/Swedish-Climate-Policy-Jenny-Jewert-2012

SWEDISH CLIMATE POLICY LESSONS LEARNED JENNY JEWERT

PREFACE

Has Swedish climate policy severed the link between economic growth and energy consumption – the emission of carbon dioxide? This appears to be the case. While the size of the economy has doubled since 1970, emission levels have almost halved. The domestic industry has cut its emissions by half and has maintained a constant level of total energy consumption since the seventies, despite at times having experienced very rapid growth.

This is a case of absolute decoupling, not just relative – when GDP grows by more than energy consumption and CO2-emissions. There is, in other words, good reason for the outside world’s interest and curiosity regarding the Swedish experience of energy and climate policies, and a clear motive for us to tell the story of how it came about; to show that it is possible to set high climate ambitions and still improve economic performance. Both corporations and countries can benefit from leading the way.

Of course the situation is not as simple as that. Sweden still has a large ecological footprint, harmful to the environment, stemming from our high consumption of goods produced elsewhere in the world. As long as fossil fuels dominate in the countries that Sweden imports from, our lifestyle comes at the cost of an unsustainable climate impact. When environmental economists sum up Sweden’s total consumption and include the emissions it generates in other countries, studies of individual years indicate that emissions of greenhouse gases are up to 25 per cent higher than what is found using the production perspective alone.

There is, however, no rule of nature saying that the goods we import must be CO2-intensive. If others switched their production as efficiently as we have done, our imports, too, would involve lowered CO2emissions. This is just what the UN proceedings and the climate efforts of the European Union are all about: getting everybody to introduce the regulations that would enable a global transition. We know that the difficulties in reaching an agreement are considerable, and it is therefore necessary to follow a bottomup approach, and let the local, national and regional processes get started and gain momentum before binding agreements are put in place.

An interesting discovery one makes when reading Jenny Jewert’s historical overview is that the majority of positive climate outcomes are the result of choices made long before anybody in Sweden spoke of climate policy at all. Examples are the phasing out of fossil fuels for both residential heating and the processing industries, and investments in municipal district heating. The truth is that Sweden’s relatively low emission levels are an outcome of rational, long-term system solutions, sprung from a domestic need for cheap, safe and clean energy. These solutions have strikingly often been the result of a fruitful collaboration between public procurers and innovative companies and sectors.

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This experience reveals two important points: firstly, that sound energy provision and good climate outcomes go together. The prospects for continuing down this road are good and many of the gains from improved energy efficiency have not yet been realised. Within the area of housing and transportation, a lot remains to be done.

The second key lesson is the importance of political decision-making and the interaction of different sectors. The public sector, at both the municipal and the state level, and the private sector have to work together to find workable long-term solutions. Our neighbouring Nordic countries have similar experiences to be shared.

So is this perhaps the Swedish and Nordic example that we should share with an increasingly interested world? Because Swedish climate policy is by no means a modern success story. It is the result of strategic long-term choices made long before the climate issue topped government agendas. It appears to have been the economy, rather than the climate and the environment, that has stood in the foreground.

It is our hope that Jenny Jewert’s report will inspire many within the international community and provide a pillar of support to the dedicated local and national politicians around the world who are working for the climate and the environment. What we have done is not rocket science – it is something everybody can do. That it is furthermore good for both industrial competitiveness and for economic development is something that others, just as we have, soon should realise.

Kristina Persson Chairperson Global Utmaning

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Swedish Climate Policy – Lessons learned

“To elevate all things Swedish as exclusively refined, or at least better than everything else in the world, is far from the Swedish reality” Carl Jonas Love Almqvist from “The importance of Swedish poverty”, 1838

Sweden has long been seen as a pioneer country where climate policy is concerned. The surrounding world has been able to follow, with a certain amount of incredulity, the way in which the small country in the north, in spite of its relatively large, energy-intensive process industry, comprehensive need for heating and long-distance transportation, has dramatically reduced its greenhouse gas emissions while its economy has continued to grow. Carbon dioxide emissions are low compared with other industrial nations, measured as emissions per capita and emissions per GDP (1). While the economy has doubled in size since 1970, emissions have almost halved (2). The growth within the country has increased and the actual emissions reported to the UN’s climate convention have fallen. On the other hand, Sweden has achieved that which all countries with high environmental ambitions strive for – a complete decoupling.

The majority of OECD countries have succeeded only in achieving a relative decoupling, which means that emissions continue to increase, but not as quickly as growth (3), (4).

The environmental organisations that give the world’s countries a climate ranking every year put Sweden in fourth place after three empty positions (5). Sweden is the best, but the three empty top places do of course signify that no country in the world does enough to reduce the low emission levels that will be required within the forthcoming decades.

How did this development come about? How could Sweden – which was one of the world’s most oilthirsty countries of the 1950s, more than halve its dependency on oil from 1970 until today? (6). All in all, the use of oil – including shipping and air traffic abroad – has fallen from 31 to 16 million m3, a development that most of the climate politicians can only dream of (7).

Little wonder that OECD economists ascertain that Sweden’s share of the world’s total emissions is minute (less than 0.2 %) (8), and Sweden could therefore equally be a detached “free-rider” in the climate work. For a country that is situated on the Arctic Circle’s latitude, a somewhat warmer climate could also involve some benefits in the form of longer crop production seasons, greater forest growth and possibly more tourism. They also point out that Sweden is a small, open economy that is completely dependent on maintaining the competitiveness of its export industry to safeguard the country’s welfare. In spite of all these factors, Sweden has introduced a number of powerful financial instruments and, in practical politics, has taken the energy and climate issue more seriously than many other countries (9). Particularly impressive are the emissions reductions that have occurred within the housing and waste sectors, but noteworthy streamlining and fuel switches have also occurred within industry.

By emphasising the social sectors and instruments that have facilitated the Swedish emission reductions, the hope is that this essay can offer inspirational reading for all those who are grappling with policy issues 3

linked to the climate. The most important message of all is that it is possible to pursue a progressive energy and climate policy (towards a greater share of renewable energy and a lesser dependency on fossil energy) without losing growth and greater welfare. It shows the development in Sweden over the past forty years (10).

From an academic point of view, it is of course problematic that the environmental economists have no “control Sweden” (stuck in its dependency on oil, or with one of the world’s highest carbon dioxide taxes, having not introduced instruments such as the electricity certificate or a ban on the deposition of waste or extended environmentally-friendly district heating) for comparison, but there surely cannot be many people who, from the climate and energy policy point of view, believe that such a passive Sweden would have been a richer and better country to live in.

However, every country’s conditions for pursuing an energy and climate policy are unique and an analysis of the development in Sweden shows that the progress – as is so often the case – depends on luck and dexterity. For example, Swedish prospectors found no major oil finds within the country’s borders, but no-one should believe that we did not look, and no-one should think that Sweden would have had the power to resist extracting such a fossil resource had we found it in the sixties or seventies. Some oil prospecting still does take place today, outside Sweden’s largest island in the Baltic Sea, Gotland, which is not in tune with the country’s strict environmental ambitions.

However, where there has been a lack of coal and oil, Sweden has so far had to satisfy itself with pines (and there are many of them), the water rapids and the less-than-popular nuclear power. Resources that – should this become apparent – have served the climate and the Swedish energy supply well.

Figure. 1 The national emissions have been decoupled from the economic development. Sweden’s GDP and CO2 emissions, 1950-2007. (CDIAC, SCB).

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Figure 2. 2007 emissions of CO2 per capita and GDP in EU and OECD countries

Source: OECD in figures - 2010 edition, processed and presented in Energy in Sweden 2010, ET 2010:45.

________________________________________________________________________________________________________________ References: 1. OECD in figures - 2009 edition.

2. Eklund, K. 2009. Our climate economics, policy, energy. Norstedts akademiska förlag. Emissions have fallen by 40 % since 1970.

2b Lindmark, M & Andersson, L F. Unintentional Climate Policy: Swedish experiences of carbon dioxide emissions and economic growth, 1950200 3. OECD in figures - 2009 edition 4. Christian Azar, John Holmberg*, Sten Karlsson with contributions from Tobias Persson, Robert Ayres, Thomas Sterner and Jonas Nässén. 2002. Decoupling - past trends and prospects for the future.

