The UnSustainability Report 2023 – NE

Information on the reduction obligation is unclear

In addition, there is a great deal of uncertainty surrounding the reduction obligation: the law stipulates that the share of biofuel in petrol and diesel must gradually increase by 2030 according to a previously agreed curve. But the 2023 increase is now on hold - and the Government has announced a decrease to  the minimum EU level. But what level the EU eventually will decide has yet to be determined.

Svante Axelsson, the coordinator of Fossil Free Sweden, an organization that brings together 22 industries, is critical of the reduced ambition level of the reduction obligation:

- If a policy instrument so crucial for the development of the entire bio-economy is compromised, then there is also doubt as to whether the Parliament's decisions can be trusted at all, he tells Dagens Industri.

Uncertainty hits Swedish companies

The unpredictability surrounding tax exemptions for clean biofuels and the reduction obligation levels negatively impacts a wide range of companies that have invested or are planning to invest in renewable fuels. Clear and long-term decisions, on the other hand, would increase the incentives for companies to invest in fossil-free transport.

Scandinavian food company Arla has been a pioneer within fossil-free transportation since 2018 – despite regulations for renewable fuels remaining unpredictable.
This unpredictability makes it harder for Swedish companies to invest in fossil-free transportation.
'If we do not receive a continued tax exemption for renewables, we may be forced to switch back to fossil fuels,' says the company's sustainability manager, Victoria Olsson.

One of Sweden's most important climate targets is to reduce emissions from domestic transportation by at least 70 percent, measured from 2010 to 2030. But according to many analysts, we will fail to meet our own climate goal. Why?

One barrier is the uncertainty surrounding tax exemption on renewable fuels.

Sweden was previously exempt from EU state aid rules, in order to promote the use of pure, high-blend biofuels. The previous government applied for a ten-year extension, but the EU recently decided to grant Sweden a four-year extension only. What happens after that is unknown, creating unpredictability for Swedish biofuel producers and companies that want to invest in a fossil-free future.

Arla: Investing in sustainability requires a long-term approach

Arla is Sweden's leading food company and one of Sweden’s largest heavy transport operators. The company's milk tankers collect milk from around 2,000 Swedish farms for processing at twelve dairy plants in southern and central Sweden. Arla's trucks then deliver milk and other dairy products to customers in a transportation chain that totals 40 million kilometers a year.

Arla aims to achieveclimate-neutral production by 2045, and has therefore invested hundreds of millions SEK in biofuel-powered trucks.

- Everything related to sustainability and investments must be done with a long-term approach; even minor adjustments can make a big difference. For example, suppose we do not receive a continued tax exemption for renewables. In that case, we may have to switch back to fossil fuels, losing a benefit we have built over time," says Victoria Olsson, Head of Sustainability.

Even though Sweden produces more electricity than we use, we still regularly experience electricity shortages. The electricity is simply not produced when and where it is needed.This became apparent for the food giant ICA, when its intended fleet of electric trucks for a new warehouse in Upplands-Bro could not be charged due to a lack of power.

Electricity is crucial for the green transition, and in Sweden, we produce enough electricity - but there are bottlenecks in our electricity grid. The grids cannot supply the electricity needed at each moment. This is due to the uneven distribution of production and consumption across the day, the year, and different parts of the country. Since a large part of our electricity production takes place in northern Sweden, the electricity is transmitted over long distances via grids that are not sized for the needs of southern Sweden. It is, quite simply, too cramped. Especially the backbone grids to the Stockholm region and Skåne.

- Capacity shortage is one of several barriers; unfortunately, there is no simple solution to the energy issue. But Sweden is capable of making the necessary investments. It is about creating innovative solutions that will future-proof our society in the best possible way," says Camilla Mattsson, Head of Sustainability at the technology consultants WSP, currently at Tyréns.

Slows down the transition of major emitters

The capacity shortage is a barrier to the electrification of transport and industry - our biggest sources of CO2 emissions. Ranging from passenger and freight transport to energy-intensive activities such as mining, steel, or raw chemical industries.

