HyunJeong Hwang
OECD
OECD Economic Surveys: Sweden 2025
Abstract
Sweden is experiencing rising temperatures, more frequent extreme weather events, and increasing coastal erosion. Sweden has made significant progress in climate adaptation, with a strong framework in place and ongoing efforts to address climate risks. However, funding remains insufficient and unstable, and many smaller municipalities struggle to implement necessary adaptation measures. Market-based incentives remain underdeveloped, limiting private-sector investment in climate resilience. Governance remains fragmented, with responsibilities spread across multiple agencies and municipalities, leading to coordination gaps. Mainstreaming adaptation funding into national budgets and expanding risk-based insurance mechanisms would help bridge the funding gap. Establishing clear national adaptation targets and enhancing cross-sector and cross-municipalities coordination would improve policy effectiveness.
Despite global mitigation efforts, climate change is advancing rapidly. Sweden's average annual temperature has risen nearly 2°C since the late 19th century, outpacing the global average of just over 1°C, and by over 1°C in recent decades (Figure 2.1, Panel A). The country is already grappling with severe impacts of a warming climate. Extreme weather events are becoming more frequent and are expected to intensify in the coming decades, as exemplified by the devastating Hurricane Gudrun in 2005, the unprecedented drought and wildfires in 2018 and the extreme precipitation near Gävle in 2021. According to simulations, average annual precipitation is projected to increase by up to 40% between 1961-1990 and 2071-2100 (IEA, 2022[1]), and Sweden is likely to be more vulnerable to climate change than many other OECD countries (Panel B).
1. Annual surface temperature change 2018-2022 average compared to the 1981-2010 average.
2. The vulnerability index measures a country's exposure, sensitivity and ability to adapt to the negative impact of climate change.
Source: OECD Environment Statistics database; Notre Dame Global Adaptation Initiative Index (2022).
The impacts of climate change in Sweden will vary regionally, but the country’s high population density in coastal or river areas makes it particularly vulnerable to flooding and storm surges (Figure 2.2). A total of 131 out of 290 municipalities are located in coastal or river areas (National Expert Council on Climate Adaptation, 2022[2]). Moreover, one in ten homes is situated within three kilometres of the coast and less than five meters above sea level, while over 82% of Swedes live in coastal regions, far exceeding the EU average of 42% (RISC-KIT, 2015[3]). The south coast of Skåne serves as a sobering example, where coastal erosion has claimed over 200 meters of shoreline in just four decades, a trend expected to accelerate.
Empirical analysis suggests that extreme weather events in OECD countries reduce regional economic output by 1.6%, with effects lingering for years (Helia et al., forthcoming). Adaptation efforts, such as making infrastructure more resilient to flooding or storms and limiting the number of people and properties exposed to coastal extreme weather events, can significantly lower the overall economic costs of climate change. While Sweden has made notable progress in climate adaptation (Box 2.1), substantial challenges remain. Existing funding is short of actual needs and favours large-scale projects, leaving smaller municipalities struggling to access resources. Furthermore, market-based mechanisms to encourage private sector involvement in adaptation lag behind many other OECD countries. The governance of adaptation measures is fragmented. Addressing these challenges will not only enhance Sweden's resilience to climate impacts but also improve economic stability and social equity.
Note: Panel B presents an adjusted ranking where higher bars indicate greater relative exposure to climate-related natural hazards among OECD countries.
Source: WorldPop; Maes et al. (2022[5]).
Sweden has implemented several measures to enhance adaptation policies through a combination of national strategies, regional planning, nature-based solutions, and legislative changes, including:
Regional Adaptation Plans (2014): all 21 County Administrative Boards (CABs) have been required to develop regional adaptation plans since 2014.
National Adaptation Strategy (2018 and 2024): in 2018, Sweden adopted its first national climate change adaptation strategy, outlining specific risk areas for erosion, landslides, and floods. In 2024, a new strategy was adopted, expanding on previous efforts by incorporating updated climate risk assessments, stronger coordination between national and local authorities, and enhanced funding for preventive measures.
National Expert Council (2018): Sweden established the National Expert Council focusing on climate change adaptation.
LIFE Cost Adapt Project (2018-2023): this €3.7 million initiative tested nature-based solutions for coastal adaptation, including sand dune regeneration and eelgrass planting.
Legislative Changes (2018): the Planning and Building Act was amended to better incorporate climate change adaptation in municipal planning; Regulation (2018:1428) on Government Agencies' Climate Adaptation Work was established to mandate 32 national authorities and all 21 county administrative boards to initiate, support, and evaluate climate adaptation within their responsibilities.
Risk Area Identification (2021): the Geotechnical Institute and the Civil Contingencies Agency conducted a comprehensive inventory of areas at risk of landslides, mudslides, erosion, and flooding.
Additionally, the Swedish Expert Council on Climate Adaptation is currently conducting a climate risk and vulnerability assessment, set for release in 2026. The final report of the inquiry A Society Adapted to Climate Change was submitted to the Government in May 2025. It proposes legislative changes to support adaptation measures. Key proposals include the state taking responsibility for establishing protection against sea flooding along certain coastal areas, accompanied by an implementation plan. Furthermore, the report proposes the introduction of a new law with a funding model that would allow municipalities to levy charges on property owners whose properties benefit from these protective measures.
