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12. Domestic transport

12.1. Introduction and summary

The Nordic domestic transport sector emitted 51 million tonnes of CO2e in 2021, corresponding to 34% of the total Nordic emissions when including the LULUCF sector. Leaving out emissions/removals from LULUCF, the Nordic domestic transport sector was responsible for 26% of total net GHG emissions in the Nordic region.
This chapter covers domestic emissions from fuels used for different modes of transportation. It does not include international shipping and international aviation.
From 1990 to 2021, the GHG emissions from the Nordic domestic transport sector were reduced by 3 million tonnes of CO2e, corresponding to a 5% emission reduction in the sector. Finland and Sweden in particular contributed to this reduction with domestic transport emission reductions of 17% and 23%, respectively, from 1990 to 2021. In Iceland, Norway and Denmark, domestic transport emissions increased by 45%, 24%, and 14%, respectively, in the same period.
Figure 17, below, shows the development of the Nordic domestic transport sector’s GHG emissions.
Figure 17: GHG emissions from domestic transport across the Nordic countries 1990-2021
Note that the memo items ‘international shipping, bunkering and international aviation’ are not included in the emissions above. From 1990 to 2021, the total emissions of the Nordic countries from these items increased slightly (6.7%). Numbers for 2021 might be skewed due to the global pandemic (2019-2021), however, and the development from 1990 to, e.g., 2018 shows an increase of approximately 46% (equal to 13.5 million tonnes’ CO2e).
Across the Nordic countries, the emissions in domestic transport have been addressed with a range of initiatives primarily focused on road transport and passenger cars. Electrification of the car fleet has accelerated across the Nordic region in recent years, with Norway as a frontrunner in electrical vehicle uptake. In Norway, electrification of short-range ferries has also been a success. Biofuels and blending requirements, partly driven by EU regulation, have also played a large role.
There are, however, still challenges to overcome to reduce emissions in this sector. The table below provides an overview of GHG emissions and developments in 1990, 2010 and 2021In addition, Table 6 summarises the main country challenges described in the section later in this chapter.
Emis­sions, 1990
Mt CO2e
Emis­sions, 2010
Mt CO2e
Emis­sions, 2021
Mt CO2e
Table 5: The domestic transport sector across Nordic countries – a summary
Summary of main challenge(s)
  • Emissions from road transportation decreasing too slowly despite policies promoting new EV registration
  • Reducing emissions of heavy trucks
  • Decisions to cut the blending obligation
  • Political challenges in using pricing (taxes, road charges) to steer demand
  • Emissions are rising despite electrification efforts due to increased transport demand
  • Lack of transparency and foresight in the use of economic instruments
  • Lack of targets and initiatives in harder-to-mitigate sectors (incl. heavy duty vehicles, aviation and domestic shipping)
  • A combination of topographical, technical and financial challenges
  • Lack of development of climate-friendly designs and fuels in deep-sea shipping
  • Lack of broad political agreements about long term and stable conditions for fuels and electro-fuels, including the production of biofuels in Sweden
  • Lowered GHG reduction mandate
  • Need for supplementary policy measures which enable rapid electrification and increased transport efficiency
Table 6: The domestic transport sector across the Nordic countries – summary of main challenges
Despite previous efforts, emissions in the transport sector remain high across the Nordic region, with almost no actual GHG reductions compared to 1990. Further electrification of the private car fleet, enhanced public and multi-modal transportation and plans to decarbonise heavy transport are part of the plans and strategies towards a domestic transport sector aligned with a climate neutral pathway.  
There are many challenges in reducing emissions from the Nordic domestic transport sector. In this report, we have singled out the following two cross-Nordic challenges:
  • determining the future role of biofuels
  • phasing out ICE (Internal Combustion Engine) car dominance.
In the transport sector, we see the following opportunities for creating added Nordic value through collaboration:
  • joint analysis of development, production and use of biofuels in the Nordic region
  • developing a Nordic roadmap for the sustainable production and use of biofuels and synthetic fuels
  • developing a strategy for how to reallocate ICE cars to those users and uses that would have the lowest travel needs and a supporting assessment framework to identify the GHG trade-offs of different policies
  • supporting urban action plans for zero emission passenger and freight transport
  • knowledge-sharing on promoting public transport.

12.2. Status of the transport sector across the Nordic countries

In Denmark, the transport sector was responsible for a total of 12.6 million tonnes of CO2e emissions in 2021, equal to 27% of Denmark’s total CO2e emissions. In 1990 the sector emitted 11.74 million tonnes of CO2e, and thus from 1990 to 2021 the total CO2e emissions from the transport sector increased 8%
Energistyrelsen (2023, April). Klimastatus og -fremskrivning, 2023. Retrieved from, https://ens.dk/sites/ens.dk/files/Basisfremskrivning/kf23_hovedrapport.pdf
. Most of the emissions were from road traffic. There are no national GHG reduction targets specifically for the transport sector. Denmark has a general target of 50%-54% reduction in 2025, 70% reduction in 2030 and a target of climate neutrality by 2050. In the Danish Energy Agency’s scenarios for 2050 (presented in the chapter on Denmark), the transport sector is expected to emit 0.1 to 0.3 million tonnes of CO2e, depending on the scenari0
Energistyrelsen (2022, September 23). Resultater for KP22-scenarier. Retrieved from, https://ens.dk/sites/ens.dk/files/Basisfremskrivning/resultater_for_kp22-scenarier_23-09-2022.pdf
. Electrification of almost all road transport is expected to contribute most of the reductions. Further, the DEA scenarios show that smarter planning, infrastructure and behavioural change can decrease the need for transport, or slow the growth in transport work, and may make the transition faster.
