European Union climate policy threatens to wreck Sweden's forestry sector^*, warns Viveka Beckeman, Director General of the Swedish Forest Industries Federation Skogsindustrierna. According to a new report, the sector could lose as much as 41 billion Swedish kronor a year.

European Union rules could cost Sweden's forestry sector as much as 41 billion kronor in a single year. That is the finding of a recently published report by the Swedish Forest Industries Federation. "For a sector that is already on its knees, these rules could seriously aggravate an already difficult situation," Beckeman stresses. "Ultimately it could create such a large risk that companies are driven out of the market."

A fight to the knockout

The heaviest blow is expected to come from the Land Use, Land Use Change and Forestry Regulation (LULUCF). The regulation aims to increase the absorption of carbon dioxide in forests and soils in order to offset European Union emissions. The forest sector** expects the implementation of the LULUCF regulation to result in a loss of added value of up to 27.5 billion euros a year. That is a substantial blow. It should be stressed that, because the tools for measuring emissions are unclear, the consequences are hard to predict. In 2024, for example, Sweden exceeded the target by several million tonnes, whereas the year before it fell short by 19 million tonnes. Such wide variation in the measurements makes it difficult for decision-makers to determine what measures are needed.

It is not only the requirements to reduce felling that risk hitting the sector hard. The LULUCF regulation also affects companies' willingness to invest and their ability to plan their operations, Viveka Beckeman notes: "Investments have been made on the assumption that a certain volume of timber is available to count on. If land is suddenly taken out of production, the impact will be very severe."

Interpretations of the regulation

The Nature Restoration Regulation – a law intended to restore Europe's ecosystems and strengthen biodiversity – could also have significant consequences. The forest sector risks losing roughly 13 billion in added value a year. The sector expects the government to step in to the tune of 175 billion Swedish kronor, including compensation for landowners who are prevented from managing their forests. It has to be said that the possible consequences depend very much on how the Swedish authorities choose to interpret the Nature Restoration Regulation. The European Union allows a degree of flexibility in implementing this law, based on the circumstances of each country.

Industry representatives say the Swedish Environmental Protection Agency has a tendency to over-interpret directives. "At least that is how we in the forest sector see it," Viveka Beckeman stresses. Ultimately the Swedish government will decide whether the plan is to be submitted to the European Commission this autumn.

Forestry in the crossfire

European Union rules are seen as too complicated and too expensive to comply with. And where the climate is concerned, they are aimed above all at forestry. Why? "Because it is regarded as the easiest solution," says Viveka Beckeman critically. "It is far harder to phase out the internal combustion engine and get the whole German car industry behind it than it is to tell Swedish and Finnish forest owners that they have to cut felling. Every blow is aimed at the forestry sector. It was done in order to find quick fixes."

Following pressure from the German car industry, the European Union scrapped the ban on producing cars with fossil fuel engines after 2035.

There are, of course, objections within the European Union to legislation such as the LULUCF regulation, but no steps have yet been taken to hear those objections and change the situation. Even so, given the shifting circumstances in the car industry, the forest sector hopes for a more receptive response from the European Union institutions. "I want to believe, and I hope, that there is scope for a better dialogue to refine these rules," Viveka Beckeman says hopefully.

More expensive transport

Swedish forestry is also heavily affected by rising transport costs. Since 2010, rail charges for heavy freight have risen by 600%. The forest sector warns that rail transport costs are starting to reach dangerous levels.

Higher charges have made sea transport considerably more expensive as well. This is due both to the ETS*** and to FuelEU Maritime, legislation intended to reduce the climate impact of shipping. At the same time, the availability of fossil fuel is limited, which is also pushing prices up. This year the sector is expected to pay 116 million kronor more in rail charges and 514 million kronor more in shipping. The long distances over which timber has to be transported have always been a competitiveness problem for Sweden's forestry sector.

* The Swedish Forest Agency estimates that 1.6 million hectares of productive forest land are at risk of being taken out of use. That corresponds to a loss of 8 million cubic metres of raw material a year and a loss of 13 billion Swedish kronor in added value.
** More than half of Sweden's pulp and paper mills will lose the ability to sell emission allowances this year, which for the companies means a drop in revenue of roughly 1.5 billion Swedish kronor a year. Once the companies are no longer covered by the ETS, they will also have to pay carbon dioxide tax in Sweden, at an estimated cost of 130-250 million Swedish kronor.
*** ETS – the emissions trading system, from which several of Sweden's forestry giants have been excluded because of their low emission levels.