OECD Environmental Performance Reviews: Sweden 2025

Sweden has an open, knowledge-based economy with high living standards, low inequality and good environmental quality. Over 2010-22, gross domestic product (GDP) grew faster in Sweden than in many other OECD countries. Following a relatively strong performance during and after the COVID-19 pandemic, GDP shrank marginally in 2023. With lower inflation and interest rates, private consumption is projected to drive the economic recovery in 2024 (+0.6%) and 2025 (+1.8%) (OECD, 2024a).

Over 2010-23, Sweden successfully decoupled emissions of greenhouse gases (GHGs) and major air pollutants, energy supply and freshwater abstractions, and to a lesser extent municipal waste generation, from economic growth. Domestic material consumption grew faster than GDP until 2021, reflecting increased extraction of non-metallic minerals and metal ores. However, it has since declined with the contraction of the construction sector.

Sweden is closer to its clean air and non-toxic environment targets than it was in 2012 (Table 1). However, it does not expect to meet 12 environmental quality objectives out of 16 or the generational goal (to pass on a society in which major environmental problems have been solved) by 2030. The negative trends in the climate (Chapter 2) and biodiversity objectives are a cause for concern and highlight the need for continued efforts to address environmental challenges.

Air pollution levels in Sweden are among the lowest in the OECD (OECD, 2024b). Nevertheless, the country continues to record exceedances of EU air quality standards (MoCE, 2024a; SEPA, 2024a). Around 6 700 people die prematurely each year in Sweden, mainly due to fine particulate matter and nitrogen dioxide pollution from long-range transport of pollution, road traffic (vehicle exhaust and wear particles) and domestic wood burning (Gustafsson et al., 2022).

Sweden met its 2020-29 emission reduction commitments under the National Emission Ceiling Directive, except for ammonia (NH₃). Since the mid-2010s, stricter emission standards, fuel switching, improved abatement technologies and the charge on nitrogen oxides (NOx) emissions have helped to further reduce air pollutant emissions. However, additional efforts are needed for NH₃ and NOx emissions to meet the 2030 targets. Broadening the NOx charge and introducing a distance-based charge for heavy goods vehicles, as provided by the National Air Pollution Control Programme, would help achieve the NOx target (MoCE, 2024a). New measures are needed to improve manure management (SEPA, 2024b). The proposed subsidy (SEK 100 million for 2025-27) to reduce NH₃ emissions from the handling of stable manure could help reach the goal on NH₃ (MoF, 2024a).

The National Biodiversity Strategy and Action Plan is outdated, lacking milestone targets and concrete actions to meet the requirements of the Convention on Biological Diversity’s Kunming-Montreal Global Biodiversity Framework, the EU Biodiversity Strategy 2030 and the EU Nature Restoration Law (SEPA, 2023b). The government has commissioned a parliamentary committee to draw up a new strategy. Unfortunately, its proposals will come after the deadline of the 16th meeting of the Conference of the Parties (held in October 2024).

More than three-quarters of habitats and half of species of conservation importance1 are in poor or bad states. Agriculture and forestry are the main pressures on terrestrial habitats (EEA, 2023). Marine habitats are affected by eutrophication and commercial fishing (SEPA, 2022a), while climate change is expected to further disrupt ecosystems. There was little or no improvement in the state of the Baltic Sea environment in 2016-21 (HELCOM, 2023). Sweden has good knowledge of protected habitats and species, but large gaps remain (SEPA, 2021). An economic evaluation of Sweden’s ecosystem services, as carried out in Slovakia, would make the case for, and guide, biodiversity action (OECD, 2024c).

Sweden has designated 15% of land and marine areas under its jurisdiction for protection. It has achieved the 2020 Aichi target for marine and coastal areas (10%) but not for terrestrial areas (17%). The country is not on track to meet the 2030 target of 30%. Further efforts are needed to ensure the ecological representation, effectiveness, functionality and connectivity of the protected areas network (GoS, 2019). About 3 000 management plans need to be updated and some Natura 2000 sites, particularly those at sea, lack management plans (SEPA, 2021). In November 2024, Sweden adopted a law on the marine environment that aims, among other things, to strengthen the protection of marine areas.

Longstanding intensive forestry and standard clear-cutting practices have adversely affected forest habitats. Long-term formal and voluntary protection of forests and environmental consideration during felling2 have yielded positive results but have not halted the loss of forest ecosystems (SFA, 2022). Sweden has not met its objective on sustainable forest for 2020 and is not on track for 2030 (Table 1). Currently, 9% of forests are formally protected, 5% are voluntary set-asides and 2% are consideration patches (in productive forests,3 these percentages are 6%, 6% and 2%, respectively) (SCB, 2024a). Unproductive forests account for 11% of all forest land. Further work is needed to preserve unprotected productive forests, which are predominantly privately owned and face higher rates of loss, degradation and fragmentation (SEPA, 2022b).

Production and environmental objectives are not well balanced in the forestry policy, which favours voluntary biodiversity conservation initiatives (SFA, 2022). When owners of forests with high conservation values notify the Swedish Forest Agency of felling, the Agency often applies the Forestry Act instead of applying the Environmental Code. Since the Forestry Act's restriction on encroachment is often not sufficient to preserve the environmental values of forests with high conservation values, this often results in large parts of the core values being felled and the natural values in these parts being destroyed (SEPA, 2022b; SFA, 2022). Efforts to map high conservation value forests (Jonsson, B.G. et al., 2024) should be pursued to facilitate compliance. Stable funding is needed to improve oversight, advise landowners and compensate them for setting aside forest land and manage nature conservation in protected areas (SFA, 2022).