The EU effort sharing regulation has increased the Danish target from 39% to 50% reduction in 2030 compared to 2005. The latest frozen policy projection from the DEA projects that the accumulated shortage to reach the target is 16 million tonnes of CO2e
Energistyrelsen (2023, April). Klimastatus og -fremskrivning, 2023. Retrieved from, https://ens.dk/sites/ens.dk/files/Basisfremskrivning/kf23_hovedrapport.pdf#page=26
from 2021-2030. This means that further initiatives are needed in the non-ETS sectors to live up to the effort sharing regulation.
The emissions from domestic transport in Finland have been mostly decreasing since 2007. In 2021 the emissions from transport (without domestic air traffic) were 9.9 million tonnes of CO2e, which is little over 20% of the overall emissions and about 37% of the emissions from the effort sharing sector. Compared to 1990, the emissions have decreased 25% (11.7 million tonnes in 1990). In 2020, the emissions were 10.4 million tonnes, 6% lower than in 2019, partly caused by the COVID pandemic which reduced transport momentarily. Additionally, in 2021 the share of renewable fuels in transport went up from 11% to 18%.
In 2021, 95% of the emissions from domestic transport came from road traffic. The majority of the emissions from road traffic (53%) came from passenger cars and 33% from trucks. Only 3% of emissions come from waterborne transport and 1% from rail traffic. The domestic air traffic is responsible for less than 1% of the emissions from transport, although the emissions from air transport are calculated into the emissions trading sector. The decrease of transport sector emissions is heavily influenced by the increase in biofuel use and the improved energy efficiency of new vehicles. The emissions from transport will somewhat increase during 2022-2023 as a result of the reduction of the blending obligation of renewable fuels. It is estimated that the 7.5 pp. reduction in the obligation will increase emissions by 1.7 million tonnes- a fairly sizable increase in the effort sharing sector.
Ympäristöministeriö Helsinki [Ministry of the Environment] (2022). Ilmastovuosikertomus 2022 [Annual Climate Report 2022]. Retrieved from, https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/164392/YM_2022_24.pdf?sequence=1&isAllowed=y
The future blending obligation rates will be reduced from the levels set in the law, therefore rising more slowly than previously planned. This will increase emissions compared to the existing policies baseline and make it harder to reach emission reduction goals.
In Iceland, the emissions from domestic transport consist of road traffic (95.7% in 2021), domestic aviation (2.3% in 2021) and domestic shipping (2.0% in 2021). The sector is responsible for 19.3% of total national emissions in 2021 if LULUCF is excluded, but 6.4% of emissions from LULUCF are included. Emission profiles differ within the sector, where emissions from road transport have increased by 62% in 2021 compared to 1990, but emissions in domestic aviation and domestic shipping were 38% and 47% lower, respectively, in 2021 compared to 1990
Keller, N., Helgadóttir, Á.K., Einarsdóttir, S.R., Helgason, R., Ásgeirsson, B.U., Helgadóttir, D.,Helgadóttir, I.R., Barr, B. C., Thianthong C. J. Hilmarsson, K.M., Tinganelli, L., Snorrason, A., Brink, S.H. & Þórsson, J. (2023, April 14). National Inventory Report. Emissions of Greenhouse Gases in Iceland from 1990 to 2021. Environment Agency of Iceland. Retrieved from, https://ust.is/library/Skrar/loft/NIR/ISL_NIR%202023_15%20april_on_web.pdf
Emissions from road transport have fluctuated since 1990, with emissions peaking in 2008 followed by a temporary decline.  As the economy rebounded with the help of expanding tourism, emissions from road transport rose again and reached an all-time high in 2018.  Climate actions and then later the Covid pandemic led to a temporary reduction in emissions but recent data indicates that emissions are increasing again from increased transport demand particularly due to the return of tourism
Keller, N., Helgadóttir, Á.K., Einarsdóttir, S.R., Helgason, R., Ásgeirsson, B.U., Helgadóttir, D.,Helgadóttir, I.R., Barr, B. C., Thianthong C. J. Hilmarsson, K.M., Tinganelli, L., Snorrason, A., Brink, S.H. & Þórsson, J. (2023, April 14). National Inventory Report. Emissions of Greenhouse Gases in Iceland from 1990 to 2021. Environment Agency of Iceland. Retrieved from, https://ust.is/library/Skrar/loft/NIR/ISL_NIR%202023_15%20april_on_web.pdf
In Norway, GHG emissions from road traffic have increased by 17% from 1990 to 2021, primarily caused by increased freight transportation by trucks. The sector was responsible for 25% of total national emissions in 2021 excluding LULUCF, and 37% of emissions when LULUCF is included. For passenger vehicles, emissions were stable from 1990 to 2015, where increased mileage was compensated by an increasing number of electric passenger vehicles and more efficient engines. After 2015, emissions were primarily reduced due to more electric vehicles and more biofuels. Emissions from the maritime sector (domestic shipping, including fishery) and domestic aviation increased by 41% between 1990-2021. Aviation-related emissions have been stable whereas maritime emissions have grown.
Domestic transport accounts for about a third of Sweden’s total emissions of GHG and about half of the emissions in the non-trading sector. GHG emissions from domestic transport amounted to 15.1 million tonnes CO2e in 2021, which is a decrease of roughly 27% compared to 2010. Emissions from passenger cars have decreased by 26%, while emissions from heavy vehicles are estimated to have decreased significantly more, by 34% compared to 2010. The larger decrease is due to the mixing of biofuels at significantly higher levels in diesel than in gasoline. In principle, heavy traffic uses diesel exclusively, while passenger car traffic used 40% more gasoline than diesel in energy terms at the beginning of the 2020s
Swedish Environmental Protection Agency (2023, April 6). National Inventory Report Sweden 2023. Retrieved from, https://unfccc.int/documents/627663
Emissions from domestic shipping were 0.7 million tonnes of CO2e in 2021, which was nearly 40% higher than 1990. Emissions from domestic aviation in 2021 were approximately 0.2 million tonnes CO2e, which corresponds to just under 30% of the emissions in 1990.

