Study on the vulnerability of the national economy in the face of physical risks (RISK2050)

The RISK2050 initiative is a major study project aiming at better understanding the vulnerability of Luxembourg’s economy to physical environmental risks. It was initiated by Luxembourg Strategy in 2022 and commissioned to an interdisciplinary consortium of researchers at the University of Luxembourg. The point of departure is that economic activity has been fuelling an overshooting of ecosystem limits (single materiality). This generates environmental risks that jeopardize economic productivity in return (double materiality). RISK2050 examines 3 major risks categories more closely: climate change, resource scarcity and biodiversity losses. Aggregated findings from scientific publications were used to develop a Risk Matrix of 23 hazard indicators (8 for climate change and biodiversity loss each, and 7 for resource scarcity) arranged by the probability of their materialization and the severity of their impact for Luxembourg’s economy by 2050. In parallel, the research team engaged with local stakeholders representing 6 economic sectors (4 productive – Industrial manufacturing, Construction, Forestry, and Food processing; and 2 supportive – Energy and Logistics) and asked them about their own perception of the evolution of these threats by 2050. The empirical material that this generated was then compared with the projected estimates drawn from the literature review. The comparative process allowed to reveal gaps in perceptions – inconsistencies (over- and underestimations) between the perceived and the projected risks, that were integrated to the Risk Matrix. The study thus identified areas of vulnerabilities and derived a list of recommendations to improve corporate adaptation capabilities. One key overarching finding is that companies operating in Luxembourg should conduct self-assessment checks more systematically to better understand the links between the environment and their activities. Another insight concerns the widespread tendency of local stakeholders to overlook fundamental links between the 3 risk categories. Indeed, some threats (particularly those relating to climate change) are systematically perceived to be riskier and others (often biodiversity-related ones) to be less risky. RISK2050 also assesses practical solutions and highlights, for instance, that diverse vegetation in mixed-use spaces and thriving wetland ecosystems can efficiently mitigate flood risks. Recommendations are clustered in 4 groups of measures: ‘technical’, ‘operational & behavioural’, ‘governance’, and ‘territorial & nature-based’ ones.