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Swedish government raises the bar on renewable transportation fuels

The Swedish government has announced its intention to strengthen transportation fuel switch by incrementally increasing reduction levels in the reduction obligation until 2030 with a control station 2022 along with a fuel reduction obligation for aviation. The government's proposal is based on an agreement between the governing parties, the Center Party, and the Liberals and is one of the most important instruments for reducing greenhouse gas (GHG) emissions for achieving Sweden's climate goals.

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The Swedish government has announced its intention to strengthen transportation fuel switch by incrementally increasing reduction levels in the reduction obligation until 2030 with a control station 2022 along with a fuel reduction obligation for aviation.

In Sweden, the switch from fossil to renewable transportation fuels is being carried out through a reduction obligation quota, which means that fuel suppliers must reduce greenhouse gas (GHG) emissions from petrol and diesel by blending sustainable biofuels.

According to the government, this has great potential to reduce GHG emissions from the transport sector and work machines, which together account for close to 40 percent of the country’s GHG emissions. The reduction obligation makes it possible to reduce emissions while using the existing vehicle fleet.

The reduction obligation gives a “clear signal” of a stable and increasing demand for sustainable renewable fuels. It provides conditions for the industry to invest in production capacity. Sweden is well placed to increase the domestic production of sustainable renewable fuels with a low climate impact.

Increase 2030 reduction levels

The government announced on September 11 that it intends to decide on gradually increasing quota levels in the reduction obligation until 2030. The focus is on a linear path with indicative levels for 2030 of 28 percent for petrol and 66 percent for diesel, with a control station in 2022.

From the entry into force of the legislation, no earlier than June 30, 2021, means a reduction level of 6 percent for petrol and 26 percent for diesel, compared with the reduction levels of 4.2 percent for petrol and 21 percent for diesel applicable in 2020 and until the new legislation enters into force.

Preliminary calculations suggest that the indicative levels are expected to contribute to reduced emissions of approximately 6–7 million tonnes of carbon dioxide equivalents by 2030.

To mitigate the anticipated increase in fuel prices at the pump on account of increased biofuel blending, the government proposes that the Gross Domestic Product (GDP) indexation of petrol and diesel be paused until the control station for the reduction obligation in 2022.

This means that the energy tax on petrol and diesel in 2021 and 2022 is only calculated with regard to changes in the consumer price index (CPI).

Implement biojet inquiry proposal in 2021

The government also announced its intention to implement the proposal from the Biojet for Aviation inquiry (SOU 2019: 11) on a reduction obligation for domestic aviation, which is set at 0.8 percent in 2021 rising to 27 percent in 2030.

The changed reduction levels for petrol and diesel as well as a reduction obligation for aviation are proposed to enter into force in 2021 and are expected to take effect no earlier than June 30, 2021. For petrol and diesel, the 2020 levels will apply from January 1, 2021, until the new levels enter into force.

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