OECD Environmental Performance Reviews: Sweden 2025

Sweden has successfully decoupled GHG emissions from strong economic growth and a growing population (Chapter 1). Between 2010 and 2022, GHG emissions, excluding land use, land-use change and forestry (LULUCF), fell by 29%, faster than the EU average of 19% (Figure 2.1). In 2022, Sweden’s GHG emission intensities per capita and per unit of gross domestic product (GDP) were the lowest in the European Union (OECD, 2024a).

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. In 2022, renewable sources of energy accounted for more than two-thirds of electricity generation. Of this, most was from hydro, with the contribution from wind power increasing (Box 2.1). The switch to district heating in buildings and the use of more energy-efficient heating systems have also played an important role in reducing emissions.

Emissions from domestic transport have decreased by 34% since 2010 despite an increase in the number of kilometres travelled. This reduction is mainly due to increased use of biofuels, energy efficiency improvements and electrification of the vehicle fleet. Industrial emissions (including fuel combustion and industrial processes) have fallen by 21% over 2010-22. Changes in the fuel types used by industry and enhanced energy efficiency have contributed to this reduction. These reductions have occurred despite the continued high emissions intensity of the manufacture of basic metals. Increased incineration of waste in combined heat and power plants has reduced methane emissions from landfills. Meanwhile, improved capture of methane at landfills and improved management of wastewater have also contributed to large emission reductions. Emissions from agriculture have only marginally decreased over the past decade.

As a member of the European Union, Sweden has shaped its climate policy to align with EU obligations on climate and energy. As the ambition of EU policy on climate increases, the relative ambition of domestic targets by “early movers” such as Sweden decreases. EU-legislated targets now cover all major sectors. While in many cases these targets will be challenging for EU members to achieve, burden- sharing agreements enable some trading of emission allowances or applications between EU member states or across sectors.

The Swedish Climate Act (2017) includes a legally binding target to reach net-zero emissions by 2045 at the latest, followed by negative emissions thereafter. If reached, the country would achieve climate neutrality five years ahead of the EU target of 2050. The Climate Act specifies that emissions within Sweden’s borders shall be reduced by at least 85% by 2045 compared with 1990 levels. 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%. The target covers emissions included in the EU Emissions Trading System (EU ETS)1 and those covered by the EU Effort Sharing Regulation (ESR).2 Increased net carbon removals in the LULUCF sector can be counted towards domestic targets but only as a supplementary measure. The 2045 target is complemented by interim domestic targets applicable to ESR sectors for 2020, 2030 and 2040, as well as a domestic 2030 target for the transport sector. The EU ESR and LULUCF targets for 2030 are legally binding, but the interim targets are not (Table 2.1).

EU energy targets complement the climate targets. In their National Energy and Climate Plans (NECPs), EU members specify how they will achieve the objectives of the energy union on renewable energy and energy efficiency. Sweden submitted its initial NECP in 2019 and published an update in July 2024. In principle, the NECP should reflect EU climate regulation, including the Fit for 55 package and the 2022 REPower EU Plan. However, Sweden’s updated NECP is not in line with EU targets on renewable energy and energy efficiency (Section 2.3.2).

Sweden met its ESR target for 2020, as well as its commitments under the first and second periods of the Kyoto Protocol (2008-12 and 2013-20). The latest official projections (July 2024) showed that Sweden is not on track to meet climate and energy targets for 2030, 2040 and 2045 with existing measures (MoCE, 2024). The emissions gap to the 2045 target is estimated at 22 million tonnes of carbon dioxide equivalent (Mt CO₂e) without supplementary measures, and 11 Mt CO₂e with full use of supplementary measures (MoCE, 2024). To meet the 2045 target, Sweden must reduce emissions by an average of 2 Mt CO₂e per year until 2045 (CPC, 2023). This is faster than the average annual emission reductions since 1990 of just under 0.8 Mt CO₂e, and in sharp contrast to Sweden’s projected increases in emissions in 2024.

For ESR sectors, the accumulated gap to the 2030 target is estimated at 1-9 Mt CO₂e. This estimate considers the flexibilities included in the ESR of banking and borrowing annual emission allocations (Box 2.2). For LULUCF, the gap for the year 2030 is projected at around 7 Mt CO₂e in a scenario with medium forest growth, and up to 19 Mt CO₂e with reduced forest growth (SEPA, 2024a).

The budget bill for 2025 aims to reverse the projected increase in emissions, especially through measures proposed in the transport sector (MoF, 2024a) (Section 2.3.2). If adopted, the measures would improve conditions for achieving the 2030 target and narrowing the gap to the 2045 target. 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 fossil and petrol 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, 2024a).

Sweden has established itself as a leader on climate change for both international and EU climate negotiations. For example, internationally, Sweden is a member of the so-called High Ambition Coalition founded in 2014. This played an important role in supporting adoption of the Paris Agreement in 2015. During its EU presidency in 2023, Sweden also oversaw the negotiations on the major reform package Fit for 55. However, some recent policy shifts (Section 2.3.2) have cast doubt on Sweden’s ability to meet climate targets.

Action on climate is guided by the three pillars of the climate policy framework approved by the Swedish Parliament (Riksdag) in 2017:

• The Climate Act specifies that the government shall: i) each year present a climate report to Parliament in its budget bill; ii) the year following ordinary parliamentary elections, draw up a climate policy action plan; and iii) ensure alignment between climate policy and budget policy goals.

• Emission reduction targets commit Sweden to reduce GHG emissions to net zero by 2045 at the latest compared to 1990 levels, followed by negative emissions. Interim targets for emissions covered by EU’s ESR complement the long-term target (Table 2.1).

• The Climate Policy Council, an independent expert body, evaluates the alignment of the government’s climate policy with goals established by Parliament and government, and identifies areas that require further action. This is complemented by an assessment of the government’s four-year climate action plan.