5. The climate change performance index, results 2012, Germanwatch and CAN. 6. Swedish petroleum and biofuel institute, SPBI, statistics, website.

7. Energy in Sweden 2011, table to Figure 34.

7. Economy Facts. Website.

9. Jamet, S. (2011), “Enhancing the Cost-Effectiveness of Climate Change Mitigation Policies in Sweden”, OECD Economics Department Working Papers, No. 841, OECD Publishing.

10. CDIAC and SCB, in “The climate policy’s challenges during the mandate period”, Eva Samakovlis, 3. Special studies no. 25, March 2011.

Figure 1. CDIAC and SCB, in “The climate policy’s challenges during the mandate period”, Eva Samakovlis, 3. Special studies no. 25, March 2011.

Figure 2. ET 2010:45, Energy in Sweden 2010. The Swedish Energy Agency.

Right place on the Earth…

There are exceptionally good fundamental conditions for turning Sweden into a fossil-independent society. Sweden is a sparsely-populated country with plenty of forest raw materials and flowing water. Its northern location gives a temperate climate, yet it is still warm enough for forest and crops to grow. There is enough precipitation for agriculture and the returning cold winter limits the number of parasites and other pests. The conditions are thus favourable for the production of bioenergy from both agricultural and forest land. The low population density is also of crucial significance for the country’s climate accounts.

Had Sweden had the same population density as Germany, for example (ten times higher a population density), Sweden’s most important renewable energy types – biofuel and hydroelectric power – could not have constituted such a large share of the energy supply (11). It is therefore to our advantage that there are 5

so few of us and that “the whole of the Swedish culture is embedded in its huge forests like a settlement”.

(12). The share of renewable energy is a full 47 per cent of the end energy usage in Sweden, which is the highest within the EU. However, the fact that Sweden’s is well situated is due not simply to the substantial renewable energy assets, but also to an active energy policy having realised these assets (13). ________________________________________________________________________________________________________________ 11. Verbal comment, Professor Magnus Lindmark, the Institute for Economic History, University of Umeå.

12. Böök, F. 1924. Quoted in the article called “The nature-loving people of the north” in Biodiverse no. 4, 2002 by Professor Christer Nordlund at the Institute for Conceptual and Social Studies, University of Umeå.

13. Energy in Sweden 2011. The Swedish Energy Agency.

A nature-loving people…

I came ashore one night in May under the cool light of the moon where the look of grass and flowers was grey but their scent was green1 Quote from the poem called “Nattboksblad” [night-time book] by Tomas Tranströmer

Pursuing a powerful climate and energy policy is of course easier in a country whose population considers itself to consist largely of nature lovers. Sweden still has plenty of relatively untouched nature, and in the north, Europe’s biggest consecutive wilderness area is spreading. This has characterised the Swedish people’s relationship with nature, which is described by many as almost sacred (14). In the secular society, the Swede seeks captivation and time for reflection in the mountains, in the forest, by the sea or in the archipelago, and the right of public access and freedom to roam means that almost all natural surroundings are accessible to visitors. The tourism, outdoor pursuits and environmental organisations that came to life early last century have inspired many generations of walkers, skiers, berry and mushroom pickers, ornithologists and all sorts of nature adventurers. Many of these organisations have become major movements that today have considerably more members than the political parties (15).

Hunting and sport fishing are also popular leisure activities that give many Swedes the impetus to spend time out in the natural surroundings.

Even if the Swedish view of nature is undergoing continuous change and being affected by urbanisation, globalisation and many other processes, there is still a great deal of truth in both their own self-image and the surrounding world’s image of the Swedes as a nature-loving people. As many as nine out of ten Swedes think that spending time in the natural surroundings enables them to relax and regain harmony (16), which is not an obvious thing in all cultures. In the periodic attitude surveys carried out by the EU, the Swedes also end up in top position as regards the prioritisation of various types of environmental issue. In one questionnaire, a full 98 per cent of the Swedes thought that “we have a duty to protect nature, even if it involves limiting human development” (17). The Swedes also attach the maximum importance

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Translator’s note: I am not a translator of poetry, so this just gives an idea of what the Swedish says.

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to the climate change and other environmental issues (18). They take the issue of the climate almost twice as seriously as the average EU citizen, and there seems to be more than just a theoretical interest. The Swede makes more personal efforts to reduce the climate impact than the average within EU-27. Along with the other Nordic EU members (Finland and Denmark), Sweden is also the most positive towards increasing taxation on environmentally-hazardous operations and the Swedes would be happy to see a greater economic incentive in the form of taxes or subventions to encourage environmentally-friendly conduct (19). This commitment to the environment may be due to the fact that the Swedes and the other Nordic EU citizens perceive themselves as well-informed about environmental issues. For example, they feel twice as well-informed as the Lithuanian citizens. Along with the majority of EU citizens, the Swedes also think that insufficient efforts are being made to deal with the climate problem (20).

A clearer political mandate for implementing an ambitious climate policy is probably difficult to come by. ________________________________________________________________________________________________________________ 14. Bråkenhielm, C-R & Fagerström T. 2007. God and Darwin – do they know one another? Verbum, 2007.

15. Details from SNF, WWF, STF and Friluftsfrämjandet [support for outdoor activities], and the political parties’ websites.

16. Uddenberg, N. 1995. The Big Picture. Modern Swedes’ view of man’s places in nature. new Doxa.

17. Eurobarometer 2005.

18. Standard Eurobarometer 75 Spring 2011.

19. Special Eurobarometer 295, Attitudes of European citizens towards the environment, 2008.

20. Special Eurobarometer 295, Attitudes of European citizens towards the environment, 2008.

The environmental policy as a part of the modernisation of society…

“The Swedish national identity has been linked to modernity, linked with the current times, with the feeling of belonging to the avant garde. A Swede has felt a sense of pride in belonging to the elite among the world’s future-orientated nations: technology, design, science, social planning, third world country support, care for the environment, equality, equal opportunities, (…) We have seen ourselves as darlings of the information project”.

(Alf W Johansson, Pictures of Sweden abroad, 2005)

The environmental policy became part of the overall social modernisation project and an important part of the Swedish Social Democratic thinking at an early stage (22). The characteristics that were predominant features of the political culture in Sweden for a long time were: consensus over conflict, science-based rationality and thinking along the lines of modernisation, which contributed in different ways towards the incorporation of the environmental issues into the concept of welfare and into the welfare state politics.

The environmental policy became part of the ongoing structural conversion from old, dirty, inefficient industry to clean, efficient and more profitable industry. Emissions and contaminants turned out badly due to outdated technology, not due to industry as such. The environmental policy became one of the means by which to modernise Sweden rather than a policy area to combat industrialisation or the large-scale use of resources. In the early 1960s, the representatives of industry saw that environmental regulations would come to pass whether they were wanted or not, and therefore chose cooperation over conflict and proposed, among other things, to create a research institute that was co-owned by the State and trade and industry to find solutions to the environmental problems. Industry also accepted environmental legislation that required the party running the business to use the best possible technology as far as it was reasonable

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to do so. In return, industry had a certain influence over how quickly new, more environmentally-friendly technology would be introduced and was thereby able to have some influence over its costs. Even the unions went along with emissions regulations and saw them as a force in the modernisation work. The nature protection issues were more loaded and not characterised by the same degree of understanding, as more refined environmental issues such as environmental toxins, acidification and air quality (23). The climate issue, even if it is an international one, has at least periodically been a part of a national rhetoric to create the “green welfare state” (24). The dominating view today, however, is that the climate issue – as with all other cross-border environmental problems – requires powerful and joint action on the international arena. Swedish environmental policy therefore deals to an ever increasing extent with implementing different EU Directives and other international environmental agreements. Being an active and influential player in the international cooperation forum created to tackle the global problems is the new “modern”. ____________________________________________________________________________________________________ 22. Lönnroth, M 2010, report 6404, the Environmental Protection Agency.

