The Swedish export credit system enables major fossil fuel investments abroad- despite Sweden’s climate ambition

Climate change is a threat to our civilisation; urgent action is needed to avoid catastrophic consequences. Sweden has taken the lead in the global battle against climate change, but there are still neglected areas in Swedish climate policy. A new report from the Swedish Society for Nature Conservation reveals that Swedish government-backed export credit system still enable fossil fuel investments abroad.

In Paris in 2015, Sweden, along with the rest of the world, agreed to limit global warming to well below 2°C and pursuing efforts to limit it to 1.5°C, and to ”making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”. These goals are interlinked since limiting global warming is possible only if financial resources are diverted towards carbon-neutral technologies such as renewable energy, and if financial incentives for, and support to, industries related to fossil fuels are quickly removed.

In accordance with the commitments made in Paris, the Swedish Government has stated that Sweden is to become the world’s first fossil fuel-free welfare state.  In order to realise this ambition, it must include all financial actors and their national and international operations. As the principal of agencies and state-owned enterprises which offer financial services, the Swedish Government is responsible for ensuring that these actors’ operations are compatible with Sweden’s ambitions and international climate goals.

However, a new report from the Swedish Society for Nature Conservation reveals the Swedish government-backed export credit system annually offer export credits (incurrences and beneficial loans) worth millions of dollars to fossil fuel operations abroad, with the aim to promote domestic export industry. The system consists of the Swedish Export Credit Agency, that offer insurances, and the Swedish Export Credit Corporation, that offer beneficial loans. Between 2014 and 2018, the Swedish Export Credit Agency issued guarantees to fossil fuel projects to a value of USD 628 million. This corresponds to 2.3 per cent of the agency’s total guarantee volume for that same period. In 2018, the Swedish Export Credit Corporation’s gross lending to fossil fuel was USD 268 million, with another USD 2 billion being lent to fossil fuel-dependent infrastructure. Altogether, this constitutes 6.5 per cent of the corporation’s total gross lending.

The Swedish government-backed export credit system is thus incompatible with the Paris Agreement and the Swedish Government’s ambition to make Sweden the world’s first fossil-free welfare state. It is difficult to comment on the environment and climate consequences of the fossil fuel operations that are being realised via the export credit agencies as the information available about the projects is limited. Available information reveals that the operations have major greenhouse emissions, potentially negative impacts on local environments and populations. They also risk causing a lock-in to inefficient, fossil fuel-reliant technologies.

As the export credits to fossil fuels constitute a fairly small part of the Swedish export credit agencies’ total business, the introduction of restrictions on fossil fuels should not have a significant impact on Sweden’s domestic export industry. It is necessary, and possible, for the Swedish Government to introduce restrictions on fossil fuel in order for the Swedish government-backed export credit system to be compatible with the Swedish climate commitments and international climate goals. This would make Sweden the first country in the world with a fossil-free export credit system. It would send a clear signal to other governments that export credits should not be used for operations which contribute to an unsustainable reliance on fossil fuels. This is of great importance since officially supported export credits globally contribute to major investments in fossil fuel projects.