This chapter provides a brief overview of key environmental trends and progress towards Sweden’s environmental quality objectives. It assesses the environmental effectiveness and economic efficiency of the environmental policy mix, including regulatory, fiscal and economic instruments and investment in environment-related infrastructure. It also examines the interaction between the environment and other policy areas with a view to highlighting the opportunities and barriers to enhance policy coherence for green growth.
OECD Environmental Performance Reviews: Sweden 2025

Chapter 1. Towards green growth
Copy link to Chapter 1. Towards green growthAbstract
1.1. Introduction
Copy link to 1.1. IntroductionSweden has an open, knowledge-based economy with high living standards, low inequality and good environmental quality. Over 2010-22, gross domestic product (GDP) in Sweden grew faster than in many OECD countries. After a relatively strong performance during and after the COVID-19 pandemic, GDP shrank marginally in 2023 due to low domestic demand. With lower inflation and interest rates, private consumption is projected to drive economic recovery in 2024 (+0.6%) and 2025 (+1.8%) (OECD, 2024a).
Sweden has rich reserves of timber, iron and other metals, as well as freshwater. Hydropower, nuclear power and biomass provide a large part of its energy supply. Sweden’s economy is predominantly service based. Industry is led by exports and has traditionally focused on processing the abundant forest and mineral resources.
With a total area of 529 000 km2 and 11 000 km of coastline, Sweden occupies about two-thirds of the Scandinavian Peninsula. More than two-thirds of its territory is flat and covered by forests. The countryside is dotted with nearly 100 000 lakes, and thousands of islands are located off its coast. The country is sparsely populated with 10.5 million inhabitants. Most Swedes live in the south, with roughly one-third in the metropolitan areas of Stockholm, Gothenburg and Malmö.
Since the end of the 19th century, average temperature in Sweden has risen by almost 2°C, twice as much as the global average. By the end of the century, it is projected to be 2-6°C higher than the 1961-1990 average (SHMI, 2022). Climate change will also result in increased precipitation by up to 30% by 2100, varying by location and scenario. Heavy rainfall and cloudbursts are already causing loss of life and significant economic damage. The frequency and magnitude of extreme weather events are expected to increase (MoCE, 2022).
1.2. Addressing key environmental challenges
Copy link to 1.2. Addressing key environmental challenges1.2.1. Sweden has made progress on decoupling, but has some way to go to achieve its environmental quality objectives
Over 2010-23, Sweden managed to decouple 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 (Figure 1.1). 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.
Figure 1.1. Sweden managed to decouple environmental pressures from economic growth
Copy link to Figure 1.1. Sweden managed to decouple environmental pressures from economic growth
Note: Break in the time series on municipal waste generation in 2020. GDP: gross domestic product; GHG: greenhouse gas; LULUCF: land use, land-use change and forestry; NH3: ammonia; NOx: nitrogen oxides.
Source: IEA (2024), IEA World Energy Balances (database); OECD (2024), Environment Statistics (database); SEPA (2024), Sweden's emissions and removals of greenhouse gases, June.
Together with a goal “to pass on to the next generation a society in which major environmental problems have been solved”, Sweden’s environmental quality objectives (EQOs) provide long-term strategic orientation for environmental policy (OECD, 2014).
Sweden is closer to its clean air and non-toxic environment targets than it was in 2012 (Table 1.1). However, 12 of 16 EQOs and the generational goal are not expected to be reached by 2030. The negative trends in the climate (Chapter 2) and biodiversity objectives are a cause for concern. Since 2009, 43 milestone targets have been adopted to specify concrete actions for achieving EQOs. Of the 24 targets whose target year had passed by 2023, almost half were deemed to have been achieved on time (SEPA, 2023a).
Table 1.1. Most environmental quality objectives are not expected to be met by 2030
Copy link to Table 1.1. Most environmental quality objectives are not expected to be met by 2030
Source: SEPA (2023, 2012), In-depth evaluation of Sweden's environmental objectives.
1.2.2. The economy is more carbon efficient
The energy mix has further shifted to renewables
The Swedish economy has one of the lowest GHG emission intensities in the OECD. In the past decade, the energy mix has further shifted to renewables (Figure 1.2). In 2023, fossil fuels accounted for 25% of Sweden’s total energy supply, the second lowest share in the OECD. Electricity generation is almost fossil free. Thanks to its production of nuclear power, hydropower, bioenergy and, increasingly, wind power, Sweden is highly self-sufficient. It remains dependent on imports of fossil and nuclear fuels.
Figure 1.2. Renewable energy has developed further, while electricity generation is almost fossil free
Copy link to Figure 1.2. Renewable energy has developed further, while electricity generation is almost fossil free
Note: Breakdown of total energy supply excludes electricity trade. RES: renewables. FF: fossil fuels.
Source: IEA (2024), IEA World Energy Balances (database).
In 2020, renewable energy accounted for 60% of gross final energy consumption, the highest share in the European Union, well above the target of 49% set for Sweden in the EU Renewable Energy Directive. The updated National Energy and Climate Plan projects to reach 67% of renewable energy in gross final energy consumption by 2030 (MoCE, 2024a). This is below the 76% recommended by the European Commission but is the most ambitious target among EU countries (EC, 2023a). In 2023, Sweden replaced its target of 100% renewable electricity generation by 2040 with a target of 100% fossil-free electricity production (Chapter 2).
The Swedish economy is more energy intense than the OECD Europe average due to its low population density, cold winters, and pulp and paper and metals industries. Energy consumption fell by 10% over 2010-22 mainly due to structural changes in industry, and improvements in the energy efficiency of manufacturing processes, vehicles and residential buildings. The industry (41%), residential (23%), transport (21%) and service (13%) sectors are the largest energy users. The residential and service sectors mainly use energy from electricity and district heating. Industry primarily uses biomass and electricity, while transportation is mainly based on oil products and biofuels. Sweden has met its 2020 target under the EU Directive on Energy Efficiency but is not on track to meet the more stringent requirement for 2030 (MoCE, 2024a).