Since 2022, the Ministry of Climate and Enterprise has overseen development of Sweden’s climate and energy policy. The Swedish Environmental Protection Agency oversees policy implementation on climate. It is also tasked with monitoring and reporting Sweden’s emissions to the United Nations Framework Convention on Climate Change (UNFCCC) and the European Union. The mandate of the Swedish Energy Agency changed in 2023 from promoting increased renewable electricity to focusing on the transition to 100% fossil-free electricity by 2040 (GoS, 2023).

The coalition government that took office in 2022 has emphasised the importance of successful climate policy. To that end, it takes a long-term perspective grounded in legitimacy, trust, fairness and acceptance, putting in place conditions to enable action by the private sector and households. However, despite the numerous measures announced in the climate action plan, it lacks clarity on how to achieve targets. Some policy shifts increase emissions in the near term, placing a greater burden on rapid emission cuts in the future (CPC, 2024; SFPC, 2024).

The government is using the inquiry system to examine policy options. For example, an inquiry will examine policy measures for 2027-30 that would allow Sweden to meet its ESR commitments while minimising costs for households and maintaining a competitive private sector (MoF, 2024a). While the inquiry system facilitates an informed policy dialogue, it is lengthy. Some recommendations are only expected after the next election in 2027. This delays action and heightens uncertainty for both households and the private sector (SFPC, 2024).

As Sweden enters the next phase of its climate transition, the role of government in defining priorities, establishing the enabling environment and managing inevitable trade-offs becomes increasingly important (CPC, 2023). The decarbonisation of the industrial sector serves as an example. Emission reductions in energy-intensive sectors, such as iron and steel, require new technology and a skilled workforce. Since many industries are located in sparsely populated northern areas, complementary investments in basic social infrastructure (e.g. housing and public services) to attract a skilled workforce will also be needed. Contributions of individual companies to the transition depend on their ability to receive the necessary permits and access to the electricity grid in a timely manner.

The business community is a strong supporter of the climate transition, illustrated by its active engagement in the government’s Fossil Free Sweden initiative. The initiative aims to accelerate the climate transition by identifying both business opportunities and barriers to decarbonisation. Collaboration between companies, industries, municipalities and regions has contributed to 23 roadmaps, representing over 70% of Sweden’s GHG emissions. The roadmaps outline how climate neutrality can enhance competitiveness, including in hard-to-abate sectors such as steel and cement. The business community has cautioned the government against lowering climate ambition; if domestic policy does not match the climate ambitions of the private sector, companies warn they may have no choice but to relocate.

Other stakeholders have also called for a clear narrative on the government’s approach to climate change. The Fiscal Policy Council has emphasised the need for a critical assessment of proposed measures relative to the risks of inaction. It has also highlighted the importance of championing the climate policy narrative with strong leadership to gain broad acceptance (SFPC, 2024). This is particularly important given the speed of the transition needed over the next two decades for Sweden to reach its 2045 climate target.

There is also broad public support for ambitious climate action. In a 2024 Eurobarometer poll, two- thirds of Swedish respondents answered that the government is not doing enough to tackle climate change. Over 70% ranked climate change as the most important societal concern (Eurobarometer, 2024). A survey by the Swedish Confederation of Professional Associations found that seven of ten members are concerned about climate change. Conversely, only one of ten think the current policy is ambitious enough. Meanwhile, eight of ten believe that policy could play a larger role in supporting Sweden’s green transition (SACO, 2023).

In the past, broad public support for ambitious climate action combined with a strong political commitment have created a clear and predictable framework for action. However, the government’s recent shifts on some key issues is eroding that predictability. Over the years, for example, Sweden’s fuel industries have invested significantly in the development of biofuels. However, following the decision to reduce the blending obligation in the transport sector (Section 2.3.2), the share of biofuels on an energy basis has fallen substantially. This has led the industry to call for policy stability and predictability (Sweden’s Fuel Industries, 2024a; 2024b).

Sweden has a diverse mix of regulations, subsidies and pricing instruments (Chapter 1) that, combined with investments in infrastructure and innovation, support the climate transition. The EU ETS and Sweden’s carbon tax are key elements. The Swedish government also seeks to incentivise private sector engagement through the Industrial Leap. This initiative aims to reduce emissions from industrial processes, contribute to achieving negative emissions through BECCS and support strategic projects for the industry transition. Similarly, the Climate Leap, established in 2015, provides investment support to both the public and private sector for local and regional mitigation. Support, for example, has been provided to electric vehicle charging infrastructure and the electrification of farm machinery and agricultural production processes.

Sweden is consistently ranked among the top environmental performers on the European Innovation Scoreboard and the European Eco-Innovation Scoreboard (EC, 2023a). This reflects high government spending on research, development and deployment (RD&D) related to the environment and energy. The budget on energy RD&D is mostly allocated to energy efficiency, renewable energy and cross-cutting technologies (Figure 2.4). In comparison with other European countries, Sweden has a low share of the public energy RD&D budget for nuclear. RD&D is complemented with high patenting activity, especially for climate mitigation (Figure 2.5).

Research and innovation for climate are financed through various domestic and EU programmes and initiatives. For example, the Swedish Energy Agency manages the government’s energy research and innovation programme in close collaboration with related policy measures and instruments. The Swedish National Research Programme on Climate, a ten-year programme established in 2017, supports collaboration between Swedish funders of climate research, nationally and internationally (FORMAS, 2022). For its part, Vinnova – Sweden’s innovation agency – boosts the country’s innovation capacity in support of sustainable growth.

Bridging the gap between RD&D, venture capital investments in climate tech start-ups and scale-ups tripled over 2019-23, contributing to enhanced industrial competitiveness domestically and within the European Union.

The climate transition is transforming Swedish society as evidenced by the renewed industrialisation of the northern areas. Transformations at such scales inevitably entail both economic benefits and costs. 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. This system supports households going through structural changes like employment status or life circumstances. However, it may not adequately support households that experience increased costs, e.g. in the context of passenger transport or electricity use. Some compensatory measures are in place, such as tax reductions for green technologies or support for energy efficiency improvements (SFPC, 2024).

