Exploring Technology Paths: The Development of Alternative Transport Fuels in Sweden 2007 - 2020

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Technological Forecasting & Social Change 75 (2008) 1279 – 1302
Exploring technology paths: The development of alternative

transport fuels in Sweden 2007–2020
Karl M. Hillman ⁎, Björn A. Sandén
Environmental Systems Analysis, Department of Energy and Environment,
Chalmers University of Technology, SE-412 96 Göteborg, Sweden
Received 22 April 2006; received in revised form 25 January 2008; accepted 30 January 2008
Abstract
By using socio-technical scenarios, we investigate how present policy choices may affect the development of
alternative transport fuels in Sweden. One important choice for policy lies in the balance between general tax
exemptions stimulating the market for alternative fuels, and funding of research and development more directly
promoting new technology. The implications of this choice are illustrated with four diverging development paths
until 2020. In the market-oriented scenarios, we illustrate consequences of breaking the dominance of entrenched
technologies and demonstrating a growing market potential for alternatives, but also the risks with a large focus on
first generation renewable fuels. In the technology-oriented scenarios, we point out the value of keeping variety
among niches in this stage of the transition. In conclusion, if policy is implemented without taking the dynamic
forces within the system into account, there is a risk that any measure leads the system into a dead end. But if
policy strives to balance the development in different parts of the technological system while making use of
various prevailing forces of change, a multitude of different efforts can contribute to the development of a more
sustainable transport system.
© 2008 Elsevier Inc. All rights reserved.
Keywords: Socio-technical scenarios; Technological innovation systems; Technological systems; Alternative fuels; Biofuels
⁎ Corresponding author. Tel.: +46 31 772 8601; fax: +46 31 772 2172.
E-mail addresses: karl.hillman@chalmers.se (K.M. Hillman), bjorn.sanden@chalmers.se (B.A. Sandén).
0040-1625/$ - see front matter © 2008 Elsevier Inc. All rights reserved.
doi:10.1016/j.techfore.2008.01.003
1280 K.M. Hillman, B.A. Sandén / Technological Forecasting & Social Change 75 (2008) 1279–1302
1. Introduction
Some environmental problems, in particular climate change, cannot be solved by incremental change of
current technologies, but require radical change of large technological systems, such as the energy and transport
systems. Radical change of large systems implies the need for system innovation spanning over a considerable
time period, in the order of several decades [1]. The long time scale is due to the stability of the entrenched
technological system, which is created by positive feedback from adoption, such as scale economies and
learning, and technological, organisational, regulative and normative adaptation. In addition, new technologies
are plagued by high costs, uncertainty, incompatibility and lack of advocates [1–9]. The technological system
forms a techno-institutional complex that to a high degree is locked in [10]. But history shows that large
technological systems also change. A multitude of change processes in various subsystems may eventually
build up a radically different system. This has been referred to as a technological transition [11,12].
The term transition should not be interpreted as a transformation towards a well specified alternative
system but rather a transformation towards a system, loosely defined by some general performance
characteristics (in this case related to greenhouse gas (GHG) emissions and resource use).2 Desired
innovation has a direction but a great deal of uncertainty prevails. Evolutionary processes may guide the
transition into different pathways, whereof some may be less benign from an environmental perspective than
others. It has been argued that the long time scale could allow for a premature lock-in of technological
trajectories (or ‘dead-end technologies’) that look promising in the short term but are constrained in some
dimensions prohibiting it from solving the problem in a more fundamental way in the longer term [9,14,15].
On the other hand, all parts of a complex system cannot be changed at once. New technologies need to make
use of the existing system and then gradually transform it [16]. This dilemma of making use of bridging
technologies while avoiding dead-ends poses a great challenge for policy. Consequently, there is need for
better understanding of complex technical change processes extended over long time periods.
In Sandén and Jonasson [17], we analyse the emergence, diffusion and co-evolution of alternative
transport fuels in Sweden 1974–2004, i.e. a study of the early phases of a transition. In this paper, we draw
upon that analysis, and create socio-technical scenarios for the subsequent phases to illustrate possible
effects of policy choices made today, and the competition and co-evolution of various technologies under
the influence of exogenous forces.
Problems related to air quality, climate change and expected scarcity of oil have triggered the search for
alternative transport fuels. However, due to supply constraints the renewable fuels used in Sweden today
are unlikely as large-scale solutions substituting for petrol and diesel. Fossil natural gas, on the other hand,
does only slightly reduce GHG emissions and the size of the resource is comparable to that for oil [18].
Several new renewable alternatives exist but are not yet commercialised, e.g. ethanol from wood, and
fuels produced from gasified biomass. Solar hydrogen or electricity has huge potential but is also far from
commercialisation. Another option for dealing with the scarcity problem is to produce transport fuels from
gasified coal. Coal is abundant worldwide [18], and the coal price is expected to stay at a stable level
during the coming decades [19]. The carbon contents per unit of energy output are, however, larger for
coal than for oil, thus causing even higher emissions of the GHG carbon dioxide (CO2).3
2
In retrospect, transitions can be defined more rigorously, since the final state is known, see for example [13]. Of course it
can be discussed in what sense any state can be called ‘a final state’.
3
This is without carbon capture and storage, which could imply a certain potential for reducing CO2 emissions from fuel
production.