Swedes enjoy good air quality, but efforts are needed to reduce ammonia emissions
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 for particulate matter (PM10) and nitrogen dioxide (NO2) in 2022 (MoCE, 2024b) and for PM10 and carbon monoxide (CO) in 2023 (SEPA, 2024a). Around 6 700 people die prematurely each year in Sweden, mainly due to fine particulate matter and NO2 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 NOx emissions have helped to further reduce air pollutant emissions. However, additional efforts are needed for NH3 and NOx emissions to meet its 2030 targets. Among the measures of the updated National Air Pollution Control Programme (NAPCP) (MoCE, 2024b), the broadening of the NOx charge to recovery and lye boilers in the pulp and paper industry and the introduction of a distance-based charge for heavy goods vehicles (Section 1.4.4), have yet to be implemented. Reducing NH3 emissions will require new measures, notably to improve manure management. The NAPCP will not be enough to reach the 2030 target for NH3 (SEPA, 2024b). The proposed subsidy (SEK 100 million for 2025-27) to reduce NH3 emissions from the handling of stable manure could help narrow the gap (MoF, 2024a).
1.2.3. Sweden needs an action plan to halt and reverse biodiversity loss by 2030
The National Biodiversity Strategy and Action Plan (NBSAP) is outdated. Until 2020, the ten milestone targets related to biodiversity1 and the Act on Biodiversity and Ecosystem Services (Gov. Bill 2013/14:141, adopted in 2014) formed the main strategy for biodiversity. Parties to the Convention on Biological Diversity (CBD) have committed to update their NBSAPs by the 16th meeting of the Conference of the Parties (COP 16) in October 2024 (CBD, 2024).
Sweden has not yet defined milestone targets or specified concrete actions to meet the requirements of the CBD’s Kunming-Montreal Global Biodiversity Framework, the EU Biodiversity Strategy 2030 and the EU Nature Restoration Law (SEPA, 2023b). The government has tasked the All-Party Environmental Objectives Committee with proposing a strategy for meeting Sweden's EU and international commitments on biodiversity and net GHG removals in the land use sector. However, its proposals will come after COP 16. In June 2024, Sweden was one of the six EU countries to vote against the Nature Restoration Law, on which it had built a compromise during its EU presidency in the first half of 2023.
Biodiversity loss has continued
More than three-quarters of habitats and half of species of conservation importance2 in Sweden are in a poor or bad state (Figure 1.3). The situation is particularly worrying for forest, grasslands, coastal habitats and dunes. Improvements have nevertheless been recorded for some species of amphibians, reptiles and mammals (SEPA, 2022a). Despite signs of recovery for certain species, the state of marine species and habitats remains critical, and their use is not sustainable (SwAM, 2023a). There was little or no improvement in the state of the Baltic Sea environment in 2016-21 (HELCOM, 2023).
Agriculture and forestry are the main pressures on terrestrial habitats (EEA, 2023). Marine habitats are affected by eutrophication and commercial fishing (SEPA, 2022a). Negative impacts of climate change are observed mostly notably in mountain areas and the Baltic Sea. Changes in temperature, ice cover and salinity are expected to further disrupt ecosystems. Increased precipitation and runoff are expected to exacerbate eutrophication.
Figure 1.3. A significant share of habitats and species are in an unfavourable state
Copy link to Figure 1.3. A significant share of habitats and species are in an unfavourable state
Note: The unit shown (share of assessments) refers to single assessments in one biogeographical region over 2013-18. Therefore, one species or habitat type that occurs in more than one biogeographical region can have more than one assessment. Sclerophyllous scrubs: Juniperus communis formations on heaths or calcareous grasslands.
Source: EEA (2021), Conservation status of habitat types and species: Datasets from Article 17, Habitats Directive 92/43/EEC reporting.
Sweden’s history of intensive forestry and standardised clear-cutting practices have adversely affected forest habitats (Figure 1.3) (Figure 1.4). Long-term formal and voluntary protection of forests and environmental consideration during felling3 have had positive effects but have not halted the loss of forest ecosystems (SFA, 2022). The country has not achieved its objective on sustainable forest for 2020 and is not on track for 2030 (Table 1.1) (Figure 1.4). Only 9% of forests and 6% of productive forests4 are formally protected; 5% are voluntary set-asides and 2% are consideration patches (in productive forests5 these percentages are 6% and 2%, respectively) (SCB, 2024a). Productive forests that are not formally protected, most of which are privately owned, are subject to higher rates of loss, degradation and fragmentation (SEPA, 2022b). Unprotected boreal old-growth forests are being cut at a rate that could lead to their complete loss by the 2070s (Ahlström and Canadell, 2024). Forestry practices need to be adapted to better support biodiversity, especially in areas of high conservation values.
Production and environmental objectives are not well balanced in forestry policy, which favours voluntary biodiversity conservation (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). Ongoing efforts to map high conservation value forests (Jonsson, B.G. et al., 2024) should be pursued to facilitate compliance with the Environmental Code. Predictable and stable funding are also needed to ensure better oversight; advise landowners and compensate them for setting aside forest land; and manage nature conservation in protected areas (SFA, 2022).
Figure 1.4. Logging intensity has increased sharply, while protected forest areas are growing slowly
Copy link to Figure 1.4. Logging intensity has increased sharply, while protected forest areas are growing slowly
Note: Intensity of use of forest resources: ratio of fellings to productive capacity (gross increment). Sweden 2020: 2018-22 average. Productive forests: with a yearly wood volume increment more than 1 m3/ha. Formally protected forests: national parks, nature reserves, habitat protection areas, nature conservation agreements and Natura 2000 sites governed by laws and regulations. Voluntary set-asides: smaller areas for which the landowner has voluntarily decided not to carry out measures that can damage natural values, the cultural environment or social values. These areas must be documented in a management plan. Consideration patches: smaller areas that have been designated for regeneration felling, voluntarily by the landowner or pursuant to the Forestry Act. Comparisons of protected areas over time must be made with caution.
Source: OECD (2023), OECD Environment Statistics (database); SLU (2024), Productive forest land: Annual volume increment; SCB (2024), Formally protected forest land, voluntary set-asides, consideration areas and unproductive forest land.