Truck transport alone accounts for 10% of Swedish greenhouse gas emissions. But the desired shift towards all-electric trucks in commercial traffic places demands on both charging infrastructure and electricity grids - needs that are not always met.

Charging ICA trucks is not possible until 2027-2028

This became apparent when ICA's new e-commerce warehouse in Upplands-Bro wanted to purchase electric trucks to deliver groceries to customers in Stockholm and Mälardalen. As the grid owner could not promise the power required, ICA would not be able to charge the trucks in its depot, and therefore decided to hold off on investing in electric trucks.

This type of "last mile" transports move through densely populated areas right up to the customer’s door. Their electrification would have a significant positive impact on both the local environment and the climate. However, ICA's warehouse electricity needs are expected to be met sometime between 2027 and 2028, when the main grid into the Stockholm region is set to be completed. The shortage in capacity affects not only the warehouse in Upplands-Bro but also several other ICA logistics units around Sweden.

Six years of work. An 8,000-page application. And a cost of SEK 100 million. That was not enough for the Land and Environmental Court to approve Swedish mining giant LKAB's request for a renewed environmental permit in conjunction with the relocation of large parts of Kiruna city.
– Today's time-consuming and unpredictable process is a direct threat to our efforts in transitioning toward a sustainable future, says Niklas Johansson, Director of Communications and Climate at LKAB.

Lack of resources, ignorance, manual handling, poor coordination, illogical prioritization, unclear requirements and directives…

The business community has strongly criticized the environmental permit process. There is also no time limit for the permit process, resulting in applications sometimes taking more than 20 years to finally be assessed by the Land and Environmental Court or the Environmental Permit Office of the County Administrative Board. The time-consuming processes prevent many companies from investing in new sustainable solutions. Major companies, experts, and lawyers now warn that Sweden will fail to meet its climate targets if the permit processes do not improve.

Using new technology to transform

LKAB, a state-owned mining company, is one of the companies that is highly critical of how the current system is set up and applied. LKAB is a leading force in transforming the iron and steel industry and has, together with SSAB and Vattenfall, developed the Hybrit technology, which forms the basis for producing fossil-free steel later in the value chain. LKAB's objective is to transform its entire iron ore production to the technology by 2045, saving carbon dioxide emissions equivalent to Sweden's total greenhouse gas emissions for the company's global steel mill customers.

Must start all over - due to a summons from 2017

Recently, LKAB's application to develop its existing operations in Kiruna was rejected - despite a six-year process that cost SEK 100 million and resulted in an 8,000-page document.

The Land and Environmental Court referred to the fact that a summons for public consultation in 2017 had not been drafted appropriately, as property owners with geothermal heating were not specifically invited. LKAB's position is that almost all residents of Kiruna are affected by the gigantic project - as large parts of the town will be relocated – and that all, therefore, were invited in the same way.

After a six-year application process, LKAB is now forced to return to square one.

- This is entirely disproportionate and can only be described as another example of a systemic failure," says Niklas Johansson, Director of Climate and Communications at LKAB.

One in two Swedish companies believes that unclear and short-sighted policies hinder the transition to more sustainable business operations. Even foreign investors are reluctant to invest in Sweden for the same reasons. One example is wind power:
- All countries with a coastline are looking at how offshore wind can become an important part of the energy mix. Sweden is questioning whether it wants to be part of that journey," says Jesper Kühn Olesen, project director at Danish company Ørsted, which has big plans for Swedish wind power.

The Swedish business community currently sees several barriers to accelerating its sustainability work. By far, the most critical barrier - identified by 51% of 876 Swedish companies in a survey by the UN Global Compact - is short-sighted decisions and a lack of political guidance.

A recent example is the Tidö Agreement between the M-KD-L government and the Sweden Democrats, rewriting the rules for offshore wind power. "The plan to let the electricity grid community subsidise the grid connections of ocean-based wind power is stopped." they write. According to state-owned Svenska Kraftnät, this reversal can lead to dramatically increased costs. The connection to land accounts for 15-30% of the costs of offshore projects . In addition, Svenska Kraftnät fears that interest in building offshore wind power will decrease.

