On Balance: Why aren’t BCAs Done in Sweden for Environmental, Energy and Climate Policy? And Can Something Be Done About It?

Monetizing the impact of regulation in order to weigh its benefits against its costs is comme il faut in the US, see, e.g., a recent blog post by Dan Ackland in On Balance. In Sweden, this is not the case. Three laws govern the requirements for background analyses ahead of regulation in Sweden: National Budget Law, Authority Regulation, and Ordnance on impact assessment in regulation. These stipulate that consideration must be taken of costs to the state budget, and to firms, but not to individual citizens or the society as a whole. As a consequence, if a benefit-cost analysis (BCA) is conducted ahead of environmental, energy, and climate policymaking (a big if), it is often of a very poor quality (Swedish Environmental Protection Agency, 2020; Hammes, Nerhagen, & Fors, 2021).


Since the 1970s, Swedish politicians and government agencies love to view the country as a forerunner in environmental policy. Politicians regularly set goals, such as reducing the greenhouse gas emissions from transport by 70 percent by 2030 compared to 2010 levels, meeting water-quality requirements even in waters that naturally don’t meet them, and being carbon neutral by 2045 that are very expensive to reach. At the same time, strong industrial interests influence policies, e.g., a vehicle industry that at times wields an undue influence over policy proposals (SOU 2016:33; Hammes, 2014). This has, among other things, led to a car fleet with the highest CO2 emissions in Europe, when domestic industry has been accommodated in the definition of an “environmentally friendly car”. Policy is made by consensus, and the politicians’ self-image is one of being able to weigh different interests against one other in the process – a process, that nevertheless does not contain a formal BCA.

Many authors have pondered the question of what drives the (presumably) very stringent Swedish environmental policy. Instead of looking at politicians, many researchers point at the bureaucrats who, to a large extent, participate in the commissions of enquiry preceding regulation (Uba, 2010), and who do the background analyses ahead of regulation. As for example Carlsson et al. (2011), and Eggert et al. (2018) both show, bureaucrats often have very strong environmental preferences compared to the public and choose both policy goals and policy instruments accordingly. Another oft pointed-out factor is the recruitment process which gives preference to like-minded individuals (Rothstein, 2016; Hammes, 2021). In our recent study (Hammes, Nerhagen, & Fors, 2021) we went one step further to try to determine what kinds of characteristics the bureaucrats who recommend the strictest environmental regulation have. That is, we wanted to understand whether there are differences between bureaucrats which might be used to further the use of BCA in government regulation in Sweden.

In order to study the impact of individual characteristics, we set up a study with four hypotheses: that bureaucrats’ risk averseness, strength of preferences with regard to a policy (strong environmental preferences versus strong preferences for cost-efficient policy), uncertainty about the BCA outcome, and the presence of a binding governmental budget constraint, respectively, influence their propensity to do a BCA. We designed a questionnaire and sent it by e-mail to persons working for one of five government agencies: Swedish Environmental Protection Agency, Energy Agency, Transport Administration, Transport Agency, and Transport Analysis. Out of 1,488 sent questionnaires we got 425 answers that we could use in the analysis.

Our empirical results lend strong support for our hypotheses. Thus, individuals with training in economics indeed pay more attention to the cost-effectiveness of policy than individuals with other types of education. Those with very strong environmental preferences tend to disregard the cost information and choose the strictest possible environmental policy. Risk neutral/loving individuals, especially those with training in economics, also tend to give more weight to the BCA results than other individuals, choosing cost-efficient policy over very stringent one. At the same time, risk averse persons without training in economics choose the non-cost-efficient but environmentally strict alternative. Finally, we find that the propensity to weigh in costs varies between the agencies so that bureaucrats at those agencies, notably the Transport Administration, that regularly work under a binding budget constraint take more account of BCA even unprompted than bureaucrats at the Environmental Protection Agency.

