Sweden has a huge task in 2023, as it holds the Presidency of the Council of the European Union (EU) in the first half of the year. Håkan Jevrell, the state secretary for trade, sat down for a brief interview with ESG and two other media outlets.

Jevrell begins by emphasising that the country is very keen to find solutions to climate change, especially by investing in science, research and innovation. “We want to build a sustainable society and planet for the future and for our children,” he says.

The following are excerpts from the interview.

ESG: What can we expect to see from Sweden in terms of sustainability in the next six months?

Håkan Jevrell: One of the priorities is really to find how the EU will be able to meet the needs of the future in a sustainable way. In this sense, it is very natural for us to say that the EU seeks partnerships with like-minded friends who are ready to address these issues. Generally, we want everybody to work on these issues, but those that show a little bit more interest makes it easier.

This is, of course, a general perspective. Putting it more into place is seeing how we can address the issue of free trade agreements because that is a clear tool of achieving this ... I do believe that free trade agreements, if that were to really move on, allow you to automatically get the political will when you engage in that way. 

Are there any challenges for the current government to continue policies of the previous administration?

In many political areas, we have different opinions. But when we talk about the issue of climate change and sustainability, I think we’re all very much aware of the situation and that we have to do whatever we can to hold [back] the rapid and steady increase of carbon dioxide in the atmosphere.

One very clear political difference is that this government is very open to new investments in the area of nuclear power. I just had a meeting with one of the Swedish developers of small modular reaction generators. There are other initiatives as well. In that sense, we see that, most probably, there will be an increase of nuclear power due to the stability it provides. However, that does not in any way exclude other sources of energy, like energy, wind and especially solar. 

Three sticking points in the EU-Malaysia relationship currently are the ban on products linked to deforestation, elimination of palm oil from biofuels and the carbon border adjustment mechanism (CBAM). What are your thoughts on these?

I can’t really tell the EU position on that. But our perspective is that in all areas, we need to move into sustainable ways of moving forward. When I woke up this morning, there was yet another article about how we are to use the resources of the Swedish forest. There is always a debate on what the timber as a product provides. It is a sustainable renewable resource but, on the other hand, it affects the forest.

Of course, we want to have a forest that is full of biodiversity. So, it’s interesting to discuss how to move forward when we talk about sustainable forestry. It’s up to every country to decide how to use their resources. But let’s have a discussion on how we can do it in a sustainable way.

As European companies adjust to CBAM and their own net zero goals, it will affect their supply chain, which could be Malaysian companies. How do you think it will influence Malaysia’s trade with Sweden?

This is a very tricky issue that we need to consider how to do it in the long term. That cooperation and sharing knowledge and working together is the future. We cannot expect everyone to immediately fulfil the requirements. We need to find processes for moving forward. I have spoken to many Swedish companies and they are very keen to work with suppliers to solve the issues that may lie ahead. 

Some Malaysian businesses think CBAM is punitive. 

I understand and I’ve heard it many times that CBAM might be considered [by some as] a sort of trade barrier. It’s a policy that is chosen to really spur innovation and change when it comes to sustainability. 

I would assume that some companies will be affected and may feel that they are not relevant any more. Some would see this as a great opportunity to innovate within their system and be part of it. 

I fully understand the concerns. We have an energy crisis in Europe now and it affects prices in Sweden. I spoke about [increasing] nuclear [energy] earlier. Regardless of energy source, it takes time to get it in place. So, this is a continuous discussion. 

It’s a balance. We must not forget the idea behind it is to decrease carbon dioxide for all of us. In every country, there is a discussion on how to do this. It’s also very clear there are massive interests in keeping the old fossil fuel system going. A lot of people depend on it for jobs. So, it is not just a scientific issue, it’s a political issue, where our leaders and your leaders have to make difficult decisions. It’s not easy.

Electricity production in Sweden has been powered by renewable sources — mainly through hydroelectric and nuclear power — since the 1970s. Wind power has begun to inch its way into the energy mix over the last decade, while biomass continues to be the main source of raw material for its district heating system. 

Interestingly, the country’s final energy consumption has been relatively stable since 1970, despite its increase in population from 7.5 million to 10 million. This can be credited to an emphasis on energy efficiency, according to Paul Westin, senior business developer at the Swedish Energy Agency.

SEA is the national authority for energy policy issues and is under the new Ministry of Climate and Enterprise. 

The big challenge is in transforming the transport sector, which is still supported by fossil fuels. Electric vehicles (EVs) currently comprise half of the sales of new vehicles now, says Westin, so the statistics may change. In addition, biofuels are making their way into buses and trucks. 

Meanwhile, the manufacturing sector is transforming to change its source of energy. But that leads to the second big challenge: The increase in demand for electricity in the transition. 

“The electrification of vehicles will not increase the demand for electricity by that much. But all the industrial developments north of Sweden, like the fossil-fuel-free steel and battery factories that we are building, will take a lot of electricity,” says Westin. 

Adding more nuclear power is a solution, but it comes with problems of security, difficulty in securing raw materials and concerns about nuclear waste, which is currently buried underground for 100,000 years. Small modular nuclear reactors are still not as common.

Injecting sources such as wind power is a good option, but it is an intermittent source of energy. So, there will need to be battery storage and smart grids.

