3. ENERGY, CLIMATE CHANGE AND TRANSPORT
Other types of electrified transport
In 2018, the government introduced an Electric Vehicle Premium to promote commuting with electric two-wheel vehicles. The support covers up to 25% – or maximum of SEK 10 000 – of the price when buying an electric bike, scooter or motorcycle. In April 2018, the government proposed to provide the premium also to electric boat engines. The total budget for the premium is SEK 395 million per year for 2018-20. As of 4 September 2018, 85% of the budget for 2018 had been used (SEPA, 2018e).
Since 2016, regional public transport agencies may apply for an electric bus premium for buses used in public transportation. The size of the premium depends on the number of passengers and on whether the bus runs on electricity only or is a hybrid. The government allocated a budget of SEK 350 million for 2016-19.
Sweden is also active in research, development and demonstration (RD&D) of future transport solutions, including pilot projects on electrified roads (Box 3.2). On an electrified road, EVs can be charged while driving, which also enables heavy EVs, e.g. trucks, to cover long distances without stopping to charge.
Box 3.2 Electric roads in Sweden
The STA, the Swedish Energy Agency and Vinnova (Sweden's innovation agency) established a programme to test and demonstrate electrified roads, and initiated two demonstration projects:
In 2016, the world first electrified road for commercial traffic was opened in Gävleborg. Electric lines above the road allow electric trucks to charge using a pole on the roof.
In 2018, a new electrified road outside Arlanda airport was opened. This road uses charging via lines in the road, which could also allow regular cars to charge.
In 2017, the STA presented a roadmap to develop electric roads. This includes a further one or two demonstration projects to test other technologies, e.g. inductive charging. The next stage is a larger pilot project to test a complete concept, which includes payment methods, etc. on a number of roads of 20-30 kilometres. After the pilot project, the STA will develop a long-term plan for electric roads in Sweden.
Source: STA (2017), Nationell Färdplan för Elvägar (National Roadmap For Electric Roads), www.trafikverket.se/contentassets/b1c845c023e04a3fb61280d072e832cc/nationell-fardplan-for- elvagar_slutlig.pdf.
Assessment
From 1990 to 2016, Sweden’s GHG emissions (excluding LULUCF) decreased by 25% to 54 Mt CO2-eq. The government expects emissions to continue to decline. However, in recent years, the reductions in energy-related emissions have stalled, which indicates a change in the decreasing trend. Since 2013, emissions have increased slightly, mainly in heat and power generation, oil refineries and coke ovens. Energy-related CO2 emissions account for nearly three-quarters of the total GHG emissions and the transport sector accounts for around half of the energy-related CO2 emissions.
In 2017, the government decided on a new climate framework that contained a Climate Law, emission targets and a Climate Policy Council. The Climate Law states that the
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policy of the government shall be based on the overall climate target and the Climate Policy Council will assess the government’s climate policy against the climate goals and advise the government. The climate framework was developed in a broad political agreement, which enables long-term stability in the work towards the targets.
In the new framework, Sweden’s goal is to have zero-net emissions by 2045, with intermediate targets for non-EU-ETS emissions to be at least 63% lower by 2030 than in 1990, and at least 75% lower by 2040. With these ambitious targets, which go beyond its international obligations, Sweden sets an example for other countries to follow. The zero net-emission target requires an 85% reduction in domestic emissions compared to 1990 (excluding LULUCF) and allows alternative measures to cover the rest.
Following the adoption of the climate framework, the government should now start preparing for the Climate Policy Action Plan. This work should include overall strategies and national emission scenarios and pathways for how to reach the targets. To engage other important stakeholders, the government should collaborate with industry, academia and civil society and create a shared vision towards the long-term targets.