12.3. Pathways towards climate neutrality in the transport sector

In Denmark, national as well as EU mitigation measures are expected to reduce the GHG emissions in the transport sector
Klimarådet (2023). Sektorvurderinger, Baggrundsnotat til Klimarådets Statusrapport 2023, kapitel 3. Retrieved from, https://klimaraadet.dk/sites/default/files/paragraph/field_download/Baggrundsnotat%20Sektorvurderinger.pdf
. Projections from the DEA estimate that this will lead to a reduction of 2.2 million tonnes CO2e between 2021 and 2030 (around 17%). In this projection the transport sector will make up 35% of the expected emissions in 2030
Energistyrelsen (2023, April). Klimastatus og -fremskrivning, 2023. Retrieved from, https://ens.dk/sites/ens.dk/files/Basisfremskrivning/kf23_hovedrapport.pdf
The Climate Council is critical of this projection, as only few political initiatives are at an implementation stage and most policies are only proposals, analyses, or technical potentials. Thus, the Climate Council projects that implemented political initiatives can reduce emissions in the transport sector by 0.8 million tonnes of CO2e between 2020 and 2030, while proposals, analyses, or technical potentials are estimated to have a reduction potential of 7.99 million tonnes of CO2e between 2020 and 2030
Klimarådet (2023). Sektorvurderinger, Baggrundsnotat til Klimarådets Statusrapport 2023, kapitel 3. Retrieved from, https://klimaraadet.dk/sites/default/files/paragraph/field_download/Baggrundsnotat%20Sektorvurderinger.pdf
According to the Climate Council, the majority of the projected GHG reductions in the transport sector are a result of EU policies
Klimarådet (2023). Sektorvurderinger, Baggrundsnotat til Klimarådets Statusrapport 2023, kapitel 3. Retrieved from, https://klimaraadet.dk/sites/default/files/paragraph/field_download/Baggrundsnotat%20Sektorvurderinger.pdf
The main national initiative is the green transport agreement adopted in 2020. This agreement includes initiatives such as a kilometer-based toll for trucks, a tax reform that is projected to deliver 750,000 zero and low emission cars in 2030, a fuel blending mandate
Regeringen (2021, October 4). Aftale om grøn omstilling af dansk landbrug. Retrieved from, https://fm.dk/media/18511/aftale-om-groen-omstilling-af-vejtransporten_a.pdf
To reach carbon neutrality in Finland by 2035, a target has been set to cut transport emissions by half by 2030 compared to 2005. Furthermore, the goal is to achieve carbon neutrality in transport by 2045. In line with the then Government Programme, in 2021 the Ministry of Transport and Communications issued a Roadmap for fossil-free transport
Liikenne-ja viestintäministeriö (2021). Fossiilittoman liikenteen tiekartta. Retrieved from,  https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/163258/LVM_2021_15.pdf?sequence=1&isAllowed=y
to reduce emissions from transport. The roadmap included three phases:
  1. Implementation of a wide range of support and incentives to promote emission-free transport such as inclusion of biogas and electric fuels in the blending obligation, various subsidies related to the procurement and distribution infrastructure of electric and gas vehicles, support for promoting walking, cycling and public transport services, transport infrastructure maintenance and digitalisation in logistics.
  2. In 2021, there was an evaluation of development trends and additional measures which could influence the emissions from transport but there was not yet enough information on these when the roadmap was released. These measures/trends include the increase in remote work, promoting multi-modal options in freight transport and Mobility as a Service (MaaS), and increasing the blending obligation. It is estimated that with these measures, traffic emissions could be reduced by 0.4-0.6 million tonnes by 2030, if the remote work and MaaS progress as estimated and if there was a 4 pp. increase in the blending obligation.
  3. Once the progress of EU-level measures and impacts of all measures of phases 1 and 2 are known, the Government was supposed to assess and decide on the possible need for additional national measures in the transport sector.
However, a new Finnish government has introduced changes in policy. Because increasing the blending obligation raises fuel prices for consumers, the government has decided to cut future blending rates. According to the current law, the rates would be increased to 28% in 2024, 29% in 2025–26, 30% in 2027, 31% in 2028, 32% in 2029 and 34% in 2030. Because of the policy changes, the new rates will be considerably lower: 13.5% in 2024, 16.5% in 2025, 19.5% in 2026 and 22.5% in 2027. This will make reaching emission targets in the transport sector significantly more difficult.
The electrification of passenger cars and light trucks is progressing, which will lower emissions in future. That said, the current development will not be enough to reach the emission reduction targets set for transport
Liikenne- ja viestintävirasto Traficom (2023, January 27). Henkilöautoja liikenteessä 2,74 miljoonaa - sähköautojen määrä miltei kaksinkertaistui. [online] Retrieved from,  https://www.traficom.fi/fi/ajankohtaista/henkiloautoja-liikenteessa-274-miljoonaa-sahkoautojen-maara-miltei-kaksinkertaistui [Accessed 20.05.2023].
. Finland used to offer subsidies for those who purchase electric cars, but the amount was low (2,000 euros) compared to other European countries and now the subsidy has been removed. Finland has also spent less than many other countries in Europe in developing the charging infrastructure and the new government has decided to cut support.
