"Today, municipalities have 100 percent of the public risk - it doesn't work"

Now, researchers at Chalmers University of Technology in Gothenburg, Lund University and Luleå University of Technology have delved into industrial initiatives in northern Sweden. They largely confirm the conclusions of the Norrbotten report – and emphasize the importance of support for the establishment municipalities.

This spring, a group of members of the Royal Swedish Academy of Engineering Sciences, IVA, worked to develop a broader knowledge base about industrial initiatives in northern Sweden.

 “There are conditions for them to succeed and the state should play an important role in the process,” said the working group's chairman, Pontus Braunerhjelm, during yesterday's presentation of the conclusions.

In summary, the researchers conclude that industrial investments in Norrbotten have good conditions: there is clean energy, expertise, the right actors. But the permit processes are time-consuming, and the expertise base is a huge challenge. What is required is political will, long-term thinking and clarity. And not least a powerful and credible climate policy.

The researchers largely confirm the conclusions in Region Norrbotten's report on the socio-economic effects of the industrial transition, although they partly took into account slightly different things.

Risk of indebtedness

For example, industrial restructuring requires large amounts of capital. Industrial investments must be balanced against the risks of basic industry being locked into old technology for a long time to come. For municipalities and regions, there is the risk of incurring very large debts.

– Today, the municipalities have 100 percent of the public risk, and that doesn't work. So that's where the state has to step in. This applies to everything except industrial processes: housing, infrastructure and so on, said Pär Weihed, vice-chancellor of Luleå University of Technology and IVA member at the Department of Mining and Materials Engineering.

The researchers see that electricity production must double by 2045 and that much of it must be in place already by 2030. Therefore, the expansion of wind power is particularly important.

“Unfortunate with the polarization”

"It is mainly wind power that can meet the increased need until 2030. Nuclear power may come in sometime in the 2030s. It is therefore unfortunate with the polarization in the energy debate where wind power is pitted against nuclear power as this risks taking focus away from the real challenges that are about acceptance issues, permit processes and flexibility in the electricity grid," the summary states.

During the seminar, Filip Johnsson, professor at Chalmers and IVA member of the Electrical Engineering Department, emphasized the importance of government climate leadership and actually making decisions.

– Do we want this or don't we? If we want it, we have to compromise. Previously, municipalities received grants to map out where wind power was suitable, this should be reintroduced. Also agree on how to develop a system for offshore wind power.

“Stimulate skilled immigration”

A third obstacle is skills. The workforce must increase by 20 percent.

 – Measures are needed to stimulate skilled immigration, now it seems to be "fly in fly out" and a certain movement within the region. That is a process that makes it difficult to retain workers in other socially important functions, said Pontus Braunerhjelm.

A central question is precisely what role the state should and can play in the industrial transition in northern Sweden. IVA believes that there are clear answers to this question in economic research. It is justified for the state to intervene when there is:

• There are clear spillover effects that can be either positive or negative, such as carbon dioxide emissions that you want to reduce, or research and development that you want to promote.
• A technological development that is always uncertain in the early stages, private investors prefer to invest in old technology.
• When competition doesn't work. A current example is the Chinese state's heavy subsidies for Chinese cars.
• When there is a strong belief in shared societal benefits

However, one important piece of advice is to work with general structures.

– The state should not enter individual industries, the state should not compete with private initiatives, but ensure that the general conditions are expanded so that they can benefit everyone, said Kerstin Enflo, professor at Lund University, IVA member of the Economics Department.

Active industrial policy

An important message from the researchers to the government is that the state must develop the skills to pursue an active industrial policy:

"This means setting clear goals, monitoring, holding people accountable, being able to redirect projects that don't work, and learning from both mistakes and successes. Today, much of industrial policy (the Industrial Step, the Climate Step, the Green Credit Guarantees) is fragmented across different agencies. Not all industrial policy initiatives will be successful. If there were a guarantee of success, the policy wouldn't be needed."

The report and a summary are available here.

Text: Sara Stylbäck Vesa