Public funding for climate change adaptation in Sweden has been insufficient and inconsistent. The primary source of public funding is the budget for natural disaster prevention, managed by the Civil Contingencies Agency's 2:2 fund. Additional funding sources, such as research grants and EU funding, are also available for certain projects. While infrastructure resilience is a major focus of climate adaptation funding, current financial resources remain insufficient to meet the growing needs (National Expert Council on Climate Adaptation, 2022[2]). For example, the Housing Authority estimates that coastal municipalities alone will require SEK 100 billion (approximately USD 10 billion) to increase resilience and adapt to climate change by 2100 (Boverket, 2021[4]). Spread over time, this roughly equates to SEK 1.33 billion (0.02% of GDP) annually. In contrast, the 2:2 fund for natural disaster prevention disbursed around SEK 500 million (0.01% of GDP) in 2023, while the 2024 budget for climate adaptation was only around SEK 200 million (0.002% of GDP), falling dramatically short of the required scale of investment (Figure 2.3). Moreover, most of the adaptation budget is earmarked for preventive and knowledge-building activities, such as research, investigations, and planning, rather than for direct investments in infrastructure resilience. Local tax revenue should serve as a complementary source of funding, but budgets are already stretched in many municipalities (OECD, 2023[5]). The volatility of public funding further compounds the challenge, undermining municipalities’ ability to plan and implement long-term adaptation strategies.
1. Numbers come from government budgets, expense category (“utgiftsområde”) 20, 1:10, climate adaptation and 1:19 measures preventing landslides along the Göta älv river valley.
Source: Ministry of Finance budgets and The Swedish National Financial Management Authority.
There is also a significant disparity in access to adaptation funding among municipalities. Climate adaptation funding is not integrated in Sweden’s cost and income equalisation system, which helps resource-limited municipalities maintain essential public services. The state does generally not provide direct funding for municipalities to implement adaptation measures. Instead, municipalities must rely on their own resources or apply for funding through a complex and resource-intensive process (Rylenius and Hamza, 2024[6]). This requirement may place a burden on smaller municipalities, which often lack the administrative capacity to navigate the application process. Indeed, larger cities are more likely to have dedicated financial resources, while smaller municipalities struggle to secure funding - a survey found that 60% of large cities had dedicated adaptation budgets, compared to only 30% of smaller cities (Swedish Environmental Institute, 2023[7]).
To address the public funding gap, climate change adaptation should be mainstreamed into government budgeting and planning, similar to the approach taken for climate change mitigation. This integration would involve establishing a long-term funding strategy with consistent annual allocations, providing stability and enabling effective long-term planning for municipalities. A steady funding stream would reduce the likelihood of drastic budget cuts or fluctuations, supporting more effective long-term planning for adaptation projects. Many OECD countries, including Canada, France, the Netherlands and the United Kingdom, have already mainstreamed climate change adaptation into their government budgeting and planning processes, alongside climate mitigation efforts (OECD, 2024[8]). Additional measures are needed to address the funding disparities between municipalities and ensure fair distribution of resources across municipalities of all sizes. One option is to introduce conditional grants linked to specific performance targets, while ensuring that administrative complexities do not delay fund allocation (see section 2.4). Going forward, incorporating climate adaptation funding into Sweden's cost and income equalization system could be explored.
Private funding should pay a key role in financing adaptation for several reasons. Public funding alone will not suffice to meet the growing adaptation needs, especially as governments face increasing fiscal constraints (Chapter 1). The private sector can play a pivotal role in closing this funding gap. Businesses, investors, and financial institutions not only have access to substantial resources that can complement public funding, but they also drive cost-effective, innovative solutions to adaptation challenges (Green Climate Fund, 2024). Moreover, businesses are increasingly expected to engage in climate action, responding to stakeholder demands (OECD, 2024[9]). Individual small-scale adaptation measures, such as elevating buildings or improving insulation, can often be more cost-effective than large-scale government infrastructure projects. Perhaps most importantly, property owners are the main beneficiaries from safeguarding their own assets and should therefore at the outset also foot the bill.
Unlike direct regulation, market-based incentives promote voluntary, ex-ante risk reduction by households and businesses, fostering a proactive and cost-effective approach to adaptation with targeted, site-specific solutions tailored to the unique risks of individual properties or businesses (Pareliussen and Purwin, 2023[9]). Governments have imperfect information about future risks and do not know how committed developers or households will be to adopting adaptation measures. With such imperfect information, shifting more financial responsibility to private entities creates stronger incentives for proactive investment in ex-ante protective measures. A proactive approach significantly lowers ex-post recovery costs, mitigating the overall economic impact of climate-related events (Valverde et al., 2022[10]). Moreover, market-based mechanisms are in general equitable because they align costs with those who stand to benefit the most from adaptation. Since property owners directly benefit from adaptation measures that safeguard their assets against flooding, storms, and sea-level rise, they should bear a considerable share of the costs rather than relying on public funds. Using taxpayer money to protect property values in high-risk areas raises fairness concerns, as it shifts the financial burden to the broader public. However, Sweden lags behind many OECD countries in terms of private-sector adaptation initiatives (Figure 2.4), resulting in a growing gap between adaptation needs and available finances (Gram-Hanssen et al., 2023[11]).
