Climate policy in Sweden in the light of Fit for 55.

Sweden has long supported a more ambitious domestic climate policy than that required by the EU, providing strong incentives for some abatement options (e.g., switching to biofuels or electricity in transport) while other activities have faced a relatively low carbon pricing regime. The Fit for 55 package reduces this ambitions gap. This leads to the question: should Sweden continue to go it alone or harmonise its domestic policy with that of the EU? We use a computable general equilibrium model to assess the cost savings accruing to Sweden from introducing a more uniform domestic climate policy and trading emission-quota units with other member states. The results indicate that such a policy shift would be welfareenhancing. The analysis does not capture any losses to Sweden by being less of a forerunner (e.g., smaller demonstration effects). An EU-wide cost-benefit analysis of the policy reform would also consider the trade gains accruing to the countries that sell emission-quota units to Sweden. [ABSTRACT FROM AUTHOR]