Sweden's top economist names EU Green Deal as driver of Europe's competitiveness collapse

• Henrekson et al. identify the EU Green Deal and associated energy policy as a primary driver of Europe's competitiveness crisis
• Swedish and Finnish industrial electricity prices now far exceed those in the US and major Asian economies, accelerating relocation of energy-intensive production
• Norway's hydropower dominance has largely shielded its industry, exposing the policy-driven nature of Sweden's and Finland's cost disadvantage
• The argument lands as Sweden grapples with Northvolt's collapse and debates state financing for new nuclear capacity

Magnus Henrekson, one of Sweden's most cited economists and former head of the Research Institute of Industrial Economics (IFN), together with co-authors, argues in a final rejoinder in Svenska Dagbladet that a large share of Europe's competitiveness crisis traces directly to the EU's Green Deal and the energy policy pursued in the name of climate. The claim is blunt: green policy has not been expensive at the margins — it has been economically self-defeating at the core.

The timing is difficult to ignore. Sweden is still sorting through the wreckage of Northvolt, the flagship battery maker that was supposed to prove Europe could compete in the green industrial race and instead proved it could not. The Swedish government is simultaneously debating whether the state should finance new nuclear capacity — an implicit admission that decades of energy policy left the country short of the reliable, affordable electricity that heavy industry requires. Finnish manufacturers face the same squeeze: industrial electricity prices across the Nordics (excluding Norway) have diverged sharply from those in the United States and Asia, where competitors operate without the burden of EU carbon levies, emissions trading costs, and renewable energy mandates layered on top of each other.

Henrekson's argument gains force from the numbers. The EU's Emissions Trading System (ETS), the Carbon Border Adjustment Mechanism (CBAM), and national energy taxes have collectively pushed European industrial power costs well above those in competing regions. American manufacturers benefit from cheap natural gas. Chinese steelmakers benefit from state-directed coal power. Swedish and Finnish producers benefit from political speeches about leading the green transition — and from electricity bills that make expansion uneconomic. The result is not a hypothetical future risk. Energy-intensive industries are already relocating or scaling back investment across Europe, and the Nordic countries are no exception.

The contrast with Norway is instructive. Norway's industrial base remains competitive in large part because its electricity supply is dominated by hydropower — cheap, reliable, and built decades before the current policy framework existed. Norwegian aluminium smelters and data centres operate with power costs that Swedish competitors can only envy. The difference is not geography or luck. Sweden had nuclear capacity that provided similarly cheap baseload power until political decisions began dismantling it. Finland invested in new nuclear at Olkiluoto, but the project ran a decade late and billions over budget, offering a cautionary tale about the gap between energy policy ambitions and engineering reality.

The political tension is now acute across the Nordic region. Climate commitments made in the 2010s assumed that green investment would generate new industries to replace the old ones. Northvolt was exhibit A in that narrative. Its failure leaves the thesis without its best supporting evidence, at exactly the moment when the costs — higher prices, lost investment, industrial decline — are becoming impossible to reclassify as transitional growing pains. Henrekson and his co-authors are not making a climate-sceptic argument. They are making an economic one: that the policy package chosen to address climate change has inflicted damage on European industry that no amount of subsidy can offset, because the damage is built into the price of energy itself.

Sweden's government now faces the question that Henrekson's piece makes unavoidable: whether to continue competing on climate ambition or to compete on industrial electricity prices. So far, no European country has managed both. Norway comes closest — but Norway's advantage was built by engineers in the twentieth century, not by policymakers in the twenty-first.

Sources: Svenska Dagbladet