K.M. Hillman, B.A. Sandén / Technological Forecasting & Social Change 75 (2008) 1279–1302 1281
The development of alternative fuels can be promoted through various policies. In Sweden, one
important choice for policy lies in the balance between general tax exemptions stimulating the market for
alternative transport fuels, and funding of research and development (R&D) more directly promoting new
technology. The implications of this choice are illustrated in our scenarios. The challenge is to make
alternatives grow in a highly developed and interlinked system dominated by powerful incumbent actors,
while at the same time avoiding that new inferior alternatives are selected and better alternatives are
locked out.4
A theoretical framework is outlined in Section 2. Section 3 contains a recapitulation of the historical
and present situation for alternative fuels in Sweden, in the words of the framework. The scenarios are
divided into two phases, 2007–2012 and 2013–2020, which are presented in Sections 4 and 5,
respectively. Finally, some general conclusions for policy and method are drawn in Section 6.
2. Theoretical framework
2.1. System innovation and innovation systems
Kemp and Rotmans [12] and Geels [20] describe system innovation or technological transitions as a
multilevel reconfiguration process, involving the three levels niche, regime and landscape. The
entrenched technological (or socio-technical) system resides at the regime level. The regime defines the
normal way to provide the function of the system, e.g. transport. The entrenched technological system is
built up by a large number of interrelated and compatible physical artefacts [6,7], well-developed methods
to use and transform natural systems and a stable set of rules shared by a large number of actors,
disseminated through established networks.5 The oil-car-road system is a prime example of such a stable
system.
The literature on economics of innovation and science and technology studies has identified a number
of structural elements that constitute a technological system; see e.g. [7,20,21]. We group them here into
three main categories: artefacts, actors and rules. In a technological system, these elements are linked in
various ways.
Artefacts do not only include the technology in focus but also machinery to produce the technology.
Artefacts may be hard-linked to make up larger artefacts (e.g. components in a car) or more loosely linked
in infrastructural networks (e.g. cars and petrol stations). Similarly, actors may be organisationally hard-
linked into firms and other organisations (forming actors at a higher level), loosely linked via markets or,
as an intermediate form, be linked in networks [22]. Firms (and other organisations) are found within the
whole value chain. Other organisations include universities, industry associations, NGOs and government
bodies. Taken jointly, these make up the actor base of the system.
4
Since we do not consider a reconfiguration of the whole transport system, we focus on vehicles and fuels, while road
construction and traffic systems are assumed to be less relevant. Imagining a complete transition of the transport system that
could take place during this century this would of course be important. By leaving out dynamics in these related systems we
could miss processes and trends that could have a dramatic impact on fuel and vehicle development further on in the transition
process. A possible co-evolution of electric vehicles and new traffic systems and road infrastructure is an example of a possible
disruptive transition path.
5
Compare ‘technological paradigm’ [5].
Rules define what actors and artefacts can and should do.6 The cognitive dimension [21], or the
knowledge base of the technological system, constrains what actors are able to do. Knowledge is partly
found as competence within actors, but is also codified in recipes (text, drawings, etc.) or embedded in
artefacts. Knowledge may thus be of a more formal character or of a more experience-based or tacit
character. The normative dimension, or the institutional base of the system, regulates interactions between
actors and define what actors and artefacts should or should not do. These rules include hard regulations
(controlled by juridical systems) and norms or attitudes (controlled by social systems).
The cognitive and normative dimensions are not always easily separated. Taken jointly they influence
decisions and actions in the form of frames [23,24] or paradigms [5] that structure learning processes
(problem agendas, ways to do business, etc.). An integral part of these frames are expectations [25], i.e.
beliefs about the future.
It has been observed that change within entrenched technological systems is mainly incremental, along
well-defined technological trajectories [5,26]. The same old companies make the same stuff slightly
better. The system thus develops its own path and is not very sensitive to external influence. Change is
mainly endogenous to the system.
However, over time, system innovation, or transitions to radically new systems, do occur. Transitions
may follow different pathways [27]. The impetus for radical change often comes from external sources. In
principle there are two sources that create a pressure for radical change. First, new discoveries create new
technological opportunities, and second, the emergence of problems related to the old system creates a
demand for new performance characteristics. The two forces may be combined in different sequences. In
our case the focus is on change initially induced by problems in the regime, in relation to developments at
a higher level, in Kemp and Rotmans' [12] terminology a ‘landscape’ level.
The landscape level is beyond the direct reach of regime actors. The landscape is thus a source of
exogenous forces even if it can (and will) be changed by regime shifts in the long term. Landscape factors
can for instance be the road network, the general economic situation or the concern for climate change.
Even though the landscape metaphor indicates a large stability some changes at the landscape level may
appear rather suddenly, not in the way of a slow landscape evolution but as a shock that shifts focus
(earthquakes and landslides); an important example is the drastic increase of the oil price in the 1970s.
Similar shocks can be awaited in the future, e.g. in connection with dramatic weather conditions. 7 A large
pressure from the landscape level can destabilise the regime and open it up for larger adjustments. The
pressure also opens for novelties at a niche level.
The central actors in emerging technological systems at the niche level are often a small number of
outsiders to the stable system (at the regime level) but may also be subgroups from within incumbent
actors. The actors and networks tend to be weak and fragmented, a lot of knowledge about the new
products, production processes and use are yet to be discovered, performance is uncertain, costs are high
due to low production volumes and the new technologies do not fit into the infrastructure and regulative
framework developed for entrenched technologies [1–9].
