Prerequisites for a green structural transformation of Swedish industry
– synthesis report
In order for the government’s environmental and climate objectives to be attained in parallel with positive economic development, a green transformation of industry is needed. This synthesis report summarises the results and lessons learned from five different studies conducted within the scope of Growth Analysis’ government assignment “Green Structural Transformation” (RB6:2012). The objective of the assignment is to produce material that can contribute to more effective and cost-efficient policy.
A more effective and more cost-efficient mix of climate policy instruments
The aim of Swedish climate policy is to use the price mechanism to the furthest possible extent to drive change. This is achieved in part by putting a price on negative (external) effects on the environment such as carbon dioxide emissions, and in part by using specific policy instruments to promote innovation and technological development (positive external effects). Our analysis of the prerequisites for green structural transformation shows that the current framework includes the required policy instruments, but that their implementation needs to be sharpened considerably.
- Increasing the cost-efficiency of the Swedish climate policy framework. Today, the price of carbon dioxide emissions varies considerably between different actors on the market. Reductions and exemptions may be justified to reduce the risk of production moving to countries with weaker or no climate policy regulation. However, if reductions are needed other tax breaks (instead of carbon tax reductions) should be considered in order not to undermine the climate policy framework’s effectiveness and cost-efficiency.
- Accelerating technological development through the use of specific policy instruments. The objective is not to “pick winners”, but rather to ensure a broad line-up of technologies that have the potential to contribute to major emissions reductions and reduce the cost of achieving the government’s climate objectives. Specific policy instruments also aim to increase efficiency by addressing other market failures.
- Tailoring policy to increase effectiveness and efficiency. Growth Analysis’ case studies show that the possibilities for change differ among different types of companies. The opportunities for large firms differ from those of small ones. Capital-intensive firms face different challenges than labour-intensive ones. The conditions of firms that are subject to international competition differ from those that are not. Knowledge about these differences can contribute to greater efficiency.
Green transformation of industry could improve global competitiveness
Growth Analysis’ studies show that without a more powerful climate policy framework, the conditions for a green structural transformation are poor. In addition, Growth Analysis’ studies indicate that consistent policy could help strengthen Swedish companies and position Swedish production in value chain niches with comparatively higher value-added, which better match Sweden’s comparative advantages.