23. Lönnroth, M 2010, report 6404, the Environmental Protection Agency.

24. The Law Council, The Green Welfare State, the social democratic party, 2004.

Pioneers within climate research and active knowledge disseminators…

Few areas of politics are as “scientifically loaded” as the climate policy. Lively and successful research within the areas concerning climate change has very probably possibly enabled the climate issues to position themselves in the political arena. Sweden had several leading scientists within climate research already at the end of the last century. Arvid Högbom – the first geologist who worked with charting the carbon cycle in detail – said in 1895 that humans should, by combusting coal, be able to increase the carbon dioxide content of the atmosphere. One year later, chemist Svante Arrhenius published an article discussing the effect of carbon dioxide on the average temperature of the atmosphere (25). These climate research pioneers had no influence on the energy policy of their time, but one researcher who without doubt did have a major influence on the political development is meteorologist and Professor Bert Bolin, who helped to start the UN’s climate panel, the IPPC, and was chairman thereof for the first ten years, 1988-1998. While Bolin was chairman, the IPPC published knowledge bases that were used to form the both the climate convention and the Kyoto Protocol, which currently constitute the two most important foundations of the international climate policy. On the home front, Bolin demanded political action as early as 1975 and, as an official at the Prime Minister’s office between 1986 and 1992, he had a good opportunity to exercise political influence. Bolin was an absolute key knowledge disseminator between the scientific circles and politics. The climate sceptics have had less of an impact in the Swedish debate compared with the American one, and debates in some other countries have been characterised by greater consensus regarding the seriousness of climate issues (26).

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Sweden and the other Nordic countries are still very active within climate research. Sweden is number four in the world as regards the number of scientific publications per inhabitant (Norway is number 1, Denmark number 5 and Finland number 6) (27), and more and more interdisciplinary links to the climate issue are being examined. In a report recently published by the Environmental Protection Agency, sociologists analyse the climate issue in the light of the latest “happiness research” (28). The report launches a type of third way to approach the climate issue, somewhere between the technology optimist’s confidence, which can sometimes be far too superficial, and those who think that humans must make sacrifices in the form of lifestyle changes. Could people’s wellbeing be a driving force rather than an obstacle for sustainable development? Instead of focusing on the things we need to refrain from, the discussion should be about the way in which a climate-smart life can increase our happiness and wellbeing.

Meteorologist Bert Bolin’s commitment to creating a forum within the UN to tackle the climate challenge was based on the insight into the global nature of the climate issue and close connection to justice issues.

The small nation’s route to influence is not through traditional officialise but through the power of good example and promoters of international agreements. In this way, the handling of climate issues in Sweden fits into a Nordic tradition that is characterised by a high level of confidence in the UN as an arena for international cooperation. The UN’s first environmental conference was held in Stockholm in 1972 and Sweden has since then been actively working with international conferences and conventions concerning the environment. ____________________________________________________________________________________________________ 25. Use and abuse of nature’s resources. A Swedish Environmental History, the Environmental Protection Agency.,2009.

26. Knaggård, Å. 2009. Scientific uncertainty in the political process. A study of Swedish climate policy. The University of Lund.

27. Nordforsk 2009, bibliometric study.

28. SNV report 6458, The Transformation of the Climate and the Good Life, 2011.

The energy policy until 1990 – “development track”, oil replacement, energy management For most of the 1900s, Sweden’s policy was mainly to increase access to electricity (31). Expansion of hydroelectric power and nuclear power would mean that the growing industry would be assured cheap electricity. The focus was on increasing the energy supply to facilitate continued growth and greater welfare in society. A key factor in this process was the “development tracks” that arose between state works and large private enterprises. These long-term, close cooperations between technical engineers within the state and trade and industry were, according to some people, “a specific Swedish virtuoso art” that is often forgotten in the description of “the Swedish model”. Better-known building blocks are the “Saltsjöbad Agreement” (institutionalised consensus between the labour market’s parties) and the “Harpsund Democracy” (consensus-orientated political decision-making). The state-industry development tracks do actually constitute just another example of the consensus that was aspired to with the nation’s best interests at heart, which characterised the community spirit for most of the 1990s (32). The former

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ASEA, now ABB, blossomed with the state as a competent customer and client while helping to build Sweden’s technical systems and infrastructure. ASEA-Atom was equally active in the building of nuclear power, which got going just a few years after the end of the Second World War. Between 1972 and 1985, twelve nuclear reactors were in use, making Sweden the nation with the greatest nuclear power use in the world, with more than one reactor per million inhabitants.

Not until after the oil crises of the 1970s was an energy policy formulated with the intention of attempting to limit energy consumption and not just increase the supply. During the 1970s, oil represented as much as 70 per cent of Sweden’s energy supply, and most of it came from the Middle East. It did of course become extremely obvious when the price of crude oil quadrupled within the space of three months in connection with the 1973 October War in the Middle East (33). The 1979 revolution in Iran meant that the already high price of oil doubled (34). As a reaction to both of these energy crises, a number of political instruments were introduced to reduce the vulnerability and wean people off their dependency on oil.

This oil replacement and energy streamlining policy was very successful and meant that Sweden’s carbon dioxide emissions fell by thirty per cent from the mid 1970s until 1990 (35). The use of heavy fuel oil fell by more than four fifths (86 %) and the use of light fuel oil fell by two thirds (64 %) during the same period (36). This policy was driven by climate argument to a very small extent, even though the climate issue was mentioned in Sweden’s first energy policy bill from 1975 (37). The oil was replaced early on with a whole load of coal, and prospecting for domestic oil also began.

The short-term crisis measures included rationing of vehicle fuels and firing oil during the winter of 1974, plus various electricity and energy-saving campaigns (38). The efforts that aimed at municipalities and industry to make investments that saved energy and reduced the use of oil had more of a permanent effect.

It was a combination of contributions, changes to building standards, advice, energy considerations prior to the erection of new industrial plants, requirements regarding municipal energy planning, energy management campaigns and raising the energy tax that, together with the high price of oil, steered society away from oil dependency (39). Swedish Parliament earmarked many hundreds of millions of SEK as support for the insulation of homes, improvement of heating and ventilation systems, connection of properties to district heating plants and other energy-saving measures. Between 1981 and 1986, there was also an oil replacement fund that gave state support to oil-replacing measures, prototypes and demonstration plants (40).

The development that took place before 1990 is often disregarded because all climate objectives are related to 1990 as the base year. However, the fact is that the streamlining and emissions reductions that then took place were very much greater (the lion’s share of reductions) than those that took place after the start of an active climate policy. An interesting example for Sweden is the pulp and paper industry, which reduced its carbon dioxide emissions by 80 % between 1970 and 1990 while increasing its production by 18 per cent. An important lesson from this transformation process is to coordinate the environmental policy as far as possible with the long-term structural conversions and streamlining with which all industries always work (41).

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________________________________________________________________________________________________________________ 31. The energy policy and the industrial development, IVA M-233, 1983.

32. Fridlund, M. The common development. The state, the big enterprise and cooperation concerning the Swedish electrical power technology.

Symposion, 1999.

33. Vedung E. 1982. Energy policy evaluations, 1973-1981.

34. Use and abuse of nature’s resources. A Swedish environmental history, the Environmental Protection Agency, 2009.

35. Eklund, K. 2009. Our climate economy, policy, energy. Norstedts akademiska förlag.

36. SPBI statistics 37. Bill 1975:30. The government’s bill on energy management, etc.

38. Vedung E, 1982. Energy policy evaluations, 1973-1981.

39. Do management instruments control energy management? Seventeen building researchers on incentives and obstacles in the housing sector, the Swedish National Council for Building Research, 1985.

40. Do management instruments control energy management? Seventeen building researchers on incentives and obstacles in the housing sector.

The Swedish National Council for Building Research, 1985 and Vedung E, 1982. Energy policy evaluations, 1973-1981.

41. Lindmark, M, Bergquist, A-C & Andersson L F. Energy transition, carbon dioxide reduction and output growth in the Swedish pulp and paper industry: 1973–2006, 2011. Energy Policy.