Agricultural area accounts for 7% of land area, predominantly located in the southern regions due to favourable climatic conditions (SCB, 2023). Sweden has a limited number of crops and a large dairy sector. Around half of the agricultural area has natural or other area-specific constraints. In the centre and south of the country, large cropping farms dominate, while in the north there are mainly small livestock farms. Almost 85% of agricultural area is arable land and 15% permanent pasture. After a drastic decline in agricultural land for most of the 20th century, arable land has continued to fall, albeit more slowly, while pasture has increased slightly since 2014. 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 not been sufficient to reverse the long-term loss of landscape diversity and has 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. About 30 000 of 80 000 ha of grasslands of special conservation interest requiring management were not included in payment schemes over 2014-22, mainly due to a shortage of farmers and grazing animals (SEPA, 2022a). On the other hand, the CAP has supported intensive grazing in some Natura 2000 sites, harming target species and habitats on the Gotland Island (Kindvall et al., 2022). Sweden’s 2023-27 CAP Strategic Plan supports biodiversity mainly through compensation for management of semi-natural pastures and organic farming. In 2022 Sweden had the third largest area (20%) under organic farming in the European Union (Eurostat, 2024a). However, like plans in other EU countries, Sweden’s 2023-27 CAP Strategic Plan is not sufficient to protect biodiversity (EC, 2023b; 2022a). Although comparisons should be made with caution, financial allocations to the biodiversity objective (24%) and the share of Natura 2000 area under supported commitments (3%) seem low compared to the respective EU averages (29% and 19%) (EC, 2024a). 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).
Sweden has good knowledge of protected habitats and species, but large gaps remain for forest habitats outside protected areas; for certain grassland habitats, freshwater and marine habitats; and for many species (SEPA, 2021). Long-term, stable support for ecosystem mapping and assessment would be key to mainstream biodiversity in sectoral policies and align biodiversity conservation efforts with EU policies (EC, 2022b). With the exception of the production of materials and bioenergy from trees, there is no monetary valuation of the 20 or so ecosystem services linked to the forests in Sweden (SFA, 2022). Such an assessment was carried out in Slovakia, making a strong case for biodiversity conservation (Box 1.1).
Box 1.1. The value of ecosystems and their services in Slovakia
Copy link to Box 1.1. The value of ecosystems and their services in SlovakiaSlovakia mapped its ecosystems using geographic information systems and field surveys. It examined the capacity of Slovak ecosystems to deliver 11 regulatory, 10 provisioning and 2 cultural services. The monetary value of each ecosystem service was ascertained using the value transfer methodology. The value of ecosystems was estimated at about twice Slovakia’s GDP, with forests making a major contribution to these benefits. However, due to ecosystem degradation, Slovakia loses about EUR 20 billion/year (equivalent to 20% of GDP) in potential ecosystem service value.
Source: Černecký et al. (2021), “Value of ecosystems and their services in Slovakia”; OECD (2024), Environmental Performance Reviews: Slovak Republic.
Sweden is not on track to meet the 2030 targets for protected areas
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%). It has not achieved the target for terrestrial areas (17%), although the areas under strict protection represent a larger share of its territory than in most other European countries. The country is not on track to meet the 2030 target of 30% (Figure 1.5).
Further efforts are needed to ensure the ecological representation, effectiveness, functionality and connectivity of the protected areas network (GoS, 2019). Formal protection combined with compensation programmes for landowners would help safeguard threatened habitats. Increasing formal protection of sub-montane, boreal, continental and alpine forests is necessary to halt their loss (SEPA, 2021).
About 3 000 management plans need to be updated. Management strategies and guidelines are rarely comprehensive and the evidence-base for conservation measures and their priority varies at national and regional levels. Country administrative boards (CABs) and the Swedish Environmental Protection Agency (SEPA) aim to create a centralised database of conservation plans to support municipal land-use planning (SEPA, 2021).
Only 16.2% of terrestrial and 4.5% of marine protected areas have completed Protected Area Management Effectiveness assessments required by the CBD (UNDP/SCBD, 2021). These are essential to identify and address weaknesses and ensure compliance with EU directives. Additionally, not all Natura 2000 sites, particularly those at sea, have effective management plans in place (SEPA, 2021). In November 2024, Sweden adopted a law on the marine environment which aims, among other things, to strengthen the protection of marine areas. Sweden faces EU infringement procedures regarding its wolf hunting regime, the sufficiency of its Natura 2000 network designation and the protection of harbour porpoises from fishing activities (EC, 2022b).
Figure 1.5. Sweden is not on track to meet its 2030 targets for protected areas
Copy link to Figure 1.5. Sweden is not on track to meet its 2030 targets for protected areasExtent of protected areas by IUCN category, top ten OECD Europe countries and Sweden, 2022

Note: IUCN: International Union for Conservation of Nature. CBD: Convention on Biological Diversity. EEZ: exclusive economic zone. Some protected areas have not been designated under a specific international category. This includes areas with international or regional labels (like Natura 2000) that might actually fit an IUCN standard category. Because they have not been officially classified yet, they are listed as "No IUCN Category".
Source: OECD (2023), OECD Environment Statistics (database).
1.2.4. Reaching ambitious water quality objectives requires more cost-effective policies and faster progress
Only 40% of surface water bodies have good ecological status and none have good chemical status when considering mercury and other ubiquitous substances6 (Figure 1.6). The status of surface water is better in the north than in the south, where population density and agricultural intensity are higher. Hydromorphological changes, notably from hydropower, as well as diffuse pollution, are the main pressures on surface water bodies. Eutrophication, caused by excess nutrients from agriculture, wastewater and atmospheric deposition, remains a major challenge in Swedish freshwater and marine environments. Excess nutrients cause various impacts, such as algal blooms and about 30% of the Baltic Sea is either affected by oxygen deficiency or completely lacks oxygen, negatively affecting marine ecosystems (SwAM, 2023b). Although the status of most groundwater bodies is assessed as positive, the national objective is not on track due to insufficient evidence to support this assessment (Lång et al., 2022).
Figure 1.6. Further efforts are needed to achieve good water status
Copy link to Figure 1.6. Further efforts are needed to achieve good water statusStatus of freshwater bodies by river basin district

Note: Data cover 2017-21. uPBTs: ubiquitous, persistent, bioaccumulative and toxic substances, i.e. mercury, brominated diphenyl ethers, tributyltin and certain polyaromatic hydrocarbons.
Source: VISS (2024), Water Information System for Sweden; WISE (2021), Freshwater Information System for Europe.
In 2010, Sweden set the ambitious goal of “Zero eutrophication” by 2020, which was not met. Nutrient balances (nitrogen and phosphorous) declined between 2010-19 (OECD, 2024c). The Local Engagement for Water (LEVA) initiative established in 2018 has supported action to reduce eutrophication at local level. However, the overall pace of measures implemented to reduce eutrophication is too slow to reach the 2027 deadline of the EU Water Framework Directive (WFD) (SwAM, 2021). Swedish water authorities estimate that implemented measures to reduce nitrogen and phosphorous in agriculture have not been sufficient and have not always been well targeted (Vattenmyndigheterna, 2024). For phosphorous, the effect of the implementation of measures is low (about 23%) compared to what is required to reach good status. Moreover, some measures were poorly targeted in water bodies that do not require action. For nitrogen, the assessment is more positive, with a much higher rate (about 85%) of impact of measures implemented as a share of the impact of possible measures; however, some of these have been incorrectly targeted (Vattenmyndigheterna, 2024).
