Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: Swedish transportation has a high reliance on biofuels, accounting for approximately 20% of total energy demand in 2019 for transportation, excluding electricity. This makes Sweden an exceptional opportunity to study the interaction between climate policy and fuel security objectives in a small open economy with no domestic oil production. Despite this high reliance, we estimate Sweden’s fuel security premium to be upwards of 0.065 EUR per liter diesel equivalence (or 12.6 USD/barrel) of imported oil, which is comparable although lower than similar estimates for the USA. We then discuss fuel security policy related to specific fuels including HVO/FAME, biomethane, and electricity. We conclude that electricity, and to some extent biomethane, are the most promising in terms of their potential to support fuel security objectives and reduce greenhouse gas emission.

Keywords: Fuel security premium; renewable fuel; climate policy; biofuels; electricity

JEL-codes: Q42; Q43; Q58

Language: English

23 pages, August 26, 2024

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