The climate policy between 1990 and 2011 Over the past twenty years, greenhouse gas emissions in Sweden have fallen by nine per cent (6.5 million tonnes) while the GDP has grown by around 50 per cent. The greatest reduction has taken place within the housing and premises sector, but the waste sector has also heavily reduced its climate impact.

Without the management instruments that are part of the Swedish climate strategy, greenhouse gas emissions would have been considerably higher. According to Sweden’s fifth national report on climate changes that are reported within the UN’s climate convention, emissions would have been 35 million tonnes higher (95 million tonnes instead of 65 million tonnes) by 2010 had all the climate policy instruments that have been introduced since 1990 not become valid. Emissions from the electricity and district heating sector could have been as much as 70 per cent higher had the management instruments of 1990 not been developed and sharpened (42).

However, it is difficult to evaluate the effect of the climate policy management instruments since there are so many of them and they often interact. It can also be complicated to separate the effects of the instruments from the effect of other changes in the outside world (43). The above information should therefore be interpreted only as a very rough estimate of the overall of the effect policy.

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Housing and premises Figure 3.1. Economic effect of instruments on heating fuels in the housing sector

Figure 3.2. Cost estimation (2005-2007) for different heating alternatives in single-family homes

Figures 3.1 and 3.2 (Fifth national report, page 43) show the economic effect of instruments in the housing sector. Without the energy and carbon dioxide taxes, heating using oil would be a competitive alternative for heating homes.

Emission reductions within the housing sector are one of the major successes for Swedish climate policy.

Greenhouse gas emissions from heating homes and premises have fallen from 9.2 million tonnes to 2.4 million tonnes per year between 1990 and 2010. In 2010, the total use of oil products in the housing and

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service sector amounted to 14 TWh, a reduction of 65 per cent since 1990 (44). The forecast indicates further reductions, which means that the use of fossil fuels for heating in this sector may largely be phased out by 2020 (45).

As shown in previous sections, a number of political instruments had an effect on greenhouse gas emissions within the housing sector even before 1990. In some analyses, the phasing out of fossil fuels would have continued in any case due to high oil prices and steering from a previous policy. However, these models do not take into account high threshold effects as regards the willingness of private persons to make comprehensive investments to improve the energy standard in their homes. With the tightening measures that were implemented after 1990, however, the profitability for fossil-free heating increased substantially, which the Department of the Environment believes has had an effect, primarily on private persons who require a high level of profitability to make changes to the heating systems in their homes (46). The carbon dioxide tax was increased during this period from 27 € to 114 € per tonne per year (47).

Without the extra cost that both the energy and carbon dioxide taxes involved, heating using oil would still have been a competitive alternative for residential and small commercial customers (see Fig. X).

Technology procurements and market introduction efforts from the public sector are also thought to have had a significant effect on the consumption of energy within the housing sector (48).

District heating – the housing sector’s flexible climate saviours

Figure 4. District heating energy input, 1970-2010, in TWh

Source: Swedish Energy Agency and SCB, presented in Energy in Sweden 2011 (Energiläget 2011), p. 72.

Note: Peat is included with biofuels, although it is typically considered renewable. It should be noted that developments in the last two years are primarily due to unusually cold winters. This is particularly true for 2012.

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The expansion of the district heating network and the conversion of combined power and heating plants from fossil fuels to bioenergy and industrial waste heat explain a large part of the Swedish emission reductions since 1990. Over the past twenty years, district heating has contributed a greenhouse gas emissions reduction of 11 million tonnes, corresponding to a reduction in the total Swedish emissions by fifth (sic) (49). Since heating within the housing and service sector corresponds to a full 40 per cent of the total energy consumption in Sweden, it is of course important for this heating to be climate-smart (50).

By using wood fuel and other bioenergy, waste heat from industry and waste rather than fossil fuels, the district heating industry and its users – albeit on the quiet – have become one of Sweden’s most important contributions to the climate work.

In Sweden, almost all multiple family buildings (91 % of surface area and hot water) are heated using district heating. If all types of housing are included, district heating will represent approximately half of all heating (51). This is an incredibly high share compared with the rest of Europe where the average is around one tenth (52). Calculations show that the expansion of district heating on the Continent could increase by 1900 TWh, corresponding to 35 % of the heating need (53). Making better use of surplus heating from electricity production and the waste heat from industrial operations, Europe would be able to reduce its greenhouse gas emissions in the same way as Sweden. More than half of the electricity in the EU is produced in condensing power plants where 65 per cent of the fuel’s energy content disappears as waste heat that has no purpose. Were this waste heat to be used, climate emissions would be radically reduced. (54) Public drive formed the basis for sustainable heating The first district heating plant in Sweden was built in 1948, but it was not until the 1950s and 1960s that the expansion got underway. It was primarily the municipal electricity board that saw to the establishment of the combined power and heating plants and the district heating networks. The state supported the expansion through beneficial equity loans, known as district heating loans, which the municipalities were able to take out in accordance with a special licence from Riksbanken. State contributions have also been made to expand the district heating networks and connect new users (55). Today, 270 of Sweden’s 290 municipalities use district heating (56).

The industry often refers to it as a “Swedish model” for district heating expansion that was characterised by the overall view of the chain from need through to usage, distribution, production and the various energy sources. In Sweden, it has been possible to have control over the whole chain because the expansion of the district heating has principally taken place under municipal auspices. The municipalities have taken responsibility for production and supply to the properties (57). The district heating system, like the majority of infrastructure investments, requires major investments that can take a long time to see a return. It is often easier for public players to act with the necessary long-term thinking. In countries where production, distribution and consumption are divided among several players, the agreement terms become much more complicated and the overall financing risk tends to be greater, along with the interest 14

expenses. Competitive tendering and short agreement periods make the actual expansion phase more difficult according to many assessors (58). As well as the comprehensive approach, the industry emphasises demand management and environmentally-efficient systems as being characteristic of Swedish district heating.

Since the electricity market reform in Sweden in 1996, the ownership has been moved from municipal energy companies to energy groups. There are now municipal, private and state district heating companies. The reform means that district heating will compete on market terms and the price must no longer be set at actual cost price. As regards the district heating networks, they should be seen as natural monopolies and the owner currently have the right to refuse suppliers access to the network. However, a report (59) has proposed that the district heating networks be opened to more players, which would strengthen the position of the customers through the possibility of lower prices on a more efficient market.

It is hoped that this will increase the supply of waste heat from industry, which would be good from the climate point of view.

One of the greatest benefits of district heating is that it is a flexible system. If there is only one expanded district heating network, it is possible to use different political and financial instruments to influence the type of energy that is fed into the system. In Sweden, the fossil fuels initially dominated the heat production and the district heating expansion was pursued primarily for economic reasons. However, as time passed, the knowledge of the negative impact of coal and oil firing on the air quality due to the emission of hazardous particles increased. District heating was then able to contribute to an improvement in the local air quality because the big oil-fired boilers in the district heating plants were able to have more advanced flue gas cleaning than boilers in individual properties.

Between 1970 and 1988, the use of oil fell from 95 to around 50 per cent of the energy fed into the district heating system, to then have fallen today to a modest 7 per cent.

The use of biofuel has more than quintupled since 1990, and now constitutes around half of the energy that is fed into the district heating sector. The remains of felling, low quality timber, solid by-products from the forest industry but also refined fuels such as briquettes and pellets are used more and more.

Almost one fifth of district heating comes from waste and waste gas. Six per cent is waste heat from industry (60).

Several factors lie behind this success. The oil price shocks of the 1970s did of course play a role, but cannot be the sole explanation for the comprehensive and permanent fuel change. A combination of political carrots and whips have helped to phase out the fossil fuels. An important political decision was to free biofuels from energy tax as early as 1984, which favoured the use of biofuels in the district heating plants. The carbon dioxide tax was then introduced in 1991, which served to further strengthen the competitiveness of bioenergy. In 2003, the electricity certificate system was introduced, which meant that all electrical companies had to sell a certain share of renewable electricity (quota obligation). Producers of renewable electricity are given an electricity certificate for each MWh electricity that they can then sell to the electricity companies who do not fulfil their quota obligation. The system was strongly in favour of a 15

transformation to renewable energy types in the district heating companies’ combined power and heating plants, which are suppliers of electricity and heating. However, the electricity certificate has also favoured the expansion of wind power.