Extending the use of economic instruments such as taxes, trading schemes or compensation measures to address eutrophication would improve cost effectiveness. The current policy mix to address eutrophication relies to a large extent on voluntary measures supported by financial grants, from the EU CAP and government grants to co-finance local water management initiatives (LOVA grants). The approach does not promote effective prioritisation or cost effectiveness. Moreover, funding programmes are not well-designed to meet water quality objectives, and the level of funding is insufficient and lacks long-term stability. Pilot programmes to support co-ordination of measures at catchment scale via Catchment Officers have proven effective at increasing the rate of uptake of implementation and better prioritisation of measures; these efforts should be continued. Sweden has studied options to improve cost effectiveness and efficiency of reducing diffuse pollution. A proposal for an emissions trading system was developed, but the government has not taken further action. Ecological compensation measures could be a first step towards a trading system. Such measures are being investigated but may require changes in regulations to implement. A tax on mineral fertilisers (targeting nitrogen and phosphorus) had been in place for 25 years before it was repealed in 2009 (Andersen, 2018).
Hydropower production should be better balanced with the benefits of freshwater ecosystem services
Hydropower accounts for an important share (40%) of electricity production (Figure 1.2). There are nearly 11 000 dams in flowing water, of which 2 000 are active hydropower plants (SwAM, 2023b). Large-scale facilities play a pivotal role in enabling the expansion of wind and solar energy by maintaining the balance of the electricity system. Hydropower is also the most extensive pressure on lake and river water bodies in Sweden (SwAM, 2024) and impacts from hydropower and dams are one of the main threats to biological diversity (SwAM, 2023c). These impacts need to be addressed to achieve good ecological status under the WFD and to achieve the national objective of “Flourishing lakes and streams”, among others. About 90% of active hydropower concessions were granted decades before modern environmental legislation was enacted (Rudberg, 2013); hence, many older permits for hydropower lack or have limited environmental considerations, especially for minimum environmental flows and fish passages. About 12% of hydropower installations produce 98% of produced electricity (SwAM, 2023b). However, small-scale hydropower installations can still have significant environmental impacts despite low electricity production.
The revision of the legal framework for hydropower in 2019 was a major development to adapt facilities to maximise benefits to the freshwater ecosystems, while providing an efficient supply of hydropower. The National Plan for Modern Environmental Provisions for Hydropower calls for Land and Environmental Courts to reassess permits in line with the WFD. Over 75% of hydropower plants have signed up to the national plan for re-examination.7 Facilities affecting Natura 2000 sites have been prioritised. The Hydroelectric Environmental Fund, established and financed by the largest hydropower companies, will allocate SEK 10 billion (EUR 1 billion) to improve water quality and hydrological connectivity in water bodies and river basins affected by hydropower. The process began in 2022, with a 20-year time horizon. However, the schedule has been postponed several times to better assess potential negative consequences on hydropower production. The reassessment process is expected to resume on 1 July 2025. Measures for water bodies affected by hydropower are not expected to be completed before 2045, long after the deadline of 2027 to reach WFD objectives.
The reassessment of permits for hydropower weighs heavily towards protecting electricity production when facing trade-offs with environmental objectives. The government introduced an obligation for water management to fully use all the opportunities provided by EU law regarding exemptions and declaring water as heavily modified (GoS, 2020) with the aim that the modernisation of the hydropower should mean as little loss of production as possible (GoS, 2020).8 In August 2024, the government proposed legislative amendments to enshrine this approach in law, requiring the full use of exemptions and derogations in reaching environmental objectives allowed under the WFD (MoCE, 2024c). To support efforts to reach WFD objectives and Sweden’s broader EQOs, Sweden should clarify guidance on the development of environmental standards in affected water bodies, ensuring a balance between the benefits of improvements in freshwater ecosystems and impacts on hydropower production. In addition, monitoring of the impact of environmental measures and improving co-operation between hydropower facilities and water authorities would facilitate successful implementation of the national plan.
Addressing increasing water scarcity calls for stronger controls on abstractions
Despite overall water abundance, water scarcity has been an issue for some time in southeastern Sweden. It is also an emerging concern in other regions, with risk of shortage during dry summers (Swedish National Expert Council for Climate Adaptation, 2022). Sweden has abundant water resources and overall low water stress at national level: only 1% of renewable freshwater resources are withdrawn annually. Industry is the largest water user, accounting for 61% of abstractions in 2020, with public water supply accounting for 35% and agriculture 4% (SCB, 2022). However, increased variability of rainfall and higher temperatures due to climate change are expected to exacerbate scarcity, decreasing available supply and increasing demand for water. Sweden has also faced droughts, leading to negative impacts on agriculture (Copernicus, 2023). At the same time, numerous areas are prone to flooding, especially in the northern, central and southeastern parts of the country (Panahi et al., 2023). The Swedish National Expert Council for Climate Adaptation has identified water security as one of the top three risks related to climate change in the country. This highlights the need to continue to integrate climate adaptation into water management planning and policies.
To address drought and water shortages in the South Baltic Sea Water District, where water shortages are pervasive, Sweden developed the Partial Management Plan and Partial Action Programme 2022-27. The impact of water withdrawals in the district is so significant that environmental quality standards are not met or at risk of not being met in 81 groundwater bodies and 10 surface water bodies (The South Baltic Sea Water District, 2022). Measures in the Action Programme include development of guidance on water efficiency and water retention in landscapes, as well as stronger monitoring of water abstraction.
Sweden is one of only three OECD countries (along with Austria and Chile) that do not charge for water abstraction (Leflaive, 2024). A broader review and strengthening of the system for abstraction permits would be timely to adapt to current and emerging water challenges. While newer abstraction permits are time-bounded and consider minimum environmental flows, most older permits do not. The “exception rule” in the Environmental Code, intended to exempt smaller surface water abstractions from obtaining an abstraction permit, has been widely used, including for some large abstractions. Water used for household purposes or for an agricultural property does not require a permit.
