Anyone doubting that government standards, requirements, taxes and incentives can't spur markets and be effective hasn't taken a close look at Sweden's policies on greenhouse gas reduction and global warming. The country has an ambitious energy policy agenda that includes programs and measures to increase energy efficiency, and to introduce new renewable energy technology. Environment taxes, fees and other economic instruments are widely used in Sweden. As of 2004, the government had implemented nearly 70 market-based instruments, such as taxes on carbon dioxide in the energy and transportation sectors.

The government has also invested in efforts to reduce the country's energy consumption. For example, the 2007 energy budget for research, development and demonstration is SEK$816 million (US$117 million). The result of these efforts is an economy in which environmental technology is one of its biggest industries. According to Statistics Sweden, the environment sector has annual sales of SEK$240 billion (US$34.3 billion) and employs approximately 90,000 people. Plus it's effective. "Since 1990, our carbon dioxide and greenhouse gas emissions have decreased by 7 percent," Environment Minister Andreas Carlgren says. "Meanwhile, the Swedish economy has grown by more than 36 percent.… We have shown that it's possible to decouple economic growth from increases in emissions."

The impetus behind these policies is to curb global warming. Because of its northern location, Sweden's climate is more susceptible to climate change. In fact, Leif Kullman, professor in the Department of Ecology and Environmental Sciences at Umeå University, identified a trend that is caused by warmer temperatures. Kullman published a report on the country's alpine timber line in the January issue of the Journal of Ecology, in which he found that the entire sampled population of Scots pines increased by 50 percent during the 32-year observation period between 1973 and 2005. In other words, certain plants are moving up in elevation and latitude to areas that were formerly inhospitable.

A changing local climate is cause for concern, but Sweden's progressive policies towards fossil fuel independence were in the works long before global warming became a hot topic. "The oil crisis of the 1970s spurred a thorough political debate on energy policy," Carlgren says. "Energy efficiency, economic instruments, bioenergy and district heating are important pieces in the jigsaw puzzle that have enabled us to reduce our emissions of greenhouse gases."

Last year, the government announced intentions to completely break the country of its dependence on fossil fuels by 2020, citing global warming as the driver. The Swedish Parliament has endorsed the goal of reducing national emissions of greenhouse gases by at least 4 percent on average below 1990 levels by 2008 to 2010. Additionally, the government says the environmental quality objective of reduced climate impact implies that Swedish emissions of greenhouse gases should decline by up to 50 percent from present levels by 2050. This would reduce the national average for emissions per resident from eight metric tons of carbon dioxide to below 4.5 metric tons.

As a result of its aggressive policies, the country today gets most of its electricity from nuclear and hydroelectric power. In the transportation sector, Sweden is ahead of its European counterparts in the use of biofuels. Sweden and Germany were the only countries that met the 2005 deadline of the European Comission's biofuels directive, which instructed member countries to replace 2 percent of all gasoline and diesel with biofuels by the end of 2005. Sweden exceeded the 2005 target with a 3 percent market share decrease by primarily using ethanol.

Sweden was able to meet the target by using a 5 percent ethanol blend. According to Statistics Sweden, gasoline blended with at least 5 percent ethanol made up 90 percent of the gasoline pool in the second quarter of 2005. This number was up from 81 percent in the same quarter of 2004. The European Union Fuel Directive (98/70/EG) requires a 5 percent ethanol blend but doesn't permit a 10 percent blend. The Swedish government has petitioned the European Commission to allow the use of E10.

Sweden has invested in its ethanol infrastructure, and with good reason. Unlike much of Europe, where diesel is the mainstay, gasoline is the most common motor fuel in Sweden. In 2005, there were 4.3 million vehicles on the road. Approximately 4.1 million of those were gasoline-powered cars, while just 231,287 were diesel, according to a report on vehicle usage by Statistics Sweden. Although ethanol isn't the only alternative Sweden is pursuing, it's a logical first step for a gasoline-based transportation system.
Despite its progress, Sweden's vehicles remain largely fossil-fuel dependent. "The transport sector is Sweden's single- largest source of greenhouse gases," Carlgren says. "Here, emissions are still increasing. Action is necessary, and new technologies are needed."

