy or resource savings brought about by a technology. Direct effects occur when efficiency gains result in reduced resource prices and a resulting increase in demand – for instance, as cars become more fuel-efficient one drives more miles. Indirect effects arise when the same efficiency gains boost purchasing power, which is diverted to other products with potentially worse environmental impacts: for instance, buying a heavier SUV-type vehicle. This efficiency dilemma is clearly visible in the fact that primary energy consumption in the EU-27 is not changing significantly, despite a rapid reduction in the energy intensity of the economy (IEA, 2024). To avoid such (..) consequences, innovation and technological advancements must be complemented by other economic, social and behavioural measures such as effective citizen communication and awareness-raising, regulatory tools and/or appropriate taxation if they are to be effective (Jaume Freire González, 2023).”
- “Economic models based on circularity and sufficiency make it easier to reconcile the digital, ecological and social transitions. Indeed, any reduction in the need for raw materials reduces the pressure on ecosystems and the scale of the societal, organisational and industrial transitions to be achieved.”
- Free up resource for the sustainable production of essential goods and services: “To free up energy, materials, water, or land for the production of essential goods and services, other production could be reduced. It would be prudent to discourage the use of certain non-essential or overconsumed goods and services, particularly those with a high ecological footprint. These include products which are overconsumed and harm our health (fast food, sugary soft drinks, social networks, chemical products, disposable plastics, immersive video games), or devices that replace what was previously done manually or offer services that were previously considered unnecessary. Other examples include mass air travel, fast fashion, long distance food imports, luxury products, some single-use plastic packaging and utensils, heated terraces and urban sprawl. Methods to disincentivise these include better informing consumers, implementing the Klima-Biergerrot (KBR) proposals on planned obsolescence, and addressing food waste and advertising that encourages such consumption.”
- Rematerialisation and potentially even the recarbonisation of energy generation: “Under the combined effect of the energy and digital transitions and the expansion of construction, individual transport and the consumption of goods, the demand for material and mineral resources is set to double by 2060 (OECD, 2019). To achieve the goals of the Paris Agreement, metal production could increase twelvefold by 2050 (Copper8, 2017). The challenge is to ensure that decarbonisation does not result in a net increase in material and energy needs. Both the OECD and the IEA emphasise the risk of rematerialisation and potentially even the recarbonisation of energy generation and (..) the production of goods and services (OECD, 2023; IEA, 2021). A rapid transition to a fully renewable electrical system worldwide by 2060 could lead to a substantial rematerialisation of the economy, increasing the risk of hitting ‘peak materials’ (Iñigo Capellán-Pérez et al., 2019).
- Existing technologies vs future innovations: “Given the limited time available to achieve the transitions, a balance must be struck between innovation and improving existing technologies. Deploying existing, repairable and robust clean technologies on a larger scale may offer advantages over focusing exclusively on new technologies (Gaston Trauffler, 2023).”
Shifting Paradigms presented on Circularity & Sufficiency at the 3rd Luxemburg Strategy Conference at 26 September 2023. The contribution covered topics like the complementarity of circularity and sufficiency, the Jevons Paradox and rebound effect, the need to prioritise essential and sustainable products and services when allocating scarce resources in the economy, and why it is important to regulate advertising accordingly.
The conference was attended by Mr. Franz Fayot, Minister of the Economy.
The Luxembourg Strategy was developed by the strategic foresight and long term planning team. The team was dismantled in 2024 after the elections but its work continues to inspire.