Indicator of private sector adaptation, average for 2022 and 2023
Note: 'Strategy' refers to firms adopting an adaptation strategy for physical risks. 'Investments' denotes investments in solutions to avoid or reduce exposure. 'Insurance' indicates the purchase of insurance products to offset climate-related losses. Data is sourced from the annual EIB Group Survey on Investment and Investment Finance (EIBIS). The survey covers approximately 12 000 firms across the EU27 and 800 firms in the United States.
Source: Costa et al. (2024[77]); EIB Investment Survey 2024.
2.3.1. Strengthening price signals
Sweden’s legal framework places the primary financial burden and responsibility for climate change adaptation on the private sector. By law, property owners, rather than the state, are primarily responsible for protecting their own assets (Boverket, 2025[74]). In practice, however, many property owners are not aware of their responsibilities (RISE, 2024[12]). Furthermore, there is an implicit expectation among property owners and insurers that the state will cover the cost of catastrophic events, reflecting Sweden’s long history of providing financial support during natural disasters and catastrophic events (Villeneuve and Grislain-Letrémy, 2022[13]; RISE, 2024[12]). This situation creates moral hazard, where property owners may delay or avoid taking necessary adaptation measures because they believe the state will step in during a disaster.
An effective way to address this moral hazard is by strengthening risk signals through pricing mechanisms. When property owners face direct financial consequences for climate risks, they are more likely to take responsibility for mitigating those risks upfront to avoid higher future costs. This approach can encourage individuals and businesses to adopt adaptive or preventive measures to reduce the impact of climate-related events. Property damage reduction measures generally have a higher benefit-cost ratio than other adaptation measures such as relocation, as they involve more limited investments (Coral and Brunner, 2024[14]). This is particularly evident in Sweden (Figure 2.5). By integrating pricing mechanisms, the financial rationale for property owners can be further reinforced to invest in these cost-effective adaptation measures. An inquiry assessing how climate adaptation costs can be distributed among the beneficiaries of measures delivered its recommendations in May 2025, in which it proposed a new funding model that would allow municipalities to levy charges on property owners whose properties benefit from these protective measures (Figure 2.5).
Benefit-cost ratio values for four adaptation measures for the period 2020-2100, under a 2°C scenario
Note: The costs were calculated as the sum of capital investment costs to implement the measure and maintenance costs. The benefits are the damages avoided by implementing the measure, calculated as the difference between future damages with and without adaptation respectively. The benefit-to-cost ratio, which is the ratio of total benefits to total costs, is based on discounted values. Benefit-to-cost ratios below one have been given the value of 0.5 in this figure.
Source: Dottori et al. (2020[16]).
The role of insurance premiums
Insurance premiums are useful tools in this regard. By linking premiums to the level of risk associated with a property, insurers can provide a clear financial signal to property owners. Higher premiums for high-risk properties will incentivize owners to implement adaptation measures, such as flood defences, in order to reduce their exposure to climate-related risks. This creates a direct financial incentive for adaptation, while also ensuring that those who benefit from reduced risks share the costs.
In Sweden, insurance penetration is high (Figure 2.6). The real estate sector has a coverage rate of over 95%, although property insurance is not legally required. This is largely because banks and lenders in Sweden require property insurance as a condition for obtaining a mortgage (National Expert Council on Climate Adaptation, 2022[2]). Swedish insurance companies provide broad coverage against climate-related risks (UNFCCC, 2022[15]). Standard policies often cover various natural disasters, including fires, windstorms, hail, and flooding. Between 2015 and 2022, insurers paid compensation for 133 700 natural event-related damages caused by floods, erosion, storms, and other hazards, averaging 16 700 claims per year, and the total cost exceeded SEK 8.1 billion (0.1% of GDP), with annual payouts averaging slightly over SEK 1 billion (0.02% of GDP) (Svensk Försäkring, 2023[16]) (Figure 2.7).
Total direct gross premiums written in 2023
Source: OECD (2024), Global Insurance Market Trends 2024.
Note: Claims payments have been deflated using the consumer price index.
Source: Insurance Sweden; NIER.
However, Sweden’s insurance system lacks a clear link between premiums and the level of risk, weakening the risk signalling function of insurance premiums. In Sweden, there is no government-imposed price cap on home insurance premiums. Insurance companies determine premiums based on various factors, including the location, size, and condition of the property, as well as the policyholder's claims history. Given the absence of price caps, premiums can in principle vary significantly based on risk profiles. In practice, however, insurance premiums are currently set almost uniformly across locations, regardless of the actual risk level by location. Furthermore, risk reduction measures implemented by property owners do not lead to adjustments of insurance premiums. This pricing approach may stem from a tradition of solidarity and a long-standing practice of cross-subsidizing premiums across regions to maintain affordability and ensure broad insurance coverage (Maynard and Ranger, 2011[17]).
