Oh, sorry, missed part of your message (Launchpad truncated), so yeah,
you definitely hit the second case.

And no, LXD doesn't do any direct modification to the container rootfs.
It also doesn't propagate the host environment to the container as there
are a lot of cases where this would be wrong and a potential information
leak.

In an ideal world, init systems wouldn't ignore the environment provided
to them, so our environment.* keys would work great for you, sadly we're
not in an ideal world, so with things as they are, your best bets are
cloud-init or Juju itself.

** Changed in: lxd (Ubuntu)
       Status: Incomplete => Invalid

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https://bugs.launchpad.net/bugs/1575386

Title:
  Proxy issue with 16.04

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