By Jon Pareliussen, OECD Economics Department
“When I say ‘climate change’, what do you think of? I think of jobs – green jobs (…). Hope is not blah blah blah (…) hope is taking action (Greta Thunberg, 2021).”
Calls for a rapid green transition have followed us from Rio and Kyoto in the 1990s, to Paris and Sharm El Sheikh more recently. The calls have grown more desperate over time while emissions have continued to increase. However, as Greta Thunberg urged world leaders to move from talk to action during a 2021 climate summit in Milan, wheels were literally being put in motion at a factory in Braås, Sweden. In October the world’s first vehicle built from fossil-free steel rolled out the factory doors. The steel was produced in Luleå, Sweden in August the same year with hydrogen instead of coal for the first time in history. As described in the 2023 OECD Economic Survey of Sweden, green steel is just one part of a green wave of industrial development washing over Sweden, powered by abundant clean electricity notably in its Northern regions.
This nascent green industrial revolution was made possible thanks to a comprehensive and relatively efficient policy package comprising carbon pricing, subsidies, and regulations. These measures have helped cut greenhouse gas emissions by more than half since the 1970s. As the EU’s climate ambitions are converging towards Sweden’s and EU-wide policy instruments such as the Emissions Trading Scheme (EU ETS) are expanding to new sectors of the economy there is considerable hope that other countries will follow Sweden’s lead.
One might think that such radical change would trigger angst over industrial death and worker displacement, but the opposite is the case. Policy consistency and systematic dialogue between industry and government under the umbrella of “Fossil-free Sweden”, have made Swedish companies the most climate-conscious in the OECD (Figure 1), replacing nail-biting and resistance with green investment and green jobs.
Today’s worries revolve around how to meet rising demand for skills and how to supply adequate public and private services, housing and infrastructure, especially since the green wave’s epicentre is Sweden’s north, an area in demographic decline for decades. Another major challenge is maintaining momentum. For this, Sweden will need to roughly double its electricity generation with renewables and nuclear power and invest in plannable electricity generation capacity, storage and transmission. Plans for considerable investments exist and financing seems to be readily available, but long and complex planning and permitting procedures need to be streamlined.
What next? The big picture is that Sweden’s green industrial revolution is gaining considerable momentum. Russia’s war of aggression against Ukraine and the ensuing energy crisis further increased the urgency of investments in clean energy and infrastructure. But just as national policies mattered in the past, they will continue to matter in the future. The government recently drastically cut mandatory biofuel blending in gasoline and diesel, thus placing Sweden on a trajectory to miss its 2030 emission reduction target by a margin. It should use the National climate action plan due this fall to sharpen policies for transportation, agriculture and other emissions outside of the EU ETS, and incentivise carbon uptake in Sweden’s forests as well as engineered carbon capture, usage and storage. Removing fuel tax cuts put in place during the energy crisis and remaining exemptions from the carbon tax are important first steps. This is the Government’s chance to convince the world that Swedish climate policies remain, as in the past, much more than just blah blah blah.
Further reading:
OECD Economic Survey of Sweden (2023), OECD Economic Surveys: Sweden 2023, OECD Publishing, Paris.
G. Thunberg (2021), ”blah blah, blah”, Speech held at the 2021 preCOP26 Youth4Climate Conference in Milan in September 2021.