Such “risk-blind” premiums do not properly incentivise ex-ante adaptation strategies. This reduces not only awareness among property owners or businesses regarding the true risks they face but also motivation to invest in climate resilience or disaster prevention measures. In addition, by spreading risk costs evenly across policyholders, those in safer locations subsidise those in riskier ones, which undermines fairness and the overall efficiency of the insurance market.
Encouraging insurers to adopt risk-based insurance premiums could help incentivize climate risk reduction. A system that adjusts premiums based on risk exposure, with discounts for policyholders who implement mitigation measures, has been successfully adopted in several OECD countries, including Denmark and the United Kingdom (Hudson et al., 2019[18]). In the United States, California recently introduced a similar initiative, offering insurance discounts to homeowners and businesses that invest in wildfire mitigation, such as home hardening and fire-resistant modifications (CA Department of Insurance, 2024). Evidence suggests that such pricing structures encourage policyholders to invest in adaptation measures (ICMIF and UNDRR, 2021[19]) and incentivize property owners to relocate to lower-risk areas, thereby reducing overall exposure to climate-related hazards (You, Kousky and Atreya, 2024[20]).
Accurate risk assessments are needed to correctly internalise risks in the insurance premium. Insurance pricing in Sweden often relies on historical risk data that does not account for the increasing severity of climate risks in specific areas (Holmgren and Karlsson, 2020[21]). The UK Prudential Regulation Authority, for instance, requires insurers to conduct long-term climate scenario analyses as part of their risk assessments (Bank of England, 2024[22]). Such initiatives would enable insurers to move beyond historical data and reflect actual future risks in their premiums. To achieve this, partnerships between insurers, climate scientists, and local governments can be considered. Collaboration with climate research organizations can provide more accurate, up-to-date models of climate risks, while local authorities can offer valuable insights into regional vulnerabilities and potential adaptation strategies. A relevant example comes from California, where a partnership between three key actors aims to provide accessible, science-based risk assessments to support fair insurance pricing (CA Department of Insurance, 2024).
High premiums in high-risk areas can make insurance unaffordable, particularly for lower-income households and small businesses, inadvertently leading to underinsurance or coverage gaps. Furthermore, insurers may eventually find certain properties or areas uninsurable if the risks become too high. Indeed, the first such case in Sweden happened in 2018, when the Länsförsäkringar insurance company informed the owner of a coastal property in Kristianstad that they would no longer be able to insure the property (Swedish portal for climate change adaptation, 2021[23]). Such cases could become more common in Sweden, potentially leading to gaps in coverage and higher premiums. This trend has also raised concern among Swedish authorities: Finansinspektionen launched an investigation in early 2025 into how extreme weather events are affecting insurance availability and affordability.
To ensure coverage remains widely accessible, the risk-based insurance system should be supplemented with additional measures. The government could offer targeted subsidies to help lower-income households and small businesses access affordable insurance. Rather than directly subsidising high-risk insurance or requiring insurers to provide coverage at lower prices, a more sustainable approach could be to subsidise ex-ante risk mitigation measures. For instance, allowing homeowners in high-risk areas to apply for funding to implement risk reduction measures, such as flood defences or fireproofing, would make their properties more insurable. In the worst case, support for relocation could also be considered. Such a scheme could be publicly run and financed or managed in partnership with the insurance industry, potentially linked to reinsurance funds mentioned below. This would incentivize risk mitigation while helping to stabilise the insurance market in the long term.
Even with the best models and expanded coverage commitments from insurers, the scale of a major extreme weather event can be far beyond what was anticipated, leading to claims that exceed insurers' capacity. This could threaten the financial stability of insurers, potentially pushing them into insolvency and leaving policyholders without the financial support they depend on during crises.
In these scenarios, measures would be needed to prevent widespread insolvencies among insurers and ensure that victims are not left without financial support. Explicit ex ante risk pooling is at the outset a superior solution to ex post tax-financed bailouts. One solution could be the creation of a reinsurance mechanism financed entirely through a mandatory surcharge on all property insurance premiums, which currently lacks in Sweden (OECD, 2018[24]). This prefunded pool would activate only after insurers have absorbed losses up to a predefined cap. The second option is a government-backed reinsurance backstop that kicks in once the private pool is exhausted. Such a system would ensure that insurers retain an appropriate level of risk and responsibility, while also protecting the financial stability of the broader insurance market during extreme events and limiting contingent liabilities from the current implicit state backstop. Additionally, insurers that actively encourage and facilitate risk mitigation efforts could be rewarded with more favourable terms when accessing the backstop. This would incentivise insurers to promote responsible risk management among their customers, reducing the likelihood of high claims. For example, France has implemented the Natural Disaster Compensation Scheme, funded by an additional premium on property insurance contracts and reinsured by the state-backed Caisse Centrale de Réassurance (CCR), which provides unlimited coverage with a government guarantee. Insurers that actively encourage and facilitate risk mitigation efforts are rewarded with more favourable terms when accessing the backstop.
