"I'm not sure if making public transport free here in Luxembourg will take more people out of their cars", he said.
The country as a whole has about 200,000 residents and almost 200,000 people from neighbouring countries cross the border each day to work in Luxembourg.
Aside from free public transport, Bettel's coalition government seeks to legalize the purchase, possession and consumption of cannabis for recreational use, as per the publication.
The tiny European Union country of Luxembourg is seeking to make travel free on its trains, trams and buses as part of efforts to reduce traffic congestion and air pollution. Prime Minister Xavier Bettel has promised to make public transit a priority and to lift fares on buses, trains, and streetcars by next summer, the Guardian reports.
Some 400,000 commuters flock to the city for work while 200,000 from neighbouring cross the border France, Germany and Belgium every day.
Mr Bettel's Democratic party is to form a government with the left-wing Socialist Workers' party and the Greens after he secured a narrow victory in October.More news: US Senate introduces resolution accusing MBS for Khashoggi murder
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Travel of up to two hours now costs €2 (NZ$3.30), while an all-day pass costs €4.
High school students are also provided with free shuttle services between school and their homes.
The national public transport system now costs around €1 billion ($1.13 billion) each year to operate, but only recoups around €30 million ($34 million) in fares, The Independent explained.
There are a few issues to be sorted out before fares are abolished, such as what to do about first- and second-class train compartments. During his election campaign, Bettel also emphasized the importance of environmental protection.
Part of the cost for the initiative will be footed by removing a tax break for commuters.
However, because the Greens gained, the three parties in government have 31 seats in the 60-seat chamber.