Strong CO2 taxation drives de-carbonisation
Sweden was one of the first countries to introduce a CO2 tax on fuels, and it has the highest level of CO2 taxation in the world. Since its introduction in 1991, the CO2 tax has increased from 0.25 SEK/kg to 1.15 SEK/kg in 2018 (around USD 140/tonne). It has provided economic incentives for Sweden’s energy transformation from fossil fuels to alternative energy sources across sectors such as households, heat and power generation, and transport. However, some sectors benefit from tax exemptions, which may lead to missed opportunities for cost-effective emission reductions.
Sweden sets an example for how to combine high CO2 taxation with steady economic growth. The IEA applauds this and encourages the government to continue to use effective carbon pricing and to review the remaining tax reductions, e.g. for the mining industry. Tax exemptions can have the effect that some cheap abatement options are missed. All tax exemptions that are not necessary for avoiding carbon leakage should be gradually phased out.
Taxation alone will not be enough to drive investments in renewable energy and other new technologies at the rate necessary to reach the climate targets. The Climate Leap investment programme provides a good complement to taxation in supporting investments that lead to emission reductions. To ensure the cost-efficiency of the programme, the government should regularly monitor how the funding is used and assess the climate impact of the subsidised investments.
Transport emissions in focus for new targets and policy
Decarbonisation of the transport sector is crucial if Sweden is to meet its climate objectives. In 2017, transport accounted for less than one-quarter of Sweden’s final energy consumption, but for over half of energy-related CO2 emissions. The government has now set the ambitious target to reduce emissions from domestic transport by 70% from 2010 to 2030. The proposed ban on sales of new fossil fuel cars after 2030 will further drive emissions reductions in the longer term.
Sweden has already reached its 2020 target of 10% renewable energy in the transport sector thanks to a rapid increase in biofuels, supported by energy and CO2 tax
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exemptions. However, the country is not yet on track to meet the 2030 target, and the government has introduced several additional policies and measures to tackle transport emissions further. The most important new policies are the Emission Reduction Obligation system and the bonus-malus system for new light-duty vehicles, both introduced in July 2018.
Initial results show that the increase of the vehicle tax had an immediate impact on car sales in Sweden, with falling sales in gasoline and diesel cars. However, the government needs to monitor the long-term effect on the vehicle fleet transition and review the policy design to ensure its effectiveness and avoid any unintended negative effects.
The Emission Reduction Obligation will ensure further growth in biofuels. It is more effective than the Pump Act, which imposed costs for filling stations without guaranteeing an increased uptake of renewable fuels. The government should closely monitor the fuel prices and growth in biofuels, and continue to align the emission reduction requirements with other policies, including taxation and the bonus-malus system.
The government also subsidises the purchases of electric buses, electric bikes, scooters and boat engines. Such investment support can be useful to speed up the transition towards a sustainable transport sector, but deviates from Sweden’s usual market-based policy approach. The government should closely monitor the results of the new policies to ensure that emissions are reduced in a cost-effective manner. Furthermore, electrified transport can provide multiple benefits, such as lower particle emissions and noise levels, which should be taken into account.
Electric vehicles require new infrastructure
Electrification of transport suits well with the largely decarbonised electricity production in Sweden. In 2017, EVs accounted for 6.3% of new car sales, one of the highest shares in the world. Further growth of the EV market requires a new infrastructure of chargers. Most EV charging is done at home, and the government has introduced an investment subsidy to support home charger installations.
To enable longer trips and to increase consumer trust in EVs, a public charging infrastructure is also required. Investments in public chargers are supported by the Climate Leap fund, and the number of public charging points is growing. These investment subsidies could help accelerate EV adoption, but the government should assess the cost-effectiveness and focus the support on investments that would not take place without the support.
Utilities and other companies are investing in public EV chargers to offer charging as a new business. Market-based investments tend to focus on commercially attractive areas in cities and along main routes. To reach rural areas as well, municipalities and other public actors play an important role. Regional co-ordination and state oversight are needed to ensure that investments in EV infrastructure are sufficient and have a broad reach. Furthermore, as the number of EVs grows, charging will have an impact on the electricity distribution system. This increases the importance of co-ordinating the infrastructure together with stakeholders on the electricity market, e.g. distribution system operators.
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