The Common Agricultural Policy (CAP) 2014-22 has helped maintain land management and grazing in marginal areas and pastures, preventing land abandonment – a key threat to biodiversity (SBA, 2022; SEPA, 2022a). However, it has also contributed to further intensification in areas already subject to intensive agriculture. Public support and management practices should be adapted to the diverse geographic context, particularly for grasslands in the Natura 2000 network. Like plans in other EU countries, Sweden’s 2023-27 CAP Strategic Plan is not sufficient to protect biodiversity (EC, 2023a; 2022). In addition to CAP funding, the budget bill for 2025 proposed to allocate SEK 120 million for the restoration and management of semi-natural pastures and meadows over 2025-27 (MoF, 2024a)_.

Only 40% of surface water bodies have good ecological status and none have good chemical status when considering substances like mercury and other ubiquitous pollutants.4 Eutrophication, caused by excess nutrients from agriculture, wastewater, and atmospheric deposition, remains a major challenge (Table 1). Progress in reducing eutrophication is too slow to meet the 2027 deadline of the EU Water Framework Directive (WFD) (Barquet, 2021). Measures to reduce nitrogen and phosphorous in agriculture have not been sufficient and not always well targeted (Vattenmyndigheterna, 2024). Although pilot co-ordination programmes at catchment scale have been positive, the reliance on voluntary measures has not promoted effective prioritisation.

Hydropower exerts the most extensive pressure on lakes and rivers (SwAM, 2024). Most hydropower concessions were granted decades before adoption of modern environmental legislation (Rudberg, 2013). Consequently, permits lack environmental considerations such as minimum environmental flows and fish passages. In 2019, Sweden revised its legal framework and adopted the National Plan for Modern Environmental Provisions for Hydropower to reassess permits. The largest hydropower companies have established the Hydroelectric Environmental Fund, which will allocate SEK 10 billion (EUR 1 billion) to improve water quality and hydrological connectivity in affected water bodies. The process began in 2022, with a 20-year time horizon, but it has been postponed several times. The measures are not expected to be completed before 2045, long after the WFD deadline of 2027. A government review of the implementation of the National Plan highlights scope for improved co-operation between hydropower facilities and water authorities, clearer guidance on environmental standards development and the need to monitor the impact of environmental measures (SwAM, 2023). A recent legislative proposal seeks to enshrine in law the requirement to fully apply all exemptions and derogations allowed under the WFD (MoCE, 2024b). As a result, the reassessment of permits will likely prioritise electricity production when facing trade-offs with environmental objectives.

Sweden has abundant water resources and low water stress at national level: only 1% of renewable freshwater resources are withdrawn annually. However, water scarcity is a recurring issue in southeastern Sweden and emerging in other regions (Swedish National Expert Council for Climate Adaptation, 2022). Sweden has faced droughts and floods, prompting measures to improve water efficiency, water retention in landscapes and monitoring. This is especially the case in the South Baltic Sea Water District where water shortages are pervasive. A review of the system for abstraction permits would be timely to revise older permits, broaden the coverage of users requiring a permit and strengthen the monitoring of abstractions. Sweden is one of only three OECD countries (along with Austria and Chile) that do not apply abstraction charges (Leflaive, 2024).

Swedes generate less municipal waste per capita than the EU average (395 vs. 513 kg/capita in 2022). As Sweden was already landfilling less than 1% of municipal waste in 2010, it is well ahead of the EU target of 10% by 2035. The landfill tax and ban on landfilling for combustible and organic waste introduced in the 2000s were key factors in this success (OECD, 2014). However, the country did not meet the target of recycling 50% of municipal waste by 2020 and is at risk of not meeting the 2025 target of 55%. Over 2010-19,5 increasing amounts of waste were incinerated with energy recovery and, to a lesser extent, recycled. Sweden's circular material use rate remains low, at 6%, just over half the EU average in 2022 (Eurostat, 2023).

To improve recycling, the Swedish Environmental Protection Agency (SEPA) has proposed regulatory changes requiring increased sorting at source and improved separate collection of paper, plastic, metal and glass; better sorting of the reusable or recyclable part of combustible waste prior to incineration; and better information to households and businesses by municipalities on how waste should be handled. SEPA also suggested considering an extended producer responsibility system for furniture and mattresses; improving data on waste from businesses; investigating economic instruments to stimulate demand for recycled materials, improve conditions for repair, remanufacture and reuse; and supporting municipalities, particularly the smaller ones (SEPA, 2023c). In November 2024, the government initiated a reform of the waste legislation to prevent waste and increase material recycling (GoS, 2024a).