Harju, J., Kosonen, T., Laukkanen, M., Kuitunen, S. & Palanne, K. (2022, October 3). FIT #2/2022: Liikenteen ilmastopäästöjen vähentäminen vaatii ripeämpää liikenteen sähköistymistä. Verotutkimuksen huippuyksikkö. Retrieved from, https://verotutkimus.fi/liikenteen-ilmastopaastojen-vahentaminen-vaatii-ripeampaa-liikenteen-sahkoistymista/
As in the other Nordic countries, the Icelandic transport sector is a sector governed under the EU’s Effort Sharing Regulation and the domestic aim of 55% reduction in GHG emissions by 2030 compared to 2005. Given the access to low-carbon electricity the climate action plan prioritises electrification of road transport, building infrastructure for electricity use in the harbours and reducing travel demand by car by enhancing active mobility and public transport.  No formal plans have yet focused on domestic aviation.  Rapid mitigation in the transport sector is key to reaching climate neutrality by 2040 and for road transport it is both economically and technically feasible, despite slower technological development in heavy duty transport. Current initiatives in road transport focus on electrification of light duty vehicles, enhanced active transport and improved public transportation. 
The overall country strategy for transport aims to be independent of fossil fuels by 2040 and reach climate neutrality through electrification and e-transport.  The strategy can be broken into three key pillars: i) facilitating rapid electrification of light duty vehicles including rental cars, ii) reducing travel demand by private vehicles, iii) facilitating the energy transition in heavy transport, shipping and aviation e.g. by stimulating and funding research and development and funding demonstration projects.
Numerous policy instruments are being applied to facilitate electrification, including both economic instruments and regulations: subsidies for low-and zero emissions vehicles such as reduced VAT and import duties for BEVs and hydrogen vehicles, subsidies for BEV rental cars, carbon taxes, funding infrastructure for low and zero emission vehicles and a requirement to buy low-emitting vehicles in government agencies. New registration of gasoline and diesel vehicles will be banned after 2030.  E-transport is also expected to emerge for heavy duty vehicles, yet given less mature technologies the transition is expected to take longer.
Infrastructure is being enhanced for active transport and incentives are being given for active mobility, for example no VAT is levied on electric bikes.  Public transport is also being enhanced in the capital area.
In the domestic shipping sector, all harbours will have charging infrastructure by 2025, and domestic ferries are expected to transition to electric ferries. In 2020, grants were given for infrastructure projects in harbours for electrical connections and heating/hot water onboard. 
No initiatives have been implemented for aviation in Iceland.
Despite these efforts and the fact that 57% of all newly registered light duty vehicles in 2022 were BEV or PHEV, the Environmental Agency
Helgadóttir, Á.K., Einarsdóttir, S.R., Keller, N., Helgason, R., Ásgeirsson, B.U., Helgadóttir, I.R., Barr, B.C., Hilmarsson, K.M., Thianthong, J.C., Snorrason, A., Tinganelli, L. & Þórsson, J. (2023, March 15). Report on Policies, Measures, and Projections. Projections of Greenhouse Gas Emissions in Iceland until 2050. Environment Agency of Iceland. Retrieved from, https://ust.is/library/Skrar/loft/NIR/0_PaMsProjections_Report_2023_WITH%20BOOKMARKS.pdf
expects emissions from transport to be only 15% and 65% lower in 2030 and 2040, respectively, compared to emissions in 2021.  The large % difference in mitigation between 2030 and 2040 illustrates the significant stock effects on the near-term effectiveness of mitigation efforts.
Norway has a plan to increase the share of biofuels – biodiesel and bioethanol – in fossil fuels, where the main policy tool is a mixing requirement for dealers. From 2023 the requirement is 17 % biofuels of which 12.5 % should be advanced biofuels (i.e. based on waste products, not crops
Norwegian Environment Agency (2023), Biodrivstoff. Retrieved from hrtps://www.miljodirektoratet.no/ansvarsomrader/klima/transport/biodrivstoff/
. Currently, 75% of biofuel is advanced. The mixing requirement for aviation is 0.5% biofuels. The government has proposed a 6% biofuel mixing requirement for the maritime sector from autumn 2023. For total biofuels 94% of the raw materials are imported. Some biogas is produced and based on domestic resources, but there is no mixing requirement for this fuel category. There are plans for hydrogen production based on electrolysis (green hydrogen) to serve maritime transportation, as well as hydrogen production from natural gas combined with CCS (blue hydrogen), where government seems willing to offer substantial subsidies. The blue hydrogen plans are directed foremost at exports to EU countries.
Electric vehicles have been promoted and supported by many tax and road toll exemptions and other benefits since 2008. This has led to a very high share of electric passenger cars sold in Norway. In 2022 the electric car share for newly registered cars was at 83 %, increasing the electric vehicle share of the total car stock to 21 %.
Low-carbon fuels have been introduced in freight transportation. The leading grocery transport company Asko, for example, currently has a 40 % share of low-carbon fuels in their truck fleet. This is a mix of biofuels, biogas and battery operation. The first electric truck was introduced in 2016. The leading public transport company in the Oslo region – Ruter – has introduced electric buses, as well as biofuel, biogas and natural gas-fueled buses. The renewable fuel share in 2020 for buses was at 74 %. A pilot on hydrogen-fueled buses has ended.
Norway has been successful in the domestic ferry segment, where most of the connections will soon have fully electric or hybrid-electric systems. This development has been possible due to requests for low-carbon solutions by counties and the state in public procurement processes for ferry services, in addition to public support for investments in local grid and charging facilities. Battery solutions are relatively straightforward for ferries due to short distances and frequent charging opportunities. Low-carbon solutions for express boats are more challenging, but hydrogen solutions are being developed.
There has been an ambition to transfer more freight from trucks to rail and ships to save energy and GHG emissions, but sufficient measures and progress are missing.