The growth of novel technologies and their related technological systems has been described in the
framework of technological innovation systems [28]. The innovation system, i.e. the system that creates the
new technological system, can be described by a set of innovation system functions [29]. We interpret these
functions as corresponding to the creation of the structural elements in the technological system. The number
6
Corresponding to the old philosophical dichotomy between ‘is’ and ‘ought to’.
7
In our scenarios, this kind of landscape shocks is not considered.
Fig. 1. The innovation system can be described by a set of n innovation system functions (Fx) that correspond to the creation of
the structural elements in the technological system. Functions determine how the structure develops, while the functions are
determined by the structure, as well as by external influence.
of functions is then somewhat arbitrary but should cover the creation of all structural elements. Bergek et al.
[30] describe a set of eight functions whereof the eighth function ‘creation of positive external economies’ is
somewhat different in character and will be treated in Section 2.2. Among the remaining seven, three capture
actor participation: ‘Influence of the direction of search’ describes the incentives and pressures for firms on
the supply side (e.g. manufacturers of fuels and vehicles) to participate in the system, ‘market formation’
captures the entry of users, and ‘resource mobilisation’ reflects the participation of educational and financial
organisations, such as universities and venture capital firms. ‘Materialisation’ denotes the establishment of
artefacts. ‘Development of formal knowledge’ refers to creating and tapping a research-based knowledge
pool, whereas more applied, diverse and tacit knowledge comes out of ‘entrepreneurial experimentation’ by
firms and other actors. Finally, ‘legitimation’ is a process that leads to an alignment of normative rules,
implying changed attitudes and regulations.
In comparison to the entrenched system, the emerging technological systems are very unstable and are
vulnerable to, and dependent on exogenous forces. In other words, the functions of innovation are to a
large extent determined by forces outside the emerging technological system. But as the system grows,
change becomes more endogenously driven, i.e. positive feedback loops, or cumulative causations, play a
vital role, whereby the structures and agency within the emerging technological system starts to determine
growth processes. Functions determine how the structure develops, while the functions are partly
determined by the structure (see Fig. 1). 8
There are several different loops of positive feedback linking different functions in chains, leading to a
cumulative build-up of structural elements, ultimately leading to decreased cost and increased
performance as well as fit into technical and institutional structures.9 In the early phases of a transition,
8
In a closed and interlinked world the only causes of change that are perfectly exogenous are related to independent natural
events such as radioactive decays and meteorites from outer space. However, there is a scale from the more endogenous forces
created within the studied system and exogenous forces that give an impulse from the outside.
9
See [9] for a compilation of positive feedback mechanisms inspired by the list provided by Arthur [2]. See also [31] on
cumulative causation.
before many system components are in place and uncertainty is high, positive feedback leading to cost
reduction through economies of scale (through materialisation and standardisation) is less important.
Instead, knowledge development and legitimation are key functions. The technology needs to get
accepted as a desirable and realistic alternative. Bergek et al. [30] distinguish between two main
legitimation mechanisms. First, when little is known, assessment studies supply important information
about how well the technology could perform in relation to prevailing demands and the new demands
introduced by landscape pressures. This is a kind of expert legitimation based on arguments and formal
knowledge, which affects the expectations related to the technology. Second, when the technology
becomes more widespread through market formation, it appears as a more realistic alternative. This
creates a kind of legitimation based on familiarity and experience.
2.2. Co-evolution, competition and system boundaries
As described in cyclical models of innovation, the early phases of a technological transition are
characterised by a large variety of solutions to a problem and great uncertainty with regard to the merits of
various technical options [32,33]. In later phases, increasing returns to adoption often lead to reduced
variety and the selection and lock-in of a new dominant design [2,34]. In the case of transition to a carbon
neutral energy and transport system, the scale of the required change is large enough and the time scales
long enough to allow for a premature selection and lock-in of technologies that are promising in the short
run but with limited potential to complete the transition. The corresponding lock-out of better long-term
options could seriously delay the process [14,15].
On the other hand, all parts of a complex and technically interrelated system cannot be changed at once.
New technologies need to make use of the existing system and then gradually transform it [16]. For this,
hybrid technologies [11] and ‘two world technologies’ [12] could be used as ‘bridging technologies’ [14],
even though they themselves are not suitable for large-scale implementation in the long term. 10
Two diverging views on the interplay between new alternatives are thus available. First, they compete
for a fixed amount of resources, markets and attention to become the new dominant design. Alternatively,
the emerging technological systems contribute to destabilising the regime and expanding the amount of
resources, markets and attention available to all the novelties. Is it a matter of dividing the cake, or of
baking it? This question can be reframed as a question of innovation system boundaries.
From an actor's (e.g. a firm's) point of view, what characterises a technological system is the presence of
positive external economies (or free and shared utilities or ‘spillovers’). The first actors in the system can find
little knowledge, knowledge is hard to come by since the number of actors and links between actors are small,
the understanding of, and attitudes towards the new technology among suppliers, customers and regulative
bodies are not favourable, and regulation and surrounding technical systems do not fit the technology. When
the 50th actor enters the system, these structures have changed, and a number of positive externalities in the
form of available knowledge, favourable attitudes and compatible legal and technical structures are present,
making progress less difficult. According to Carlsson [38] the main function of a technological innovation
10
The case of wind turbines demonstrates the risk with trying to go for the best long-term option at once. In the USA and
Sweden, development focused on large wind turbines which according to assessments should be able to produce electricity at a
lower cost than small turbines [35,36]. Then not much happened. In Denmark and Germany, an industry was created around the
production of small turbines that were relatively inefficient but marketable [35,37]. Now the Danish and German industries
produce the large turbines that once – in Sweden and the USA – were projected to be more efficient.
system is “to capture, diffuse, and magnify spillovers, some of which are the result of intentional acts of
individual actors, while some occur as a result of largely unintended interaction”.