Since 2014, Sweden has introduced new economic instruments to promote a circular economy. The value added tax rate for repair services for bicycles, shoes, leather goods and clothes was reduced from 25% to 12% in 2017. The rate was further reduced to 6% in 2022 and increased again to 12% in 2023 to increase the uniformity of the tax system. Taxes on incineration and plastic carrier bags were introduced in 2020 but removed in 2023 and 2024, respectively. The tax on plastic bags was no longer deemed necessary as Sweden had exceeded the EU consumption target for plastic carrier bags. The tax on incineration was abandoned to maintain the profitability of combined heat and power production, but it was lifted before the effect of the tax on recycling had been measured. A tax on chemicals in certain electronic goods was introduced in 2017; its rate increased in 2019 and the deduction rules were changed in 2023. It is not always clear how environmental impacts are considered when amending or abolishing these instruments. An inquiry on economic instruments for a more circular economy is under public consultation (GoS, 2024b).

Sweden is a unitary state with a decentralised governance system including 21 counties and 290 municipalities. In 2022, the Ministry of the Environment was merged with the Ministry of Enterprise and Innovation to become the Ministry of Climate and Enterprise (MoCE). The MoCE oversees 36 government agencies, including SEPA which co‑ordinates and implements environmental policy. After ten years of growth in the budgets of environmental agencies, the government has reduced their appropriations since 2022.

At the regional level, county administrative boards (CABs) are central government agencies responsible for environmental permitting, compliance monitoring and enforcement. Municipalities are responsible for spatial planning, environmental service provision and protection. Sweden has adopted a National Strategy for Environmental Supervision for 2022-25 (SEPA, 2024c). Increased appropriations for licensing and guidance have supported more effective and uniform supervisory activities by regional and municipal authorities (SEPA, 2024d). However, CABs lack resources and municipalities have skill shortages (SEPA, 2024e). Although annual monitoring provides positive indications of compliance levels, outcome indicators would help to better assess the strategy’s effectiveness. Since 2018, Environmental Collaboration Sweden has been facilitating the follow-up of the municipalities’ supervisory activities (Environmental Collaboration Sweden, 2024).

Sweden has yet to adopt adequate measures to address or mitigate the potential adverse effects of large renewable energy and mining projects on Sámi land and traditional lifestyle, including reindeer herding (OHCHR, 2024). A green industrial revolution has been launched with numerous ongoing investments. This includes producing steel from green hydrogen, developing batteries for electric vehicles and extracting critical minerals from mine waste (OECD, 2023a) (Chapter 2). However, the development of related infrastructures in northern regions is creating conflicts with the traditional land use of the Sámi people (MoCE, 2024c). The Constitution and the National Minorities and Minority Languages Act protect and promote the preservation of Sámi culture. The 2022 Act on Consultation (2022:66) requires the government and local authorities to consult Sámi representatives on issues significant to the Sámi people. However, in practice, it does not always lead to effective consultation in decision making that affects them, or to their free, prior and informed consent (OHCHR, 2024).

Sweden is one of the best performing OECD countries in terms of green budgeting practices (OECD, 2024d). The Budget Act requires the government to report to Parliament on progress towards environmental goals, and the Climate Act requires a separate report on climate mitigation progress to be attached to the budget bill (Pojar, 2023). The country has made progress on assessing the budget's contribution to environmental and climate objectives, notably through the update of the regulatory impact assessment ordinance (2024:183) and the development of guidance to help government agencies assess the climate impact of policy proposals (SEPA, 2024f). However, the climate report highlights inconsistencies between fiscal and climate policies (MoF, 2024b; 2023). There is still room for improvement in tagging measures with a negative environmental impact, including tax expenditure.

Public expenditure on environmental protection grew significantly from 0.4% to 0.6% of GDP in 2010-22. This is due to the sharp rise in government subsidies to reduce GHG emissions and increased municipal investment in wastewater treatment. Overall, 97% of urban wastewater is treated according to the requirements of the EU Urban Waste Water Treatment Directive, well above the EU average of 82% (EEA, 2024). Sweden has made major investments to reduce emissions of pharmaceutical residues into the environment and has been a leader in addressing contaminants of emerging concern in freshwater (OECD, 2019). However, individual sewage treatment systems, on which around 15% of the population depends, remain a significant source of water pollution (EEA, 2024).

Sweden would benefit from investing more in measures to protect biodiversity and ecosystems, in the circular economy, and in pollution prevention and control (EC, 2024a). The environmental investment gap is expected to increase to EUR 7 billion over 2021-27. The gap is especially wide (EUR 4.4 billion) for biodiversity and ecosystem protection. After reaching its highest level for ten years in 2021-22, the budget for nature protection was drastically cut in 2023 (ESV, 2024).

The need for additional (mainly private) investment is estimated at SEK 30 billion per year in 2030 for electricity generation and SEK 48 billion by 2030 for transmission networks (MoCE, 2024d). Publicly financed climate measures, including for adaptation, could amount to SEK 25-45 billion per year over the coming decades, on top of the planned SEK 60 billion in annual investment for transport infrastructure over 2022-33 (SFPC, 2022). There is scope to prioritise transport investments with high benefit-cost ratio (SNAO, 2022). Over 2010-22, investment in roads increased much faster than investment in rail infrastructure (OECD, 2024e). Since 2023, applications for new urban environment agreements for the development of cycling and public transport are no longer being granted (MoF, 2023).

Subsidies for climate change mitigation have surged since 2015. These include the bonus for low-emission cars, support for local and regional climate investments, installation of charging infrastructure for electric vehicles and reduction in industry’s process-related emission (Chapter 2). Although some subsidies have proved effective in reducing GHG emissions (SEPA, 2024g), there is scope to streamline them to avoid overlaps (SNAO, 2024). The cost effectiveness of climate mitigation subsidies should be systematically assessed and weighed against energy price support measures that counteract their effects.