More comprehensive monitoring of abstractions would support Sweden’s efforts to manage water scarcity and its impact on reaching EQOs. The Geological Survey of Sweden has developed maps to identify areas affected by shortage and drought in the future. However, many water abstractions are not known or monitored and national funding for environmental monitoring has decreased. Requirements for more comprehensive monitoring of abstractions is expected with forthcoming revisions to EU regulations.
1.2.5. Further progress is needed on the circular economy
Swedes generate less municipal waste per capita than the EU average (395 vs. 513 kg/capita in 2022) (Eurostat, 2024b). After a decade of stability, municipal waste generation seems to have fallen in recent years although changes in the definition make recent trends difficult to interpret (Figure 1.7). The introduction of a landfill tax and bans on landfilling for combustible and organic waste in the 2000s led to a drastic reduction of municipal waste sent to landfill (OECD, 2014). Over 2010-19, increasing amounts of municipal waste were incinerated with energy recovery and, to a lesser extent, recycled (Figure 1.7).
Figure 1.7. Municipal waste generation has fallen recently, but most is incinerated with energy recovery
Copy link to Figure 1.7. Municipal waste generation has fallen recently, but most is incinerated with energy recovery
Note: Break in the time series on municipal waste generation and management in 2020.
Source: Eurostat (2024), Municipal waste by waste management operations.
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. However, it did not meet the target of recycling 50% of municipal waste by 2020. Moreover, it is at risk of not meeting the 2025 target (Table 1.2).
Table 1.2. Sweden risks missing its targets for waste reduction and recycling
Copy link to Table 1.2. Sweden risks missing its targets for waste reduction and recyclingProgress towards selected targets on waste management
Target |
2022 performance |
2025 target |
Prospects for meeting EU targets |
---|---|---|---|
Municipal waste prepared for reuse and recycled (%) |
40% |
55% |
At risk |
Total food waste per capita reduced from 2020 levels (%) |
-3% |
-20% |
At risk |
Recycling of overall packaging (%) |
60% (2021) |
65% |
At risk |
Recycling of plastic packaging (%) |
35% |
50% |
At risk |
Recycling of wooden packaging (%) |
28% (2021) |
25% |
Achieved |
Recycling of ferrous metals packaging (%) |
82% |
70% |
Achieved |
Recycling of aluminium packaging (%) |
82% |
50% |
Achieved |
Recycling of glass packaging (%) |
86% |
90% (70%) |
At risk |
Recycling of paper/cardboard packaging (%) |
78% |
85% (75%) |
At risk |
Note: Selected targets of the National Waste Management Plan and Waste Prevention Programme 2018-24, the Waste Framework Directive (EU 2018/851) and Packaging Waste Directive (EU 2018/852). Sweden’s recycling targets for glass and paper packaging are higher than the EU targets in brackets.
Source: Eurostat (2024), Municipal waste by waste management operations; Eurostat (2023), Recycling rates of packaging waste by type of packaging; SEPA (2024) Food waste in Sweden in 2022; SEPA (2023), Sweden's recycling of packaging.
To improve recycling, 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 before 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; and improve conditions for repair, remanufacture and reuse; and supporting municipalities, particularly the smaller ones (SEPA, 2023c). The updated National Waste Management Plan and Waste Prevention Programme includes these and other proposals, stressing the importance of all stakeholders in implementation (SEPA, 2024c). In November 2024, the government initiated a reform of the waste legislation to prevent waste and increase material recycling (GoS, 2024a).
Municipalities are responsible for the collection and treatment of municipal waste. Since 2024, they also collect packaging from producers, although producers continue to bear the collection cost (Avfall Sverige, 2024). In 2023, 12% of municipalities implemented weight-based charges to incentivise waste reduction in households (Avfall Sverige, 2024).
At 6%, Sweden's circular material use rate under SDG 12 remains low – just over half the EU average in 2022 (Eurostat, 2023). The country adopted a Circular Economy Strategy (2020) prioritising plastics, textiles, food, the construction and building sector, renewable and bio-based raw materials, and innovation for critical metals and minerals. Sweden also adopted a Circular Economy Action Plan (2021), although it lacks concrete timelines for implementation (EC, 2022b).
Sweden has implemented several new economic instruments to promote a circular economy. In 2017, repair services were taxed at a reduced value added tax rate (from 25% to 12%) to extend the life of bicycles, shoes, leather goods and clothes. The rate was further reduced to 6% in 2022 but increased again to 12% in 2023 to increase uniformity of the tax system. In 2020, Sweden introduced a tax on incineration (excluding hazardous waste and bio energy) and gradually increased the rate from SEK 75/t to SEK 125/t in 2022. The tax was removed in 2023 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. Sweden also introduced a tax on plastic bags, which contributed to a 75% reduction in their use over 2020-22 (SEPA, 2024d). This tax was abolished in 2024. It was no longer deemed necessary as Sweden had exceeded the EU consumption target for plastic carrier bags. 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 in decisions to modify or abolish these instruments. An inquiry on economic instruments for a more circular economy is under public consultation (GoS, 2024b).
1.3. Improving environmental governance and management
Copy link to 1.3. Improving environmental governance and management1.3.1. Sweden has decentralised environmental governance with many agencies
Sweden is a unitary state with a decentralised governance system including 21 counties and 290 municipalities. The municipalities have extensive autonomy in implementing national policies and legislation. Higher-level authorities generally do not have the mandate to direct subnational and local governments. Rather, they employ a range of guidance and co-ordination mechanisms to ensure consistent policy implementation nationwide.
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 is responsible for matters relating to climate, the environment, energy, enterprise, innovation and radiation safety. It oversees 36 government agencies, including SEPA, which co‑ordinates and implements environmental policy; the Swedish Agency for Marine and Water Management (SwAM); the Swedish Energy Agency; and the Swedish Research Council for Sustainable Development (Formas), which supports research and innovation in the fields of the environment, agricultural sciences and spatial planning. After ten years of growth in the budget of environmental agencies, the government has reduced their appropriations since 2022.
Other central agencies with key environmental responsibilities are the National Board of Housing, Building and Planning; the Swedish Board of Agriculture; the Swedish Forestry Agency; and the Swedish Transport Administration under the Ministry of Rural Affairs and Infrastructure.
At the regional level, CABs – central government agencies headed by appointed governors – have major environmental permitting, compliance monitoring and enforcement responsibilities. Locally, municipalities are responsible for spatial planning, public service provision (water supply, sanitation and waste management), and environment and health protection.