Thus the function of creating positive externalities (spillovers) can be viewed as adding links between
actors and other elements, such as technical knowledge or attitudes, or better, as a second dimension
(width) of the other functions making the created new elements available to more actors. Developed
technical knowledge can be kept proprietary or made accessible to many, favourable regulation such as
subsidies can be given to the lobbying group or to a broader set of actors, materialisation in the form of
technical infrastructure can be open to many or a few etc.
While the concept of positive externalities is tied to economic actors, the idea of spillovers can be
generalised and applied to technologies [39]. Emerging technologies could share actors and networks of
actors, technical artefacts and knowledge, benefit from the same regulations and be viewed as similar by
consumers and investors. Hence, the growth of one technological system could generate functions that
induce growth of a parallel system.
In the first three decades of alternative fuel development in Sweden, we are inclined to say that
spillovers have been a dominant feature. For example, wheat ethanol and wood ethanol (as well as biogas
and fossil natural gas) shared the same downstream technology (shared knowledge and artefacts) and
have been complementary in terms of creating legitimacy. Ethanol benefited from vehicle competence
development and regulatory change created by methanol. Methanol, DME, FT-diesel, biogas and
hydrogen could all benefit from knowledge formation around biomass gasification. Wheat ethanol and
RME (rapeseed methyl ester) shared the same advocacy coalition within the agricultural regime. Methane
and ethanol have benefited from the work of organisations, once developed for electric vehicles (shared
actors), promoting ‘clean cars’11 in Stockholm, Göteborg and Malmö. Finally, increased sales of ethanol
flexifuel cars (post 2000) have resulted in a consumer acceptance of clean cars in general and have given
legitimacy to the group as a whole.
The chance of mutually beneficial co-evolution instead of competition is more likely for alternatives
that share many structural elements. It is important to notice that it is not only overlaps in terms of
technical similarity that should be considered; conceptual similarity may be of equal importance in the
early phase to create legitimacy and markets, and mobilise resources. One could also imagine a role for
‘battering-ram technologies’ that destabilise the old regime and create the turbulence required for other
technologies to enter ‘the castle’, even if they share not more than the notion of novelty with the battering-
ram technology. An overlap could also imply the risk that a bad reputation for one technology spills over
and defames a related technology.12
It seems reasonable to assume that the benefits of spillovers (shared utilities) are larger, and that the
competition for exclusive utilities (resources and markets) is less pronounced in the early phases of a
transition. In later phases when diffusion takes off, the different technological systems become more
clearly defined and production processes and infrastructure more standardised which decrease the width
of sharing. In addition, it is likely that competition for markets and resources gets tougher. Hence, a
pattern of co-evolution could be turned into a pattern of competition and exclusion in subsequent phases.
The functional spillovers and structural overlaps blur the distinction between different technological
systems. Ultimately, the choice of system boundaries depends on problem definition, i.e. which growth
process that is to be studied. We need to decide on technical resolution, the number of included value
11
The Swedish term is ‘miljöbilar’, in English ‘environmental cars’.
12
See discussion on the nuclear power history in [15].
Fig. 2. The technological system of transport fuels contains several more narrowly defined systems. The established system
around petrol and diesel resides at the regime level. We are concerned with a transition to a system based on renewable fuels that
currently is emerging at the niche level. To understand the dynamics of the innovation system of renewable fuels, also narrower
system boundaries need to be applied.
chains (ethanol production, ethanol used as transportation fuel, ethanol from forestry, ethanol from
forestry used as transportation fuel), and geographical boundary (World, Europe, Sweden, county of
Sweden). Even though the choice of boundary is from one point of view arbitrary, it is not unimportant. If
we choose a narrow system boundary we face the risk of missing important feedback mechanisms, treated
as merely external influence in historical studies and not included at all in scenario constructions. On the
other hand, applying a wide system boundary, important feedback mechanisms may be missed due to lack
of detail. A possible solution is to apply narrower and wider system boundaries in parallel.
2.3. Socio-technical scenarios
Our framework of structure and dynamics is here used as a base for constructing socio-technical
scenarios. The concept is introduced by Elzen and colleagues [40], as an answer to an appreciated need for
a more qualitative scenario approach that a) takes both technology and society into account, b) explain
development processes, or technology paths, rather than just final outcomes, and c) put more emphasis on
niche and regime developments than previous approaches.13 In their respective studies of electricity in the
Netherlands and global mobility, Hofman et al. [42] and Elzen et al. [43] use transition theory and the
multilevel model to construct socio-technical scenarios for the period up to 2050. They show that
seemingly small differences in actor views and policy choices can have a significant effect on the outcome
of the system, and how several technologies can link up and form unprecedented transition paths.
13
A similar approach is being developed by Markard et al. [41].
Here we use the socio-technical scenario concept, while also making use of the innovation system
framework. Our focus lies on different national policy choices, and the competition and co-evolution of
various technologies under the influence of exogenous forces. We apply a shorter time frame – up to 2020 –
than previous studies, allowing for a higher resolution regarding the connection to present policy. The
transition will thus be far from completed at the end of the scenario period.
