Weak governance and unclear effects of international climate initiatives
The central government’s purchases of international emission reduction units have so far been a cost-effective climate policy measure. Nevertheless, the projects carry considerable uncertainties, the Government is weak in its direction, and it is unclear whether the efforts contribute sufficiently to achieving the national climate objectives, according to the Swedish National Audit Office’s audit.
As part of Sweden’s climate policy, the Swedish Energy Agency – on behalf of the central government – purchases emission reduction units from projects that reduce greenhouse gas emissions abroad, particularly in developing countries. Emissions trading is regulated under the United Nations Framework Convention on Climate Change.
The Swedish National Audit Office’s audit shows that purchases of emission reduction units partly serve their purpose and have the potential to help attain the national climate targets. The price of the emission reduction units purchased has been low, and international climate initiatives have been a cost-effective climate policy measure so far.
Nevertheless, the initiatives carry considerable uncertainties. Many projects are delayed and generate fewer emission reduction units than initially agreed upon. Some are terminated without having generated any emission reduction units at all. Although the Swedish Energy Agency only pays for emission reduction units actually delivered, non-performing projects still incur certain costs.
Furthermore, future developments are uncertain. Many inexpensive initiatives have already been implemented, and since every country has climate objectives of its own, projects subject to international emissions trading are mainly the more costly ones.
This audit also shows that the Swedish Energy Agency has not reported the problems of cancelled or delayed projects sufficiently clearly. In other words, the Riksdag has not been provided with a comprehensive account of whether initiatives are proceeding in line with climate policy intentions.
Neither does the Swedish Energy Agency report the total cost of its emission reduction unit purchases, which impedes comparing cost-effectiveness with other climate measures.
“If the Riksdag and the Government are not given a complete and fair account of the results and the cost-effectiveness, this reduces their ability to make informed decisions on how Sweden can best achieve its national climate objectives and contribute to reducing global greenhouse gas emissions,” says Auditor General Christina Gellerbrant Hagberg.
The Swedish National Audit Office has previously scrutinised the Government’s management by objectives in this area, and this audit shows that this remains weak. For example, the Government has not set any target for the volume of emission reduction units to be purchased in relation to Sweden’s 2030, 2040 and 2045 climate targets.
This ultimately means that the Government has not ensured that the initiatives contribute to the extent needed to achieve the national climate targets. Nor can the Government determine whether the appropriations are adapted to the volume of reduction units that needs to be purchased.
“It is unclear whether the Swedish Energy Agency is purchasing, or is even able to purchase, sufficient emission reduction units to adequately support national climate targets,” says Lena Lakso, project leader for the audit.
Recommendations in brief
The Government is recommended to clarify objectives and expectations in its management of the Swedish Energy Agency, and to monitor cost effectiveness based on total cost – including administrative expenses.
The Swedish Energy Agency is recommended to:
- monitor administrative costs
- continue to develop project monitoring and evaluation
- systematically evaluate and document completed projects
- ensure that the annual report to the Government provides a true and fair account of results.