It is not quite clear what can be done to remedy the problem of no use of BCA in environmental, energy, and climate policymaking. One suggestion arises from the study by Hammes (2021), who notes that a binding governmental budget constraint, i.e., a binding limit to how much regulation is allowed to cost for the state, creates an incentive to do a BCA if its results can be expected to loosen the budget constraint. In the absence of such a budget constraint, i.e., when the cost of policy is borne by citizens/consumers as is the case with the carbon dioxide tax, various green certificate and feed-in tariff schemes, the tax on plastic bags etc., it is unclear how to induce the bureaucrats to consider the costs of regulation. As is noted in Hammes (2021), bureaucrats may suffer from cognitive dissonance when they have to implement policies that do not accord with their (professional/personal) preferences, which reduce their incentives to do a BCA if the “goal” policy lies close to their preferences but a BCA might change the status quo. E.g., an ecotoxicologist is trained only to consider the impact of pollution on some biota, while an economist may want to consider both the benefits from protecting the biota and the costs arising from reduced production possibilities. If policy is determined by the ecotoxicologist, the economist who may have to implement it will suffer from cognitive dissonance while the ecotoxicologist is happy not to have to care about the costs of their preferred policy. Cognitive dissonance leads, over time, to an alignment of the individual’s view with organizational goals, thus cementing status quo.

In the US, courts mainly seem to drive the use of BCA: agencies have to be able to motivate their choice of regulation and its costs in front of judges. It is unlikely that Swedish politicians or the activist bureaucrats (see, e.g., Hysing and Olsson (2012; 2018), Rothstein (2016)) who determine policy choices would be willing to surrender their power to choose regulations according to their own tastes to judges in a similar manner. Indeed, they’re not even willing to surrender it to considerations of its benefits and costs that a BCA might highlight. As long as the hiring practices of agencies and to the commissions of inquiry do not change, so that competence in BCA is weighed in in recruitment, the individual bureaucrats’ preferences will continue influencing policy in a direction that mostly implies more stringent environmental regulation in Sweden than may be justified by a weighing of it benefits against its costs.


Carlsson, F., Kataria, M., & Lampi, E. (2011). Do EPA administrators recommend environmental policies that citizens want? Land Economics, 87, 60-74.

Eggert, H., Kataria, M., & Lampi, E. (2018). Difference in preferences or multiple preference orderings? Comparing choices of environmental bureaucrats, recreational anglers, and the public. Ecological Economics, 151, 131-141. doi:10.1016/j.ecolecon.2018.04.034

Hammes, J. J. (2014). Kvotplikt för biodrivmedel - högsta vinsten till specialintressen? Ekonomisk debatt, 2, 42-51.

Hammes, J. J. (2021). The impact of career concerns and cognitive dissonance on bureaucrats' use of benefit-cost analysis. Environmental and Resource Economics. doi:10.1007/s10640-021-00590-w

Hammes, J. J., Nerhagen, L., & Fors, H. C. (2021). The influence of individual characteristics and institutional norms on bureaucrats' use of cost-benefit analysis: A choice experiment. Journal of Benefit Cost Analysis, 12(2), 258-286. doi:10.1017/bca.2020.23

Hysing, E., & Olsson, J. (2012). Tjänstemän i politiken. Lund: Studentlitteratur.

Hysing, E., & Olsson, J. (2018). Green Inside Activism for Sustainable Development . Springer International Publishing AG .

Rothstein, B. (2016). Epistemic democracy, corruption and human well-being. Pisa: Paper presented at the European Consortium for Political Research - Joint Session of Workshops, April 25-29.

SOU 2016:33. (2016). Ett bonus-malus-system för nya lätta fordon. Stockholm: Statens offentliga utredningar.

Swedish Environmental Protection Agency. (2020). Samhällsekonomiska analyser inom miljömålsarbetet - en kartläggning av analyser 2008-2019. Sweden: Naturvårdsverket Rapport 6935.

Uba, K. (2010). Who formulates renewable-energy policy? A Swedish example. Energy Policy, 38(11), 6674-6683. doi:10.1016/j.enpol.2010.06.037

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