Other financial instruments including catastrophe bonds and green bonds can also help finance adaptation for critical public infrastructure. Catastrophe bonds allow the private sector to absorb the financial risks of natural disasters in exchange for high returns. In the Netherlands, the government has partnered with private investors through a combination of public-private partnerships and catastrophe bonds to finance flood defence infrastructure, helping to enhance resilience against rising sea levels and extreme weather events. In Norway, Kommunalbanken, a local government funding agency, has been actively financing resilience projects through green bonds, including the installation of tsunami warning systems and the construction of landslide and flood protection measures across the country (GCA, 2021[25]). Gothenburg became the first city in the world to issue green bonds in 2013 to fund climate change projects, and Sweden has expanded their use to fund environmental and climate resilience projects. While these bonds have been effective in supporting climate change mitigation efforts, they are primarily focused on reducing emissions rather than enhancing the resilience of infrastructure to climate impacts. There is growing potential to leverage these financial instruments to fund resilience-enhancing initiatives for public infrastructure.
Addressing the public goods dilemma through taxation
Similar to risk-based insurance pricing, a risk-based tax is another market-driven approach to incentivize climate resilience. While insurance incentivizes individual adaptation, risk-based taxes are better suited for situations where collective adaptation efforts are needed at the community level. Unlike insurance, which reflects individual exposure, a risk-based tax applies to all property owners in a given area, ensuring broad participation in financing climate resilience initiatives. For instance, flood-prone or coastal communities could impose higher municipal property tax rates, with revenues allocated to projects such as improved drainage systems or sea wall construction. This approach can help resolve the public goods dilemma where individuals delay action, expecting others to absorb the costs.
The public goods dilemma is pressing in some coastal municipalities in Sweden. In Malmö and Vellinge, for instance, the question of who should bear the financial burden of constructing sea walls caused funding disputes and delays (National Expert Council on Climate Adaptation, 2022[2]). This is because while property owners hesitate to invest in adaptation measures that benefit the wider community, local authorities are reluctant to intervene and finance these projects, fearing accusations of favouritism toward specific areas or property owners at the expense of other taxpayers (Daher, 2022). The situation is further complicated by the fact that in Sweden, wealthier individuals, who have higher adaptive capacity, often choose to live in waterfront properties that are at high risk of flooding (Englund et al., 2023[26]).
Implementing a risk-based property tax in these areas would help address the free-rider and moral hazard problems, ensuring that those who benefit most from adaptation efforts contribute fairly to their costs (Daher, 2022). Structuring this tax similarly to existing water service fees could make it more politically and administratively feasible, ensuring that contributions are proportionate to the level of direct benefits received from climate change adaptation efforts (National Expert Council on Climate Adaptation, 2022[2]). In the current system municipalities are not allowed to set their own property tax rates. Delegating the authority to collect local property taxes and set property tax rates locally, as recommended in the previous Survey (OECD, 2023) could provide municipalities with the flexibility needed to implement risk-based property taxes.
Introducing the risk-based tax could also help correct existing financial incentives that encourage development in high-risk coastal areas. In recent years, there has been a rise in waterfront housing construction in Sweden, with an increasing share of new developments occurring in vulnerable coastal zones (ClimateChangePost, 2024[27]). This trend is driven in part by strong demand for waterfront properties, which commanded a 14% price premium in Sweden in 2024 (Investropa, 2025[28]). Waterfront properties are often used as rental homes, further fuelling interest in coastal development. The annual municipal fee for residential properties is capped at either 0.75% of the property's assessed value or SEK 9 525 (for 2024), whichever is lower (Global Property Guide, 2024[29]). This means that for properties with an assessed value above approximately SEK 1 270 000 (USD 119 000), the cap makes the effective tax rate lower for higher-valued properties, potentially encouraging development in climate-vulnerable areas. This structure can make owning high-value coastal properties relatively less expensive in terms of annual property taxes, potentially encouraging development in climate-vulnerable areas. By introducing the municipal property tax that accounts for climate risk, Sweden could help counteract these incentives, ensuring that those who choose to build or invest in high-risk coastal zones contribute more to the costs of climate change adaptation. For instance, in the United States, proposals have been made for Washington State to adjust property tax rates to reflect climate risks (Kiplinger, 2023[30]).
2.3.2. Addressing the potential unresponsiveness to price signals through regulation
While market-based solutions are generally more effective than direct regulation, there may be cases where agents do not respond to price signals. Property owners and developers might still proceed with projects in high-risk areas despite elevated insurance premiums. Some may prioritize short-term financial gains over long-term risks, especially if they plan to sell the property soon after completion. Others may underestimate climate-related hazards, leading them to accept higher premiums without implementing resilience measures. Wealthy individuals and large corporations may simply absorb the additional costs, making risky developments more feasible for them. Additionally, personal attachment to a specific location or cultural significance may override financial considerations, further diminishing the deterrent effect of market mechanisms.
Direct regulation can help address these challenges, notably by zoning and land use regulations. For instance, by setting clear boundaries where development is either restricted or subject to higher regulatory standards, these measures would reduce the incentive to build in areas where the risks are high, regardless of insurance premiums. In Sweden, zoning and building regulations are primarily governed by the Planning and Building Act (PBL 2010:900) and Land Act. These laws grant significant planning authority to municipalities, allowing them substantial discretion in land-use decisions (see section 2.2).