In Sweden, the climate strategy for the transport sector has been implemented through efforts in three areas: energy efficiency of vehicles, a more transport-efficient society and an increased use of sustainable fossil-free fuels, especially biofuels
Naturvårdsverket (2023). Underlag till regeringens kommande klimathandlingsplan och klimatredovisning. NV-08102-22. Retrieved from, https://www.naturvardsverket.se/499a4f/contentassets/4c414b0778e9409fb2836fc4d3dc6259/underlag-till-regeringens-kommande-klimathandlingsplan-och-klimatredovisning-2023-04-13.pdf
EU regulation has a key role for the transition in the transport sector. The Swedish commitment to a tightened ESR requires a 50% emissions reduction in 2030 compared to 2005, which is more relaxed than is required by the relevant Swedish milestone target without the full use of allowed supplementary measures. At the EU level, it is above all the carbon dioxide requirements for new light and heavy road vehicles that drive the introduction of vehicles that use an electric motor for their main propulsion and an increased fuel efficiency of vehicles that use a combustion engine. Common EU requirements for the expansion of infrastructure for alternatively powered vehicles are also significant.
The latest projection from the Swedish EPA indicated that the national milestone targets for 2030 will be difficult to reach with the government's announced weakening of the GHG reduction mandate for diesel and gasoline.
The use of biofuels in diesel and gasoline is regulated by the GHG reduction mandate, which was introduced in 2018 and gradually increased until the beginning of 2022. In 2023, the increase has been paused at the 2022 level, which was decided during the previous term.
The current government has suggested reducing the blending level to 6 % for diesel and gasoline for the years 2024-2026, from previous levels of 30.5 % for diesel and 7.8 % for gasoline. The reduction levels for 2027-2030 are not yet suggested.
Regeringskansliet (2023). Budgetpropsitionen för 202. Prop. 2023/24:1 (UO 20) Retrieved from, https://www.regeringen.se/rattsliga-dokument/proposition/2023/09/prop.-2023241
The upcoming climate action plan to be delivered in the autumn of 2023 will present the government’s pathway to reaching the Swedish climate goals.
In addition to the GHG reduction mandate, the tax exemptions and reductions that are given for E85, rape seed oil-based biodiesel, HVO etc. is of importance. The energy and carbon dioxide taxes on petrol and diesel also affect the development in general in the sector.
The control towards reduced emissions of GHG for inland shipping is initially weak compared to road traffic. The EU's Fit for 55 package resulted in a regulation to promote sustainable fuels and the use of sustainable alternative energy carriers in shipping. Fossil fuels for commercial shipping are not subject to energy and carbon dioxide tax or to blending mandates in Sweden. Fuel for leisure boats, on the other hand, is taxed in the same way as road traffic, with energy tax, carbon dioxide tax and value added tax and is also covered by the blending mandate. Several authorities, regions and municipalities set climate requirements when procuring ships and transport or transport services. The procurements have entailed both ships with electric operation and the introduction of biofuels in both ferries for public transport and road ferries
Naturvårdsverket (2023). Underlag till regeringens kommande klimathandlingsplan och klimatredovisning. NV-08102-22. Retrieved from, https://www.naturvardsverket.se/499a4f/contentassets/4c414b0778e9409fb2836fc4d3dc6259/underlag-till-regeringens-kommande-klimathandlingsplan-och-klimatredovisning-2023-04-13.pdf
Airline operators that emit more than 10,000 tonnes of carbon dioxide per year from flights to and from airports in the EEA are included in the EU ETS. The majority of Sweden’s commercial domestic flights are included in the EU ETS. At national level, airlines operating flights from airports in Sweden are obliged to pay passenger tax. The flight tax applies to both domestic and international travel and the size of the tax depends on the final destination of the flight. There are also climate-differentiated take-off and landing fees for Arlanda and Landvetter airports.
In 2021, a blending mandate on aviation kerosene was introduced in Sweden. In the first year, the requirement for blending in biofuels was 0.8% and it was planned for this to be gradually ramped up to 27% in 2030. However, the government decided in 2023 that the level of the blending mandate in Sweden from 1 January 2024 would be reduced to the minimum level decided by the EU
Regeringen (2023), Promemoria Sänkning av reduktionsplikten för bensin och diesel. Retrieved from, https://www.regeringen.se/contentassets/de853e9b01aa453399187bfa5d6be326/promemoria-sankning-av-reduktionsplikten-for-bensin-och-diesel.pdf
The Fit for 55 package also resulted in an extension of the EU ETS to ships over 5,000 gross tonnage (with certain exemptions) which will come into full effect from 2026.

12.4. Challenges in the transport sector on the way towards climate neutrality and oppor­tunities for Nordic collaboration

The Nordic countries face very similar challenges in decarbonising their transport sectors.