Through the EU Just Transition Fund, Sweden has identified industries with high emission intensities that will be affected by the transition. It has also singled out regions that will require additional efforts to address the social, economic and environmental implications of the transition (MoCE, 2024). In addition to research and innovation, this includes reskilling and upskilling of workers. The deadline for EU member states to submit their Social Climate Plan is June 2025.

Energy production and use accounted for 68% of GHG emissions in Sweden in 2022 compared with 74% in 2010 (Figure 2.1). In the updated NECP, the government concludes that Sweden will not meet the 2030 targets on renewable energy and energy efficiency set out in the updated EU Energy Directive. The electrification of society and industry is a key component to Sweden’s climate strategy. While it contributes to reduced GHG emissions, it is achieved through large increases in energy use, contrary to the EU target on reduced primary energy consumption. Although the government may consider this is an acceptable trade-off in the pursuit of its climate targets, it will need to reconcile the planned increase in electricity production with EU requirements.

Demand for electricity is projected to increase from around 140 TWh to 160-201 TWh in 2030, and to 200-340 TWh in 2045. The level of increase will depend on the timing and extent of the transition, especially in the industry and transport sectors (SEA, 2023a). Three-quarters of the increased demand are projected to occur in Sweden’s northern region of Norrland (Energiforsk and Profu, 2021). Reflecting evolving needs, the energy bill presented by the government in March 2024 proposes (GoS, 2024a): i) a planning target that provides the conditions to deliver the electricity needed for increased electrification; and ii) a security of supply target that ensures the electricity system can meet demand where it exists and in a timely manner.

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, with endeavours to increase this to 45%. Member states do not have individual targets but must specify their national contributions to the EU target in their NECPs. EU guidelines recommend a target of around 76% by 2030 for Sweden. However, national projections show this target will not be reached with current measures (MoCE, 2024). Instead, the share of renewable energy is projected to reach 67% in 2030.

There is renewed political commitment to scale up nuclear energy. Factors driving this shift include a focus on energy security and resilience, and the geographical imbalance between energy demand and supply. Sweden aims to build the equivalent of at least two large-scale nuclear reactors by 2035. By 2045, the government foresees a considerable expansion will be needed that could correspond to ten large-scale reactors. The scale of expansion would 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 potential of extending the operating time of existing reactors (MoF, 2024a).

In 2023, Sweden replaced its target of 100% renewable electricity generation by 2040 with a target of 100% fossil-free electricity production. The same year, legislative changes removed the limit on the number of nuclear reactors in operation and allowed nuclear reactors to be built on new sites (Sveriges Riksdag, 2023). In 2024, a national nuclear power co‑ordinator was appointed to work with relevant actors to accelerate establishment of new nuclear reactors. Other proposed changes target three areas:

• Legislation: to remove the ban on restarting closed reactors and to develop new regulation to facilitate installation of small modular reactors

• Processing: to shorten and simplify licence processes and fast track processing for nuclear power in environmental licensing

• Cost: to review and substantially reduce the application fee for new nuclear power reactors and issue state guarantees for investments in new nuclear energy.

Given the long lead times, high cost and technical uncertainty of expanding nuclear capacity, the government’s renewed focus must consider the full range of costs and benefits. Estimates of levelised cost of energy (operation, maintenance and investment) indicate that nuclear is always more expensive than wind or solar energy in Sweden. In the short term (up to 2035), onshore wind has the lowest levelised energy costs of around 30‑35 SEK öre/kWh (GoS, 2024a; Holmberg and Tangerås, 2022; SEPA, 2024a). This is followed by large-scale solar power (around 40 SEK öre/kWh) (Holmberg and Tangerås, 2022). The levelised costs for nuclear energy are more difficult to estimate but are in the range of 49 SEK öre/kWh to 1.6 SEK/kWh. The picture is similar across Europe, except that offshore wind is projected to become cheaper than onshore wind (IEA, 2023a).

Experience has also shown the state must take on a large share of the financial risk of new nuclear capacity. Globally, the state owns around 45% of nuclear capacity; the sector benefits from large subsidies. Most ongoing construction is also implemented through public entities or involves public finance. A government inquiry concludes that Sweden will also need public support to bridge the gap between private investors’ business interests and the socio-economic benefits of new nuclear power (MoF, 2024b). To overcome this challenge, a financing and risk-sharing model has been proposed that comprises the following (MoF, 2024b):

• state loans issued by the National Debt Office to lower the cost of capital

• a price hedging agreement, through a contract-for-difference with the government

• a risk- and gain-share mechanism that ensures investors receive a minimum return on equity, while avoiding excess profits.

With such a financing and risk-sharing model, a nuclear power programme of 5 000 MW installed power (equivalent to around four large reactors) would increase national debt by SEK 300 billion (2023 prices) if no cost overruns occur. This cost would rise to around SEK 450 billion (2023 prices) with 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 the state loans and since state loans are expected to be refinanced with private loans (MoF, 2024b). In the latter, public debt will be higher in the long term. Whereas new nuclear capacity would lower the volatility of electricity prices, its impact on system costs (e.g. operational and production costs), on investments in other energy sources, or for businesses and households is inconclusive (MoF, 2024b).

The future of small modular reactors also remains uncertain. By early 2024, no design had been fully certified for construction in developed countries. Given all technologies play a role in reaching the EU climate neutrality objective by 2050, the European Commission established the European Industrial Alliance in 2024. The Alliance aims to accelerate development, demonstration and deployment of small modular reactors in the early 2030s (EC, 2024a).

Social acceptability is also a factor when it comes to wind energy. In 2021, municipal administrations stopped 78% of all wind power projects. Factors include opposition of local residents, conflicting land claims, perceived inequalities of economic benefits and geographically uneven deployment (Lindvall, 2023). Some adjustments in profit-sharing from wind power projects could improve their social acceptability (OECD, 2023a; SFPC, 2024). The budget bill for 2025 proposes financial compensation to communities for local development initiatives and to residents living within a certain distance of new developments.