1.3.2. The country has taken steps to better co‑ordinate compliance monitoring and enforcement
Sweden has established various horizontal and vertical co‑ordination mechanisms such as the Supervision and Regulation Council, the Environmental Collaboration Sweden network, the Environmental Objectives Council (Box 1.2), and inter-municipal environmental agencies. Nonetheless, the previous Environmental Performance Review highlighted a lack of consistency and an uneven playing field across regions, and particularly across municipalities, in the application of environmental legislation (OECD, 2014).
Box 1.2. The Environmental Objectives Council to improve horizontal co-ordination
Copy link to Box 1.2. The Environmental Objectives Council to improve horizontal co-ordinationEstablished in 2015, the Environmental Objectives Council is mandated by the government to accelerate the achievement of environmental objectives in a cost-effective way. It comprises heads of 17 agencies, county administrative boards and the Sámi Parliament with key responsibilities for delivering the generational goal and the environmental quality objectives. Each year, the Council reports to the government and can make policy suggestions, except on taxes.
Priorities for 2023-26 include: a framework for national planning; collaboration for a sustainable food system; health as a driver for environmental goals and sustainable development; circularity in the material flows of the climate transition; carbon sequestration and biodiversity in land-based ecosystems. The Council will submit its final report in 2026.
Source: Environmental Objectives Council, www.sverigesmiljomal.se/miljomalsradet.
The country has strengthened SEPA’s oversight by adopting a National Strategy for Environmental Supervision for 2022-25 (SEPA, 2024e). The strategy focuses on seven areas (waste, contaminated areas, health protection, chemicals control, environmentally hazardous activities, nature and water activities) covering the Environmental Code. Increased appropriations for licensing and supervisory guidance have supported more effective and uniform supervisory activities by regional and municipal authorities (SEPA, 2024f). However, CABs lack resources for inspections and municipalities have difficulty recruiting and retaining staff with the right skills (SEPA, 2024g). Although annual monitoring of the strategy provides positive indications of compliance levels, outcome indicators would help to better assess its effectiveness. Since 2018, Environmental Collaboration Sweden has been facilitating the follow-up of the municipalities’ supervisory activities, creating a base for more equal assessment and improved supervision (Environmental Collaboration Sweden, 2024).
1.3.3. Sweden is a front runner in green budgeting
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, 2024h). However, the climate report highlights inconsistencies between fiscal and climate policies: the 2024 budget bill will lead to increased GHG emissions in 2024 (MoF, 2023).
There is still room for improvement in assessing the climate impact of reforms, which the government plans to do in future budget bills (MoF, 2023). The 2024 budget bill lists the main measures with a positive and negative impact on GHG emissions. However, it does not present the total allocated to green and brown measures. The bill provides examples of tax expenditure with a negative impact, but their total amount is not indicated in the climate report, although the information exists in the report of tax expenditure (MoF, 2024b) (Section 1.4.4).
1.4. Promoting investment and economic instruments for green growth
Copy link to 1.4. Promoting investment and economic instruments for green growth1.4.1. A green industrial revolution was launched
A large share of Swedish firms views the climate transition as an opportunity (43% vs. 29% in the European Union) (EIB, 2024). In 2015, ahead of the United Nations Framework Convention on Climate Change Conference of the Parties (COP 21) in Paris, the government initiated “Fossil Free Sweden”. Through this co-operation platform, Sweden intended to accelerate the climate transition by identifying business opportunities and barriers to decarbonisation. As part of Fossil Free Sweden, 23 industries have produced roadmaps for fossil-free competitiveness, including steel, cement, transportation and electricity. A green industrial revolution was launched across the country, notably in the northern regions (OECD, 2023a) (Chapter 2).
The green revolution promises renewed growth in Sweden’s remote northern regions after decades of depopulation (OECD, 2023a). However, this will require significant investment in electricity generation and grid, housing and public infrastructure. Labour and skill shortages, competing land uses and lengthy permitting processes must be overcome. The OECD recommended streamlining and improving co‑ordination of the environmental permitting process, ensuring early-stage public consultation and participation, including of the Sámi people (Box 1.3); allocating a share of wind power profits to host municipalities; ensuring a holistic approach to skills for the green transition; and investing in public infrastructure and housing (OECD, 2023a; 2021) (Chapter 2).
Box 1.3. Effective participation of the Sámi people in the green industrial revolution
Copy link to Box 1.3. Effective participation of the Sámi people in the green industrial revolutionThe green industrial revolution in northern regions is creating conflicts with the traditional land use of the Sámi people. 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, the law does not always lead to effective consultation of the Sámi in decisions that affect them, or to their free, prior and informed consent. 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.
Source: MoCE (2024), Strategy for new industrialisation and societal transformation in Norrbotten and Västerbotten counties; OHCHR (2024), “Concluding observations on the seventh periodic report of Sweden”, Report No. E/C.12/SWE/CO/7.
1.4.2. Subsidies to climate change mitigation have surged
Subsidies for climate change mitigation have surged since 2015 (Figure 1.8). These include the bonus for low-emission cars (Climate Bonus), support for local and regional climate investments and for the installation of charging infrastructure for electric vehicles (EVs) (Climate Leap), as well as for reducing industry's process-related emissions (Industrial Leap). The Climate Bonus, which received the largest subsidies, was phased out in 2022 as the EV market was maturing (Section 1.4.4). While the Climate Leap has helped reduce GHG emissions and create jobs (SEPA, 2024i), the Industrial Leap has supported projects in the research, development and early deployment phases, notably in the iron and steel, and chemical industries. Its potential for emission reductions has yet to materialise (SEA, 2024a), and there is scope to streamline these subsidies. There are indications of overlap between the Industrial Leap and other support (SNAO, 2024).
Figure 1.8. Environmentally motivated subsidies have focused on reducing GHG emissions
Copy link to Figure 1.8. Environmentally motivated subsidies have focused on reducing GHG emissions
Note: An environmentally motivated subsidy is determined by the motivation of the subsidy/appropriation that gave rise to the subsidy. It does not include subsidies from the European Union. It includes payments from government to producers, individuals, organisations, non-profit-making associations, municipalities and county councils, as well as to EU countries and international activities. This definition is broader than the one used in the national accounts.
Source: SCB (2024), Total environmentally motivated direct subsidies.