It is unclear when Sweden will benefit from EU recovery funds. The country dedicated 44% of its Recovery and Resilience Plan (RRP) budget (to be supported by EUR 3.4 billion in EU grants6 until 2026) to climate objectives. However, as of September 2024, Sweden had not submitted a payment request (EC, 2024b), as it has not implemented certain reforms required for the disbursement of funds. These include the increase in the biofuel blending obligation (Chapter 2) and the abolition of reduced tax rates on fuels used in agriculture. Hence, discussions are under way with the European Commission on possible adjustments to the RRP.

The green tax shift (reallocating the tax burden from labour to environmentally harmful activities), implemented in the first half of the 2000s, has stalled and even reversed in recent years. While taxes on labour have fallen only marginally and remain high (OECD, 2024f), revenue from environmentally related taxes decreased from 2.5% of GDP in 2010 to 1.6% in 2023 (Figure 1). This is partly explained by the shrinking of the tax base (i.e. lower fuel consumption and increased electrification of vehicles) but also by the drastic cut in fuel tax rates.

With an average effective carbon rate (ECR7) of EUR 90 per tonne of CO₂ in 2023, Sweden continues to have one of the highest carbon prices in the world (OECD, 2024g). However, this rate dropped by almost 20% over 2021-23, compared with a 10% fall in the European Union. Combined with the increase in permit prices in the EU Emissions Trading System (ETS), the cut in fuel tax rates has narrowed the ECR gap between transport and other sectors, and between diesel and petrol. However, it has also weakened incentives to reduce emissions. While most GHG emissions from road transport, buildings, electricity and industry are priced at over EUR 60 per tonne of CO₂, emissions from agriculture – methane and nitrous oxide – remain unpriced.

In real terms, revenue from taxes on motor vehicles and transport (excluding fuel duty) increased over 2010-19, then fell with the decline in car registrations and the growing share of low-emission vehicles. Sweden taxes the ownership of motor vehicles but does not apply purchase tax. The annual motor vehicle tax is the main source of revenue from transport taxes. Since 2018, new cars and light vehicles have been charged a higher tax (malus) based on their CO₂ emissions in the first three years. For diesel vehicles, an environmental charge and a fuel charge are added to the malus to reflect their higher impact on local air pollution and offset the lower energy tax rate on diesel. The climate bonus, which has subsidised the purchase of low-emission vehicles, was abolished in 2022 (Chapter 2).

As the use of electric vehicles increases, road pricing will be needed to address transport externalities and loss of fuel and vehicle duty revenue. While fuel taxes are well suited to reduce carbon emissions, distance-based charges and congestion charges address many externalities from road transport more effectively (van Dender, 2019). Increased congestion charges in Gothenburg and Stockholm have yielded positive environmental and mobility outcomes (Börjesson, 2018). There is potential for other cities such as in Malmö and Uppsala to implement congestion charges or parking charges to internalise externalities and shift to other transport modes (Pyddoke and Lind, 2024). Sweden should also modify road tolls for heavy goods vehicles to consider the distance travelled and better reflect the climate and air pollution costs of their use. It applies a road toll to heavy-duty vehicles (above 12 tonnes) on the main roads, which varies with Euro standards and the number of axles. The charge is time-based but does not change with distance travelled.

As recommended in 2014 (OECD, 2014), Sweden analysed the incentive mix in the transport sector (Trafikanalys, 2024a; 2024b; 2018). However, the conclusions have not always been acted upon. For example, Parliament's decision in 2022 (informed by a dedicated committee) to introduce a new tax reduction for commuting – regionally differentiated, based on distance and neutral in terms of mode of transport – was ultimately not implemented. On the contrary, tax deductions for using a car for commuting to work or for business trips were increased in 2023. The coherence of the economic instruments that apply to transport needs to be improved.

Under SDG 12,8 Sweden is committed to rationalising inefficient fossil fuel subsidies. However, it has not adopted intermediate targets for doing so (MoCE, 2024d). Like other OECD countries, Sweden delivers support to fossil fuels through tax expenditures (OECD, 2023b). The reduced energy tax for diesel used in motor vehicles is the main source of forgone revenue (MoF, 2024c). This is followed by reduced energy and carbon taxes for diesel used in agriculture, fishing and forestry, as well as exemptions for domestic shipping and aviation. Over 2022-23, these measures represented almost 0.3% of annual GDP or 40% of fuel tax revenue (MoF, 2024c; SCB, 2024b). In addition, the increased income tax deduction for car commuting expenses in 2023 resulted in a tax expenditure of SEK 7.8 billion (0.12% of GDP).

With energy tax on petrol (the national benchmark) falling faster than that on diesel, tax expenditures related to fossil fuels will reduce substantially between 2022 and 2025 (MoF, 2024c). However, lower fuel taxes weaken the incentive to reduce transport emissions. This highlights the need to regularly assess the environmental impact of tax expenditures in the national context, as Belgium, Germany and Italy are doing (MASE, 2022; SFP Finances, 2024; UBA, 2021).

