2. GENERAL ENERGY POLICY

Assessment

Since the in-depth review in 2013, Sweden has made significant progress in its long-term ambition of becoming one of the world's first fossil-free welfare nations. Continuous efforts in developing and implementing energy and climate-related policies – such as stringent CO2 and energy taxation since the early 1990s, the promotion of RES, and a strong focus on research and innovation in sustainable energy systems – places Sweden at the forefront of IEA member countries in the energy transition. Sweden is also rightfully proud of its technology-neutral policies such as CO2 taxation that enable efficient and market-based development. The IEA applauds this approach and advises Sweden to divert from this principle only if energy and climate policy goals cannot be met otherwise.

The 2016 Energy Agreement, approved by parliament in June 2018, sets long-term targets for Sweden’s energy sector. The agreement was supported by around 70% of the parliament, which represents political parties from both the government and the opposition. Its work builds on energy policy targets from 2009, which have been expanded beyond the year 2020. Sweden aims for a 100% share of renewables in electricity generation by 2040 and for a 50% decrease in energy intensity (primary energy supply per GDP) from 2005 to 2030. This contributes to the target of a netzero carbon economy by 2045. Sweden also aims to reduce GHG emissions in the transport sector by at least 70% from 2010 to 2030. A progress report will be prepared every four years.

In June 2017, the parliament also introduced a climate policy framework that included targets to reduce GHG emissions from 1990 levels in non-EU-ETS sectors by at least 63% by 2030 and by at least 75% by 2040. Current policies are not sufficient to achieve this long-term goal of decarbonisation, which illustrates the need to develop roadmaps, set intermediate targets and design new policies.

The Energy Agreement sets clear long-term goals, and the IEA advises that these be complemented by shorter-term milestones in order to steer policy development and implementation and to clarify different timeframes for different targets. The government should identify pathways to reach the targets and translate these pathways into more concrete actions. This should be done without delay and in broad consultation with stakeholders.

Sweden has been able to increase gradually the use of RES, supported by dedicated policy measures and favourable natural conditions. Currently, more than half of final energy consumption is covered by RES. Sweden is thus comfortably fulfilling its goals for 2020. Sweden is also a front runner in the deployment of RES in transport. The successful growth in RES is mainly attributed to stringent taxation on energy and CO2 emissions, and to the promotion of RES through the electricity certificate system. As part of the Energy Agreement, the certificate system has been extended to 2030 and, by that year, it will deliver 18 TWh more generation annually than in 2020.

Sweden has historically used both energy and CO2 taxation to stimulate efficient energy consumption and a low-carbon energy supply. The Swedish CO2 tax was introduced in 1991 as one of the first in Europe. The tax is broadly accepted among the general public and is increased gradually to stimulate a sustainable energy transition. In recent years, Sweden has also abolished most of the tax expenditures to simplify the overall system. Further increases in the carbon price would help to achieve carbon objectives efficiently.

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2. GENERAL ENERGY POLICY

It is important to clarify the overall role of pricing mechanisms in achieving the long-term goals of the 2016 Energy Agreement.

The transport sector is broadly regarded as a challenge to decarbonisation, and Sweden leads in tackling this challenge. Although Sweden has the lowest share of fossil fuels in transport among IEA member countries, fossil fuels still constitute around 82%; the remainder consists of biofuels and some electricity. In the 2016 Energy Agreement, Sweden set a target to decrease emissions from the transport sector by 70% over the period from 2010 to 2030.

Sweden has a robust power system with sufficient generating capacity to cover national consumption and significant exports. Nevertheless, as for many countries with ageing nuclear fleets in Europe, Sweden is facing potential issues with generation adequacy in the medium term. The uncertain future role of nuclear power, which currently generates around 40% of its electricity, is at the core of this problem. The 2016 Energy Agreement clarified the future role of nuclear power as it found agreement to abolish the nuclear capacity tax and decided against a forced phase-out of existing nuclear plants or a ban on new nuclear capacity.

Sweden is not pursuing a politically decided phase-out of nuclear energy. It is also agreed among political parties that nuclear power will not be subsidised. However, on such a liberalised and well-supplied electricity market as Sweden’s where renewables are supported, there is essentially no room for other new, unsubsidised, low-carbon technologies. To achieve 100% renewable electricity by 2040, around 60 TWh more of green electricity is needed to maintain today’s level of electricity generation. Sweden should carefully assess the generation and system adequacy of an electricity system based only on RES, of which wind and hydropower would provide the majority.

Sweden can undoubtedly be considered as a front runner in a transition towards a zeroemission welfare state. Where some countries lack specific policies, Sweden has multiple dedicated policies and measures, such as the climate-related policies in the transport sector. Pursuing multiple policies and targets at the same time entails a challenge to focus on the overall target (the reduction of GHG emissions) while maintaining cost-effectiveness. Sweden should carefully address this challenge in order to minimise these risks.

Recommendations

The government of Sweden should:

Carefully translate targets of the 2016 Energy Agreement into policies and measures. In doing this, it should:

>identify possible pathways to reach the targets, using new and already existing analysis on a co-ordinated basis across all the relevant bodies

>give preference to technology-neutral policies and market mechanisms such as carbon pricing

>minimise the number of policies with the same objective and avoid overlap

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