New rules on waste handling in the 2000s increased the use of waste as fuel in the district heating plants.

The year 2000 saw the introduction of a tax on deposited waste and, as of 2002 and 2005 respectively, there were bans on the deposition of unsorted combustible waste and organic waste. The deposition bans led to a virtual tripling of the quantity of waste used within the district heating sector (61).

Stricter construction rules with stricter requirements for heat insulation, among other things, have also helped to continuously reduce the district heating pollution from approximately 150 kWh per m2 living area in 1970 to 100 kWh per m2 in the 1980s (62). However, taxes that steer people towards other environmental targets have also helped to reduce the use of oil. The sulphur tax, which was introduced to reduce acidification, is one example that has made oil firing less attractive.

Brief fact: A district heating plant is a plant for the production and distribution of hot water for heating homes and other premises (63). ________________________________________________________________________________________________________________ 42. Sweden’s fifth national report on climate changes. DS 2009:63. Department of the Environment. The Government Offices of Sweden.

43. ER 2011:09. The Swedish 2020 climate objective – contribution from international efforts, the Swedish Energy Agency.

44. Emissions statistics from the Environmental Protection Agency’s website.

45. Sweden’s fifth national report on climate changes. DS 2009:63. Department of the Environment, the Government Offices of Sweden.

46. Sweden’s fifth national report on climate changes. DS 2009:63. Department of the Environment, the Government Offices of Sweden.

47. Hammar, H. & Åkerfeldt S. CO2 taxation in Sweden. 20 years of experience and looking ahead. 2011(?).

48. SOU 2008:110. The road to a more energy-efficient Sweden.

49. District heating and the environment. Swedish District Heating.

50. Energy in Sweden 2011, the Swedish Energy Agency.

51. Energy in Sweden 2011, the Swedish Energy Agency.

52. 60 years of Swedish district heating. Swedish District Heating.

53. District heating in Europe. Report 2009:3, ref. Professor Sven Werner.

54. 60 years of Swedish district heating.

55. District heating in competition. SOU 2011:44.

56. The Competition Authority’s website.

57. Export of district heating competence report 2009:25. Swedish District Heating, 2009 58. District heating in Europe. Obstacles for Swedish export to overcome. Swedish District Heating, 2009.

59. District heating in competition. SOU 2011:44.

60. Statistics from Swedish District Heating’s website and Energy in Sweden 2010 and 2011.

61. Vattenfall’s website. Energy from waste.

62. Use and abuse of nature’s resources. A Swedish environmental history, the Environmental Protection Agency, 2009.

63. Energy perspectives 1970-1995, the State Energy Board, 1984:7.

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Industry – more goods, fewer emissions Figure 5. The industry’s oil usage, 1970-2010, 2005’s prices, expressed in kWh per SEK added

value.

Source: Swedish Energy Agency and SCB, presented in Energy in Sweden 2011 (Energiläget 2011), p. 57.

Greenhouse gas emissions from Swedish industry increased steadily until the start of the 1970s when they were at their greatest. In the first year of the 1970s, industry emitted twice as much carbon dioxide as in 1950. However, already at the start of the 1990s, emissions had fallen sufficiently to be lower than they were in 1950, and emissions then remained at this “fifties level” throughout the 2000s. The environmental improvement took place while the added value the production – more than quintupled (1). Industry thus gets more goods out at a lower environmental impact. All in all, industry has halved its emissions since the 1970s, which means a reduction from approx. 30 to 16 million tonnes carbon dioxide equivalents (2). Another way of measuring the rationalisations is that industry’s total energy usage has remained unchanged since the 1970s in spite of its periodic rapid growth during the 1990s (3).

The substantial environmental improvements took place in the 1970s and 1980s as a direct consequence of the oil crises. Changing from oil to climate-friendly electricity from nuclear power and hydroelectric power and greater use of biofuels increased and energy streamlining meant that the production industry contributed the most of all sectors to the reduction of Sweden’s carbon dioxide intensity* during 1970 to 1990 (4). Since 1970, the use of oil has fallen 17

from 48 to 10 per cent of industry’s total energy use. The share of biofuels and peat has simultaneously increased from 21 to 36 per cent (5). The use of electricity increased by a full 59 per cent during the same period (6). Since electricity is almost completely fossil-free, industry’s electricity dependency plays less of a role from a climate perspective, although more efficient use of electricity in Sweden would be beneficial to the climate if the Swedish electricity surplus could be sold and replace gas and coal power-generated electricity in Europe.

The world’s most efficient pulp and paper industry The environmental record as regards the reduction in greenhouse gas emission within Swedish industry is held by the energy-intensive paper and pulp industry. The sector represents approximately half of the industry’s energy use and is therefore particularly significant. As mentioned earlier, this sector reduced its carbon dioxide emissions by 80 per cent between 1973 and 1990 while production increased by 18 per cent (7). According to the OECD countries’ cooperation body for energy issues (IEA), the Swedish pulp and paper factories are the most carbon dioxide-efficient in the world (8).

Emission reductions are due principally to the phasing out of oil, but also to a conscious effort with energy streamlining. 60 per cent of the development can be explained by the oil price shocks of the 1970s, while subventions and energy taxes explain 40 per cent of the reduction in the industry’s oil consumption. The price of oil was a driving force, but the policy facilitated and encouraged a conversion. The subventions included other state support to develop new oil-saving technology and to test it in demonstration plants. The cellulose and paper industry benefitted in particular and, up until 1977, received the most state support for research and development of all Swedish industries. Beneficial loans for energy and oil-saving technologies and processes were also common.

The task of replacing oil with electricity and biofuel was made easier by the fact that the pulp and paper industry was in need of modernisation to fulfil other environmental requirements.

Substantial emissions of organic fibre residues had given rise to an oxygen shortfall in lakes and coastal waters. By utilising these bio-based residual products to a greater extent for power and heat production, it was possible to reduce both the oil dependency and the oxygen-consuming emissions. The measures that were implemented to reduce the acidifying sulphur dioxide emissions also helped to reduce the oil dependency. Greater use of electricity by changing over to more mechanical paper pulp production also reduced the carbon dioxide emissions.

The structural conversion that had already begun in the 1960s towards larger plants with integrated paper and pulp production was one further factor that streamlined the consumption of 18

energy and increased the productivity thereof. Within the pulp and paper industry, the development of new energy, environmental and production-increasing technology were integrated processes that contributed to the success. The fact that the companies within the forestry industry invested in common research and development projects in order to make themselves competitive with regard to energy-saving and environmentally-friendly technology was also significant.

An important lesson from the whole of this process is to coordinate as far as possible the environmental policy with the long-term structural conversions and streamlining with which industries are already working. If environmental control regulations and economic incentives are coordinated with the production-increasing development work, the results for both the environment and the companies’ finances will improve (9).

But the development also continued in the 2000s and, since 2010 Sweden, has had the world’s first completely fossil-free (during normal operation) pulp mill (10). The pulp and paper industry is moving more and more towards becoming energy suppliers alongside its traditional production. With a technology change towards more gasification of black liquor (a residual product from pulp production), the forestry industry would be able to further increase the mills’ electricity production and also provide environmentally-friendly fuels for cars (11).

Of Sweden’s 60 000 industrial companies, approximately one per cent – or 600 thereof – are counted as being energy-intensive, but these companies represent three quarters of industrial energy use. A few hundred basic industry companies in mining, paper, iron, steel and the chemicals industry thus consume most of the industrial “energy cake”. In this discussion, it is important to separate out the small group of energy guzzlers and the large number of companies within the “smaller-scale” production industry since the conditions are incredibly different for these groups. Among the 59 000 smaller-scale production industry companies, the energy expenses constitute a small share of the total production costs and the energy issue has thereby been given low priority. It is entirely possible for many of these companies to become fifty per cent more efficient without needing to wait for new innovations and leaps in technology. For the energy guzzlers, energy has on the other hand always been a major expense and they have worked consciously with streamlining for a long time. It is unrealistic for these companies to halve their energy consumption using existing technology. Between ten and twenty per cent is a more common estimate for the next few decades.

