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The decrease in oil consumption has reduced CO2 emissions in the transport sector. From 2010 to 2017, emissions fell by 9%, from 21.7 MtCO2 to 19.7 MtCO2. However, despite the positive trend, Sweden is not on a path to meet its ambitious 2030 target to reduce emissions in the sector by 70% in the period from 2010 to 2030 (Figure 3.9).

Domestic biofuel production has not kept up with the growth in consumption. In 2017, biodiesel imports accounted for 75% of all liquid biofuels used in transport. This has implications for the long-term security of supply for energy in the sector (Chapter 9).

Figure 3.9 Transport emissions 2006-17 and target for 2030

MtCO2

The recent increase in biofuels has reduced CO2 emissions from the transport sector, but Sweden is not yet on a path to meet its 2030 target.

Source: IEA (2019a forthcoming), CO Emissions from Fuel Combustion 2019, preliminary edition, www.iea.org/statistics/.

Policies introduced to reduce emissions from road transport

Road transport dominates the TFC and CO2 emissions in the transport sector. In 2016, road transport accounted for 94% of the total transport GHG emissions, of which cars represented the largest share, followed by heavy trucks (Figure 3.10).

Figure 3.10 Breakdown of GHG emissions from transport by subsector, 2016

Road transport accounts for 94% of the domestic transport emissions, and cars represent the largest share of this.

Source: SCB (2018a), Emissions of Greenhouse Gases from Domestic Transport by Greenhouse Gas and Mode of Transport. Year 1990-2016, www.statistikdatabasen.scb.se/pxweb/en/ssd/START__MI__MI0107/MI0107InTransp/?rxid=41602454-af45-48f1- 9e6d-e31227ac940d.

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In 2017, the government introduced several policies to reduce GHG emissions from the transport sector, with the main focus on light-duty vehicles (cars and light trucks). The most important new policies are an emission-reduction obligation to increase the share of biofuels and a bonus-malus system to incentivise purchases of low-emission vehicles. Both were introduced in July 2018. Furthermore, in the January Agreement from 2019, the government has set the objective to ban sales of new fossil fuel cars by 2030.

Box 3.1 The Swedish Pump Act

In December 2005, the parliament adopted the Pump Act (2005:1248), which obliged all large filling stations to supply at least one renewable fuel. The objective was to improve the availability of renewable fuels and thereby remove a major obstacle to reducing CO2 emissions in the transport sector.

By not promoting any specific fuel, the Pump Act was intended to be technology neutral. In practice, the act has resulted mostly in installations of pumps that provide ethanol (E85), which has been the cheapest option for the station owner. By the end of 2017, there were 1 749 filling stations for E85, which represented 87% of the total biofuel filling stations (Figure 3.9). The rapid growth in HVO consumption is not represented by an increase in biodiesel filling stations since the HVO is mostly blended into regular diesel fuel.

The Pump Act succeeded in increasing the availability of biofuels at Swedish filling stations. However, this does not guarantee that consumers use renewable fuels. Ethanol cars can drive on either E85 or regular gasoline, and consumption of biogasoline has declined in recent years despite the high availability of E85 fuelling stations (Figure 3.11). Fulfilling the obligation in the Pump Act has also led to extra costs for the station owner.

Figure 3.11 Filling stations for renewable transport fuels, 2005-17

The Pump Act successfully increased the number of biofuel filling stations in Sweden, but not a guaranteed growth in biofuel consumption.

Note: ktoe = kilotonnes of oil equivalent.

Sources: SPBI (2018a), “Försäljningsställen med Förnybara Drivmedel” [Filling Stations with Renewable Fuels], http://spbi.se/statistik/forsaljningsstallen/forsaljningsstallen-med-fornybara-drivmedel/; Swedish Parliament (2009), The Act on the Obligation to Supply Renewable Fuels – A Follow-Up Report, www.riksdagen.se/globalassets/06.-utskotten--eu-namnden/trafikutskottet/tu-uppfoljning/summary-a-follow-up-of- the-act-on-the-obligation-to-supply-renewable-fuels.pdf; IEA (2019b forthcoming), World Energy Balances 2019 preliminary edition (database), www.iea.org/statistics/.

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Emission reduction obligation

From July 2018, suppliers of gasoline and diesel are obliged to reduce CO2 emissions through increased biofuel blending. The indicative target is to reduce the total GHG emissions from the use of diesel and gasoline in vehicles by at least 40% by 2030, which equals a share of biofuels of about 50%.