1.4.3. Investment in environmental and low-carbon infrastructure has grown
Investment in environmental protection has increased significantly
Public expenditure on environmental protection grew significantly from 0.4% to 0.6% of GDP in 2010-22. This was due to the sharp rise in government subsidies to reduce GHG emissions (Figure 1.8); increased municipal investment in wastewater treatment (Figure 1.9); and, to a lesser extent, increased spending on biodiversity protection.
Industrial investment for environmental protection grew in all areas between 2017 and 2021, before levelling off in 2022 (Figure 1.9). The electricity, gas and heating industry invested the most in environmental protection in 2022, followed by the mining, water supply and paper industries.
Figure 1.9. Public investment in wastewater treatment has more than doubled
Copy link to Figure 1.9. Public investment in wastewater treatment has more than doubled
Note: GFCF: gross fixed capital formation; Public other: includes environmental protection n.e.c, and research and development in environmental protection; Industry other: includes biodiversity and landscape, land and groundwater.
Source: OECD (2024), Annual government expenditure by function (COFOG); SCB (2024), Investments in environmental protection in industry by environmental domain.
The share of the Swedish population connected to urban wastewater treatment systems is among the highest in Europe. Sweden has identified all of its water bodies as sensitive areas.9 Overall, 97% of the urban wastewater is treated according to the requirements of the EU Urban Waste Water Treatment Directive, well above the EU average of 82% (EEA, 2024a). Sweden has made major investments to reduce emissions of pharmaceutical residues into the environment10 and the country has been a leader in addressing contaminants of emerging concern in freshwater (OECD, 2019). However, as in many countries, there are challenges related to individual sewage treatment systems. About 1.2 million residents (about 15% of the population) and about the same number of holiday homes depend on individual water supply and wastewater disposal (Lindqvist and Sköld, 2023). Discharges of wastewater from unconnected dwellings contribute significantly to less than good water quality in 44% of coastal water bodies (EEA, 2024a).
Sweden would benefit from investing more in measures to protect biodiversity and ecosystems, in the circular economy and in pollution prevention and control (EC, 2024b). The environmental investment gap reached at least EUR 6 billion over 2014-20 and is expected to increase to EUR 7 billion over 2021-27. The gap is especially wide (EUR 4.4 billion) for investment in biodiversity and ecosystem protection. After reaching their highest levels for ten years in 2021-22, budget allocations for nature protection were drastically cut in 2023.
Investment needs in sustainable energy and transport are high
Sweden’s updated National Energy and Climate Plan includes estimates of additional (mainly private) investment needs in electricity generation (SEK 30 billion per year in 2030) and transmission networks (SEK 48 billion by 2030) (MoCE, 2024a). However, it lacks a comprehensive assessment of investment needs to meet climate targets, including specific estimates for industry and transport sectors (EC, 2023c). Other official sources suggest that the need for publicly financed climate measures, including for adaptation, adds up to SEK 25-45 billion per year over the coming decades (SFPC, 2022). This comes on top of the planned investments of the 2022-33 Transport Infrastructure Plan (about SEK 60 billion per year in 2021 prices).
Over 2010-22, investment in rail infrastructure increased by 6% compared with 31% for roads (OECD, 2024e). In 2022, roads dominated investment in transport infrastructure (0.5% of GDP), although the share for rail (0.4% of GDP) was higher than in many other OECD countries. There is scope to prioritise transport investments with high benefit-cost ratio (SNAO, 2022). Although the budget allocated to urban environment agreements (for developing local infrastructure for cycling and public transport) increased in 2022, new applications are no longer being accepted (MoF, 2023).
It is unclear when Sweden will benefit from EU recovery funds
Sweden’s Recovery and Resilience Plan (RRP) consists of 16 reforms and 14 investments to be supported by EUR 3.4 billion in EU grants11 (about 0.6% of 2021 GDP) until 2026. Sweden dedicated 44% of its RRP budget to climate objectives, well above the EU requirement of 37% (Figure 1.10). Green measures support the Climate Leap, the Industrial Leap and the designation of protected areas. Its REPowerEU chapter (added in 2023 to deal with the consequences of the Russian Federation’s invasion of Ukraine) includes additional investments for the energy efficiency of buildings and reforms to speed up authorisation for electricity grid construction. By September 2024, Sweden had not yet submitted a payment request (EC, 2024c), as it has not implemented certain reforms required for the disbursement of funds. These include the increase in the biofuel blending obligation 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.
Figure 1.10. Sweden’s Recovery and Resilience Plan could help support the green transition
Copy link to Figure 1.10. Sweden’s Recovery and Resilience Plan could help support the green transition
Note: Energy efficiency in multi-dwelling buildings and Investment for growth and housing include REPowerEU allocations.
Source: EC (2023), Analysis of the Recovery and Resilience Plan of Sweden.
The government expects the direct effect of the RRP to boost GDP by less than 0.1% by 2026. This is because the RRP continues measures approved in the previous (2021) budget bill (Binder, 2024). At that time, the total effect of the measures was estimated to increase growth in 2021 by about 2.3%.
In 2022-23, in response to increasing energy prices, the government added discretionary spending amounting to 1.2% of GDP to its already expansionary budget (Figure 1.11) (OECD, 2023a). The measures included electricity subsidies for households in southern Sweden where electricity prices are relatively high. They also included tax cuts on diesel and petrol, and a temporary increase in housing allowances for economically vulnerable families with children. Sweden should move from broad-based, untargeted energy support to targeted interventions that maintain incentives to reduce energy use.
Figure 1.11. Response to the energy crisis has focused on untargeted support measures
Copy link to Figure 1.11. Response to the energy crisis has focused on untargeted support measuresGross fiscal costs of energy support measures as % of GDP, 2022-23
1.4.4. The green tax shift has reversed
The green tax shift has reversed in recent years
Sweden has been a forerunner in environmental taxation (OECD, 2014) and continues to have high carbon prices by international standards (OECD, 2023b). However, 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 1.12). 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. Over 2021-24, combined carbon and energy taxes fell in real terms by 29% for petrol and 26% for diesel (SEA, 2024b).
Figure 1.12. Revenue from environmentally related taxes fell due to a shrinking tax base and the cut in fuel tax rates
Copy link to Figure 1.12. Revenue from environmentally related taxes fell due to a shrinking tax base and the cut in fuel tax ratesEnvironmentally related taxes by tax base, 2010-23
Carbon prices are high but decreasing
With an average effective carbon rate (ECR) of EUR 9012 per tonne of CO2 in 2023, Sweden continues to have one of the highest carbon prices in the world (OECD, 2024g). However, this rate has dropped by almost 20% over 2021-23 (Figure 1.13), compared with a 10% fall in the European Union. About 70% of Sweden’s GHG emissions (excluding emissions from biofuel combustion) are priced through fuel excise taxes, a carbon tax and the EU Emissions Trading System (EU ETS). While most emissions from road transport, buildings, electricity and industry are priced at over EUR 60 per tonne of CO2, most emissions from agriculture – methane and nitrous oxide – remain unpriced.