The researchers usually divide the companies] energy consumption into support and production processes. The support processes include ventilation, lighting, heating and hot water. Production 19

processes are – as they say – linked to the actual production, melting iron ore in a blast furnace or heat up milk at a dairy. While the support processes are easy to streamline, it is far more difficult to reduce the energy need of the blast furnace or the quantity of energy used to melt aluminium (12).

Some national instruments Instruments that influenced emissions were already in place for the industry sector before 1990, not least the energy tax, although the total tax pressure exerted by carbon dioxide and energy taxes on industry is now lower than it was at the start of the 1990s. The intention is instead for the EU’s emissions rights trading system to lead to a greater, long-term instrumental effect in the industry sector (see facts box). However, for the industries that are not covered by the EU’s emissions trade, the carbon dioxide and energy taxes were raised in 2011 and another increase is planned in 2015 (13).

Subsequently-introduced instruments are not deemed to have involved any powerful control, but some national instruments are still worthy of a short presentation since they contribute in different ways to a more climate-smart industry.

PFE, programme for energy streamlining A programme energy streamlining, PFE, has existed for energy-intensive industry since 2005.

The companies undertake to chart energy, introduce and certify an energy management system and to systematically reduce their energy use. In return, they receive an electricity tax rebate.

Over the first five years, the programme has led to a reduction in electricity use of 1.45 terawatt hours at an investment cost of 0.7 billion (14). Investing in a corresponding quantity of new electricity from wind turbines would cost many times more than that. From a national economic point of view, it appears to be a profitable programme even if it is difficult to know what would have done in any case due to rising energy prices. Since PFE was introduced, the industry’s electricity prices have doubled (15).

One of the instrument’s primary merits is probably that it emphasises the matter of energy streamlining – negawatt – to the companies’ managements. The tax debates attract bosses into energy talks (16). The requirement for the companies to introduce and certify a energy management system has been of particular importance. The energy management system is a type of management instrument which means that the energy issue is incorporated into the ordinary operations. To begin with, many company managements viewed the energy management systems as a necessary evil that had to be introduced or else the tax reduction would not take place but, 20

since most instances of energy charting demonstrated major energy saving potentials, the focus of company managements changed from the rather moderate sums to which the tax reduction would lead to the cost savings that could be achieved through various energy-smart solutions.

The communication between the companies’ engineers and managements has also been strengthened, which was one of the aims of the programme (to counteract information asymmetries at company level) (17). Thus far, just one tenth of the energy-intensive companies have affiliated themselves to PFE, but these companies represent half of industry’s electricity consumption (18).

Industry has had a great opportunity to influence the formulation of the programme and the participating companies think that the instrument combines competitiveness with environmental improvements for the industrial plants. The programme is smooth to administer because all documents for different authorities can be handled through the Web. However, industry is critical to the double control of the industry’s energy management, which takes place through both the Environmental Code and PFE. Desires for a refinement of both of the instruments to avoid unnecessary overlaps have been expressed (20).

Brief fact: In line with the EU’s energy tax directive, an energy tax was introduced in 2004 (0.5 öre/kWh) on electricity in the production industry. To compensate the energy-intensive companies, an energy streamlining programme (PFE) was introduced in Sweden. The aim of PFE is for the companies within the energy-intensive industry to streamline their electricity use and thereby receive a tax rebate on electricity. For a company to be counted as energy-intensive, the company’s energy costs must amount to at least 3 per cent of the production value and/or the company’s taxes for energy, carbon dioxide and sulphur emissions must amount to at least 0.5 per cent of the added value (21).

Energy charting checklist For small and medium-sized companies where there is great potential for streamlining in the support processes (heating, lighting, ventilation, cooling), help with energy analyses is a sensible instrument. Small companies employ no particular energy controller and they rarely have the competence or resources to chart energy use, which is the first step to dealing with energy misuse. State assistance is available in response to2 an energy charting checklist to support the

Translator’s note: the text is not written 100 % clearly here, so I’ve added a few words to clarify what appears to have been intended.

2

21

companies in this work, which covers half of the cost of the work that an energy analysis involves. The assistance is a maximum of SEK 30 000 per instance of charting. The intention is for the energy charting to constitute a decision-making basis and stimulate companies into making energy efficiencies in their operations. Large companies can also apply for this assistance but they may not simultaneously be part of the PFE energy streamlining programme. The checklists were introduced in 2010 and can be applied for up to and including 2014 (22).

Energy management requirements in legislation According to Swedish environmental legislation, those running businesses must economise with energy and use renewable energy sources in the first instance. This means that entrepreneurs, including in industry, must procure knowledge on energy consumption, identify possible measures and continuously implement reasonable measures to reduce the climate impact. The best possible technology must be used when streamlining energy. According to one report, the boundaries between the Environmental Codes’ legislation and the PFE energy streamlining programme need to be clarified. The Environmental Code supports the supervisory authority in setting more in-depth requirements for the industrial companies than are possible within the voluntary PFE energy streamlining programme (23).

Technology procurement Since 1990, Sweden’s energy authority has participated and part-financed a number of technology procurements to stimulate the development and market introduction of new and more energy-efficient technology. By creating competent client groups who set up adequately strict requirement specifications, new and more climate-smart products can be put to use in the community earlier. The competing companies produce prototypes and, following a tendering procedure, the client group procures the technology that best fulfils the set requirements. The Swedish Energy Agency may in some cases offer investment support to assist the purchasers. At the start of the 1990s, for example, such a technology procurement led to combined fridgefreezers being able to halve their energy losses. The technology spread further and reduced the consumption of energy by more white goods. Ongoing technology procurement concerns environmental cars. Alongside Vattenfall AB, the City of Stockholm has given approximately six million Euros to implement Sweden’s greatest technology procurement of electric cars (24).

The EU’s emissions rights trading system – effects on Swedish industry Since 2005, the EU’s emissions rights trading system has constituted the principal industrial 22

climate control. One third of Sweden’s total greenhouse gas emissions is included in the emissions trade and the majority (80 per cent) come from industrial plants. The remaining share comes from electricity and district heating plants.

Some industries reduced their emissions during the first trading period, but it is difficult to estimate how much the trading system contributed to the development. The companies in the trading sector were affected by a number of other factors that also affect carbon dioxide emissions: economic status, oil and fuel prices and specific national instruments (25). The total emissions from Swedish industry within the trading sector have on the contrary increased since 2008. An important explanation for this is that the majority of the industrial companies feel that they have sufficient emissions rights to be able to continue running their operations without making any changes (26). During the third trading period, the EU Commission will sharpen the trading system by setting a common ceiling for carbon dioxide emissions, which will gradually be lowered. The aim is for emissions from the EU trading sector to reduce its emissions (sic) by 21 per cent by the year 2020 since the base year 2005 (27). This change is necessary in order for the emissions trading to have any environmental effect. _______________________________________________________________________________________________________________ 1. Lindmark, M. & Andersson L F. Deflection between carbon dioxide emissions and economic growth in Sweden 1950 – 2005. Report, 2009.

2. Lindmark, M. Professor in economic history at the University of Umeå, not yet published graph by email and verbal confirmation.

3. Energy in Sweden 2011. The Swedish Energy Agency.

4. Lindmark, M. Andersson, L-F (2010). Unintentional Climate Policy: Swedish experiences of carbon dioxide emissions and economic growth 1950-2005. CERE Working Papers, CERE - the Centre for Environmental and Resource Economics No. 2010:14, Dec. 2010 5. Energy in Sweden 2011. The Swedish Energy Agency.

6. Ekonomifakta [economic facts], website.

7. Lindmark, M., Bergquist, A-C & Andersson L-F. Energy transition, carbon dioxide reduction and output growth in the Swedish pulp and paper industry: 1973–2006. Energy Policy 39 (2011) 5449-5456.