Sweden lags far behind European countries

Despite a long coastline, Sweden lags far behind several European countries in offshore wind power development. But several multi-billion projects are underway - including an application from Danish energy company Ørsted, the world leading offshore wind power developer, to build an offshore wind farm 22 kilometers south of the coast of Skåne.

Jesper Kühn Olesen, project director at Ørsted, says the company will go ahead with its Swedish plans - but says that the Tidö agreement raises questions:

- We must have a solid framework. This raises the question of what direction Sweden wants to take and what will happen here and now, and as developers and investors, we are left with uncertainty. But we look forward to working closely with the government and authorities so that we can be part of the solution," says Jesper Kühn Olesen to Dagens Nyheter.

Applications are made - municipalities say no

Sweden's total energy demand is expected to increase by more than 50% from today's 140 TWh (terawatt hours) to 220 TWh as early as 2030. Meanwhile, there are applications for on- and offshore wind power that cover almost the entire increase in electricity demand by 2030 - provided that the applications are approved.

But many planned projects are scrapped already at the municipal level. In Småland alone, seven municipalities have used the municipal veto to stop new wind power projects over the last five years. In the spring of 2022, the Parliament voted on amending the veto, but this was rejected by a majority, which the Swedish Wind Energy Association regrets:

- There is no time for political posturing and gridlock. Now, solutions and political action are needed, says Daniel Badman, CEO of the Swedish Wind Energy Association, adding that the county administrative boards' environmental assessments and the courts must broaden their perspective and look beyond the local impact of wind power in their decisions.

- If you consider that new wind power could mitigate the climate crisis, contribute to industrial competitiveness, reduce our neighbours' dependence on Russia, and lower electricity prices, then more wind energy projects would get approved, says Daniel Badman.

Uncertainty and political short-sightedness mean that Sweden risks losing multi-billion investments in, for example, the energy sector. With more broad, long-term political agreements, Swedish companies could accelerate their sustainability efforts - while making Sweden more attractive for both Swedish and foreign investors.

The transport sector accounts for roughly one-third of Sweden's greenhouse gas emissions. But the roll-out of charging points does not match the rapid increase in sales of electric vehicles.
- As a result, fewer people are willing to take the plunge and go electric," says Mattias Bergman, CEO of Mobility Sweden.

Sales of electric cars are breaking all records. Soon, more than half a million pure electric cars and plug-in hybrids will be on our roads in Sweden. A rapid transition from fossil-fueled to electric cars is essential to achieve our climate targets. The transport sector, of which passenger cars and heavy goods vehicles constitute a significant part, currently accounts for about one-third of Sweden's total greenhouse gas emissions. This is also the basis for the EU's decision to ban the sale of new combustion-engine cars and light trucks by 2035. 

Sweden is ranked at the bottom

But there are threats to this expansive development. The expansion of public charging points is currently not keeping pace. With just over 17,000 charging points and around 3,000 public charging stations, Sweden ranks towards the very bottom of European countries, according to a report by the green think tank Transport & Environment.

According to Mattias Bergman, the Swedish backlog is due to the existing regulatory framework and the fact that the energy companies take too long to indicate whether there is sufficient power available

- The average construction time for a charging point in a city is 14 months, and up to approximately three years in the countryside. In some cases, government funding has expired before the permit is approved, Bergman notes.

He is now calling for standardized building permits, improved coordination, and clear power capacity maps showing where charging stations can be built to reduce lead times.

- These are issues that we need to address if the transition to a fossil-free vehicle fleet is to continue in the right direction," says Mattias Bergman.

Sweden fails to meet EU recommendations

The number of electric cars per public charging point is measured by CPEV (Charging Points per Electric Vehicle). According to EU recommendations, this should be 0.1 or a maximum of ten cars per public charging point. With a CPEV of 0.07, Sweden is one of four countries within the EU that does not reach this threshold.

An odd shoe halted Humana Sweden's transport of donated clothes. The entire shipment was stamped as "waste" and became illegal when customs discovered the sole shoe.
– Unclear and outdated rules surrounding waste prevent the circular economy from growing.

According to the Swedish Environmental Protection Agency, Sweden alone produces five tons of waste per person each year. By having a circular economy, we would be able to keep more resources circulating in our society instead of throwing them away - and cut greenhouse gas emissions.