The Planning and Building Act requires municipalities to consider climate risks in zoning decisions. However, municipalities have broad discretion in this regard and often prioritise economic returns from development projects over long-term climate resilience, partly due to the lack of enforceable standards. Research shows that between 2003 and 2018, Stockholm lost 2% of its green space, while Malmö saw an increase in paved land from 57% to 61% between 2015 and 2020 due to growing development pressures (Brokking, Mörtberg and Balfors, 2021[31]; Egegård et al., 2024[32]). This trend is likely to continue as many municipalities face growing development pressures, including Västra Götalands län, not least due to housing shortages (National Expert Council on Climate Adaptation, 2022[2]; Boverket, 2025[33]; Västra Götaland, 2022[34]).
Current building codes do not fully encompass the necessary adaptation measures to fortify buildings against anticipated climate impacts (National Expert Council on Climate Adaptation, 2022[2]). Sweden has implemented measures like the climate declaration requirement for new buildings, effective from 2022. This regulation mandates that developers assess and document the climate impact of the construction phase. However, this initiative primarily addresses the environmental footprint of building materials and processes, rather than enhancing the resilience of structures to climate-related events such as floods or extreme weather (Boverket, 2023[35]).
To address the challenges in Sweden’s zoning and building regulations regarding climate change adaptation, climate adaptation requirements should be strengthened in the Planning and Building Act and building codes. For instance, implementing minimum green space requirements, at least in risky areas, especially if new developments are increasing the share of impervious surfaces, could help prevent the loss of green space in the rapidly growing urban centres. The city of Lyon in France, for instance, has established a binding standard that sets a minimum proportion of green spaces in new development projects, aiming to increase the proportion of open green spaces in construction projects by 5-10% (Interlace Hub, 2019[36]).
Sweden has a policy framework to guide climate change adaptation at national, regional, and local levels. The framework, introduced in 2018, provides a structured approach with goals, principles, and responsibilities at various levels (Box 2.2). However, the framework is fairly new and a number of challenges remain.
A key challenge is the fragmentation of adaptation initiatives without sufficient coordination. In principle, the Ministry of Climate and Enterprise is responsible for the government’s overarching policy work concerning climate, including climate change adaptation (Box 2.2). Each ministry is then responsible for climate change adaptation within its respective area, and work on adaptation is divided among government agencies. In practice, however, adaptation actions are spread across multiple sectors without sufficient coordination. Different agencies implement their own measures independently depending on their own priorities and objectives, leading to inefficiencies, duplication, or gaps (National Expert Council on Climate Adaptation, 2022[2]). For example, infrastructure planning, water management, agriculture, and public health each play a role in climate change adaptation, yet inter-sectoral collaboration is frequently hampered by competing interests or insufficient communication channels.
Beyond the horizontal fragmentation, vertical fragmentation is also evident. Adaptation efforts are divided across levels of government without effective integration. Sweden’s decentralised governance system grants its 290 municipalities significant autonomy in land use planning, permitting decisions, and water and sewage management, critical areas for climate change adaptation (Gram-Hanssen et al., 2023[11]). The 21 County Administrative Boards (CABs) are tasked with coordinating and monitoring municipal adaptation efforts in line with the national strategy (Box 2.2). In practice coordination remains inconsistent, leading to uneven adaptation efforts across municipalities (Rylenius and Hamza, 2024[6]).
Sweden has developed a structured policy framework to address climate change adaptation, centred on its national adaptation strategy adopted in 2018 and updated in 2024. The strategy sets out overarching goals, guiding principles, and defined responsibilities across various levels of governance:
At the national level, the Ministry of Climate and Enterprise oversees climate policies, including adaptation, while sector-specific ministries delegate adaptation responsibilities to approximately 30 government agencies.
At the local level, municipalities are responsible for integrating climate risks, such as flooding and landslides, into land-use and building regulations. For instance, the municipalities are responsible for detailed development plans where new buildings should not be allowed in areas with high risk of for example landslides or flooding and erosion.
The County Administrative Boards are tasked to monitor, evaluate, and coordinate climate change adaptation work across the county’s municipalities in line with the government’s ordinance on adaptation, ensure the harmonisation of climate change adaptation measures with neighbouring counties, and avoid unintended negative consequences.
The National Expert Council on Climate change adaptation was established in 2018 and tasked with evaluating climate change adaptation work and submitting recommendations on actions to the Government every five years. The first report was published in 2022.
In addition, 32 national authorities and all county administrative boards must carry out climate and vulnerability analyses, develop agency goals for their work on climate change adaptation and an action plan to achieve the goals. The action plan must set out the resources, procedures, timeframes and responsibilities that apply to the work.
Source: Regulation on climate adaptation (2018:1428); Klimatanpassning.se (2024[37]); Government of Sweden (2024[38])
Sweden’s climate change adaptation framework mandates that 32 national authorities and 21 county administrative boards establish their own climate change adaptation goals and corresponding action plans (Box 2.2), but there is no overarching national action plan that consolidates these efforts (National Expert Council on Climate Adaptation, 2022[2]). Although Sweden has a well-established climate policy framework, adaptation efforts remain somewhat isolated from the broader climate agenda, which is primarily focused on mitigation. In contrast to mitigation strategies, which are guided by a clear national action plan featuring legally binding national emission reduction targets, specific measures, comprehensive monitoring systems, and integrated budgets, adaptation initiatives lack the same level of centralised coordination and strategic direction, leaving much of the responsibility to individual agencies and municipalities (Kristianssen and Granberg, 2021[39]).
