Ladies and Gentlemen,

Sustainable development is the overall goal of Swedish Government policy. This means that all political decisions must take into consideration long-term economic, social and environmental consequences. I would like to give you a picture of why and how a small country could try to act in this global world.

In the west, we all live in economies that are heavily dependent on oil. We use oil for transport, for heating and for electricity. But oil is not an endless resource. The price of oil has actually tripled since 1996! Furthermore, the use of fossil fuels is contributing to global warming – the most serious environmental hazard of our time and already a fact. To add to that, the World Bank last week reported that as a result of the increase in oil prices over the past few months, poverty in a number of already poor countries has increased by 4-7 per cent. We act as though we are the last generation on earth – and we leave nothing to those who come next.

Our dependence on oil also has implications for security of supply as well as security policy. Many international conflicts today revolve around energy issues. As we know, oil reserves are not distributed equally around the world. Being able to rely on domestic and sustainable energy would also be beneficial in terms of security policy.

In light of all these factors, the Swedish Government has set a new policy target: the creation of the conditions necessary to break Sweden´s dependence on oil by 2020. And there is, indeed, an increased sense of urgency. If we prepare now, the transition to a sustainable energy system can be smooth and cost-efficient. If we wait until we are forced by circumstances, the transition may be costly and disruptive. No country can escape from this transition; to act sooner or act later are the only options.

A broad-based expert council, The Commission on Oil Independence, was appointed in Sweden in December 2005. This summer, the Commission, led by Prime Minister Göran Persson, will present actions necessary to achieve the new policy target.

In both our countries, there is a discussion about the dependence on oil. I followed with great interest the State of the Union in January where President Bush described America as “addicted to oil”. I noted, however, that climate change was not mentioned as an objective for the new Advanced Energy Initiative. However, even if our motives differ, our goal of decreasing the use of oil is the same.

It is already a major competitive advantage for Sweden´s industry and the economy that, by international standards, Sweden is not so dependent on oil. Swedish policy instruments such as investment grants, norms for energy use, loans with interest subsidies and information drives have formed the basis of a conscious policy to gradually reduce oil use. Since 1994 the use of oil in the housing and services sector in our country has decreased by 15.2 TWh. The use of oil in industry has remained largely unchanged – although industrial production has increased by 70 per cent. Measures to increase energy efficiency and to promote the development of district heating continue to be politically important tools. An increasing number of households are taking advantage of the benefits of district heating and heating pellets; car industry order books are being filled with hybrid and ethanol cars. This trend must be speeded up.

Sweden has a high percentage of renewable energy already. Half our electricity is generated by hydropower and half by nuclear power. The proportion of bioenergy used in the Swedish energy system has steadily increased to about 16 per cent in 2005. Most of the increase is due to district heating plants. The biofuels used in the Swedish energy system consist mainly of wood fuels, black liquors, tall oil pitches, and ethanol.

But this trend must also be speeded up.

I would like to mention six important measures for sustainable energy.

The first is to increase the use of electricity from renewable energy sources – and I cannot see any risk of an increase in prices of wind!

The main tool for stimulating renewable energy in Sweden is the green certificate system introduced in May 2003. The Electricity Certificates Act provides for a new market-based system intended to favour electricity production from renewable energy sources. The green certificates have proven to be very efficient, and have already provided 5 TWh of new renewable electricity. We are now extending the scheme until 2030.

Secondly, wind power is probably the renewable energy source with the greatest potential in the short and medium perspective.

Wind power is therefore a high priority for the Swedish government. The Swedish Energy Agency has decided that 49 areas in 13 counties are of national interest for electricity production from wind power. There is also a need for a simplified set of rules and regulations for wind power, as well as a shorter processing time. We also have the “Not In My Back Yard”-debate in Sweden when it comes to wind power. But if we want clean energy, we have to build it, and therefore there is a need for a higher public acceptance.

The third measure is sustainable heating.

Sweden has an extensive district heating sector. District heating accounts for about 40 per cent of the heating market in Sweden. The change in the fuel mix has been dramatic. Compared to 1970, when oil was the main fuel, oil accounts for only a few per cent today. More than 62 per cent of district heating fuel today is biomass. The Government wants this trend to continue. But there are a relatively small – but still significant number of oil heaters in Swedish homes. We consider it unacceptable that many owners of single-family homes are still dependent on oil for their heating and therefore are hard hit by high oil prices. For them, we have introduced financial support for the owners of single-family homes and multi-dwelling buildings in order to encourage conversion from oil heating to renewable energy heating. For some time now, therefore, special support has been available to libraries, public swimming pools and hospitals, for example, to help in the conversion to renewable energy.

The fourth is transport.

Breaking dependence on oil in the transport sector will probably be the greatest challenge. We shall love the car, but hate the gasoline! The Government therefore has an ambitious policy to increase the percentage of renewable fuels. Today, around 15 percent of new cars sold are environmentally friendly cars that run on ethanol or biogas. But this is not enough. For the individual, it has to pay to choose an environmentally friendly car. Carbon dioxide neutral fuels must be cheap – they are exempt from both carbon dioxide tax and energy tax. Environmental cars will be exempt from congestion charges and have access to free parking in some municipalities. Sweden is also working actively in the EU to permit a higher blend of ethanol in petrol, a measure that would quickly have a great positive effect.

Measure number five is that we must also use fewer resources.

The efficient use of resources, including energy, is a basis for economic growth and is crucial for sustainable development. For many years, the Swedish Government has promoted more efficient use of energy through various measures, including financial support, information campaigns and energy tax.

The Government recently presented a bill on a comprehensive national programme for energy efficiency and energy smart buildings. The target is to decrease the specific energy use per area unit in buildings by 20 per cent by 2020, and 50 per cent by 2050.

My sixth point is that research and new knowledge are important pillars in this transition.

Resources for energy research have been increased substantially in Sweden. The purpose of these measures is to achieve more renewable energy production and more efficient energy use. Special research projects in areas such as energy use in built environments, biofuels, gasification of biomass, and commercialisation and risk capital provision may also be called for.

This also points to the great opportunities that energy transition presents. New energy is growth! Environmental technology is Sweden´s 8th largest export trade; 100 000 work in the environmental sector – which is also the industrial sector in Sweden with the largest economic growth. Being at the forefront of development, we will also be in a position to succeed in the export market and support sustainable development in countries that are now experiencing strong growth.

In promoting sustainable energy that does not cause severe air pollution or climate change, we are all obliged to work together in crucial processes like Kyoto and the development of the Kyoto Protocol. Needless to say, we continue to hope the large countries will join the Kyoto Protocol.

Breaking the dependence on oil is, in my view, a matter of political will. A consistent policy will turn obstacles into opportunities. To hide behind excuses of ignorance or economic considerations is not leading us to a sustainable future.

In Sweden, we call this vision the green welfare state. The modernisation of our societies has to help ensure that the resources of our planet are sufficient for us all, which is a moral obligation to our rich countries. If everyone used energy and resources the same way we do in the western world, we would need 3 more Earths. We only have one.

Breaking dependence on oil brings many opportunities for greater competitiveness, technological development and progress. Our aim is to break dependence on fossil fuels by 2020. By then, no Swedish home will need oil for heating. By then, no motorist will be obliged to use petrol as the sole option available. By then, there will always be better alternatives to oil.