Offshore wind accounts for a negligible share of Sweden’s renewable energy. While there is considerable interest by developers, the Swedish Armed Forces have to date vetoed almost 90% of all offshore wind projects due to security concerns. The government is examining how to improve the permitting process for offshore wind. Proposed amendments to the maritime spatial plans should consider the multiple, and potentially conflicting, uses of marine areas, while protecting the most ecologically sensitive areas (OECD, 2024b). Costs are another constraint. Unlike many of its European counterparts, Sweden does not offer revenue stabilisation. In 2023, an exemption offered to developers to pay for grid connections was also removed.

The government considers expansion of fossil-free hydrogen to be key to the decarbonisation of several industrial sectors, such as iron and steel production, and of other emissions, such as heavy transport (GoS, 2024a). For hydrogen to provide a viable alternative to the climate transition, it must rely on large amounts of fossil-free electricity. The Swedish Energy Agency estimates that investments in hydrogen by the industrial sector could increase demand for electricity by 22-100 TWh by 2050 (GoS, 2024a). In line with the EU hydrogen strategy, hydrogen should therefore only be considered where more energy or cost-effective alternatives are not available.

Given the scale and speed of the transformation required of the energy system, the government plays an important role to ensure the enabling system that facilitates the transition is in place. Two key enablers are improved permitting processes, and enhanced grid and network capacity:

• Permitting processes are a barrier to the acceleration and scale-up of renewable energy. For example, it takes on average nine years to secure the necessary permits for land-based wind projects, which is among the longest in Europe (OECD, 2023a). The share of approved permits has also been falling over time. The government recognises the need to speed up and streamline the process, undertaking numerous inquiries to explore potential improvements. The EU Renewable Energy Directive also encourages members to designate renewable acceleration areas, i.e. areas considered particularly suitable for construction of renewable energy production facilities, a process under way in Sweden (SEA, 2024a).

• Power, grid and transmission capacity delay the transition. Many industries wishing to electrify or scale up their operations are unable to access the grid in a timely manner. In July 2024, Sweden approved amendments to the Environmental Code and the Electricity Act to shorten and streamline the permitting process for the expansion of electricity networks. The government wishes to regulate so that overhead high-voltage lines rather than underground installations become the default option (SEPA, 2024a). However, this choice has not been welcomed by all. To improve public acceptance of the overhead option, the government has commissioned an investigator to review possible approaches to compensate affected communities (GoS, 2024a).

Under the revised EU Energy Efficiency Directive, Sweden has committed to reduce primary energy consumption by 2030 to 41.2 million tonnes of oil-equivalent (Mtoe) and final energy consumption to 30.1 Mtoe. This would be down from 42.5 Mtoe and 31.0 Mtoe, respectively, in 2022 (MoCE, 2024). Both commitments are less ambitious than the reductions required to achieve the collective EU target (EC, 2024b). Sweden estimates the EU scenario does not consider the need to increase energy consumption to enable electrification and climate transition in its industrial sector. The EU Energy Efficiency Directive further encourages member states to achieve cumulative end-use savings for 2021-30 that for Sweden translates into 237 TWh. Sweden is not expected to reach this target and is analysing instruments that could fill the gap (MoCE, 2024).

Sweden also has a domestic target of 50% more efficient energy use by 2030 compared with 2005. This is a cross-sectoral target expressed in terms of energy supplied relative to GDP. Between 2005 and 2022, energy intensity decreased by 38% (MoCE, 2024). With the revised EU Energy Efficiency Directive, the planned electrification of society and the shift in policy focus to 100% fossil-free electricity production, the government has acknowledged the need to revise its national energy efficiency target. In doing so, Sweden is encouraged to ensure the new target aligns with binding EU energy targets.

In 2022, the industrial sector accounted for 38% of total final energy consumption (MoCE, 2024). This is due in large part to Sweden’s energy-intensive industries, such as pulp and paper and iron ore. For decarbonisation of the industry sector, energy input is generally high for electricity generated through processes with thermal losses (such as nuclear power) compared to renewable energy sources (such as hydro, wind or solar). The EU Directive commits member states to reduce overall energy use independent of the energy source. Consequently, the sharp increases in demand for electricity in the industrial sector mean that other sectors, including transport and building, will need drastic energy efficiency improvements.

The transport sector accounted for 24% of final energy consumption in 2022, and still relies heavily on fossil fuels, even if this is changing (see below). Households accounted for 23% (MoCE, 2024). Electricity is the largest source of energy in the residential sector, accounting for half of total final energy consumption. With its combined focus on energy efficiency, heat recycling and renewable heat, Sweden has played an instrumental role in defining a modern district heating system. Moreover, Sweden is a leader in combined heat and power plant technologies. The building sector is also subject to several policies and measures. This includes the Swedish Building Regulations with a strong focus on energy efficiency, energy declarations and broader measures such as the energy and carbon tax. A strategy for energy-efficient renovation, for example, aims to address barriers to implementation, including split incentives and lack of information (MoI, 2020).

Enhanced energy demand and supply flexibility also contribute to energy efficiency and an improved balance of the energy system. On the supply side, flexibility can be improved through investments in electricity and heat storage and in energy efficiency technologies related to energy systems. Greater flexibility in demand can be achieved through investments in technologies that raise resource and operational efficiency; enhanced energy efficiency standards; or in opportunities arising from digitalisation and electrification. Equally, clear price signals can incentivise flexible use. The government has identified lack of data and effective data management, as well as lack of standards for data communication, as obstacles to greater flexibility in energy supply (GoS, 2024a).

Despite an increase in the number of kilometres travelled, emissions in the transport sector decreased by 34% over 2010-23. The decreased emissions were due in part to vehicle fuel efficiency improvements, increased electrification of the sector and the high biofuel blending requirement in place until 2023 (SEPA, 2024b). Road transport accounts for around 90% of emissions (Figure 2.6). Progress, however, is considerably short of the domestic target of 70% emission reductions by 2030, a target the government plans to review. To achieve this target, emissions will have to decline on average just under 1 Mt CO₂e per year (SEPA, 2024b). Instead, policy changes introduced by the government in 2023 are expected to increase transport emissions in 2024.