The CABs’ coordinating function is further constrained by limited oversight and monitoring mechanisms. Effective governance requires regular tracking of municipal progress to ensure alignment with national objectives and prevent municipalities from working in isolation. However, CABs lack the authority to supervise municipalities or enforce policy actions when local governments fail to meet their adaptation responsibilities (Rylenius and Hamza, 2024[6]). Even when local actions diverge from national objectives, CABs are unable to impose corrective measures or ensure compliance. Furthermore, due to the absence of a legal obligation for municipalities to report their climate change adaptation activities to the CABs, few municipalities do so, making it difficult for CABs to monitor progress and follow up on municipal adaptation work (Gram-Hanssen et al., 2023[11]).
The lack of standardised metrics to assess climate risks and adaptation outcomes further complicates efforts to track adaptation progress across regions. Sweden has a strong capacity to assess climate change risks at the national level, with several institutions, including the Meteorological and Hydrological Institute, the Civil Contingencies Agency, and the Geotechnical Institute, actively involved in climate risk mapping and data collection. However, the data provided by national agencies often vary in resolution, scenarios, and format (National Expert Council on Climate Adaptation, 2022[2]). Moreover, no national climate risk and vulnerability assessment has been conducted that accounts for different climate scenarios or climate-related risks across various sectors and geographical areas in Sweden (Gram-Hanssen et al., 2023[11]). The lack of standardisation would hamper monitoring efforts, leading to discrepancies in risk evaluations and preventing adaptation initiatives from being accurately assessed against a common baseline. This limitation also hinders municipalities from making well-informed decisions on land use planning or infrastructure development. A national climate risk and vulnerability assessment is currently being conducted by the National Expert Council, with the report scheduled for publication in 2026. This is a step in the right direction, but details are not yet available.
To strengthen Sweden’s climate change adaptation framework, a more integrated and coordinated approach is needed at both the national and local levels. Given that climate impacts often cross municipal boundaries, effective coordination between municipalities is essential to ensure a cohesive and comprehensive response.
First, the government should establish a centralised national action plan that consolidates the existing sectoral and municipal adaptation strategies into a common framework, as proposed by the Swedish National Expert Council in 2022. This would help create a more consistent and accountable framework. For instance, Germany's Climate Change Adaptation Strategy, adopted in 2008 provides national action plans with sectoral components, and the country adopted a new national climate change adaptation strategy in December 2024, which contains 33 measurable targets and over 180 implementation measures (EC, 2025[40]). Under the Climate Act’s four-year cycle for mitigation, the government submits a climate report to Parliament every four years, assessing progress toward national and international climate targets, which then informs updates to policy measures and budget allocations. A similar mechanism for adaptation, including its alignment with the budget process, could enhance accountability and long-term planning.
Another priority should be enhancing CABs’ role in coordinating municipal adaptation efforts. Granting them a stronger mandate to monitor municipal adaptation efforts and ensure compliance with potential national guidelines, coupled with mandatory reporting requirements for municipalities, would improve their oversight and coordinating function. Introducing corrective mechanisms allowing CABs to intervene when municipalities fail to meet adaptation responsibilities can also be considered. If necessary, technical assistance and training to CABs to ensure they can effectively guide municipalities in climate change adaptation should be provided.
Furthermore, establishing standardized metrics to assess climate risks and adaptation outcomes across regions, with harmonized data formats, would enhance Sweden’s ability to track adaptation progress, ensure consistency across regions, and improve decision-making at all levels. For instance, the Netherlands has implemented mandatory climate change adaptation stress tests for municipalities, following a standardized approach that ensures climate risk assessments are consistent across different levels of governance, and these assessments must be shared with provinces and the central government, facilitating coordination and improving climate change adaptation planning (Climate Adaptation Knowledge Portal, 2024[41]; EC, 2018[42]).
Public funding mechanisms could also be revised to better support the coordination efforts. For instance, the intergovernmental transfer system or conditional grants could be used. In Germany, for instance, the "Climate Change Adaptation in Municipalities" programme, funded by the federal government, provides grants to local authorities contingent on the implementation of specific adaptation measures and adherence to national guidelines. Municipalities must report progress and demonstrate that they meet climate resilience targets to access the funding. In the Netherlands, conditional grants are provided based on collaborative regional plans that outline how municipalities will work together to implement adaptation measures. Grants could be linked to specific performance targets, such as meeting adaptation milestones, or adhering to mandatory reporting requirements.
Lastly, building municipal capacity through targeted support and technical assistance is essential to ensuring that all local governments, regardless of size or resources, can effectively implement adaptation measures. This can be achieved through a combination of training programmes, knowledge sharing initiatives, and technical support. A key component of this strategy can be the establishment of a knowledge hub to share best practices and lessons learned across municipalities, addressing their expressed need for more information on successful adaptation examples. While the National Knowledge Centre for Climate Adaptation at SMHI and the Agencies Network on Climate Adaptation provide centralised resources, smaller cities and municipalities have called for new forums to facilitate collaboration and dialogue on climate change adaptation work (Swedish Environmental Institute, 2023[7]). A centralised approach may struggle to meet these local needs. CABs can play a pivotal role by facilitating regional knowledge-sharing, offering tailored support, and disseminating information and best practices among municipalities within their respective counties. By highlighting successful examples, CABs can inspire and encourage other municipalities to undertake climate change adaptation measures.
