Sweden Backtracks on Biofuel Mandate

Everyone makes decisions that they wish they could take back, like getting frosted tips in the 90s or listening to dubstep in the 2000s. Sweden’s 2020s regret: its latest biofuel regulations.

What happened: Earlier this week, Sweden’s coalition government decided to cut its biofuel blending mandates — the percentage of biofuels, like ethanol or biodiesel, that each liter of diesel or gasoline must legally contain. The mandate will drop from around 30 percent down to 6 percent starting in 2024.

• In countries around the world — Canada and the US included — governments have imposed biofuel blending targets to reduce the carbon intensity of fuel and improve its quality.

The global production of biofuels, like ethanol and biodiesel, has boomed as a result.

Biofuel production by region
terrawatt-hours equivalent

Slowing down on decarbonization: Biofuel blending is one of the world’s simplest, most mature ways to decarbonize transportation fuels. Critics of Sweden’s policy change believe that cutting blending mandates will prevent them achieving their ambitious 2040 goal of reducing total emissions by 75 percent from 1990 levels.

• Transportation makes up about 30 percent of Sweden’s total carbon emissions and, without mandates, there is little incentive for fuel producers to blend biofuels into their networks. Doubly true, given how expensive biofuels can be.

Sweden’s greenhouse gas emissions by sector, 2019
carbon dioxide equivalent

The math is simple: lower mandates, lower costs

According to the government, cutting back blending mandates could reduce the average price of fuel by over 25 percent. For a country facing a continued rising cost of living — and who isn’t these days — the actions suggest that Sweden is prioritizing affordability over climate action, at least for now.

The big picture: While increasing our use of biofuels is a clear way to help achieve global decarbonization, the reality is that producing fuels from crude oil is simply cheaper and easier than producing fuels from, well, anything else.

Without long-term government policies like blending mandates, putting a price on carbon, or incentivizing production through credits and penalties, the renewable fuels industry wouldn’t exist as we know it today.

The bigger picture: The risk for biofuel fuel producers and would-be investors is the industry’s dependance on government policy to be successful. What happens if governments change their mind?

With the exception of assembling bedroom furniture in a fury that only a small IKEA-provided Allen wrench can invoke, what happens in Sweden doesn’t necessarily happen everywhere else in the world. But as countries face mounting pressure to combat inflation and debt ceilings, these sometimes-expensive renewable fuel policies are at risk of being watered down.

+Additional Reading:Sweden to cut biofuel additives in gasoline and diesel

++Additional Reading:Swedish Energy Agency: GHG Reduction Mandate