Sweden’s forestry sector, including its sawmills and pulp industries, is facing a tough future. A new report from the Swedish Forest Industries Federation (SFIF) has raised alarms over rising costs that are expected to total SEK 2 billion (€270 million) by 2026. This surge in costs stems from a combination of increased carbon charges, transport price hikes, and stricter environmental policies.

Cost Increases Driven by Green Regulations

The most significant increase in costs comes from reforms to the EU Emissions Trading System (EU ETS). Under new rules that took effect this year, Swedish mills that produce fewer than 5% of their emissions from fossil fuels no longer qualify for free carbon allowances. Sweden’s mills, which are 96% fossil-free, are now subject to an annual charge of SEK 1.85 billion (€160 million). Despite Sweden’s forestry sector being one of the cleanest in Europe, the new carbon-related expenses will significantly impact their bottom line.

The EU ETS changes come at a time when Sweden’s green policies have been growing increasingly stringent. The move puts additional pressure on a sector that already operates with low carbon emissions. While the Swedish pulp and paper industries have made great strides in reducing their environmental impact, these new regulations create a financial burden.

Transport Costs Soar Amid Policy Shifts

Alongside the carbon charges, transport costs are another significant challenge. Freight charges for heavy rail transport have soared by more than 600% since 2019, adding SEK 100 million (€9 million) to expenses. These price increases are expected to continue, with a further 15% rise in rail charges included in the 2026 state budget. This steep increase threatens the viability of rail transport, which is central to Sweden’s low-carbon logistics.

The higher freight costs are compounded by new EU regulations. The introduction of measures such as the extension of the EU ETS to shipping and FuelEU Maritime will drive up maritime transport costs. These changes are expected to increase shipping charges by SEK 400 million (€35 million) between 2024 and 2026. Given that over 80% of Sweden’s forest products are exported by sea, these rising costs will have a substantial impact on the sector’s competitiveness.

EU Nature Restoration Regulation Poses Further Threats

The Swedish Forest Industries Federation also warns of the long-term structural risks posed by the EU Nature Restoration Regulation. If large areas of productive forest land are withdrawn from use to meet the EU’s restoration targets, Sweden could lose up to 1.6 million hectares of harvestable forest. This would result in a reduction of 8 million cubic metres of raw materials each year.

The report highlights that such a reduction would not only diminish Sweden’s timber supply but also lead to the loss of over 11,000 jobs in the forestry sector. In addition, the industry’s value-added contribution to the economy would shrink by SEK 13 billion (€1.2 billion).

The SFIF believes that the EU’s restoration targets could drastically reduce Sweden’s ability to remain competitive on the global market. With other regions in Europe and beyond facing lower regulatory burdens and more stable policy environments, Swedish forestry businesses may find it harder to maintain their position as one of the world’s largest exporters of pulp, paper, and sawn timber.

Urgent Call for Policy Coordination

To avoid jeopardising Sweden’s place in global markets, the Swedish Forest Industries Federation is calling on the Swedish government to adopt a more coordinated approach to taxes, fees, and climate policies. The federation believes that aligning Sweden’s green policies with industry realities will be key to preserving the competitiveness of the forestry sector.

The report stresses that Sweden’s forest sector plays a crucial role in the country’s green transition. However, with mounting costs and uncertain political developments, the industry is facing significant challenges. Without a clearer and more predictable policy landscape, Sweden risks undermining one of its key export engines.

As Sweden navigates its green transition, its sawmills and pulp industries are feeling the strain. The rising costs from the EU’s carbon and transport policies, coupled with the potential loss of forest land, present a serious threat to the sector’s future. The Swedish Forest Industries Federation urges the government to consider the long-term impact of these policies on the country’s competitive edge in the global market. Failure to do so could result in lasting damage to Sweden’s forestry industry and the economy as a whole.

Source: skogsaktuellt.se