Climate change adaptation measures are undeniably important in preparing for the impacts of climate change, but the country must not lose sight of mitigation efforts to limit the extent of adaptation required. Without a strong global commitment to mitigating climate change, countries risk facing more severe adaptation challenges, ultimately increasing economic costs and societal impacts.
Sweden has a strong history of ambitious climate change policies, which together with abundant clean electricity in the north of the country has fuelled a considerable wave of industrial investments related to the green transition (OECD, 2023[5]). These developments have seen some setbacks recently, notably the bankruptcy of battery producer Northvolt, but the potential for green industrial development remains considerable.
Recent policy shifts have introduced uncertainty over Sweden’s climate commitments (OECD, 2025[43]). Sweden’s national climate targets have so far been more stringent than EU targets in terms of both overall emission reductions, timing and sector-specific goals. Sweden's national emissions reduction targets focus on reaching net zero by 2045, five years ahead of the EU target of 2050. The interim target for 2030 is similar to Sweden’s obligation under the Effort Sharing Regulation to reduce ESR emissions by 50% compared with 2005, but the EU target can be reached with flexibility mechanisms, including overachievements in previous periods (Climate Policy Council, 2024[44]). Sweden also has a separate target to reduce emissions from domestic transport (excluding aviation) by at least 70% from its 2010 level by 2030. Finally, under the EU Regulation on land use, land-use change and forestry (LULUCF, EU 2023/839), Sweden is obliged to increase annual net carbon removals by nearly 4 Mt CO2e by 2030 compared to the average of 2016-18. The second phase of the EU Emission Trade System (EU ETS-2), which enters into force in 2027, is to cover additional sectors such as road transport and buildings. In the context where EU ambitions converge with national ambitions and policy instruments are increasingly defined at the EU level, aligning national targets with the EU’s climate targets makes sense, creating a more integrated approach to emissions reductions across member states. Yet the government is shaping its policies in a way that makes it highly unlikely these targets will be met (Climate Policy Council, 2025[46]).
The second climate policy action plan, presented in December 2023, lacks the necessary measures to meet national climate targets by 2030. While the plan outlines approximately 70 proposals for emissions reductions across various sectors, it has been faulted for a lack of specificity and concrete measures. In particular, adjustments to the biofuel blending requirement for petrol and diesel and incentives for low-emission cars are expected to have led to a sizeable increase in emissions in 2024 (Climate Policy Council, 2024[44]). Additionally, the car scrapping premium, introduced from August 2024 at SEK 10 000 for at least 15-year-old cars replaced by an electric vehicle, is unlikely to yield meaningful environmental benefits, due to low participation and minimal emissions impact (Climate Policy Council, 2024[44]). As part of the spring budget 2025, the scrapping premium is to be increased to SEK 25 000. This higher premium is designed to target cars that would otherwise have been driven longer, thus increasing the potential climate benefits. Despite this increase, concerns remain about the overall impact, as even with these additional measures, the emissions reduction from the scrapping premium is still expected to be modest compared to the emissions increases from other policy measures. Adding to these concerns, the 2025 budget includes several measures that contradict climate goals, such as the reduction of taxes on transport fuels and the elimination of the aviation tax (Chapter 1), although it also introduces a policy to increase the biofuel blending quota (Table 2.1). The green tax shift, reallocating taxes from labour to environmentally harmful activities, has been reversed in recent years, with environmental tax revenue falling from 2.5% of GDP in 2010 to 1.6% in 2023, partly driven by drastic cuts in fuel tax rates in recent years (OECD, 2025[43]).
Sweden should reevaluate its policies and proposals, and refocus on concrete, targeted actions to ensure its climate policies are on track to meet both national and EU targets. The government should enhance the specificity of the climate policy action plan by establishing clear, measurable milestones and detailed measures that can effectively drive emissions reductions and increase net removals from LULUCF. A government inquiry has been tasked with identifying efficient strategies to eliminate fossil fuels to meet the 2030 ESR targets and 2045 climate goal, with findings due in May 2026. As recommended in the previous OECD Economic Survey (OECD, 2023) and in the latest OECD Environmental Performance Review of Sweden (OECD, 2025[46]), Sweden should focus on strengthening its overall policy package to ensure emissions reductions across all sectors, especially in non-ETS areas like transport, agriculture, and LULUCF, notably by improving agricultural emissions monitoring, and reinstating targeted incentives for electric vehicles, such as a bonus system (Table 2.1), as well as reversing recent climate policy rollbacks mentioned above. Sweden should also expand policies for negative emissions by introducing subsidies or tax credits for technologies that are not currently covered by the EU Emissions Trading System nor by Sweden’s carbon tax and seek synergies between biodiversity conservation and carbon sequestration in forests and wetlands.
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