8. Tracking industrial energy efficiency and CO2 emissions. Fig.7.7, IEA. 9. Lindmark, M., Bergquist, A-C & Andersson L-F. Energy transition, carbon dioxide reduction and output growth in the Swedish pulp and paper industry: 1973–2006. Energy Policy 39 (2011) 5449-5456.

10. Hallands nyheter [Halland News], 4 May 2010. “Värö mill becomes completely fossil-free”. Västnytt SVT Play. “First fossil-free blast furnace inaugurated”.

11. Mistra’s website.

12. Hundred years of stubbornness. The Swedish Environmental Protection Agency’s anniversary book, 2009. “Halve our energy, complete our welfare”.

13. Effects and interaction of industry’s energy streamlining instruments. Report 6460, the Environmental Protection Agency, 2011.

14. The energy streamlining programme. Experiences and results after five years of PFE. (ET 2011:01). The Swedish Energy Agency.

15. Ekonomifakta. Website. Continuous commercial energy prices.

16 Hundred years of stubbornness. The Swedish Environmental Protection Agency’s anniversary book, 2009. “Halve our energy, complete our welfare”.

17. Effects and interaction of industry’s energy streamlining instruments. Report 6460, the Environmental Protection Agency, 2011.

18. The energy streamlining programme. Experiences and results after five years of PFE. (ET 2011:01). The Swedish Energy Agency.

19. Effects and interaction of industry’s energy streamlining instruments. Report 6460, the Environmental Protection Agency, 2011.

20. Effects and interaction of industry’s energy streamlining instruments. Report 6460, the Environmental Protection Agency, 2011.

21. The Swedish Energy Agency’s website.

23

22. Effects and interaction of industry’s energy streamlining instruments. Report 6460, the Environmental Protection Agency, 2011.

23. Sweden’s fifth report on climate changes. DS 2009:63. Department of the Environment.

24. The Swedish Energy Agency’s website and report. The Swedish Energy Agency’s technology procurements, ET 2006:08.

25. Sweden’s fifth national report on climate changes. DS 2009:63. Department of the Environment. The Government Offices of Sweden.

26. Effects and interaction of industry’s energy streamlining instruments. Report 6460, the Environmental Protection Agency, 2011.

27. The Environmental Protection Agency’s website.

Waste The reduction of emissions from the Swedish waste sector since 1990 are noteworthy, particularly against the background that the quantity of waste during the same period has strongly increased (household waste increased by 35 per cent between 1994 and 2007) (64).

Between 1990 and 2010, emissions have more than halved (from 3.4 million tonnes to 1.8 million tonnes carbon dioxide equivalents). This is primarily because methane emissions from refuse tips have fallen strongly (65).

The positive change can be explained by a number of political decisions. In 1991, for example, requirements were introduced into all municipalities stating that they must have a waste plan that covered all waste in the municipality. In said plan, the municipality must describe the measures needed for the refuse to be handled in an environmentally-friendly manner. Source sorting and recycling systems were then expanded on the basis of these plans. However, the most controlling effect was probably that of the bans on depositing combustible and organic waste, which were introduced in 2002 and 2005 respectively.

The bans took a relatively short time to lead to more resource-efficient handling of the waste. more methane gas being collected and used as biogas (which can be used as fuel in combined power and heating plants to produce electricity and heating or, if further cleaned, can also be used as fuel in vehicles). The share of waste combustion with energy recovery has also increased dramatically. Waste combustion certainly leads to some greenhouse gas emissions if the waste contains plastic or other material of fossil origin, but emissions have still fallen overall. Assuming that waste-based district heating will supersede district heating that would otherwise have been produced from oil or coal, the outcome will definitely be positive.

One further instrument that has had a major impact is the tax on the waste that is deposited in any cases.

The deposition tax was introduced in the year 2000 and all material that comes into a waste plant is taxed.

The waste that is recovered and shipped out of the plant lead to a tax rebate. The tax currently amounts to SEK 435 per tonne and has contributed to greater recovery and less deposition. State investment programmes have also supported the municipalities’ development and expansion of many biogas plants (66).

24

Figure 6. Emissions from the waste sector 1990-2010

Source: Sweden’s National Invesntory Report 2012, submitted under the United Nations Framework Convention on Climate Change, presented on the Environmental Protection Agency’s website.

Greenhouse gas emissions from the waste sector include methane from waste deposits, carbon dioxide emissions from waste combustion (that is not used for energy production) and nitrous oxide from the handling of wastewater.

64. The Environmental Protection Agency’s website. Results - waste.

65. The Environmental Protection Agency’s website. Current emissions statistics.

66. The Environmental Protection Agency’s website. Instruments for sustainable waste handling.

The carbon dioxide tax The carbon dioxide tax is by far the most powerful tool that Sweden has introduced to reduce the climate impact (66) (67) (68). The tax was introduced in 1991 in connection with a greater tax reform (69), and Sweden was one of the first countries to introduce this financial instrument specifically aimed to reduce greenhouse gas emissions. The carbon dioxide tax was thereby put to use before the UN’s climate convention was signed at the Rio conference on the environment

and development in 1992.

The tax was initially a modest 27 € per tonne, but it has been strongly increased with the passage to time and is currently 114 € per tonne (70), which is considerably higher than the level that economist Nicholas Stern (71) thinks is needed on a global basis to bring about an adequate pressure for transformation to a climate-smart world.

25

The total incomes from the energy and carbon dioxide taxes in Sweden are significant and amounted to approx. 73 billion SEK in 2010, corresponding to almost one tenth (9.3 %) of the State’s income (72). The cost of administering the tax has been relatively low, around 0.1 per cent of the total income (73).

In principle, the Swedish carbon dioxide tax has been aimed at making efficiencies and reducing the private consumption of fossil fuels that are used for heating and as vehicle fuel. A significantly lower industry tax level has been justified as a way of minimising the risk of carbon dioxide leakage – for production to move to countries with lower environmental requirements. It is primarily the energy-intensive industry that has been given tax reductions, but also industries such as horticulture, the agriculture sector and water mills. Sectors that are covered by the EU’s emissions rights trading system do not pay carbon dioxide tax at all (check? + reference).

The gradual increase of the carbon dioxide tax has been followed by tax cuts at work, which means that a green tax exchange has taken place. Since 1994, the carbon dioxide tax has also been adjusted in line with the consumer price index to retain its steering effect.

The tax level has been calculated on the basis of the fossil fuels’ carbon content, which leads to simple mathematics in accordance with the recommendations under the UN’s climate convention (for a more detailed description, please see ref. 70).

In 2011, tax was increased for the sectors that had thus far had a reduced tax level in order to make the carbon dioxide tax more uniform between different sectors. As of 2015 , there will be a further increase and the sectors that are entitled to a tax reduction must pay 60 per cent of the general carbon dioxide tax. The government’s opinion is that the sectors that are not included in the

EU’s emissions trading have relatively low energy expenditures compared with other

production expenses and that it is therefore possible to reduce the tax relief without there being problems with carbon dioxide leakage. The repayment of carbon dioxide tax for diesel in agricultural and forestry machines will also be lowered in several stages. All of these measures are taking place to create as general and efficient a carbon dioxide tax as possible (74). This is in line with the OECD’s evaluation of the Swedish climate policy, which is that the carbon dioxide tax should be evened out between different sectors to make it more cost-effective – a perception that is also shared by many Swedish economists (75) (76).

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Figure 7. The development of the carbon dioxide tax between 1991 and 2011

(Source: The Swedish National Audit Office’s processing of data from the National Tax Agency, RiR 2012:1 ”Klimatrelaterade skatter – vem betalar”, p. 43)

Since the combustion of fossil fuels is also harmful to human health through the emission of particles, sulphur oxides and nitrous oxides, it is important for the socioeconomic analyses to also take this into account. If the analyses do not cover the positive health effects from reduced fossil combustion, there is a risk of the socioeconomic carbon dioxide tax costs being exceeded (78) (79).

The most evident effect of the carbon dioxide tax in Sweden has been to help to phase out the fossil fuels for the heating of homes and other premises. However, according to the Swedish national report to the UN, it has also had a certain reducing effect on emissions from the transport sector (80).