Our focus is on relations between different emerging alternative fuels. Our main system boundary
includes all fuels from renewable energy sources (Fig. 2). Regarding these as being part of one
technological innovation system, the system goal – within the time frame of the study – is to maximize
diffusion of renewable fuels regardless of type. Using this system boundary, more narrowly defined
systems such as the system of so-called first generation renewable fuels, or, even narrower, the system
around ethanol from crops, could serve as components that contribute to a function of the wider
innovation system. However, we also need to consider the internal dynamics of narrower systems to
explore the risk of a premature lock-in to one or a few technologies caused by narrow circles of feedback;
the growth of narrow systems could contribute to or block the development of other alternatives and thus
the development of the wider system of renewable fuels.
Previous developments and the present situation will to a large extent determine the development for
the coming years, and are thus described in the coming section. This partly builds on an investigation of
the history of alternative fuels in Sweden [17].
3. Present situation for alternative fuels in Sweden
In Sweden, the development of alternative transport fuels has been on the agenda since the first
international oil crisis in 1973. Three periods can be distinguished, all of them largely influenced by issues
at the landscape level. A first period, roughly 1974–1985, characterised by two oil crises, and R&D of
methanol mainly initiated and financed by the Swedish Government. The primary purpose was oil
substitution. A national competence on gasification – with actors and networks – was built up and has
survived at a niche level since then. Between 1986 and 1997, landscape focus was directed towards local
air pollution. Local bus fleets were introduced, and a smaller number of cars propelled by alternative fuels
were demonstrated. Production was domestic, local and small-scale and provided fuels like ethanol,
biogas and RME (rapeseed methyl ester). A stock of physical artefacts was built up, and with this came
also actors, tacit knowledge, and changed attitudes. During a third period starting in 1998, climate change
became an important issue in the debate on alternative transport fuels, and oil scarcity was increasingly
mentioned in this context, as well. Niche markets for alternative fuels and vehicles grew, and at regime
level low percentage blends with petrol and diesel became popular and the EU biofuels directive was
launched (see below). This involved several new actors and artefacts, and adjustments of regulations.
Most of the developments have so far gone on in niches, with shifting support from regimes related to
vehicle production, oil distribution, agriculture and waste-handling.
3.1. Market support
In the third period, regulations were increasingly adjusted in favour of alternative fuels, and a large
share of these was directly related to market formation. From 2003, this strategy was further legitimised
through the EU biofuels directive [44]. The indicative targets set in the directive for the use of ‘biofuels or
Table 1
Energy taxes and CO2 taxes for transport fuels in Sweden
Fuel Energy tax CO2 tax Total tax Total tax (SEK/kWh)
Petrol (unleaded), Mk1, SEK/l 2.9 2.1 5.0 0.552
Diesel, Mk1, SEK/l 1.0 2.6 3.7 0.368
Natural gas, SEK/m3 – 1.1 1.1 0.101
LPG, SEK/kg – 1.4 1.4 0.106
For ethanol imported from outside the EU there is also an import tax of approximately 1.79 SEK/l (0.192 €/l) [54] or 0.30 SEK/
kWh. (Value-added tax not included).
Source: Swedish Energy Agency [56].
other renewable fuels’ implies a 2% replacement of petrol and diesel used for transport purposes at the end
of 2005 and 5.75% at the end of 2010. 14 At the end of 2005, the actual use in Sweden was 2.2% [45], and
the national target for the end of 2010 follows the indicative target of 5.75% [46]. The targets had been
investigated in 2003–2004 by a Swedish commission appointed to investigate the consequences for
Sweden and suggest a future strategy [47,48]. The final report distinguished between a first, a second and
a third generation of renewable fuels corresponding to their respective stage of development. The first
generation includes the currently used renewable fuels imported ethanol and wheat ethanol, biogas and
RME, while the second generation is ethanol from cellulose and fuels made through gasification of
cellulosic biomass and black liquor via synthesis gas, e.g. methanol, DME, Fischer-Tropsch (FT) diesel
and methane. The third generation identified is hydrogen and unknown alternatives.
With the EU biofuels directive, an immediate market introduction and market share increase are
suggested to be stimulated through e.g. tax exemptions [44,49]. In its first report pursuant to the directive,
handed over to the European Commission in 2004, the Swedish Government presented its strategy in the
field of renewable fuels, which includes that CO2-neutral fuels are exempted from both CO2 tax and
energy tax between 2004 and 2008 [50].15 The reduced tax income is calculated to be more than 1 billion
SEK per year during the first years of the directive [52].16 The fuels of concern are mainly the first
generation, but future technical development may lead to the introduction of other alternatives. The
present Swedish taxation of transport fuels is presented in Table 1. For ethanol, there is also an import tax
for non-EU production, which makes e.g. Brazilian ethanol less attractive.
In addition to the tax exemptions, during 1998–2002 an estimated 150 million SEK from the ‘Local
Investment Programme’ (LIP) was directly used for alternative fuels and vehicles, and some projects on
biogas production also favoured biogas used for vehicles [57]. A similar ‘Climate Investment Programme’
(KLIMP) is running for the period 2003–2008 [58].
14
The percentages relate to the energy content of the fuels.
15
There is a pronounced intention to stimulate renewable fuels through favourable tax conditions until 2013 [51].
