It is, but it introduces new risks. Like your test code emailing all of your production users. And more generally data security issues.

You are absolutely right. Depending on the current environment, you should think about the protection of sensitive data (for example, data masking and obfuscation, access control).

Database Lab Engine provides some possible solutions to protect sensitive data: https://postgres.ai/docs/database-lab/masking

By the way, the Database Lab Engine maintainer is here.