Sweden should also systematically evaluate incentives that could potentially affect biodiversity as required by Target 18 of the Kunming-Montreal Global Biodiversity Framework. For example, coupled income support to cattle production under the CAP maintains livestock numbers and associated enteric fermentation emissions.

Between 2010 and 2022, greenhouse gas (GHG) emissions, excluding land use, land-use change and forestry (LULUCF) fell by 29%, faster than the EU average of 19% (OECD, 2024h). A large share of Sweden’s emission reductions to date can be attributed to a practical phase-out of fossil fuels to produce electricity and heating. A shift to renewable energy has been a longstanding policy priority in Sweden, and large-scale nuclear power development has also played a prominent role in reducing dependence on fossil fuels. In 2022, renewable energy accounted for over two-thirds of electricity generation and GHG emission intensities per capita and per unit of GDP were the lowest in the European Union (Figure 2). Sweden met its 2020 target for ESR sectors (not covered by the EU Emissions Trading System) and fulfilled its commitments under the Kyoto Protocol (2008-12 and 2013-20) (Figure 3).

Sweden is consistently ranked among the top performers on the European Eco-Innovation Scoreboard (EC, 2023b). This reflects high government spending on research, development and deployment (RD&D) related to environment and energy, as well as robust patenting activity. Sweden is pioneering technology developments for carbon capture use and storage (CCUS). Venture capital investments in climate tech start-ups and scale-ups increased significantly over 2019-23, contributing to enhanced industrial competitiveness both domestically and within the European Union (EC, 2024a).

Sweden aims to reach net-zero emissions by 2045, followed by negative emissions thereafter, with at least 85% of emissions reduced within Sweden’s borders. Supplementary measures, such as verified emission reductions abroad, increased carbon sink and carbon capture and storage from biogenic emissions (BECCS), can compensate for the remaining 15%. Recent policy shifts, particularly in the transport sector (see below), have put into question Sweden’s ability to meet legally binding EU and domestic climate targets, with emissions projected to increase in 2024. The latest official projections estimate the emissions gap to the 2045 target at around 22 million tonnes of carbon dioxide equivalent (Mt CO₂e) without supplementary measures, and 11 Mt CO₂e with full use of supplementary measures (Figure 3) (MoCE, 2024d).

For ESR sectors, the accumulated gap to the 2030 target is estimated to range from 1 to 9 Mt CO₂e. For LULUCF, the gap for the year 2030 is projected to be around 7 Mt CO₂e in a scenario with medium forest growth, and up to 19 Mt CO₂e with reduced forest growth. The budget bill for 2025 aims to reverse the increase in emissions by proposing measures in the transport sector in particular (MoF, 2024b). If adopted, they would improve the conditions for achieving the 2030 target and narrow the gap to the 2045 target.9 However, the bill's expectation to close the gap to the ESR target is based on the most optimistic scenario associated with large uncertainties, e.g. related to private transport choices when fuel prices are low, and fewer electric cars are registered. In addition, no new measures have been proposed to address the gap in meeting the LULUCF target. Further measures will be needed to achieve the long-term goal of 2045 (MoF, 2024b).

Historically, broad public and private sector support for ambitious climate action, combined with strong political commitment, have provided Sweden with a clear and predictable framework for action. However, recent policy shifts on key issues (e.g. on fuel blending and taxation) are eroding this predictability. The government has emphasised the importance of a successful climate policy taking a long-term perspective and being grounded in legitimacy, trust, fairness and acceptance, putting in place the conditions to enable action by the private sector and households. It has initiated, or expressed its intention to initiate, numerous inquiries to examine policy options. While the inquiry system facilitates an informed policy dialogue, it is lengthy; some recommendations are only expected in 2027, i.e. after the next election. With action delayed, future measures will have to accelerate the pace of the transition. The business community has cautioned the government against lowering climate ambition given its negative impact on competitiveness.

Sweden’s 2017 climate policy framework is transparent and comprises three pillars: i) the Climate Act and associated governance framework; ii) emission reduction targets; and iii) an independent Climate Policy Council. Government action on climate is reviewed annually with assessments publicly available. The government is not obliged to formally respond to the recommendations of the Climate Policy Council. However, as part of the annual budget bill, it must submit a climate report to Parliament showing progress towards the targets.

Sweden’s climate policy is also shaped by EU obligations on climate and energy. The EU climate policy framework provides Sweden the flexibility of transferring up to 2% of its ETS allowances for offsetting emissions in effort sharing sectors. Sweden has notified the European Commission that it intends to use the full amount of this flexibility for 2025-30. However, if Sweden fails to meet the requirements under the LULUCF Regulation, emission allocations corresponding to the gap will automatically be deducted from the ESR. A further flexibility provided by the EU framework is the option of banking and borrowing annual emission allocations and to sell or buy emission allocations from other EU countries. Updated 2024 National Energy and Climate Plans (NECPs) indicate that surplus emission allocations will be limited (EC, 2024c). This calls for accelerating domestic emission reductions.

As the ambition of EU policy on climate increases, the relative ambition of domestic targets by “early movers” like Sweden decreases. This applies equally to energy, where Sweden’s updated NECP is not in line with EU targets on renewable energy and energy efficiency. The government has announced that a public inquiry will be tasked to put forward proposals on how to align national climate targets with EU targets.