16
Already during the first year of the Swedish strategy, the tax exemption showed to be an over-compensation for ethanol
imported from tropical regions, used for blending into petrol [53]. This was not compliant with the EU directive on taxation of
energy [49]. The main reason for this was that it could be imported with a lower EU import tax than intended. This resulted in
much lower costs than for ethanol produced from wheat in Sweden, thus being a large threat against continued domestic
production. However, the implementation of the tax exemption was scrutinised, and today a higher tax level is paid for imported
ethanol used for blending [54]. However, there are indications that the present government will lobby for a decrease of the
import tax on ethanol [55].
Other policies used for stimulating the market for alternative transport fuels and vehicles include e.g.
reduced parking fees in larger cities, exemption from congestion fees in Stockholm, and tax incentives for
employees using company cars off duty.17 The reduced income due to the parking fee subsidy in
Göteborg, Sweden's second largest city, is estimated at 5–15 MSEK per year [50]. Policies related to
parking and congestion fees are considered instrumental in stimulating the market for alternative vehicles,
but for economic reasons they will not be compatible with large market volumes. There is also a decision
that 75% of all newly purchased government vehicles must be eco-friendly from 2006 [45].18 To
guarantee the build-up of a refuelling infrastructure, there is a political agreement that filling stations with
yearly sales of petrol and diesel above a certain level also should supply at least one renewable fuel. The
law is worked out so that an increasing number of filling stations are covered until 2009, when the largest
2400 out of Sweden's 4000 filling stations should supply a renewable fuel [46]. As the filling station
regulation alone would favour ethanol, a special grant for putting up pumps for other renewable fuels was
enacted by the parliament [59]. Evidently, regulations are adjusted to promote alternative fuels and
vehicles.
3.2. Fuel production and supply
The governmental and local incentives have especially made the use of ethanol popular. This has
involved several kinds of new actors, investments in physical artefacts have been made, and institutional
factors have changed. Of the ethanol sold in Sweden, 57 000 m3 is produced from wheat (and barley) at a
plant in Norrköping, owned by the farmers' organisations, which will extend its capacity to 210 000 m3
during 2008 [60]. Another 13 000 m 3 is produced at a sulphite pulp mill in Örnsköldsvik. The rest of the
ethanol, about 200 000 m3 , is imported from Southern Europe, where it is produced from excess wine, and
from Brazil, where the raw material is sugar cane. However, low-cost supply of European wine ethanol is
not seen as a viable option for Sweden when the competition for renewable fuels is increasing. 19 In
addition, imported Brazilian ethanol is beginning to be questioned by some parties for sustainability
reasons, as future effects of a large-scale expansion of the production are uncertain [62].
Large-scale domestic production of RME is presently in the startup phase, with a planned production
capacity of 260 000 m3 per year in two plants [63].20 Biogas production related to waste-handling and
sewage treatment exists in many municipalities in Sweden, and in several of them it is also used for
vehicles. In addition, a first plant intended to produce biogas from crops and by-products from ethanol
production will start up during 2008 [64]. Fossil natural gas is benefiting from many of the national and
local vehicle-related incentives, as the biogas vehicles also can be run on natural gas. It is mainly used in
cities along the pipeline in the southwest. A small market also exists for natural gas-based FT-diesel,
which is primarily used in machines and in vehicle field tests to improve air quality. The use of transport
fuels in Sweden is presented in Table 2.
Most of the ethanol is used for 5% blending (by volume) into conventional petrol, and the rest is used in
buses and as E85 (a mixture of 85% ethanol and 15% petrol) in flexifuel cars that can run on any mix of
E85 and petrol. Natural gas, imported via the pipeline through Denmark, as well as locally produced
17
The number of these company car users was in 2003 about 200 000 [48].
18
With some special vehicles excepted, the actual percentage will be about 35% [45].
19
Changes in the EU policies regarding the wine industry can also be awaited [61].
20
This volume would also require imported feedstock.
Table 2
Estimated use of renewable and fossil transport fuels in Sweden 2005
Fuel Total volume (m3) Energy contents c (kWh/m3) Total energy (TWh = 109 kWh)
a
Ethanol 284 802 5907 1.68 a
FAME 10 608 b 9096 0.10 b
Biogas 16 140 000 9.92 0.16
Total 1.94
Petrol 5 508 000 8940 49.24

Diesel 3 743 000 9959 37.28
Natural gas 22 000 000 9.92 0.22
Total 86.74
RME (rapeseed methyl ester) produced from rapeseed oil stands for the dominating part of the FAME (Fatty Acid Methyl Ester),
though the latter could include fuels from other vegetable oils or animal fat.
Source: Swedish Energy Agency [56].
a
Of which 252 000 m3 (1.49 TWh) are used in low percentage blends.
b
Of which 8978 m3 (0.08 TWh) are used in low percentage blends.
c
Calculated from Edwards et al. [65].
biogas is used in buses and cars. RME is increasingly used for blending into conventional diesel and to
some extent as a pure fuel.
To be able to meet the EU biofuels directive targets at a lower cost, the Swedish commission on
renewable fuels proposed that the allowed blending rates should be increased from 2 to 5% for RME, and
from 5 to 10% for ethanol [48]. The former was made possible in 2006 due to a change in the Swedish
diesel standard [52], while the latter requires a revision of the European standard for petrol, which has
been promoted by the Swedish government in the EU [66]. In 2005, the potential for 5% blending (by
volume) of ethanol into all petrol and RME and into all diesel in Sweden was 275 000 m 3 (1.62 TWh) and
187 000 m3 (1.70 TWh), respectively. The same year, 252 000 m 3 ethanol were already used in low
percentage blends [67].