Just as the government is utilizing a multi-pronged approach to reduce greenhouse gases, the measures it has proposed in the transportation sector are also diverse and far-reaching. A tax on carbon dioxide was introduced in 1991 and has been raised a number of times to its current rate of SEK0.91 per kilogram (U.S. 12 cents per kilogram). A similar carbon-dioxide-based vehicle tax was introduced in 2006. Instead of weight, vehicles are taxed on carbon dioxide emissions. To further prompt car buyers to purchase fuel-efficient vehicles, the government is considering either a vehicle tax reduction or a bonus paid to anyone who buys a light-duty vehicle with extremely low carbon dioxide emissions.

In its quest to reduce greenhouse gases, fuel efficiency is one prong, and fuel source is another.

The government offers tax relief to people who use environment-friendly fuels and green cars. Vehicles using carbon- dioxide-neutral fuels, which include biogas and ethanol, are exempt from both the carbon dioxide tax and energy tax for a five-year period. "The effect has been significant," Carlgren says. Green company cars are also given preferential tax treatment. Additionally, the government has mandated that 85 percent of all cars purchased in 2007 by the public sector (and at least 25 percent of emergency service vehicles) are required to be green. Subsidies are also available for local incentives, such as reduced parking fees and parking lots dedicated exclusively for biofuel-powered vehicles, Carlgren notes.

A mandate has also been put into place to ensure that there are ample supplies of renewable fuels. As of April 2006, all major fuel stations must offer at least one renewable motor fuel. The BioAlcohol Fuel Foundation reports that in 2006, 652 fueling stations offering E85 opened (see chart on page 112). This is compared with the 677 stations that were opened in the previous five years.

FFVs in Sweden
Sweden's political and economic environment is ripe for the sale of flexible-fuel vehicles (FFVs). According to the BioAlcohol Fuel Foundation, 48,486 FFVs were purchased in 2006, more than double the 22,618 bought in 2005 and close to four times as many as were sold between 2001 and 2004. BioEthanol for Sustainable Transport (BEST), a Swedish-led collaboration of European countries and companies designed to promote ethanol in Europe, credits the 2006 rise in FFV sales to government programs and the introduction of more FFV makes and models.

Ford Motor Company pioneered the Swedish market and thus the European market in 2001 with its Ford Focus FFV. In 2003 and 2004, more than 80 percent of environmentally responsible cars sold in Sweden were Focus FFVs, according to the company. In 2006, nearly 40 percent of all Ford sales in Sweden were FFVs.

"The outstanding success of bio-ethanol as a fuel and the performance of Ford's FFVs in Sweden is a prime example of what can be accomplished through cooperation and partnership between companies from different industries, local and national government, and non-governmental organizations," said Wolfgang Schneider, vice president of Governmental and Environmental Affairs for Ford of Europe when it joined the BEST.

Ford also owns Volvo Cars. Using Sweden as a springboard, Volvo Cars now offers three of its nine models, the C30, S40 and V50, as FFVs in nine European markets. In December, Volvo unveiled a XC60 concept car, its first six-cylinder FFV engine, which is optimized for E85. "We believe that the flexi-fuel has great potential also for larger engine sizes, and we are planning to expand our range of bio-ethanol-powered engines in the coming years," Magnus Jonsson, senior vice president of research and development at Volvo Cars says. Volvo Cars predicts sales of 7,000 flex-fuel cars in 2007 in all markets.

Saab also released a concept vehicle at the 2007 Detroit auto show. The General Motors (GM)-owned company says the Saab BioPower Hybrid Concept is converted to run solely on ethanol, with the added propulsion of GM's new two-mode hybrid system. Saab released its 9-5 BioPower FFV in Sweden in 2005.

Light-duty vehicles aren't the only ethanol-powered vehicles on the road in Sweden. Scania Bus produces buses in Sweden that can run on E95. The company developed ethanol-powered buses in the mid-1980s in close cooperation with Stockholm Transport. "After more than 15 years of regular, full-scale operation in tough city conditions, Stockholm Transport considers it a fully proven bus technology," the company says. Scania has produced 600 ethanol buses and plans to introduce its third-generation ethanol engine this year. Scania ethanol buses are on operating trials in cities in Spain, Italy and Poland.

By taking the initiative in energy policy, Sweden has been the starting point for companies to develop FFVs and other products, and then expand into other European markets. Through its involvement in BEST and other initiatives, the country may export its market-based policy philosophy, as well. To that end, Sweden will hold the presidency of the European Union in 2009. The Environment Ministry is preparing for it, noting that Sweden's presidency may turn out to be crucial for the global climate.

Anduin Kirkbride McElroy is an Ethanol Producer Magazine staff writer. Reach her at amcelroy@bbibiofuels.com or (701 746-8385.