In Denmark, the DEA estimates that GHG emissions from the transport sector will have been reduced by 11% compared to 1990 in 2030 and make up 35% of Denmark’s total emissions in 2030
Energistyrelsen (2023, April). Klimastatus og -fremskrivning, 2023. Retrieved from, https://ens.dk/sites/ens.dk/files/Basisfremskrivning/kf23_hovedrapport.pdf
The Climate Council finds the current policies and strategies inadequate and untimely if Denmark is to reach its reduction targets for 2030 and is calling for a concretisation of the political strategies
Klimarådet (2023). Sektorvurderinger, Baggrundsnotat til Klimarådets Statusrapport 2023, kapitel 3. Retrieved from, https://klimaraadet.dk/sites/default/files/paragraph/field_download/Baggrundsnotat%20Sektorvurderinger.pdf
Road transport accounted for 91% of the emissions from the transport sector in 2021 and poses the main challenge for reducing emissions adequately to contribute to net zero. An adequate GHG reduction will require a reduction in the number of fossil fuel cars. However, so far there has been no political will to speed up the transition. Instead, political focus has mostly been on the development of blending of biofuels and increasing the number of electric cars, which is an approach that has been deemed highly risky and inadequate by the Climate Council
Klimarådet (2023). Sektorvurderinger, Baggrundsnotat til Klimarådets Statusrapport 2023, kapitel 3. Retrieved from,   https://klimaraadet.dk/sites/default/files/paragraph/field_download/Baggrundsnotat%20Sektorvurderinger.pdf
. Big challenges lie also in reducing emissions of heavy trucks and air traffic, because there are not many affordable low-emission technologies available on the market yet; however, a new road pricing system for heavy duty trucks
Skatteministeriet (2023, March 29). Ny aftale om kilometerbaseret vejafgift for lastbiler gør Danmark grønnere. Retrieved from, https://www.skm.dk/aktuelt/presse-nyheder/pressemeddelelser/ny-aftale-om-kilometerbaseret-vejafgift-for-lastbiler-goer-danmark-groennere/#:~:text=Som%20en%20del%20af%20det,2%2C%20der%20udledes%20fra%20k%C3%B8rslen [Accessed 10.05.2023]
may push more towards electrification from 2025. There is a lot of interest in electric or synthetic fuels (PtX) in the medium future and possibly fuel cell technologies and hydrogen in the more distant future.
The current national policies and EU emissions trading for transport will not be enough to achieve the Finnish emission reduction targets for the effort sharing sector by 2030. The Finnish Climate Change Panel suggests that Finland could set up a national emissions trading system for emissions of transport in 2026 which would be compatible with the EU’s system. Other measures to cut emissions could be investing in public transport and the infrastructure for walking and cycling, using biofuels in trucks and developing the charging infrastructure for electric vehicles, especially on the highways.
The Finnish Climate Change Panel. (2023). Suuntaviivoja Suomen ilmastotoimien Tehostamiseen [Guidelines for enhancing climate action in Finland]. Retrieved from,  https://www.ilmastopaneeli.fi/wp-content/uploads/2023/02/ilmastopaneelin-julkaisuja-1-2023-suuntaviivoja-ilmastotoimien-tehostamiseen.pdf
In Iceland, the climate action plan has strong focus on the transport sector and electrification of private passenger vehicles is emerging. The challenges in the sector include the three following issues: i) emissions are rising again. The transition to electric vehicles has not yet materialised in lower emissions due to the large remaining stock vehicles powered by fossil fuels. As the results from the Environmental Agency
Helgadóttir, Á.K., Einarsdóttir, S.R., Keller, N., Helgason, R., Ásgeirsson, B.U., Helgadóttir, I.R., Barr, B.C., Hilmarsson, K.M., Thianthong, J.C., Snorrason, A., Tinganelli, L. & Þórsson, J. (2023, March 15). Report on Policies, Measures, and Projections. Projections of Greenhouse Gas Emissions in Iceland until 2050. Environment Agency of Iceland. Retrieved from, https://ust.is/library/Skrar/loft/NIR/0_PaMsProjections_Report_2023_WITH%20BOOKMARKS.pdf
illustrate, despite a shift to electric vehicles in recent years, oil use continues to increase in the road transport sector.  This indicates that more needs to be done to reach set aims beyond increasing investment in electric light duty vehicles, for example to emphasise even further the need for modal shifts and reduced travel demand. ii) Lack of foresight and transparency in use of economic instruments. Subsidies are changing for BEVs at the end of 2023. How the subsidies will change is not yet clear, and thus the expected impact on the transition to BEVs is unclear.  iii) Lack of targets and initiatives in harder to mitigate sectors. Government targets and initiatives in addition to R&D and demonstration are needed for heavy duty vehicles, aviation and domestic shipping.
In Norway the major challenges for reducing transport-related GHG emissions are topographical, technical, and high cost and investments. Railway is the most climate-friendly short- to medium-distance transportation mode, but expensive due to fjords, mountains, long distances and thin populations. Battery-electric vehicles can take over most of the passenger segment but have been dependent on large government subsidies as compared to fossil-fueled cars. For lorries and freight transportation, the available battery technology constrains the emission reduction potential, but increased availability of biofuels and development of a hydrogen-based infrastructure are promising alternatives. In the marine sector, battery-hybrid ferries are a success story, but express boats and other near-shore ships depend on more biofuels, and future availability of hydrogen or ammonia. The biggest challenge is for deep sea shipping, where climate-friendly designs and fuels are little developed. 
In Sweden, there is a need for combinations of policy instruments, both those that make fossil alternatives more expensive and those that contribute to the increased use of alternatives to use of fossil fuels, in order for the use of fossil fuels to be phased out and to attain the ESR commitments, as well as national milestone targets.
A further challenge is to accomplish a just transition. The faster and more comprehensive the transition, the greater consideration needs to be given to companies and households lacking the resources to change their choice of measures to fossil-free and energy-efficient alternatives at the required rate
Naturvårdsverket (2023). Underlag till regeringens kommande klimathandlingsplan och klimatredovisning. NV-08102-22. Retrieved from, https://www.naturvardsverket.se/499a4f/contentassets/4c414b0778e9409fb2836fc4d3dc6259/underlag-till-regeringens-kommande-klimathandlingsplan-och-klimatredovisning-2023-04-13.pdf
The weakening of the GHG reduction mandate will challenge Sweden’s climate targets.
Across the Nordic countries, this report indicates that the biggest challenges on the path towards climate neutrality lie in the road transport sub-sector. Despite the increased uptake of electrical vehicles, emissions have stagnated or are even rising in some countries.
While electric passenger cars produce significantly lower emissions than Internal Combustion Engine (ICE) cars, due to the high energy efficiency of electric propulsion and the low or declining CO2 emissions from electricity production, there are significant obstacles for a swift reduction in transport emissions.