Several new plants for ethanol production from wheat are announced for the coming years [68], though
not all of them will necessarily be built. According to the Swedish commission, the domestic raw material
potential for ethanol from wheat is about 2 TWh and for RME 1 TWh in 2020. Producing biogas mainly
from waste, sludge and by-products from ethanol production, the biogas potential is about 5 TWh [48].21
Altogether, this corresponds to approximately 10% of the petrol and diesel used in Sweden today (cf.
Table 2). Of course, raw materials could also be imported, which would increase the resource base.
3.3. Research and development
State funding of research and development (R&D) related to renewable fuels varies between the years,
but an estimate in the report to the European Commission claims that the sum is at least 50 million SEK
per year [50]. VINNOVA [69] suggests that it is well above 100 million SEK in 2004 and estimates of the
Swedish commission on renewable fuels lie in between [48]. Presently, funding is mainly used for three
major pilot plants developing cellulosic ethanol production and synthesis gas production from black
liquor and wood. All these technologies are several years from commercial production of transport fuels.
21
Biogas can also be produced from crops, as suggested by Svensk Biogas [64].
Some other projects on alternative transport fuels in the regions and at universities throughout Sweden are
given grants, as well, including feasibility studies of biomass gasification with FT-diesel and methane
production, in Sundsvall and Göteborg, respectively [70,71]. A few hydrogen projects have been running,
e.g. fuel cell buses in Stockholm, and a filling station for various blends of hydrogen and natural gas is in
use in Malmö. State funding usually requires co-financing from industry and local authorities.
3.4. Future policy choices
The money used for financing tax reductions can alternatively be spent on extended R&D support, and
thus bring forward a market introduction of the second and third generations of ‘biofuels or other
renewable fuels'. The R&D programme could also be diversified. In this paper we suggest two main
scenarios, starting in 2007. The scenario policies differ mainly on two points related to market formation
and knowledge development: (i) the commitment and economic incentives aiming at a rapid market
expansion for the first generation of renewable transport fuels and (ii) the economic resources allocated to
R&D of the second and third generations of renewable fuels. Policy choices in both scenarios are intended
to be realistic with reference to the present situation. The main focus is on the first point in our market-
oriented scenarios (Sections 4.1 and 5.1) and on the second point in our technology-oriented scenarios
(Sections 4.2 and 5.2). Market subsidies are today about one order of magnitude larger than R&D
spending, and shifting this balance gives room for more R&D in the technology-oriented scenario than in
the market-oriented scenario. As we will see, this has implications for the development of the structural
elements of the emerging technological systems.
Due to limitations in supply capacity for the first generation of renewable fuels, this will not be a large-
scale solution to replace petrol and diesel in the long term. Considering this, both scenarios bifurcate in
2013 into two paths, characterised by stagnation and growth, respectively, with regard to the introduction
of the second and third generations of renewable fuels in Sweden. In the growth scenarios, the changes in
structural elements lead to further growth, and cumulative causation within the emerging technological
systems. In the stagnation scenarios, this is not realised, and import of fuels made from natural gas and
gasified coal becomes necessary due to the increasing oil price.22
We choose a relatively short time perspective for the scenarios, letting them end in 2020. Within this
time frame, we do not think that any drastic changes in transport modes and the way transports are
integrated into society are realistic, and we assume that no radical progress in vehicle technology will
appear.23 Thus, to reduce CO2 emissions and replace fossil fuels in the road transport sector, alternative
fuels and vehicles will be necessary. The adoption of alternatives and the substitution of petrol and diesel
will however be far from complete at the end of this period.
Each of the two phases – 2007–2012 and 2013–2020 – is introduced by a common background scenario
involving factors external to the emerging technological systems, mainly on regime and landscape level. For
reasons of space and clarity, we deliberately refrain from exploring the effect of varying the background
scenario, such as the inclusion of different oil price scenarios or vehicle technology breakthroughs. Such an
inquiry is worth a separate study. The scenarios are schematically presented in Fig. 3.
22
There are of course other possibilities, but here we choose a symmetric approach with two similar outcomes from each
scenario.
23
Assumptions regarding incremental developments for hybrids and fuel cells are mentioned in the scenario introductions
(Sections 4 and 5).
Fig. 3. Market-oriented and technology-oriented scenarios for 2007–2020, with bifurcation points in 2013. ‘Growth’ and
‘stagnation’ refer to the introduction of the second and third generations of renewable fuels in Sweden.
For developments similar in the market-oriented and technology-oriented scenarios, causes and effects are
not fully repeated in the technology-oriented scenarios. Structural elements are built up during the first
phase, and the results are used as a base for elaborating the scenarios for the second phase. The scenario
chapters are written in the past tense, as if the development already has taken place and we are now in the
year 2021.
4. Alternative fuels in Sweden 2007–2012
One of the main exogenous forces during the first phase was the high price of primary oil and gas,
while the price of primary coal stayed at a low and more stable level.24 Together with an intensified
political debate on climate change at the landscape level, and a beginning international trade with permits
for emission of GHGs, this led to experimentation within the existing regimes worldwide. There was an
increasing share of hybrid vehicles (combining a combustion engine with an electric drive system) and a
trend towards lighter vehicles in the sales of new cars, which slightly decreased the still growing need for
fuels.25 The car manufacturers were working with plug-in hybrids (possible to charge from the electricity
grid), fuel cells and other alternatives to the conventional combustion engine, but in terms of sales these
were still very small. There were also new niche initiatives in the production of renewable fuels, primarily
adapted to local resources.