As Sweden enters the next phase of the climate transition, the role of government in defining priorities, establishing the enabling environment and managing inevitable trade-offs becomes increasingly important. Transformations of the scale foreseen entail both economic benefits (e.g. new industries) and costs (e.g. loss of employment). Sweden’s climate strategy does not include an explicit focus on ensuring a just climate transition. Instead, social and economic impacts are addressed through Sweden’s general welfare system. While this system is well suited to support households that go through structural changes – employment status or life circumstances – it may not adequately support households that experience increased costs, e.g. in the context of passenger transport or electricity use. EU members are due to submit their Social Climate Plans in June 2025.

The government also plays an important role in supporting regions in meeting the changing demand for social infrastructure and services. The labour market needs of the transition have only recently become a focus of the government. In the northern part of the country, public employment services are collaborating with the industrial sector, as well as with education and training institutions, to respond to labour shortages foreseen by the transition. However, such collaboration is not in place in other parts of the country. The central government is well placed to co‑ordinate the numerous actors involved in assessing skill needs and in developing training and educational measures supportive of the climate transition. Further, since many climate-related projects are in northern sparsely populated areas, complementary investments in basic social infrastructure are needed to attract and retain a skilled workforce.

Permitting processes present an important barrier to the acceleration and scaling up of renewable energy. It takes on average nine years to secure the necessary permits for land-based wind projects, one of the longest timelines in Europe (OECD, 2023a). The share of approved permits has also been falling over time. The government recognises the need for a faster and more streamlined permitting process, with numerous inquiries exploring how it can be improved. Further, many industries wishing to electrify or scale up their operations cannot access the grid in a timely manner. This delays the green transition and creates uncertainty for businesses. In 2024, amendments to the Environmental Code and the Electricity Act to streamline the permitting process for the expansion of electricity networks were approved.

Renewable energy accounts for nearly half of Sweden’s energy supply. The European Union has a binding renewable energy target of at least 42.5% in 2030, and endeavours to increase this to 45%. Member states do not have individual targets, but they are obliged to specify national contributions to the EU target in their NECPs. EU guidelines recommend a target of 76% for Sweden. National projections show that the recommended target will not be reached with policy measures in place (MoCE, 2024d). The share of energy from renewable sources is projected to reach 67% in 2030.

In 2023, Sweden replaced its target of 100% renewable electricity generation by 2040 with a target of 100% fossil-free electricity production. Factors driving this shift include a focus on energy security and resilience, and the geographical imbalance between energy demand and supply. The ambition is to build the equivalent of at least two large-scale nuclear reactors by 2035. The government foresees that a considerable expansion will be needed by 2045 that could correspond to ten large-scale reactors, with the scale of expansion to be determined by the rate of expansion in the electricity system, the location of new consumption and production, the technology development of both new nuclear power and the possibility of extending the operating time of existing reactors.

Given lengthy time horizons, high cost and the technical uncertainty of expanding nuclear capacity, this renewed focus on nuclear energy must consider the full range of costs and benefits. Estimates of levelised cost of energy (operation, maintenance and investment costs) indicate that nuclear is always more expensive than wind or solar energy in Sweden (GoS, 2024c; Holmberg and Tangerås, 2022; IEA, 2023; SEPA, 2024h). Experience has also shown that the state must take on a large share of the financial risk of new nuclear capacity. A proposed risk-sharing model for Sweden shows that a nuclear power programme equivalent to around four large reactors would increase the national debt by between SEK 300 billion (no cost overruns) and SEK 450 billion (50% cost overruns). In the former scenario, public debt may decrease somewhat in the long term due to a gradual increase of interest rates on state loans and since state loans are expected to be refinanced with private loans (MoF, 2024d). In the latter scenario, public debt will be higher in the long term. At the same time, the future of small modular reactors remains unclear. Their designs are yet to be certified for construction and costs remain uncertain.

In 2021, 78% of all wind power projects were vetoed by municipal administrations (OECD, 2023a). The proposed financial compensation to communities hosting new wind power projects and to residents living within proximity to the new developments is a positive step to improve acceptance (MoF, 2024b). Similarly, the Swedish Armed Forces have vetoed almost 90% of all offshore wind projects to date due to security concerns. As maritime spatial plans will be amended, it will be important to consider the multiple, and potentially conflicting, uses of marine areas. Sweden should designate renewable acceleration areas, as required by the revised EU Renewable Energy Directive.

Sweden should focus on smarter and more flexible energy systems to reduce overall demand. Between 2005 and 2023, energy intensity decreased by 38%, in line with the EU average (IEA, 2024a). Sweden has developed an exemplary modern district heating system with a combined focus on energy efficiency, heat recycling and renewable heat. It is a leader in combined heat and power plant technologies. Further efforts are required to meet the domestic target to halve energy intensity over the period 2005-30, a target the government plans to review since it is not deemed suitable with the substantial planned electrification of the industrial sector.

Electrification is a central aspect of Sweden’s climate transition. Demand for fossil-free electricity is projected to more than double from current levels by 2045, mainly due to increased electricity consumption in the iron and steel industry. While this will reduce GHG emissions, it will be achieved through increased energy use, contrary to the EU target on reduced energy consumption. Sweden’s commitments to reduce energy consumption are less ambitious than the reductions required to achieve the collective EU target of the updated Energy Efficiency Directive (MoCE, 2024d). Moreover, the updated NECP projects that Sweden will not meet the 2030 targets set by the Directive. Although the government may consider this an acceptable trade-off in the pursuit of its climate targets, Sweden will need to reconcile the planned increase in electricity production with EU requirements.