Figure 1.13. Effective carbon rates dropped significantly between 2021 and 2023
Copy link to Figure 1.13. Effective carbon rates dropped significantly between 2021 and 2023Average effective carbon rates and GHG emissions by sector, 2021 and 2023

Note: ECR for Sweden is the sum of prices from the carbon tax, fuel excises and ETS permits. Excludes emissions from the combustion of biomass. Other GHG emissions: methane, nitrous oxide, F-gases and process CO2 emissions excluding land-use change and forestry (LUCF).
Source: OECD (2024), Pricing Greenhouse Gas Emissions 2024.
Combined with the increase in permit prices in the EU 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 GHG emissions. In addition to lower fuel taxes, the reduction of the biofuel blending obligation in 2024 has put into question Sweden’s ability to meet its climate targets (Chapter 2).
Road pricing would help address transport externalities and the erosion of the tax base
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 as the price gap with combustion engines was closing. The instrument was costly, had a regressive effect and encouraged the export of subsidised EVs (SNAO, 2020). The introduction of the bonus-malus system was followed by a rapid increase in sales of EVs which, after a slowdown in 2024, is projected to pick up again (Trafikanalysis, 2024a) (Chapter 2). Sweden has one of the lowest average CO2 emissions from new cars and vans in the European Union (EEA, 2024b; 2024c).
As use of EVs 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). Higher 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 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, as required by the revised Eurovignette Directive (EU 2022/362). The country is part of the Eurovignette co-operation with Denmark, Luxembourg and the Netherlands. 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. Denmark will change from the Eurovignette to a kilometre-based road tax for heavy goods vehicles in 2025.
As recommended in 2014 (OECD, 2014), Sweden analysed the incentive mix in the transport sector (Trafikanalys, 2024b; 2024c; 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.
Since 2018, airlines serving Swedish airports pay a tax per passenger differentiated by destination. The tax aims to reduce the climate impact of aviation. It is adjusted for inflation annually. Although its impact has not been quantified (MoF, 2023), the government plans to abolish the tax in 2024 due to its overlap with the EU ETS (MoF, 2024a).
Sweden does not track support potentially harmful to the environment
Under SDG 12,13 Sweden is committed to rationalising inefficient fossil fuel subsidies. However, it has not adopted intermediate targets for doing so (MoCE, 2024a). Like other OECD countries, Sweden delivers support to fossil fuels through tax expenditures; oil attracts the bulk of government support (OECD, 2023c). The reduced energy tax for diesel used in motor vehicles is the main source of forgone revenue (MoF, 2024b). This is followed by reduced energy and carbon taxes for diesel used in agriculture, fishing and forestry and 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, 2024b; SCB, 2024b). In addition, the income tax deduction for car commuting expenses was increased significantly in 2023, resulting 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 more than halve between 2022 and 2025 (MoF, 2024b). However, lower fuel taxes weaken the incentive to reduce transport emissions. This illustrates the need to regularly assess the environmental impact of tax expenditures in the national context. Other countries such as Belgium, Germany and Italy assess the potentially harmful effect of their tax expenditure (MASE, 2022; SFP Finances, 2024; UBA, 2021). Sweden could follow their example to draw up a national inventory of fossil fuel subsidies.
Sweden should also systematically evaluate incentives that could potentially affect biodiversity as required by Target 18 of the Kunming-Montreal Global Biodiversity Framework. Under the CAP, coupled income support to cattle production (13% of direct payments in 2014-22 and 2023-27) maintains livestock numbers and associated enteric fermentation emissions, although it also contributes to the management of semi-natural pastures. The country should closely monitor implementation of the new CAP and assess its impact on the environment.
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Notes
Copy link to Notes← 1. Ecosystem services and resilience; importance of biodiversity and the value of ecosystem services; threatened species and habitat types; invasive alien species; knowledge about genetic diversity; holistic approach to the use of land; protection of land areas, freshwater areas and marine areas; environmental consideration in forestry; varied forestry; and a dialogue process in a national forestry programme.
← 2. The Habitats Directive (92/43/EEC) protects habitats and species of Community interest, i.e. which are threatened to disappear in the European Union, have a small natural range or present outstanding examples of typical characteristics of Europe's biogeographical regions.
← 3. Sweden distinguishes between i) formally protected forests, which include national parks, nature reserves, habitat protection areas, nature conservation agreements and Natura 2000 sites governed by laws and regulations; ii) voluntary set-asides – smaller areas for which the landowner has voluntarily decided not to carry out measures that can damage natural values, the cultural environment or social values; and iii) consideration patches – smaller areas that have been designated for regeneration felling, voluntarily by the landowner or pursuant to the Forestry Act.
← 4. With a yearly wood volume increment more than 1 m3/ha. Productive forests cover more than half of Sweden’s land area.
← 5. With a yearly wood volume increment of more than 1 m3/ha.
← 6. Omitting the uPBTs (ubiquitous, persistent, bioaccumulative and toxic substances, i.e. mercury, brominated diphenyl ethers, tributyltin and certain polyaromatic hydrocarbons) results in 1% of surface water bodies not being in good chemical status.
← 7. Others either do not need to be reassessed or have “uncertain status”, whereby information on participation has not been submitted to SwAM.
← 8. The government adopted a target of 1.5 TWh reduction in hydroelectric production as constituting “significant adverse impact” on power generation when declaring Heavily Modified Water Bodies.
← 9. All agglomerations above 10 000 p.e. have to implement a more stringent treatment for N and/or P and report individual equipment and performance for each of their treatment plants.
← 10. Approximately SEK 250 million was allocated between 2018 and 2020 for the expansion of advanced treatment technology in wastewater treatment plants (Lindqvist and Sköld, 2023).
← 11. Considering the 2022 downward revision of the Recovery and Resilience Facility, REPowerEU grants and Brexit Adjustment Reserve.
← 12. Without considering free allocations of allowances in the EU ETS.
← 13. SDG 12 calls for ensuring sustainable consumption and production patterns.