With strong economic growth overall and an increasingly important role as a regional economic centre, Luxembourg is experiencing mounting environmental pressures. This is mainly a result of a growing population and a rapid increase in transport, which is dominated by the car, as the number of workers commuting within Luxembourg and from across the border has risen rapidly. Ensuing environmental pressures are sizable, including through CO2 emissions, air pollution and land use changes. Large-scale commuting, combined with low fuel taxes compared to neighbouring countries, has entailed rapid increases in greenhouse gas emissions, which are higher in Luxembourg in per capita terms than almost anywhere else in the OECD. Sound housing policies, urban and transport planning to limit urban sprawl and to promote public transport, and measures to better internalise environmental externalities will be needed to ensure that Luxembourg’s economic growth is compatible with environmental and economic sustainability and the well-being of its population. This working paper relates to the 2012 OECD Economic Survey of Luxembourg (www.oecd.org/eco/surveys/Luxembourg).