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This is why the government is rejecting Northvolt

The government has said a flat no to state aid to crisis-stricken Northvolt. This despite the battery factory being seen as a Swedish prestige project. Sweden has not chosen the path of massive state support, says Energy and Trade Minister Ebba Busch (KD).

» Updated: 08 October 2024

» Published: 06 October 2024

This is why the government is rejecting Northvolt
Photo: Johan Nilsson/TT

Northvolt is a green prestige project for Sweden and has been portrayed as Europe's best chance for large-scale domestic battery production.

But now the company is in crisis. Invoices are not being paid, 1600 people are laid off, and management is working against the clock to bring in new billions.

So far, the state has given a blank no when the company has asked for money.

Cautious politicians

Sweden has not chosen the path of massive state aid and I do not want to have such a situation. Politicians are often bad at determining which company investments will hold over time, says Energy and Business Minister Ebba Busch about state aid.

Thus, the government is following a Swedish tradition of caution when it comes to supporting crisis-stricken industries with money.

During the shipbuilding crisis in the 1970s, the state intervened with gigantic support to rescue the crisis-ridden industry. It ultimately became expensive for taxpayers. Since then, politicians have been cautious.

In retrospect, it was concluded that they held unprofitable industries under their arms for far too long, says Lars Calmfors, professor emeritus of economics at Stockholm University and researcher at the Research Institute of Industrial Economics (IFN).

According to Calmfors, there is a completely different view on industrial support within several major EU countries. He mentions, among others, France.

From the Swedish state, Northvolt has received SEK 600 million in various support. This can be compared to Germany's investment of SEK 10 billion in Northvolt's facility in Heide, Germany.

Even outside the EU, industries are supported by the state. The USA provides support to green industries through the Inflation Reduction Act (IRA). China is pouring money into various sectors. And in Canada, Northvolt has been guaranteed state support of around SEK 50 billion for its new factory.

We are more restrained than most countries, says Lars Calmfors.

Good money after bad

Will the green investments in the north work if the state doesn't help?

It's a difficult question, I don't have a ready answer to that. In a perfect world, we wouldn't want anyone to give unnecessary state aid, but it's a dilemma when others do it. It's also associated with great risks, that you're throwing good money after bad, he says.

Ebba Busch hopes that Northvolt will manage without the state.

It's important for Sweden's and Europe's competitiveness to have strong European battery production, if we don't want to leave the field open to China in yet another important area, she says.

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By TTThis article has been altered and translated by Sweden Herald

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