Sweden slashes biofuels mandate to increase diesel demand by 1.5m tonnes per year

In response to pressure from Swedish voters, government suggests cuts to biofuel targets

Sweden’s biofuels industry has warned that the slashing of the country’s biofuel targets by the minority government to 6% could increase the Nordic country’s demand for diesel by around 1.5 million tonnes per year.

The warning comes after the government last week published an official memorandum suggesting the cuts to Sweden’s biofuel mandate after pressure mounted from Swedish voters as the country’s largest Facebook group advocated for a reduction in fuel prices at national forecourts.

The proposal, first revealed in May by the right-wing Sweden Democrats-backed coalition government, states that the greenhouse gas reduction obligation will be reduced to the EU minimum of 6% for gasoline and diesel, where it will remain until 2026.

The reduction of 34 percentage points for diesel and a 6.5 percentage decrease for gasoline “is not cost-effective and the timing is wrong as new hydrotreated vegetable oil (HVO) capacity is coming on-stream this year and next in the order of millions of tonnes,” the director of Svebio’s BioDriv program Tomas Ekbom told Fastmarkets Agriculture.

Meeting the target, therefore, could potentially only be feasible by blending fatty acid methyl-ester (FAME) biodiesel – which is subject to a 7% blend wall – and there will be “very little room or need” for HVO – also known as renewable diesel, Ekbom said.

Currently, HVO accounts for around 30-33% by volume in the road transport diesel pool in Sweden, but the share could drop below 1% with the new mandate.

Tomas Ekbom

Fastmarkets understands that interest groups have until August 25 to respond to the government’s proposal.

After the Swedish Council on Legislation has processed the proposal, it will then go to the country’s Parliament for an official decision to be taken, with the legislation expected to come into effect on January 1, 2024.

“Because of Sweden’s arctic climate, we need a winter diesel quality and not all refineries in the world can produce it,” Ekbom said, adding that there could be a shortage of winter diesel in Sweden, “especially because the change would take place in such a short timeframe.”

Meanwhile, the potential reduction could also mean a reduction in forest harvesting to increase Sweden’s carbon capture volumes.

“The government anticipates a growth in transport electrification to reduce emissions,” Ekbom said, adding, however that if these measures are not sufficient to enable the country to reach its 2030 targets, Sweden might need to purchase carbon emissions rights within the European Union’s Emissions Trading System (ETS).

Consultancy Stratas Advisors last year estimated that a reduction in the GHG reduction mandate to 6% from the current 30.5% in biodiesel from 2024 onwards would slash demand for renewable diesel in Sweden by two-thirds, equivalent to 1.2 billion liters compared with 1.8 billion liters of demand based on the current requirement.

For more information on the current biofuel market, take a look at our dedicated page for biofuel prices.

What to read next
The graphite industry in 2025 faces major challenges, including trade wars, high US tariffs on synthetic graphite and policy changes affecting EV manufacturing and tax credits. Low natural graphite prices, oversupply and slow EV growth make diversifying supply chains essential for market stability.
Analysts suggest that the "One, Big, Beautiful Bill" may impact clean energy and battery manufacturing in the US by altering key incentives from the Inflation Reduction Act (IRA).This may disrupt supply chains, cut investment in renewable energy and raise costs for electric vehicles, home energy products and other clean technologies.
CBAM creates a new frontier of opportunity for low-emissions producers who can offer cost-effective, sustainable alternatives.
Get insights into the European pulp & paper sector and how US tariff discussions could influence future trade agreements.
South Africa’s newly approved Critical Minerals and Metals Strategy and the draft of the 2025 Mineral Resources Development Bill (MRDB) have drawn significant attention from global market participants, particularly manganese and chrome buyers in China.
The announcement comes amid wider reports of general market uncertainty in the European biodiesel space, as producers struggle to operate profitably against a backdrop of consistently high feedstock prices. “The complexity of a multi-feedstock greenfield investment leading to comparatively high capital (CAPEX) and operating (OPEX) costs, combined with a market that demands competitive production economics, […]