Despite an increase in the number of kilometres travelled, emissions from the transport sector have decreased by 34% over 2010-23 (SEPA, 2024i). Road transport accounts for most of these emissions. However, this progress, is considerably short of the domestic target of 70% emission reductions by 2030, a goal that the government plans to review. To achieve this target, emissions will have to fall by an average of 1 Mt CO₂e per year in 2023-30 (SEPA, 2024i). Instead, policy changes introduced by the government are expected to increase transport emissions in 2024. Sweden’s ability to meet the 2030 ESR target also requires substantial reductions in transport sector emissions.

In an important election promise, the government committed to reduce the cost of transport fuels. In 2023, the obliged blending of biofuels into petrol and diesel was reduced from 7.8% and 30.5%, respectively, to 6% for both. This change, initially planned for 2024-26, is expected to increase emissions in 2024 (MoCE, 2024d), whereas previous blending requirements were projected to halve emissions in the sector by 2030. However, the government announced that the blending requirement for both petrol and diesel will increase to 10% starting in July 2025 (GoS, 2024d). To address the expected increases in fuel prices, fuel taxes will be further reduced along with targeted support measures. While the proposals outlined in the budget bill for 2025 (except fuel tax reductions) aim to improve the likelihood of achieving the 2030 target and narrowing the gap to the 2045 target, they will not suffice to meet the domestic transport target (MoF, 2024b).

In 2023, battery electric vehicles and plug-in hybrid electric vehicles accounted for 60% of car sales and for 11% of the passenger car fleet. A bonus for buying electric cars was removed in 2022 as the total cost of owning and driving low-emission cars was approaching that of petrol and diesel cars. In 2024, a new premium was introduced for car owners replacing an old car with the purchase or lease of an electric car. Another electric car premium targeted at groups in need of support (e.g. those living in sparsely populated areas) has also been proposed in the budget bill for 2025 within the framework of the EU Social Climate Fund (MoF, 2024b).

The government has announced further investments in charging infrastructure for both light and heavy-duty electric vehicles. Nonetheless, many of the 4.4 million fossil-fuelled cars will still be on the road in 2030. Additional measures are therefore required to minimise private vehicle use, e.g. by ensuring consistent incentives and extending road pricing (Chapter 1). This would also prepare the sector for its forthcoming inclusion in EU ETS-2 in 2027 and the EU zero CO₂ emissions target by 2035 for all new cars and vans.

The industrial sector is one of the hardest sectors to decarbonise. Still, it is playing a key role in reducing emissions and strengthening Sweden’s competitiveness internationally (GoS, 2024c). Emissions from the sector have varied with production volumes and economic growth. In 2023, they were 23% lower compared with 2010, largely due to increased electrification, the use of biofuels and enhanced energy efficiency (SEPA, 2024j). Strong public support for research and development has propelled Swedish companies to the forefront of technological developments. Further emission reductions will require new technological developments in the iron and steel industry, large investments in new process technology and increased supply of electricity. However, with overall demand for electricity projected to double by 2045, progress in mitigating emissions from the sector is likely to contribute to increased electricity prices. Further, government support for technological innovations risks favouring some technologies over the development and maturation of potentially more efficient approaches, such as closed-loop carbon recycling (OECD, 2023a). Such approaches contribute to resource savings and emission reductions but remain far from commercialisation.

The emission intensity of the Swedish agricultural sector is below the OECD average, but emission reductions have been minimal over the past decade. This is common across many EU countries. The composition of emissions has remained unchanged, with enteric fermentation and agricultural soils in 2022 accounting for 50% and 40% of emissions, respectively. Agricultural emissions face low carbon prices or are not priced (Chapter 1), and most climate measures are voluntary.

The government considers that further emission reductions in the sector will be difficult, could affect its competitiveness and might result in emissions leakage, one reason for including supplementary measures in the climate policy framework (GoS, 2023). Sweden may wish to follow the implementation of the Danish agricultural tax to explore what aspects it could adopt. As the European Commission is considering pricing GHG emissions from agriculture, Sweden should take a proactive approach in exploring all options available and in piloting potential measures. A complementary focus could be on further reducing food loss and waste and influencing consumer behaviour and preferences. 

Sweden’s Strategic Plan for the EU CAP provides an opportunity to increase the climate ambition in the agricultural sector, e.g. by making payments conditional on achieving emission reductions. Sweden will use 30%, or around EUR 1.3 billion, of the EU CAP financial contribution to support environmental and climate objectives, including carbon sequestration. This will be particularly important as Sweden aims to increase domestic food production while achieving relevant environmental objectives and generating growth and employment.

Sweden’s climate policy framework specifies that supplementary measures can account for up to 15% of the total emission reductions needed by 2045. These include: i) increased carbon sinks in forests and land; ii) implementing carbon capture and storage (CCS) from biomass combustion (i.e. BECCS); iii) facilitating verified emission reductions through investments in other countries. The use of supplementary measures is intended to offset emissions that are difficult or costly to mitigate. However, all three groups are complex and characterised by long lead times, further highlighting the importance of limiting reliance on such measures to meet climate targets. Moreover, there are numerous uncertainties and risks associated with their eventual contributions to Sweden’s climate targets. For example, the scale of mitigation outcomes that can be sourced from abroad is uncertain, due to stringent EU targets and the relatively immature Article 6 market (see below).

