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FINANCING THE DECARBONISATION OF HEAVY INDUSTRY SECTORS
IN SWEDEN

New research from Stockholm Sustainable Finance Centre on a low-carbon transition for different industrial sectors reaches a surprising conclusion: the chief barrier to industrial transition is not a lack of capital, but the absence of clear policies on incentives for green transitions linked to biofuels for transport, waste management and carbon capture and storage.
A new report by researchers from Stockholm Environment Institute, host organization for Stockholm Sustainable Finance Centre, shows that it will not be especially demanding to meet the investment needs for decarbonizing heavy industry in Sweden: around SEK 66 billion of investments additional to those needed to maintain current production levels, using existing technologies, would be required. Capital needs to decarbonize industry through to 2045 are thus a little more than one-tenth of the planned transport infrastructure effort over the coming decade.

The report shows large differences in how much the production costs increase in each sector as a result of net-zero transition. Increased production costs must be covered by either higher prices (which would mean that consumers would need to pay a higher price for reduced emissions), or new policy measures that would cover the additional costs, or by increasing the price of emissions. 

However, the real barriers to decarbonizing heavy industry are not financial; they are linked to policies, regulations and technological development. From a business perspective, uncertainty about long-term policies make investments in transitioning risky. Clear and long-term policy frameworks reduce uncertainties and allow actors to better see what investments will be economically viable.