In 2023, in keeping with an important election promise to reduce the cost of transport fuels, the government reduced the obligation to blend biofuels into petrol and diesel from 7.8% and 30.5%, respectively, to 6% for both (MoF, 2023). This change was initially planned for 2024-26. Whereas previous blending requirements were projected to halve emissions in the sector by 2030, the policy change was projected to increase emissions by about 3 Mt CO₂e in 2024 (SEPA, 2024a).

In 2024, the government announced the blending requirement for both petrol and diesel would increase to 10% from July 2025. Further adjustments enable suppliers of renewable electricity to public charging stations to receive credits that they can sell to fuel suppliers. These suppliers, in turn, can use those credits to fulfil the reduction obligation (GoS, 2024b) in line with the EU Renewable Energy Directive. To address the expected increases in fuel prices, fuel taxes will be reduced and targeted support provided. If the measures are fully implemented, the government estimates they will reduce ESR emissions by 2.6-2.9 Mt CO₂e over 2025-30 (MoF, 2024a). The measures proposed in the budget bill for 2025 (except fuel tax reductions), will improve the conditions for achieving the 2030 target and narrowing the gap to the 2045 target. However, they do not appear to be enough to meet the domestic transport target (MoF, 2024a).3

The changes to the blending requirement create policy uncertainty. Moreover, the use of biofuels in mitigating emissions has limitations. Most biogenic content blended into Swedish fuels is from imported feedstock (SNAO, 2023). The relative cost advantage of a biofuel blending over other ways of reaching the climate goals (e.g. accelerating electrification of the transport sector or scaling up efforts in the forestry sector) has been questioned (SNAO, 2023). In comparison, biofuels are expected to play an important role in the transition of other parts of the transport sector that are harder to electrify, including long-distance sea transport and aviation.

The forthcoming reduction in the petrol fuel tax comes in addition to tax changes already introduced by the government (Chapter 1). These tax changes have eroded the proportionality of CO₂ taxation. Given the important role of the transport sector in meeting Sweden’s ESR target, the required emission reductions may be difficult to achieve with petrol and diesel prices below SEK 18-20 per litre (Hassler, J., 2023). Rather than addressing distribution impacts through lower fuel costs, analysts have suggested other forms of support to affected households, e.g. a climate bonus (Hassler, J., 2023). An increase in the vehicle tax (malus) would have a similar impact, since low-income households may be less able to afford a large, new fossil-fuelled car.

In 2023, battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) accounted for 60% of the sales share and for 11% of the passenger car fleet. To accelerate electrification of the sector, the government introduced a bonus in 2011 for the purchase of electric and other low-emission vehicles (Svensk Kollektivtrafik, 2023a). The bonus mainly benefited businesses and city dwellers (SNAO, 2020). This was removed in 2022 as the costs of owning and driving a low-emission car were approaching that of a petrol and diesel car (MoF, 2023).

Based on the Norwegian experience, once the electric vehicle market has reached a level of maturity, uptake will continue regardless of national policies due to increased price competitiveness (Box 2.3). A premium was introduced in 2024 for car owners replacing an old car with the purchase or lease of an electric car. An additional premium targeted at groups in need of support (e.g. those living in sparsely populated areas) has been proposed (MoF, 2024a). While the registration of new BEVs dropped in 2024, it is expected to increase again with the forecasted improvement of the Swedish economy (Figure 2.7). To increase convenience and reduce range anxiety for prospective buyers, the government has proposed to increase and extend investments in charging infrastructure until 2030 for both light and heavy-duty electric vehicles. It will focus on areas where expansion to date has been slow. However, lack of connection capacity in local and regional networks is delaying installation of new charging infrastructure (GoS, 2024a).

The private vehicle fleet includes an estimated 4.4 million fossil-fuelled cars, many of which will still be on the road by 2030. The large volume of fossil-fuelled cars highlights the importance of minimising private vehicle use. In 2023, public transport accounted for 31% of all motorised journeys (Svensk Kollektivtrafik, 2023b). Over half of all personal trips (to work, school, or for services and shopping) are done by car, compared to around a third by active transport methods (e.g. cycling and walking). In 2023, the government reallocated SEK 750 million in the budget from railway maintenance to road maintenance. This could contribute towards greater reliance on private vehicles rather than encouraging travellers to use public transport.

In 2024, the Fiscal Policy Council strongly criticised the government for its lack of strategy for reaching domestic and EU emission targets for 2030 (SFPC, 2024). While recent policy shifts and proposals aim to meet those targets, Sweden still lacks a clear plan for how different mitigation measures will support the proposed transition for the sector. Sweden is encouraged to explore other measures, including the role of enhanced transport efficiency, with public transport playing a critical role; accelerated electrification of the sector with direct targets for electrification; and increased energy efficiency in vehicles and ships (Svensk Kollektivtrafik, 2023a). In addition to contributing towards Sweden’s national climate mitigation target for the transport sector, it will prepare the sector for inclusion in EU ETS-2 in 2027, and the EU zero CO₂ emissions target by 2035 for all new cars and vans (OECD, 2023a).

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, 2024a). Historically, emissions from the sector have fluctuated with production volumes and economic growth. In 2023, emissions were 23% lower compared with 2010. Metal (iron and steel) production accounts for the largest share of emissions in the sector.

Since 2010, emission reductions have largely been due to increased electrification, the use of biofuels and enhanced energy efficiency. Strong public support for research and development has propelled Swedish companies to the forefront of technological developments (OECD, 2023a). To date, most research has been driven by industry and led by private organisations, with Vinnova serving as the public sector counterpart. The Industrial Leap has also provided an important source of funding. Fossil Free Sweden, a government initiative from 2015, works with the business sector and government to identify obstacles and opportunities for accelerating the climate transition. This has resulted in 23 roadmaps that outline the climate commitment of business sectors, as well as policy proposals for how all actors involved – companies, industries, municipalities and regions – can support the transition. Examples include roadmaps for fossil-free steel and cement.