Forests and woodlands account for almost 70% of Sweden’s land area. Sweden has high net carbon removals from LULUCF, but the level of sequestration is declining. Increased harvesting, decreased forest growth in part due to the impacts of climate change, and lower sequestration of carbon by ageing forests contribute to this downward trend. Under the EU LULUCF Regulation, Sweden is obliged to increase its annual net carbon removals by nearly 4 Mt CO₂e by 2030, compared to the average from 2016-18. However, Sweden is not on track to meet this obligation and projections indicate that net carbon removals may continue to decrease over time. An important unknown variable is the impact of a changing climate on forest growth and health.

To meet the target of the LULUCF sector, Sweden must take additional measures. Today, few policy instruments directly address emissions and removals in the LULUCF sector. In 2022, the government tasked a cross-party inquiry to propose a strategy with intermediary targets, policies and measures for Sweden to reach its international and EU obligations on both biodiversity and LULUCF, with the proposal expected in February 2025. In 2024, an investigation was launched to review the national forest policy in light of developments within the European Union, but also to consider measures for long-term sustainable and competitive forestry.

Sweden is pioneering technology developments for CCUS, especially BECCS. Based on the current landscape of operating support for BECCS, an estimated 1.7-2.6 Mt CO₂ could be captured by 2030 (IEA, 2024b), with the potential to reach 3-10 Mt CO₂ by 2045 (GoS, 2020). Currently, all CCUS projects are at the planning phase. Some investment decisions are expected in 2024, but around half of the projects remain uncertain.

For CCS deployment to occur at scale, both regulatory and economic support are needed. A public inquiry is examining how permit processes can be shortened and simplified. The government also provides direct financial support. To date, this has primarily been through the Industrial Leap, a support scheme that aims to reduce emissions from industrial processes, contribute to achieving negative emissions through BECCS and support strategic projects for the industry transition. In 2024 a new support scheme in the form of a reverse auction for biogenic CO₂ was put in place. The scheme allows companies to put forward bids on how much biogenic CO₂ they can capture and store and at what cost. The companies (one or more) requesting the lowest amount of support per tonne of biogenic CO₂ removed win the auction, receiving financial support for investment and operational expenses for 15 years. The government can commit up to SEK 36 billion (around EUR 3 billion) over 2026‑46. The beneficiaries can sell the carbon credits tied to their negative emissions in voluntary carbon markets.

Despite the large financial commitment, the number of recipients eligible for the auction scheme will be limited. It will therefore be important to explore alternative incentives with broader application. One example is the provision of tax credits for captured carbon. Being part of a CCUS hub or cluster can also help bring down transport and storage costs (Dechezleprêtre, Mulligan and Vitkova, forthcoming). However, the development of such hubs requires careful planning and permitting co‑ordination across industries, and in Sweden’s case, across national borders.

As the sector develops, close attention must be paid to associated risks. For example, the efficiency of CCUS technology in capturing carbon and the additional energy required for the entire process (capture, transport and storage) are still poorly understood. Current technologies are best suited for point source emissions with high concentrations of CO₂, which is the case for most facilities in Sweden. For emission sources in remote locations or with low concentration of CO₂, the economics of CCUS may pose challenges. Associated regulatory frameworks are also evolving. While the EU Directive on geological storage of CO₂ was introduced in 2009, Sweden together with five other European countries has called for a better EU regulatory framework for cross-border transport of captured CO₂ in 2024. Sweden has also signed bilateral agreements with Norway and Denmark, allowing CO₂ transport across borders for geological storage.

To meet its domestic climate targets, Sweden can, among other things, use Article 6 of the Paris Agreement to co-operatively implement mitigation actions in other countries, thereby supporting a higher overall mitigation ambition. The government is also considering purchasing emission allocations from other EU countries to fulfil its commitments under the 2030 ESR and LULUCF regulations.

Sweden has played an active role in the climate negotiations on Article 6 and has entered Memoranda of Understanding with Zambia, Nepal, Rwanda and the Dominican Republic, as well as a bilateral agreement with Ghana, with discussions ongoing with other countries. Sweden is also working with international organisations and multilateral development banks to facilitate the implementation of Article 6 collaborations. To advance understanding of the international rules for Article 6, Sweden has also signed a Memorandum of Understanding with Switzerland, with the aim of piloting international transfers and reporting of emissions removals.

However, there are multiple barriers to increasing the share of verified emission reductions and removals outside Sweden. Potential challenges in growing Sweden’s pipeline of Article 6 activities include limited capacity in host countries, long project lead times and risks due to ongoing Article 6 negotiations and an evolving rulebook. The Article 6 market is still nascent, making the transaction costs of engaging in these markets high. Furthermore, there are risks associated with each project. For example, a project may not achieve the expected mitigation impacts and host countries may no longer want to authorise mitigation outcomes. In the EU context, emission allocations have in the past been available from the newer EU members with lower emission reduction targets. However, the availability of such allocations is becoming scarcer as the stringency of EU climate and energy policy increases.

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