For the present, in most Nordic countries, barriers remain for consumers on the car markets, in terms of higher purchase prices compared to ICE cars – combined with limited availability of (especially) cheap electric car models – limited driving range of available models, and limited availability of charging points for some user segments, for example dwellers in apartment housing. Those barriers are currently being addressed by market actors and via EU and national policies with Norway as the leading example.
However, even with accelerating uptake of electric cars and future bans on new ICE car registrations in the EU, ICE cars are still widely purchased and a huge number of those cars will remain in the vehicle fleets of the Nordic countries for several years to come, where they will emit and cumulate large amounts of GHG emissions beyond 2030. Policies to curb remaining ICE fleet emissions have so far mostly been limited to the deployment of biofuels though blending mandates or GHG reduction requirements for fuels. This approach follows EU-regulations, supplemented by national measures in most Nordic countries.
However, measures to promote biofuels are now becoming more controversial due to issues like high fuel costs, concerns over indirect climate impacts, alternative uses of scarce raw material and the persistence of pollutant emissions in urban areas. For example, Sweden, which adopted the strongest pro-biofuel policy in the EU so far (reaching a 25% share of renewable fuels in the transport sector by 2021) has recently reversed their position completely, towards compliance at the EU minimum level. In Denmark, the Climate Council has recently advised against the government‘s intentions to fulfill the 2025 climate target via increased biofuel blending, due to the indirect market and land-use effects.
Other alternative fuels based on hydrogen, or even synthetic fuels for combustion engines are not considered by climate and energy policy authorities as realistic alternatives for passenger cars, due to low energy efficiency and very high fuel costs for years to come, meaning that EV’s will deploy before and make those solutions unattractive.  Hence, the remaining ICE car fleets represent a huge challenge for climate and environment policies in the Nordic countries and beyond, not least in urban areas where ICE cars in particular create multiple externalities while also taking up urban space and capacity for driving and parking that could be put to other beneficial uses.
While electrification, as above, has penetrated passenger road transport (including both cars and buses) the transition to electric or electricity-based transport has hardly begun in the road freight sector (representing around 20-30% of road transport emissions). Significantly higher vehicle costs, limited market supply of e.g. electric or hydrogen trucks, limited driving range of available models, and so far poorly developed infrastructure represent significant obstacles in this area. Meanwhile, the continued dominance of diesel for freight transport is most urgently felt in urban areas, where freight vehicles represent a much larger proportion of emissions and environmental impacts than their numbers indicate, creating a strong momentum for zero emission alternatives. While there are diverging views and market outlooks regarding the future propulsion systems for long distance trucks, electrification is likely to become the preferred solution for most trucking operations towards and after 2030 as technologies mature and costs are expected to come down.  Yet due to the uncertainties involved and the long lead time for this transition, the issue of a role for biobased or synthetic alternatives as possible transition or niche fuels is particularly pronounced in the road freight sector. Business interests in existing or potential new alternatives such as Liquified Biomethane (biogas), HVO, hydrogen and various PtX-based products are currently pushing for government attention and support in Nordic countries and elsewhere. It is a challenge for Nordic governments to define clear strategies and business framework conditions for decarbonising road freight transport and especially to devise a clear role (if any) for biofuels.
Based on these observations, we have singled out the following two cross-Nordic challenges:
  • the role of biofuels
  • phasing out ICE car dominance.
These are described in further detail below.

12.4.1. Determining the future role of biofuels

The challenge
EU and national regulations in the Nordic countries prescribe suppliers to limit CO2 emissions from fuel combustion on a life cycle basis. The metrics used allow the blending of sustainable biofuels to count towards reduction targets depending on the particular feedstock and production methods. This has been a cornerstone in strategies to obtain CO2 reductions from transport in Nordic countries like Sweden, Norway and Finland, some of which are currently suspending previous targets.
Bodies like the IPCC, the European Scientific Advisory Board on Climate Change and the Danish Climate Council have recently highlighted that the production of biofuels is limited by land resources, competing with food production and ecosystems services. Some types of biofuels, like first generation based on food crops, have been increasingly restricted while other ‘advanced’ ones, based on non-food items, residues and waste, are favoured. The rationale is that First Gen biofuels compete with other uses of the feedstock leading to higher market prices and expansion of cultivated areas which may lead to indirect emissions. The Indirect land use change (ILUC) emissions are, however, difficult to calculate, and they are not currently included in GHG accounting metrics for biofuels in countries like Denmark or Sweden. There are ongoing technical and policy debates on how such criteria could best be applied (see, e.g., Malins 2021
Malins, C. (2021, December). Considerations for addressing indirect land use change in Danish biofuel regulation. Cerulogy. https://ens.dk/sites/ens.dk/files/Basisfremskrivning/chris_malins_rapport_-_conciderations_for_adressing_iluc_in_danish_biofuel_regulation.pdf
) in the case of continued or extended use of biofuels.
It has been argued that the Nordic region has a rich base of biological waste and residues stemming from large agricultural and forest sectors, and thus a large potential feedstock capacity for producing sustainable biofuels without indirect land-use consequences. However, some of these feedstocks (like lignin in wood waste) are difficult to process, requiring further research and development before they could potentially be deployed at scale.
Hence, by now the vast majority of transport biofuels consumed in the Nordic countries are based on imported raw materials. This has also led to questioning the overall sustainability of the current approach, due to the fact that waste feedstocks are globally limited and not all countries could base their biofuel on imports. This emphasises the need for realistic evaluations of the potential for sustainable biofuel production in the Nordic region.