Further emission reductions will require technological developments in the iron and steel industry, large investments in new process technology and more electricity, including for hydrogen production. However, with overall demand for electricity projected to double by 2045, several potential externalities should be considered. These include the risk that progress by the sector will contribute to increased electricity prices (OECD, 2023a). Further, when such technological innovations have benefited from government support, some technologies can be favoured over potentially more efficient approaches. Closed-loop carbon recycling, for example, contributes to resource savings and emission reductions but remains far from commercialisation (OECD, 2023a). Maintaining technological neutrality in the public support provided is therefore important.

The commitment by the industrial sector to transform its production processes has contributed to the development of new skills and opportunities, and in turn economic growth. This is especially true in the northern regions where many industrial companies are located (OECD, 2023a). Future progress, however, will be determined in part by the ability of industrial facilities to connect to the electricity grid. Another important determinant will be the availability and development of the right skills. This is true both for the industrial facilities and for public services. Services such as housing and infrastructure, for example, are crucial for a region that has suffered from changing demographics and lagging productivity growth (OECD, 2023a).

The labour market needs of the transition have only recently become a government focus. In the northern part of the country, public employment services are collaborating with the sector, as well as with education and training institutions, to respond to projected labour shortages from the transition (OECD, 2023b). However, such collaboration is not in place in other parts of the country. Further, the focus to date has primarily been on skill needs for electrification, battery development and mining. Limited attention has been paid to the implication of the climate transition on related jobs and industries (OECD, 2023b). 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. Indeed, given the scale of the challenge, these cannot successfully be scaled-up without government support (OECD, 2023b).

GHG emissions from agriculture mainly consist of methane and nitrous oxide from animal feed digestion, manure processing and nitrogen transformation in soil. The emission intensity of the Swedish agricultural sector is below the OECD average, but at levels comparable to other Nordic countries (EC, 2024c). The limited reduction of emissions in the agricultural sector is not unique to Sweden, but common across many EU countries (Figure 2.9). Sweden’s 2017 National Food Strategy aims to increase domestic food production while achieving relevant environmental objectives, and generating growth and employment. This focus on domestic production and the inevitable GHG emissions associated with biogenic processes highlights the importance of a complementary focus on environmental and climate objectives.

Agricultural emissions face low carbon prices or are not priced (Chapter 1), and most climate measures are voluntary. Emission reductions to date have been attributed to increased efficiency (e.g. higher milk production per dairy cow), less livestock (cows and pigs, in particular) and decreased emissions from agriculture soil, due especially to reduced use of nitrogen-mineral fertiliser (SEPA, 2024c). However, the composition of emissions across the different components of the agricultural sector has remained unchanged since 2010. Enteric fermentation and agricultural soils accounted for 50% and 40% of emissions in 2022, respectively.

The government considers that further emission reductions in the sector will be difficult. It believes more reductions could affect its competitiveness, and potentially result in emissions leakage. This is one reason for the inclusion of supplementary measures in the climate policy framework (GoS, 2023). A roadmap, produced by agricultural businesses in collaboration with Fossil Free Sweden, estimates the potential for CO₂ emission reductions at around 655 000 tonnes. Of these, around 80% would be achieved by replacing farm machinery fossil fuels with renewable sources of energy (Fossil Free Sweden, 2020). The remainder would be achieved by heating agricultural premises with renewable energy.

The EU Common Agricultural Policy (CAP) is the principal economic policy instrument supporting mitigation measures in the agricultural sector. For 2023-27, the CAP does not include any quantitative climate targets. However, novel to this round is the introduction of national strategic plans. Sweden’s CAP Strategic Plan, approved by the European Commission, specifies that Sweden will use 30%, around EUR 1.3 billion, of the EU financial contribution to support environmental and climate objectives, including carbon sequestration (EC, 2023b; GoS, 2023). The plan specifies that support will be provided for investments, innovation, method and competence development that help increase productivity, resource efficiency and GHG mitigation. It will also compensate for carbon sequestration through catch crops, intermediate crops, wetlands and precision farming (GoS, 2023). However, financial allocations to the climate objective (16%) and the share of agricultural area under supported commitments to reduce emissions or to maintain or enhance carbon storage (22%) seem low compared to the respective EU averages (29% and 35%) (EC, 2024d).

The Climate Leap prioritises the agricultural sector, providing more than 800 grants between 2015 and 2022, totalling SEK 2.2 billion. This included support for electrifying farm machinery and production processes, switching from fossil fuels to renewable sources of energy, and producing biogas and anaerobic digestion. A climate premium for environmental vehicles also contributes to decarbonise the sector through the financial support it provides for the purchase of agriculture work machines powered either by electricity or biofuels. Broader instruments, such as the Environmental Code, the Animal Welfare Act and environmental quality objectives also help reduce emissions, even when this is not their primary purpose. As an example, regulation of manure management for environmental quality objectives affects the emission of methane and nitrous oxide (MoCE, 2022).

As Sweden explores additional mitigation measures, it may wish to explore what aspects of the Danish agricultural tax could be transferable to the Swedish context (Box 2.4). As the European Commission is considering pricing GHG emissions from agriculture (EC, 2023c), Sweden should explore all options available and pilot potential measures. A complementary focus could be on further reducing food loss and waste and influencing consumer behaviour and preferences. Globally, halving food loss and waste by 2030 has the potential to reduce agricultural GHG emissions by 4%. In the European Union, almost a quarter of all meat production is estimated to be lost or wasted (OECD/FAO, 2023). 

GHG emissions in the waste sector dropped by over 50% between 2010 and 2022 (Figure 2.1). Legislative and policy measures that have contributed to reduced emissions include the expansion of methane recovery from landfills, reduced landfill disposal of organic material and increased levels of waste incineration with energy recovery (Chapter 1). GHG emissions associated with waste incineration, which are accounted for in the energy sector, more than offset the reduction in emissions in the waste sector over 2010-22. However, the 2023 climate action plan does not include any measures to reduce waste incineration or phase out the use of fossil-based plastics (CPC, 2024). The tax on incineration was removed in 2023 (Chapter 1).