The illegality of second-hand

However, some laws and regulations are not adapted to a circular mindset. One such barrier is waste legislation.

- According to the EU regulatory framework, a defective item that does not work equals waste, and by Swedish law, municipalities have a monopoly on waste management. In many cases, it becomes illegal for companies to repair and resell a used item - or to collect materials from their manufacturing for reuse, says researcher Jonas Grafström, an environmental economist who wrote the article "Breaking circular economy barriers".

Product in one country - waste in another

An increasing number of companies want to grow in the circular economy and see great potential in several parts of the value chain - such as trade in used products and materials from recycled goods, repair and upgrading, deposit schemes, and services such as rental and leasing.

But it is not entirely clear what can and cannot be done. In a survey of 10,000 Swedish retailers, companies call for a modernized waste legislation that is harmonized at the EU level. Today, many countries define waste differently and have diverging rules for transportation to processing.

- "A product in one country is waste in another. It becomes a catch-22 situation that makes it complicated and expensive to sell used items," says Trond Narvestad, chairman of Humana Sweden. This non-profit organization collects clothes in Sweden and transports them to sorting facilities in Europe to find new owners in second-hand shops or to be donated to charity.

For example, one of their shipments of second-hand clothing was intercepted because customs spotted an odd shoe. The clothing consignment - categorized as a "resource" in Sweden - became "waste" under EU regulation because the shoe was listed as defective, rendering the shipment illegal.

Easier to repair, sell and reuse

According to the UN, 45% of the world's emissions come from the way we source new raw materials to produce everything from food and goods to infrastructure. A faster transition to a circular economy is therefore urgent, and with renewed waste legislation, circular business models could grow more freely. A product designed and produced in one country would be easier to repair and update, sell, and reuse in other countries. We reduce our carbon footprint for every reused product that is not discarded.

Electronic waste in Swedish homes is increasing. According to the government's investigation, 20-25 million mobile phones clutter our drawers - and 10 million are fully functional. If we used the devices longer while improving our recycling, the climate impact of electronics would reduce. But outdated taxes and regulations, among other things, are holding back the transition.

In 2021, the Swedish government set up an inquiry into a deposit scheme for small electronics. The report found that there are currently millions of working mobile phones in Swedish households that are not in use, and each reused mobile phone could reduce CO2 emissions by the equivalent of 55 kilos. In other words, increasing the average lifetime of mobile phones could reduce emissions by millions of kilos of carbon dioxide in the long-term.

High VAT a barrier to circularity

Elgiganten, one of Sweden's leading consumer electronics retailers, believes that outdated taxes and fees are the main obstacles to the transition.

Tony Ottebjer-Winkler, Operations and Sustainability Manager at Elgiganten, said:

- Today, the VAT rate for repairing electronics is 25%, unlike, for example, repairing textiles, where the VAT rate is 12%. It has to be financially sustainable for companies to repair electronics and enable this type of service. For example, recycling a laptop instead of buying a new one can save 1.2 tons of waste generated by the manufacturing process and as much as 280 kg in CO2 emissions.

A high VAT rate on repairing electronics also raises the price for the end consumer in the event of a repair. Consequently, many consumers prefer to buy a new device and leave their old one sitting in the drawer. According to the government's investigation, 20-25 million mobile phones are lying around in Swedes' drawers today, while three million new mobile phones are sold yearly.

Calls for a national target

Tony Ottebjer-Winkler and Niclas Eriksson, CEO of Elgiganten, are now calling for a national target to reduce electronic waste. Such a target, and the measures that go with it, could have several effects that could create a more sustainable future:

1. It would promote circularity and make it easier for consumers to choose products with a longer lifespan.
2. Reducing VAT, requiring repairable products and easily accessed spare parts would make it easier and more affordable to repair products instead of scrapping them.
3. It would also make donating or reselling products to the secondary market easier.