Finally, there is a discussion about which sector should be allowed to utilise the limited biofuel resources if production and scale-up becomes successful. Road transport will be increasingly electrified over the coming years with a potential need to supplement with hydrogen or ammonia for some long-distance freight trips. By contrast, sectors like aviation and shipping will likely be more difficult to electrify although technological developments are progressing there as well. Allocating biofuels to hard-to-mitigate sectors (that cannot be electrified directly) could be one option.
  • Developing a Nordic roadmap for the sustainable development, production, and use of biofuels and synthetic fuels
The Nordic Council of Ministers should commission a cross-Nordic study on how the development, production and use of different types of biofuels in the Nordic region could best contribute to a reduction in GHG emissions over the coming decades, avoiding overutilisation of sparse bio-resources and negative externalities.
This work should conclude with a Nordic roadmap for sustainable development, production and use of biofuels and synthetic fuels. The roadmap should address to what extent expansive, contractive or more differentiated strategies could be pursued, in the light of global constraints, regional opportunities and different sectoral needs.

12.4.2. Phasing out ICE (Internal Combustion Engine) car dominance

The challenge
There is a high risk that ICE cars constituting the bulk of the vehicle fleets will maintain high levels of transport GHG emissions for several years ahead, despite strong increases in EV sales in Nordic countries. Solving this challenge likely requires a strategy to de-scale and phase out the dominance of ICE cars in use well ahead of any future bans of new ICE car sales. Such a phasing-out strategy should clearly recognise and support the various mobility needs of current ICE users, as well as the potential climate and environmental impacts of early phasing out/scrapping existing ICE cars, taking into account life-cycle emissions as well as any spillover impacts from the export and life extension of used ICE cars in other countries or other regions outside the Nordics.
EV’s should ideally proliferate first in those contexts where they would benefit zero emission mobility the most, especially by replacing ICE cars. This would likely include much of today’s and future ICE car use in urban areas. ICE passenger cars continue to dominate cities in the Nordics and elsewhere despite opportunities for extensive use of public and active transport modes and shared solutions offered by the density and proximity of urban areas. The negative aspects of this dominance extend to factors like emissions, environmental quality, safety and the use of space. Shift to EV’s will help alleviate some but far from all of those problems. Hence, urban mobility strategies should include a combination of so-called Avoid, Shift and Improve measures, within a framework of Sustainable Urban Mobility Planning as promoted by the EU New Urban Mobility Framework. To be effective, such plans would not only need to include measures to promote greener forms of mobility and access (shared EV’s, public transport, cycling, walking, virtual mobility, etc.) but also to gradually constrain access by ICE cars to more parts of the cities.
It is paramount that national governments support cities in conceiving and implementing such strategies within a multi-level governance framework. National support programmes are strongly encouraged by recent EU mobility policies, while existing models for green multilevel transport governance are already partly applied in the Nordic countries through programs such as Norway’s so-called ‘Byvekstavtaler’ aiming to curb car traffic growth, and the ‘Stadsmiljöavtal’ in Sweden, where national funding supports comprehensive sustainable local plans.  There is a need to better understand and compare the potential for such multi-level arrangements to speed up the transformation to climate neutral urban mobility in the Nordic countries, with a clear potential for transfer to other regions of the world.
ICE cars gradually discouraged from maneuvering in or entering cities could either be considered for early scrapping or for shifting to a second life serving car users and families outside cities with limited needs for driving, and hence lower daily and yearly transport emissions. It would be a highly interesting challenge to explore a set of policy measures that could underpin such a shift in the remaining (and shrinking) ICE fleet towards gradually lower transport need contexts, without introducing significant socio-economic burdens to groups of citizens.
Early retirement of ICE’s could also be potentially beneficial, provided it would not either cause excessive emissions and waste from the destruction and recycling of useful capital, or lead to export of ICE’s to, for example, LDC’s in the global South where they, in contrast, could end up remaining in active (and highly emitting) service for many more years than would be the case in their Nordic country of origin. The challenge could be to better understand the trade-off between such outcomes for various vehicle categories considering life cycle GHG emissions within and outside the Nordic region, and to devise appropriate policies.
  • Developing a strategy for how to reallocate ICE cars to those users and uses that would have the lowest travel needs and a supporting assessment framework to identify the GHG trade-offs of different policies
The Nordic Council of Ministers could assist the countries with phasing out ICE car dominance by developing a strategy for how to potentially reallocate ICE cars to those users and uses that would have the lowest travel needs and vehicle kilometers, via suitable policy measures, considering socio-economic and mobility impacts. To support and advise on this strategy, an assessment framework to address GHG trade-offs between policies that would shift ICE cars to lower use, exporting to external regions, or early scrappage should also be developed in parallel.
  • Supporting urban action plans for zero emission passenger and freight transport
This would include analysing and comparing multi-level governance frameworks and arrangements for decarbonised sustainable mobility in urban regions. Different levels of government have responsibilities for different parcels of the spatial domain, different sections of the transport system and different levers in the policy toolbox. Aligning transport planning and policy measures across levels of government, therefore, has the potential to achieve more effective decarbonisation
Marsden, G. & Gudmundsson, H. (2023, March 31). Aligning Transport Decarbonisation Across Policy Levels - a comparative review of countries. Concito. Retrieved from, https://concito.dk/files/media/document/Aligning%20Transport%20Decarbonisation%20across%20levels%2011.04.pdf
. The Nordic Council of Ministers could strengthen decarbonisation efforts in the transport sector by commissioning a study on multi-level governance frameworks in different countries, suggesting strategies applicable to the Nordic region and focusing on models empowering cities to diminish car dependence in general and eliminate the use of ICE cars.
  • Knowledge-sharing on promoting public transport across the Nordic countries to further lower emissions from the use of ICE cars, and coordination of rail transport systems across the Nordics