Compose: Environment vars with default values are not available inside compose

The issue

Environment variables availability inside compose file provided from the following:

• shell or .env file
• defined in compose file

feels inconsistent. Environment vars with default values are not available inside compose unless explicitly provided from outside of it.

The example

Consider the following minimal compose file:

version: '3'
services:
    example:
        environment:
            TAG: edge
        image: alpine:${TAG}

The ${TAG} variable is not available _anywhere_ inside compose file.

E.g.:

$ docker-compose up
WARNING: The TAG variable is not set. Defaulting to a blank string.
Pulling example (alpine:latest)...
...

But:

$ TAG=edge docker-compose up
Pulling example (alpine:edge)...
...

the $TAG is now available inside the compose file.

The outcome

It's required to always explicitly provide env variable values to be able to use them inside compose file.

It feels natural to expect that all env variables are available/resolving inside the compose file, especially those that were defined by it in the first place. Although this seems to not be the case.

Sorry if this was answered before, I didn't find this particular use-case in issues list.

Tech specs:

$ docker version
Client:
 Version:      1.13.1
 API version:  1.26
 Go version:   go1.7.5
 Git commit:   092cba3
 Built:        Wed Feb  8 08:47:51 2017
 OS/Arch:      darwin/amd64

Server:
 Version:      1.13.1
 API version:  1.26 (minimum version 1.12)
 Go version:   go1.7.5
 Git commit:   092cba3
 Built:        Wed Feb  8 08:47:51 2017
 OS/Arch:      linux/amd64
 Experimental: true

$ docker-compose version
docker-compose version 1.11.1, build 7c5d5e4
docker-py version: 2.0.2
CPython version: 2.7.12
OpenSSL version: OpenSSL 1.0.2j  26 Sep 2016