The emission reductions from diesel and gasoline vehicles that are required to reach the 2030 target depends on other changes to the transport sector, such as how fast the EV market grows. Therefore, the exact quota levels up to 2030 are not decided. Initially, the blending obligation is a 19.3% reduction of emissions by blending biodiesel in diesel fuel and a 2.6% reduction of emissions by blending ethanol (or other biofuel) in gasoline, which, in volumes, roughly equals 25% biodiesel in diesel and 5% ethanol in gasoline.2

Since the introduction of the emission-reduction obligation scheme, biofuels that are blended with gasoline and diesel are levied with the same energy and CO2 tax per litre as the fossil parts of the fuels. To avoid rapid increases in consumer prices due to the reform, the emission reduction obligation is complemented by reduced energy and CO2 taxes on fossil fuels (Table 3.2). These tax reductions should compensate for the increased costs of supplying more biofuels in the fuel mix.

Table 3.2 Energy and CO2 taxes by fuel, January and July 2018 (SEK/L)

Sources: Swedish Tax Agency (2018a), Skattesatser på Bränslen och El under 2018 [Tax Levels for Fuels and Electricity 2018], www.skatteverket.se/foretagochorganisationer/skatter/punktskatter/energiskatter/skattesatserochvaxelkurser.4.77db cb041438070e0395e96.html; Swedish Tax Agency (2018b Verksamheter med Lägre Skatt (Sectors with Lower Taxation), www.skatteverket.se/foretagochorganisationer/skatter/punktskatter/nyheter/2018/nyheter/ nyaskattesatsernaforbensinochdieselfranden1juli2018.5.41f1c61d16193087d7fd1f3.html.

The bonus-malus system (“feebate”) within light-vehicle taxation

Sweden has used vehicle taxation to promote low-emission vehicles for many years, and the government considers it an important complement to fuel taxation. Cars of model year 2006 or later and other light-duty vehicles from 2010 or later are subject to carbonbased vehicle taxation. Other vehicles are subject to weight-based vehicle taxation.

In the carbon-based system, the annual vehicle tax consists of a basic rate of SEK 360 plus a part based on CO2 emissions. The CO2 part of the vehicle tax is SEK 22 for each gramme of CO2 emitted above 111 grammes of carbon dioxide per kilometre (gCO2/km) a vehicle emits at mixed driving. For diesel cars, this sum is multiplied by 2.37 (fuel factor) to compensate for a lower energy tax on diesel than on gasoline. Diesel cars registered for the first time in 2008 or later pay an additional SEK 250 (cars registered

2 The reduction levels are set as a reduction of GHG emissions compared to using fossil gasoline or diesel, not as specific volumes of biofuels. The fuel supplier can choose between blending in larger volumes of a biofuel with low emission reductions or smaller volumes of a biofuel with large emission reductions.

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before 2008 pay SEK 500). For vehicles that can be powered by ethanol or gas other than liquefied petroleum gases (LPGs), the CO2 part of the tax is SEK 11 per gramme emitted above 111 gCO2/km.

In July 2018, the government introduced a bonus-malus system (sometimes referred to as a “feebate”) for new light-duty vehicles. Vehicles with low CO2 emissions qualify for a bonus at purchase, whereas vehicles with high emissions are taxed at a higher rate for the first three years. The system is replacing the previous five-year exemption from annual vehicle tax and the super-green car rebate for low-emission vehicles. “New vehicles” refers to vehicles of model year 2018 or later that have become subject to taxation for the first time on 1 July 2018 or later. Light-duty vehicles are passenger cars (class I and II), and buses and trucks with a maximum weight of 3 500 kilogrammes. The system does not cover motor cycles.

Vehicles with low emissions of CO2 qualify for a bonus at purchase. Vehicles that emit zero CO2, such as pure EVs, qualify for the maximum bonus of SEK 60 000. Vehicles that emit a maximum of 60 gCO2 qualify for the minimum bonus of SEK 10 000. Vehicles using gas qualify for a bonus of SEK 10 000 (Figure 3.12).

Vehicles with high emissions of CO2 are subject to an increase in vehicle tax (malus) during the first three years. For gasoline and diesel vehicles, the increased CO2 amount is SEK 82 per gCO2/km at mixed driving above 95 grammes and SEK 107 per gCO2/km above 140 grammes (Figure 3.12). From year four and beyond, the CO2 tax is back at SEK 22 per gCO2/km above 111 grammes.

Vehicles that can be powered by ethanol or gas other than LPG are not subject to increased taxation, which means that these vehicles have a CO2 tax of SEK 11 per gCO2/km above 111 grammes, for all the years they are in service. The vehicle tax for diesel-powered vehicles in the bonus-malus system is adjusted by converting the current fuel factor into a fuel surcharge.

Figure 3.12 Subsidies and fees in the bonus-malus system per emission level

SEK

gCO2/km

The bonus-malus system provides a purchase subsidy for vehicles with low emissions and an increased CO2 fee for high-emission vehicles.

Note: The malus fee is calculated as the total additional vehicle taxation under three years.

Source: Analysis based on STA (2018), Bonus-Malus System för Personbilar, Lätta Lastbilar och Lätta Bussar (Bonus-Malus System for Cars, Light Trucks and Light Buses), www.transportstyrelsen.se/bonusmalus.

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