Sweden has a reputation as an ambitious and influential actor on sustainable development. It has a strong focus on peace and conflict prevention, gender equality, environmental sustainability and climate change (OECD, 2019). In 2023, the government published a reform agenda that directs development co-operation towards freedom, empowerment and sustainable growth. It further specifies that the share of development assistance to be channelled through core support to multilateral organisations will be limited to enhance the effectiveness of the support provided, while the proportion of support channelled through civil society organisations will increase (MFA, 2023a). A complementary strategy for trade, investment and global competitiveness aims to stimulate trade and the participation of Swedish businesses in international procurements (MFA, 2023b).

Over 2021-22, 26% of total bilateral allocable aid focused on climate change (the DAC average was 31%) with a greater focus on adaptation (25%) than on mitigation (14%) (OECD, 2024c). The 2023 climate action plan, as well as the reform agenda, call for expanded and more effective climate aid, included through more focus on energy efficiency and effective emission reductions (including fossil-free energy) in major emission countries, including middle-income countries (MFA, 2023a). The increased focus on middle-income countries is consistent with the priority of linking development with trade and on official development assistance being a catalyst for private sector engagement.

All net-zero scenarios recognise the need for removing emissions from the atmosphere to meet the climate targets of the Paris Agreement. Some emissions are either difficult or costly to mitigate with available knowledge and technology. Examples include emissions from the cement or metal industries or the elimination of methane and nitrous oxide emissions from biological processes. Sweden’s climate policy framework specifies that supplementary measures can account for up to 15% of emission reductions by 2045 (Table 2.1). The limit aims to ensure that the primary focus remains on rapidly reducing emissions (excluding LULUCF). Three types of supplementary measures are highlighted:

• Increased uptake of CO₂ by forests and agricultural land as a result of additional measures: Trees cover more than two-thirds of Sweden’s land area, providing opportunities for supplementary measures that affect terrestrial carbon sequestration. Forests, soils and wetlands are among the ecosystems that could contribute to increased carbon sequestration.

• Carbon capture and storage from the combustion of biomass (i.e. CO₂ of biogenic origin, BECCS): The use of biomass as raw material for the pulp and paper industry means that Sweden has significant sources of biogenic CO₂ emissions. The use of biomass residue in the energy sector also contributes to large point emission sources.

• Verified emission reductions and removals through investments outside Sweden’s borders: In compliance with Article 6 of the Paris Agreement, the framework for countries to mitigate climate change through market-based co‑operation,4 verified emission reductions and removals in other countries must go beyond those that the host country would already have taken. Further, the mitigation outcomes must not be double counted. Flexibilities within EU commitments also enable member states to trade emission allowances.

All three groups are complex and characterised by long lead times, further highlighting the importance of limiting reliance on supplementary measures to meet climate targets. Moreover, there are numerous uncertainties and risks to their eventual contributions to Sweden’s climate targets (Box 2.5). To bring clarity on their respective feasibilities, the government has emphasised the urgent need to demonstrate progress. For example, if BECCS is to significantly contribute to negative emissions by 2045, it has been recommended that the first plants must become operational in the 2020s (GoS, 2020).

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 (Figure 2.10). Increased harvesting, decreased forest growth and lower sequestration of carbon by ageing forests contribute to this trend. Some inter-annual variation is inevitable due to storms and drought. Recent infestations of spruce bark beetle have further contributed to fewer net removals (Wikberg et al., 2023). In a changing climate, such natural disturbances are projected to increase in frequency. This highlights the importance of spreading the risk by taking a diversity of measures that preserve and increase carbon sinks (SFA, 2023).

In the context of Sweden’s climate target, the LULUCF sector is only considered as a supplementary measure. Under the EU LULUCF Regulation, Sweden is obliged to increase by 2030 annual net carbon removals by nearly 4 Mt CO₂e compared to the average of 2016-18 (Table 2.1). However, Sweden is not on track (Figure 2.3). A review of various LULUCF measures on carbon sequestration concludes that Swedish forests and harvested wood products will continue to serve as carbon sinks over the next hundred years. However, it also notes that net carbon removals will decrease over time. Research suggests that different measures (Box 2.6) can contribute to enhanced sequestration to varying extents in different parts of the country. However, the impact of a changing climate on forest growth and health will be an important unknown variable. For example, data show that forest growth has decreased in recent years, with summer drought identified as a potential reason (SFA, 2023). If the frequency of summer droughts increases, the potential contribution of the different measures may be overestimated.

The Swedish Forest Protection Act (1979), and subsequent amendments, focus on two main and equally important goals. First, a production goal calls for effective and responsible use of forests and forest lands to produce sustainable yields. Second, an environmental goal calls for the preservation of the natural productive capacity of forest land, including biodiversity and genetic variation in forests (SEPA, 2019). Further, a flexible forest management approach shares responsibility among all actors in the sector to collectively meet the dual objectives. As most productive forests are privately owned, the potential impact of this flexibility is large.

Emissions from drained peatlands are high and the rewetting of these lands, from agricultural or forestry land, is estimated to have a high potential for carbon removals (EC, 2023d). The restoration of wetlands also contributes to strengthened biodiversity, water management and reduced eutrophication. The government has increased the budget allocation for wetland restoration. This builds on efforts over the past few years to rewet drained lands. Of these efforts, around half have taken place in protected areas with a focus on improving conditions for biodiversity (SEPA, 2024a).

To meet the target of the LULUCF sector, additional measures must be taken. Today, few policy instruments directly address emissions and removals in the LULUCF sector (SEPA, 2024a). The government tasked a cross-party inquiry in 2022 to propose a strategy with intermediary targets, policies and measures for Sweden to reach its international and EU obligations on both biodiversity and LULUCF. The proposal was expected in February 2025 (GoS, 2022). 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 (GoS, 2024c). Sweden may also consider lessons learnt in other countries, including New Zealand where land-use change and forestry are included in its ETS (NZMFE, n.d.).

Sweden is pioneering technology developments for carbon capture use and storage (CCUS), especially BECCS. The focus is on large point sources of biogenic emissions, including the pulp and paper industry, waste incineration plants, and the electricity and district heating sector. Based on the current landscape of operating support for BECCS in Sweden, an estimated 1.7-2.6 Mt CO₂ could be captured by 2030 (IEA, 2024), with the potential to increase to 3-10 Mt CO₂ by 2045 (GoS, 2020). For each part of the CCS chain – capture, transportation and storage – technologies are available, but their levels of maturity vary. All CCUS projects are at the planning phase, with some investment decisions expected in 2024. However, decisions for around half remain uncertain (IEA, 2024).