“With batteries coming online in EVs, there will be a market for second-life batteries that are well suited to become battery storage in grids,” says Westin. Research on smart grids and efficient transport of electricity over long distances is rapidly picking up in Sweden.

How could Sweden ensure waste from its huge forestry and pulp and paper sector are sent to be incinerated and generate energy? One factor is the ban on sending organic waste to landfills. 

“We need heat in the cities. The combination of burning waste to produce electricity is a good fit for the Swedish system,” says Westin. 

“But we would like to prevent waste from being generated. We would like to reuse and recycle more before waste incineration.”

A tax on carbon and the EU’s emissions trading scheme, which puts a cap on emissions for industries, are contributing factors to the decarbonisation of industries. This makes the alternative of using fossil fuels more expensive. 

In addition, to encourage generation of renewable energy, producers are given green electricity certificates, which electricity sellers have to purchase, and energy-efficiency support schemes are introduced. Heavy industries can enjoy a lower tax rate if they implement energy-efficiency measures.

The Stockholm Royal Seaport is a former industrial site that produced natural gas. The land, owned by the City of Stockholm, has been redeveloped into a sustainable urban district with housing units and workplaces since the 2010s.

It is the second high-profile example of a sustainable city in Sweden after Hammarby Sjöstad, which is often cited as a successful urban renewal project. What used to be a run-down and polluted industrial area is now a city designed from scratch to be sustainable in terms of energy, water and waste.

These examples highlight the importance of putting in place good design and policies from the start to promote sustainable living. 

Transforming old industrial sites is not an easy task. The old gasworks were closed in 2010, and the city had to dig up contaminated soil left from decades ago. It also had to work with developers to meet its sustainability requirements, such as building green rooftops and solar panels.

Careful planning was needed to build a “five-minute city”, where residents can easily access public transport and amenities in that time without using vehicles.

Self-emptying trash cans and waste inlets were built. Waste thrown into the bins is sucked through underground pipes into a collection station, where some are recycled and others used to generate energy. This solves the problem of overflowing waste bins and eliminates the need for waste collection vehicles. 

“The base technology of moving waste through pipes is not new. But the way we’ve applied it here is new because we’ve introduced sorting in the system and made it digitalised. So, it’s more automated,” says Mattias Widell, head of strategy and business development at Envac North Europe, the company that built the waste collection system.

All residents are within 50m of waste inlets. When the waste inlets and bins are full to a certain level, they are automatically emptied. This makes it easy for residents to get rid of their waste, which they are required to separate according to categories. The city realised that using underground pipes to transport waste, much like how water and heat is distributed, is efficient.

“They decided that any new areas being built should have this system included from the beginning,” says Widell.

Steel manufacturing is called a hard-to-abate industry because of its high emission footprint and energy requirements. It contributes 10% of global carbon dioxide emissions, most of which is due to the use of the blast furnace and basic oxygen furnace, says Deloitte.

Given its huge potential for decarbonisation, there is a race to find solutions and decarbonise this industry. In Sweden, three major players — steel manufacturer SSAB, mining company LKAB and energy firm Vattenfall — came together to form Hybrit, which stands for Hydrogen Breakthrough Ironmaking Technology. The company’s mission is to produce fossil-fuel-free steel using hydrogen. 

Hybrit has replaced the blast furnace process that uses carbon and coke to remove oxygen from the iron ore with one that uses green hydrogen. The only by-product of this process is water.

Ulf Spolander, managing director of Hybrit, says: “The hydrogen is produced through electrolysis, where you split the water molecule into hydrogen and oxygen. To do this process, you need a lot of electricity. To get the carbon emissions down, the electricity used needs to be fossil-fuel-free. That is one main reason we are doing this initiative in Sweden, because we have a big surplus of fossil-fuel-free electricity.”

Hybrit, which has a pilot plant for research and development, is now planning its first industrial-scale plant, a project that requires major investments to kick in. Hybrit benefited from grants and collaborations with the Swedish Energy Agency, universities and the three owner companies. 

The goal is for Hybrit to help the three owner companies become carbon neutral. “It’s a total rebuild of Sweden’s iron and steel industry and the biggest industrial initiative in the country by far,” says Spolander.

Producing fossil-fuel-free steel will roughly double the demand for electricity in the short term, says Spolander. If wind power is used to meet this demand, it could cause volatility in energy supply.

“We need electricity around the clock for electrolysis. That’s also why we are doing another pilot project to store hydrogen, so we can produce hydrogen when it’s windy,” he says. 

On the other hand, he adds, fossil-fuel-free steel can be 20% to 30% more expensive than regular steel, and this depends on variables such as the price of carbon. Electricity and coal prices also play a part. The higher the price of electricity, the more expensive fossil-fuel-free steel becomes. Conversely, the higher the cost of carbon, the cheaper it becomes. 

Christer Ryman, director and head of regulatory affairs at Hybrit, says the subsequent rise in costs could be negligible. “State producers in Europe have been surprised by the market demand for this product. They are willing to pay extra for it. Even if you pay 20% more for fossil-fuel-free steel to produce your car, for example, the extra cost will be very small if you compare it to the price of the car.”