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After intense google-fu, I found some git conversation that pointed me to use .env files. I have moved my submodule environment variables to a .env file and I load this using the “envFile” parameter in the root launch.json.
This allows me to run a custom launch configuration with submodule env vars.
[Edit] Which, btw, shouldn’t be stored in a git repo any way I just remember 😐
Source:stackexchange.com