For CCS deployment to occur at scale, both regulatory and economic support are needed. Legal barriers include complex permitting processes for the construction of CCS facilities, and a regulatory focus on facilities that capture emissions from either biological or fossil origin, but rarely both (Nordic Energy Research, 2022). A public inquiry is examining how to shorten and simplify permit processes for existing companies wishing to change their practices, as well as for new companies wanting to enter the market (MoF, 2023).

The government also provides direct financial support. To date, this has primarily been through the Industrial Leap. Funding targets industries with process-related emissions, research institutions and universities, with the focus ranging from research and feasibility studies to investments (GoS, 2023). By 2023, the Industrial Leap had supported around 20 Swedish facilities in undertaking BECCS feasibility studies and pilots (GoS, 2023). One Swedish project has also received support from the European Union, through the Innovation Fund and Horizon Europe.

In 2024, a support scheme in the form of a reverse auction for biogenic CO₂ was also 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. They receive financial support for investment and operating costs, according to their bids, for 15 years. The initiative is open to companies that i) operate in Sweden and emit biogenic CO₂; and ii) implement projects with a capacity to capture and store at least 50 000 tonnes of biogenic CO₂ per year. The government can commit up to SEK 36 billion (around EUR 3 billion) over 2026‑46 (GoS, 2023).

Emissions that are captured and permanently stored do not count towards the allocated emission rights under the EU ETS. Therefore, facilities covered by the EU ETS can partly motivate CCUS deployment with reduced compliance costs. However, the price of emission allowances in the EU ETS is likely too low to stimulate CCUS investment decisions (ICAP, 2023). The beneficiaries of the reverse auction can sell carbon credits tied to the negative emissions in voluntary carbon markets. Such a sale would reduce the government support provided by 90% of the selling price. Further, the buyer of the negative emission credits must transparently disclose that they contribute to the achievement of Sweden’s climate goals.

Despite the large financial commitment, the number of recipients of the auctioning scheme will be limited. Given the difficulty in developing viable business models for BECCS in the short term, it will be important to explore alternative incentive measures with broader application. One example is the provision of tax credits for captured carbon, an approach taken in the US Inflation Reduction Act. In a global assessment of 400 announced CCUS projects, over half are part of a CCUS hub or cluster that bring down transport and storage costs. However, the development of such hubs requires planning and permitting co‑ordination across industries (IEA, 2023b; Dechezleprêtre, Mulligan and Vitkova, forthcoming), and for Sweden, also across national boundaries.

Sweden’s domestic capacity for geological storage is unknown. Initial assessments identified two potential areas suitable for storage: one in the southeastern Baltic Sea and a second south-west of Skåne (SGU, 2023). Their suitability is being further examined with results expected in 2026. In the near term, Sweden relies on the possibility of storing carbon abroad with Memoranda of Understanding reached with Norway and Denmark. Similar agreements are foreseen with other countries, including the United Kingdom and the Netherlands (SEA, 2023b).

Individual companies must identify counterparts that can transport and store the carbon. The maturity of technologies for transportation, such as pipelines, is already well established in other contexts; the maturity of technology in ocean transport, however, is lower (Dechezleprêtre, Mulligan and Vitkova, forthcoming). Innovative storage solutions have increased in recent years. Internationally, legislative and regulatory frameworks still need to clearly set out the legal requirements and responsibilities in case of leakage during transportation or at the geological storage site (Dechezleprêtre, Mulligan and Vitkova, forthcoming). Through the EU Directive on geological storage of CO₂, Sweden has already taken measures to address some of these risks. Together with five other European countries – Denmark, Finland, France, Germany and the Netherlands – Sweden has also called for a better EU regulatory framework for cross-border transport of captured CO₂.

As the sector develops, careful attention must be paid to associated risks. For example, the efficiency of CCUS technology in capturing carbon and the additional energy required in the process (capture, transport and storage) are still poorly understood (EASAC, 2022). Current technologies are best suited for point emission sources 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 pose challenges.

In meeting 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, and support a higher overall mitigation ambition. The government is also planning to purchase emission allocations from other EU countries in support of Sweden’s 2030 EST and LULUCF commitments.

Sweden has played an active role in the climate negotiations on Article 6. Collaborations have been established with partner countries to implement co‑operative mitigation activities that can contribute to climate objectives of both Sweden and the host country. Through such collaborative approaches, Sweden can acquire emission reductions and removals, so-called Internationally Transferred Mitigation Outcomes (ITMOs).

Sweden has signed Memoranda of Understanding with Zambia, Nepal, Rwanda and the Dominican Republic, as well as a bilateral agreement with Ghana. Discussions are ongoing with other countries. Sweden is also working with international organisations and multilateral development banks to facilitate implementation of Article 6 collaborations. Sweden is already implementing pilot activity in Ghana, with more co‑operative approaches in the pipeline. To advance understanding of the international rules for Article 6, Sweden has also signed a Memorandum of Understanding with Switzerland to pilot international transfers and reporting of emissions removals (SEA, 2024b).

There are multiple barriers to Sweden growing its pipeline of Article 6 activities. These include limited host country capacity, long project lead times and risks due to ongoing Article 6 negotiations, and an evolving rulebook. The Article 6 market is still nascent, so the transaction costs of engaging in these markets are high. Furthermore, each project has risks such as not achieving expected mitigation impacts. Host countries may also wish to stop authorising mitigation outcomes. This creates considerable uncertainty around the scale of ITMOs that Sweden could acquire, and therefore how this will contribute to the 15% quota of supplementary measures.

Finally, in the EU context, the availability of emission allocations is unclear. In the past, emission allocations were available from the more recent 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. Updated 2024 NECPs indicate that surplus emission allocations will be limited (Rudberg, 2013).

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