Adjustment and competitiveness in energy-intensive industries: An analysis of policy instruments Lars J. Nilsson and Patrik Söderholm Lund University and Luleå University of Technology

Overall objective, focus and contributions of the project Objective: Generate new knowledge about the prospects for the Swedish energy-intensive industries to adapt to climate and energy policy instruments. Two PhD students: Eva Henriksson (LTU) and Christian Stenqvist (LU) Scope: (a) pulp- and paper industry; (b) policy-induced structural changes; (c) energy efficiency; and (c) multi-disciplinary synthesis. Contributions: knowledge for: (a) assessing the effectiveness of policy measures (e.g., PFE) on industry; (b) selecting policy instruments and improving methods to evaulate these; and (c) assessing the role of policy in inducing structural change.

Growth and the environment in Swedish manufacturing industry, Source: Brännlund (2008). Umeå Economic Studies No. 728.

Publications: Electricity Demand Behvaiour and PFE Henriksson, E., and P. Söderholm (2008). “The Cost-effectiveness of Voluntary Energy Efficiency Programs,” Proceedings of the 31st IAEE International Energy Conference, Istanbul June, Henriksson, E., and L. Wårell (2008). ”Electricity Demand Impacts of Knowledge-generating Investments: Experiences from the Swedish Pulp and Paper Industry,” Proceedings of the 31st IAEE International Energy Conference, Istanbul June, Nilsson, L. J., C. Lopes, P. Fonseca and M. Araujo (2008). Evaluation and Monitoring for the EU Directive on Energy End-Use Efficiency and Energy Services: Assessment of Existing Evaluation Practice and Experience, EMEEES Report, Wuppertal Institute, Germany. Stenqvist, C., and L. J. Nilsson (2009). ” Process and impact evaluation of PFE: A Swedish Tax Rebate Program for Industrial Energy Efficiency,” Paper to be presented at the ECEEE Conference, June Henriksson, E., and L. Wårell (2009). ”Electricity Demand and Factor Substitution in the Swedish Mining Industry: An Econometric Approach,” Paper to be presented at Securing the Future and 8th ICARD, June , Skellefteå, Sweden.

PFE: a selection of results/lessons Strengths: addresses the problem of asymmetric information, clear monitoring guidelines, focus on organization and working practices. Reasonably cost-effective. Weaknesses: Business-as-usual scenario not clearly defined, implying also that policy target is not clear. Distinction between short- and long-run not addressed. We assess methods to distinguish between short- and long-run price responses, and we.. …analyse free-riders and spillover effects.

Forthcoming conference paper (IAEE conference, Vienna, 2009).

Publications: Structural changes and policy impacts on the base industries Söderholm, P., and R. Lundmark (2009). ”The Development of Forest- based Biorefineries: Implications for Market Behavior and Policy,” Forest Products Journal, Vol. 59, Nos. 1-2, pp Blomberg, J., and P. Söderholm (2009). ”Factor Demand Flexibility in the Primary Aluminium Industry: Evidence from Stagnating and Expanding Regions,” re-submitted to International Journal of Production Economics. Ericsson, K., C. Stenqvist, L. J. Nilsson, and M. Nilsson (2009). ”Stuck in the Greenhouse: Opportunity or Threat for the Pulp and Paper Industry?”, forthcoming report. Johansson, B., G. Modig, and L. J. Nilsson (2007). “Policy Instruments and Industrial Responses: Experiences from Sweden,” Proceedings of the ECEE Summer Study on Energy Efficiency, The European Council for an Energy Efficient Economy, La Colle sur Loup, France, 4-9 June. Söderholm, P., and L. Lundberg (2009). “Structural Breaks in Swedish Industrial Demand for Electricity: An Econometric Analysis,” Paper to be revised and submitted to an international journal.

A selection of results/lessons Market and policy implications of the development of forest-based biorefineries: (a) future competition for the raw material; and (b) the role of public policy is to target environmental externalities and R&D spillovers. Evidence of structural changes in Swedish industrial electricity demand since the early 1990s. Methods assessed to analyze structural shifts (e.g., endogenous vs. exogenous). The direct (short-run) impact of stringent climate policies on the industry are significant (e.g., primary aluminium production). Long-term targets and engineering flexbility should be encouraged.

A forest-based biorefinery

Ongoing work Climate and energy policy and structural breaks (methods and empirical analysis). Structural change in the pulp and paper industry (cooperation with Smurfit and Billerud within the realms of Solander Science Park). The overall impact of energy and climate policy on the paper and pulp industry (including organizational changes) Continued work on PFE, and lessons for future programs (t.ex. spillovers, rebound, double-counting etc.). Methods/approaches for evaluating energy efficiency in the base industries.