Estimating the cost-effectiveness of the carbon dioxide tax is linked with a number of difficulties, however. The economists find it difficult to differentiate between which emission reductions are due to an increase in the carbon dioxide tax and which are due to other simultaneous socioeconomic changes. For example, the researchers have problems modelling the technical development and assessing which technical improvements have taken place thanks to the carbon dioxide tax. Additional challenges are evaluating whether the carbon dioxide tax is optimally formulated to take into account other political objectives such as retaining the competitiveness of companies or different regional policy objectives. In spite of all these reservations, most 27

economists agree that the carbon dioxide tax is among the most cost-effective instruments that the politicians have at their disposal.

Sweden’s third report to the Climate Convention estimates that carbon dioxide emissions have fallen by approx. five million tonnes carbon dioxide equivalents per year as a consequence of the energy and carbon dioxide taxes (81). Compared with other climate policy measures, these reductions clearly represent the greatest contribution to the total emissions reductions during the period studied (the 1990s) (82).

The experience of the carbon dioxide tax has been summarised in the following conclusions by the Ministry of Finance’s tax experts: it is easy to administer and efficient to realise emissions reductions without throttling the growth. It is technology neutral and cost-effective. In countries that already have an energy tax, the extra administrative outlays to handle a carbon dioxide tax are negligible. The gradual increases of the carbon dioxide tax in Sweden have sharpened the control effect while a process has been introduced to make the tax more uniform within different sectors (83). ________________________________________________________________________________________________________________ 66. The climate policy’s challenges during the mandate period, Eva Samakovlis, Special studies no. 25, March 2011 67. Use and abuse of nature’s resources. A Swedish environmental history. The Environmental Protection Agency, 2009.

68. Söderholm, P & Hammar, H. Cost-effective instruments in the Swedish climate and energy policy? Methodological questions and empirical applications. Special study No. 8. 2005. The National Institute of Economic Research.

69. Knaggård, Å. 2009. Scientific uncertainty in the political process. A study of Swedish climate policy. The University of Lund.

70. Hammar, H. & Åkerfeldt S. CO2 taxation in Sweden. 20 years of experience and looking ahead. 2011(?).

71. The Stern Review on the Economics of Climate Change, 2006 72. Energy in Sweden 2011. The Swedish Energy Agency.

73. Hammar, H. & Åkerfeldt S. CO2 taxation in Sweden. 20 years of experience and looking ahead. 2011(?).

74. The Ministry of Finance’s website.

75. Jamet, S. (2011), “Enhancing the Cost-Effectiveness of Climate Change Mitigation Policies in Sweden”, OECD Economics Department Working Papers, No. 841, OECD Publishing.

76. Brännlund, R. & Kriström, B. EN efficient climate policy. SNS förlag. 2010.

78. Östblom, G. & E. Samakovlis (2008) “Linking health and productivity impacts to climate policy costs: a general equilibrium analysis”, Climate Policy 79. Östblom, G & E. Samakovlis (2004) “Costs of Climate Policy when Pollution Affects Health and Labour Productivity - A General Equilibrium Analysis Applied to Sweden”, Working Paper no. 93. National Institute of Economic Research.

80. Sweden’s fifth national report on climate changes. DS 2009:63. Department of the Environment. The Government Offices of Sweden.

81. Sweden’s fifth national report on climate changes. DS 2009:63. Department of the Environment. The Government Offices of Sweden.

82. Söderholm, P & Hammar, H. Cost-effective instruments in the Swedish climate and energy policy? Methodological questions and empirical applications. Special study No. 8. 2005. The National Institute of Economic Research.

83. Söderholm, P & Hammar, H. Cost-effective instruments in the Swedish climate and energy policy? Methodological questions and empirical applications. Special study No. 8. 2005. The National Institute of Economic Research.

International trade – the Swedes’ increasing consumption leads to emissions in other countries In principle, there are two ways of classifying greenhouse gas emissions – as an effect of production or consumption. within the EU’s and the UN’s climate work, it is the countries’ territorial emissions from production that are assessed, and Sweden passes with distinction.

Emissions have fallen since 1990. but the environmental accounts do not provide equally 28

pleasant reading if emissions from international trade are taken into account. As long as fossil energy dominates in the countries from which Sweden imports goods, the Swedish people’s lifestyle has an unsustainable impact on the climate. When environmental economists count up the Swedish people’s total consumption and include emissions that this causes in other countries, studies of individual years show that greenhouse gas emissions are as much as 25 per cent higher than what they are from a strictly production perspective (1). In these consumption-based calculations, emissions from the production of Swedish goods that are exported to other countries have been deducted. These are instead entered into each of the importing countries’ environmental accounts.

A few studies have attempted to examine the trends for the consumption-based emissions to see whether the development is going in the right direction, but the research inputs need to be deepened in order for any safe conclusions to be drawn. Longer time series are required, better import statistics with details of country of origin and better estimates of the emissions intensities for different industries in the countries that dominate Sweden’s imports. At this moment in time, science therefore cannot say whether Sweden as a nation has succeeded in turning the tide as regards our total global impact on the climate. According to the most comprehensive study, Sweden’s consumption-based emissions fell for a period during the 1990s, but the researchers explain this reduction by the collapse of the Soviet Union and a fall in imports from the former Eastern Block. The Swedish financial crisis at the start of the 1990s also weakened Sweden’s purchasing power. During the 2000s, the consumption-based emissions increased again in parallel with the economy making a recovery (2) (3). It would therefore be misleading to maintain that Sweden has broken the link between consumption and the emission of greenhouse gases (4).

From a longer term perspective, it is highly unlikely that consumption emissions have fallen.

Households spend more than twice as much now than they did forty years ago, converted into fixed prices (5). The number of cars per household has increased, as has the number of electronics, household devices and toys. We also eat more meat. Meat consumption, which is linked with substantial greenhouse gas emissions, has increased by 50 per cent since 1990 alone (6).

Even if production has been streamlined in most countries, the volume increase eats up the streamlining gains. The famous environmental Kuznets curve, as introduced by Nobel Prize winner Simon Kuznet, that stipulates that the environmental impact will decline at a certain level of wealth and gradually cease, may apply to many local and regional environmental problems,

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but global environmental issues such as carbon dioxide emissions do not follow this development as closely (7).

The consumption perspective does not change the view of which global instruments are appropriate. The most efficient thing to do is still to set a price on the environmentallydestructive emissions, through either a global carbon dioxide tax or emissions rights trading under a ceiling that is gradually lowered (8). The international environmental agreements must still be based on the nations and their territorial emissions that the politicians do actually have the power to influence. Applying a consumption-based perspective to the UN negotiations would above all be difficult, expensive to administer and misleading due to inadequate information.

However, knowledge of the environmental effects of our consumption is important in order to make visible the driving forces behind the increasing global emissions. It is evident that Sweden’s global footprint on the climate (carbon footprint) is larger than that revealed by the international book-keeping. This means that Sweden’s challenge - to reduce emissions to just over two tonnes carbon dioxide per person and year by the year 2050 – is thereby also greater (9). No world citizen will be able to demand more environmental space than that in a world that is striving for fairness. ________________________________________________________________________________________________________________ 1. The impact of consumption on the climate, the Environmental Protection Agency’s report no. 5903, 2008.

2. Peters, G & Solli. C. TemaNord 2010:592. Global carbon footprints. Methods and import/export corrected results from the Nordic countries in global carbon footprint studies.

3. Peters, G. Growth in emission transfers via international trade from 1990 to 2008. PNAS 2011.

4. Peters, Glen, personal comments by email, 19/12/2011.

5. Arhengart, M. The economy of households over 40 years, 1971-2011, part 3. The expenses of households. The Institute for Private Economy, Swedbank, 2011.

6. The impact of meat consumption on the climate. Driving forces and instruments. Report 6456, the Environmental Protection Agency.

7. Stern, N. 2006. The economics of climate change, the Stern review, Cambridge.

8. Eklund, K. 2009. Our climate, economy, policy, energy. Norstedts akademiska förlag.

9. The impact of consumption on the climate, the Environmental Protection Agency’s report no. 5903, 2008.

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