The Government wants to increase producer responsibility

Another important measure to create more sustainable development is to increase the recycling rate of electronic products. At present, less than half (47.7%) of Sweden's electronic waste is recycled, compared to PET bottles for example, where the corresponding figure is almost 90%. However, the Government's study estimates that a deposit scheme, regardless of its design, would constitute a cost disproportionate to its overall benefit. Instead, the Government wants to increase the producers' responsibility to ensure that electronic products are recycled.

Elgiganten has designed a recycling system where authorized staff offers customers secure collection. One of the main reasons mobile phones are not recycled is the concern about how stored personal data will be managed.

And so far, interest in the new service has been high.

- Products can be brought in for repair or recycling in all Elgiganten stores to extend the life of the products or their materials. For example, Elgiganten's stores have received more than 113,000 products for service in 2021 and sent a total of 4,000 tons of electronic waste for recycling in 2021, says Tony Ottebjer-Winkler.

Electric bicycles and scooters are prerequisites for modern, sustainable cities of the future. A study by the OECD estimates that micro-mobility and shared mobility will need to represent 60% of urban traffic by 2050 if the Swedish transport system is to be sustainable. But an unregulated market is hampering progress in Sweden.

The Swedish transport sector's climate target is to reduce emissions by 70% by 2030. The Swedish Transport Administration assesses that car traffic must reduce by 10-20%. At the same time, a study by the OECD's International Transport Forum (ITF) states that so-called micro-mobility and shared mobility must constitute 60% of city traffic by 2050 if the transportation system is to be sustainable. Cities have a particular responsibility - and better opportunities - to reduce car traffic.

26 million trips with electric scooters

Travel by electric scooters is skyrocketing in Swedish city centers. In 2021, 26 million trips were recorded - the equivalent of 4.6 million hours, 190 000 days, or 521 years. In Stockholm, trips rose by 81% between 2020 and 2021. And with the access to car-free mobility increasing, more and more people can choose environmentally sustainable and space-saving travel options. In turn, the opportunity to opt out of using a car in urban spaces increases, shaping vibrant, green cities of the future - built for people instead of cars.

Safety challenges

But one barrier to development is that the market in Sweden is unregulated, which could lead to economic short-termism and unfair competition that undermines responsible business conduct. Poor working conditions, safety challenges, and illegally parked bicycles causing traffic problems, have prompted cities to react by limiting the number of electric scooters - instead of developing and integrating micro-mobility as a natural part of public transportation.

- Limiting the number of electric scooters is the wrong way to go. Instead, cities should use public procurement for the service in order to ensure that a limited number of responsible actors can provide a proper supply of vehicles across the city, benefiting both the users and the city's residents at large," said Fredrik Hjelm, CEO and co-founder of Voi.

The benefits of public procurement

Public procurement modifies the competitive conditions for the operators. Rather than engaging in short-term market competition, operators would compete in presenting the solution that best promotes sustainable, safe, and accessible car-free mobility in the city - based on criteria set by the public sector, just like traditional public transport.

- Our experience from more than 150 million trips in 11 countries is that accessibility is a crucial factor that makes shared micro-mobility attractive. By creating seamless, sustainable transportation services that connect with buses, trains, and trams, more people can travel without a car. But proper regulation and partnerships are necessary for the sustainable development of a new service that has the potential to help revolutionize the way we travel in cities," says Fredrik Hjelm.

Procurement a trend in Europe

More than 100 European cities - such as London, Marseille, Oslo, and Seville - have already awarded public procurement contracts for electric scooters. Gävle is the first city in Sweden to follow the international trend.

Norway has taken a step further by introducing a national regulation that clarifies the municipality's ability to procure shared electric scooters. The Swedish Center Party has filed a motion for national-level regulation in Sweden, but there has yet to be a parliamentary decision.

With a regulated market, cities can use procurement to place higher demands on a smaller set of licensed operators to address challenges such as parking and safety. With fewer operators involved, it will also become easier to integrate micro-mobility with other public transport, which has additional positive effects on climate and the environment.

The archipelago boats in Stockholm are moving towards being fossil-free, but the transition is hampered by the renewable fuel HVO being twice as expensive as diesel at sea.
Fossil marine fuel is subsidized, causing diesel and oil to dominate our seas completely. Today, maritime traffic in Sweden emits more greenhouse gases than domestic flights.

