Industrial policy for a circular industrial transition in Sweden: An exploratory analysis

Currently, both the US and the EU are pursuing industrial policies to support climate mitigation objectives. The climate transition will require increased use of material resources, but the envisioned industrial policies do not sufficiently address resource use, despite the current unsustainable global resource-use trajectory. The lack of industrial policy in this field is therefore relevant and timely to address. This exploratory contribution aims to gain an understanding on how an industrial policy for Circular Economy (CE) transition in Sweden could be designed. The methods employed are literature reviews and interviews with 18 senior experts. The research finds that a Swedish industrial policy focusing on the CE transition is needed, together with larger public investments in CE-related technologies. Few existing policy instruments functioning as industrial policy for CE are identified, but many additional instruments could potentially serve this objective. The interviews provide insights into the specific policy needs, the factors determining policy-design, and the choice of sectors and value chains for policies to target. A relevant policy mix includes policy instruments such as green tax shifting, differentiated Value Added Tax, Circular Public Procurement, funding schemes, but also an improved institutional framework. Policy criteria should be based on environmental impact, but also on potential competitive advantages, and close alignment with European Union policies. The study concludes that a policy mix combining new and expanded industrial policy instruments, focusing on correcting market failures, market creation, and capacity-building, can support a circular industrial transition.