Fossil fuel subsidies continue to increase both in Sweden and globally. Every minute, SEK 14.3 million is poured out to sustain the production and consumption of coal, oil, and gas worldwide, according to a new report from the IEA and OECD.

Escaping energy and carbon taxes

According to the Swedish Society for Nature Conservation's calculations, Sweden spends SEK 30 billion on grants, subsidies, and tax exemptions each year. Most of it goes to relieving fossil fuels from energy and carbon dioxide tax in agriculture and shipping (does not apply to recreational crafts).

- The fact that marine fossil fuels are exempt from tax is an obstacle to the green transition, says Fredrik Larsson, responsible for environmental issues at the trade association Svensk Sjöfart:


- "You will find it difficult to cope financially if your maritime traffic is powered by an environmentally friendly fuel that is much more expensive than that of your competitors. Another global consequence of the tax exemptions is the lack of compelling incentives to develop alternative fuels.

At present, the lack of alternatives to fossil fuels is dire. There are long-term projects underway, particularly with hydrogen, methanol, and ammonia as fuel for larger ships. And some smaller vessels are converting to electric power. But so far, fossil-free shipping is a drop in the ocean.

Green fuel twice as expensive

Meanwhile, public transport by sea in Stockholm is becoming increasingly greener. Today, 56 percent of the traffic is fossil-free as Waxholmsbolaget's archipelago boats - which run between 299 piers during the summer - are refueled with the renewable biodiesel HVO, making Stockholm a world leader in the field.

But the price is a significant barrier. HVO is a tax-exempt fuel, but more expensive to produce and therefore costs roughly twice as much as tax-exempt diesel at sea.

- Our goal was 90 percent renewable fuels in maritime traffic in 2019, but it had to be rewritten. Now Region Stockholm's goal is 100 percent fossil-free maritime traffic by 2030," says Maria Röjvall, section head for sustainable development at the Transport Administration.

As of 2018, all of Stockholm's 2,200 SL buses are powered by renewable fuels - biogas, ethanol, biodiesel, or electricity. On land, HVO and other renewable fuels compete with taxed diesel - and the price differential between renewable and fossil fuels is not as significant as at sea.

The transition to a more sustainable construction and real estate sector is imperative, considering that the sector accounts for one-fifth of Sweden's carbon dioxide emissions. But sometimes, municipalities' zoning plans get in the way. For example, Johan Graper in Halmstad was not allowed to install solar panels on the roof of his villa despite soaring electricity prices.

For Graper, changing the residential area's red roof tiles by installing black solar cells was not allowed - and the case is not uncommon. It all depends on how municipalities choose to approach zoning plans and building permits. In Skurup in Skåne, for example, solar panels are perfectly acceptable, regardless of the roof color - while Halmstad's building permit rules are more stringent.

- "The way I see it, they think the red roofs are more important than saving the planet," Johan told SVT Halland. The affected administrations in the municipality are now investigating how the regulatory framework can be relaxed.

Focus on appearance rather than sustainability

Because the Swedish Planning and Building Act promotes sustainable practices, the legislation is not the problem. However, zoning plans and building permits often focus on the exterior - such as colors, materials, or roof pitch - and therefore overlook the sustainability perspective.

- To manage the climate crisis and take advantage of rapid technological development, zoning plans need to be more general to allow for future changes based on a climate perspective. "Today, zoning plans sometimes prevent good climate solutions," says Agneta Wannerström, climate and sustainability strategist at the construction company Skanska.

Include sustainability early in the process

The construction and real estate sector accounts for 21 percent of Sweden's total greenhouse gas emissions. In other words, the sector has great potential to contribute to better solutions. Several reports claim that the climate impact of the construction and real estate sector can be cut in half by 2030 if existing solutions are fully utilized.

But it also requires collaboration and innovation:

- Today, technological developments in sustainability are so fast that municipalities struggle to keep up. This is why it is smart to collaborate on complex issues like sustainability. Bringing in developers and other stakeholders early and working together is a prerequisite for introducing sustainable solutions," says Agneta Wannerström.