At the end of the first phase synthesized fuels made from coal and natural gas became available on the
global market, and were accepted as a necessary complement within the old regime. Using similar
technology, further experimentation in gasification of biomass resources eventually gave rise to a limited
production at a number of locations around the world.
24
As proposed in [19].
25
This was realised partly due to commitments between governments and the automobile industry, e.g. the EU strategy
[72].
4.1. Market-oriented scenario
The Swedish strategy worked out in 2004 to reach the targets of the biofuels directive was
implemented, and supplemented by local incentives for ‘clean vehicles’. In the middle of phase one the
yearly losses for this was roughly 1 750 billion SEK.26 R&D was limited to a few, partly state-financed
projects for renewable fuel production, and financial support from the agricultural and waste-handling
sectors created incentives for more investments in production of first generation renewable fuels.
The most significant increase in volume until the end of the first phase was the use of the full potential
for blending of 5% ethanol and RME into conventional petrol and diesel, respectively. Such blends had
limited influence on the structural elements on the user side and for the vehicle industry, as the petrol and
diesel were labelled as before and as no adjustments to the vehicles were needed. The influence on
distribution was then somewhat higher, as the alternative fuels were accepted as standard components of
transport fuels, and as equipment compatibility and compliance with regulations had to be handled. Thus
both artefacts and normative rules were slightly affected.
The government initiatives made it interesting to sell E85, methane (biogas and natural gas) and RME
on the Swedish market, while the number of filling stations supplying those fuels increased in the whole
country, in compliance with the law from 2005. The diverse set of incentives at various levels made
vehicles that could run on alternative fuels a real option taken into consideration by most relevant
customer groups, including those attracted for plain economic reasons. New domestic plants (see below)
increased the number of customers directly or indirectly linked to fuel production. The most used
alternative fuel vehicles were ethanol flexifuel cars, and bi-fuel cars that had one tank for methane and one
for petrol, i.e. typical ‘two world technologies’. The geographic distribution of these vehicles was high
due to the increasing number of filling stations. Short-range heavy vehicles dedicated to methane, and city
buses dedicated to ethanol or methane were used in urban areas, partly to improve the local environment.
This was also an argument for several professional users of diesel vehicles and machines, who chose to
use RME or FT-diesel instead of conventional diesel. Fuel tests were needed, but no major adjustments of
the engines were required.
Most of the ethanol and RME used in Sweden were produced from wheat and rapeseed oil,
respectively, at domestic production plants, but sometimes with imported feedstock. Most of them started
up after 2007, and some were built in connection with biogas plants that could utilise the by-products. The
import of these renewable fuels was very limited during phase one. Natural gas filling stations were built
in densely populated areas, in close connection to the existing pipeline in the southwest of Sweden.
Biogas production and use was mainly developed near cities, where projects could be combined with
waste-handling processes, and where markets for both fuels and by-product (fertilizer) could be assured.
In some places biogas production was organisationally and sometimes physically associated with the
supply of natural gas to ensure secure supply of methane. Because of their multiple functions, biogas
projects could get additional funding from stakeholders within local waste-handling utilities and the
agricultural sector.
R&D initiatives stayed at the comparatively modest level of approximately 50–100 million SEK per
year. No new major projects were started during the first phase, but a few smaller projects were running at
universities around Sweden. The pilot projects for gasification and wood ethanol went on, but there were
26
Calculated from [62].
severe problems to get additional funding for unforeseen extra costs. For a scale-up of either process, and
commercial production of fuels during the second phase, substantial amounts of new money were
needed.
As the variation in incentives between different fuels was non-existing or small, the customers' choice
of alternative vehicle was mainly based on regional availability, individual requirements and price. From
an environmental point of view, all alternatives were seen as equally satisfactory. The main influence on
the user side was thus an awareness that alternatives to diesel and petrol exist, and the active choice in
buying an alternative vehicle and then filling it up with an alternative fuel. User experience was also
effectively communicated by word of mouth (experience legitimation). The vehicle industry supplied the
market with alternative fuel vehicles, which for ethanol, RME and FT-diesel were technically very similar
to conventional petrol and diesel vehicles, and resulted in little new formal knowledge. Gas vehicles,
though, gave rise to improved technical solutions for vehicles and fuel distribution. Finally, it can be
concluded that the introduction of any alternative to the conventional vehicles and fuels seemed to have an
effect on the tacit knowledge and the attitudes of the actors involved.
The structural elements built up during the first phase were mainly the increasing number of actors
using alternative fuels and the corresponding evolution of tacit knowledge and normative rules, and the
creation of legitimacy for alternative fuels in general. The growth was stimulated by continued
implementation and development of regulations that had emerged before the onset of the first phase.
Actors with connections to the supply of raw materials and domestic production of the first generation
of renewable fuels had a growing impact on the preservation and development of these rules. Together
with investments in physical artefacts, such as production facilities, filling stations and vehicles, this
contributed to a reinforcement of the endogenous change processes of the emerging technological
systems.
4.2. Technology-oriented scenario
The Swedish strategy for reaching the targets of the biofuels directive was not fully implemented, as it
was considered too costly and as not leading forward towards more long-term solutions. The tax
exemptions, but also local incentives to stimulate the use of alternative vehicles, were increasingly
questioned for economic reasons. Some of the capital previously allocated to economic incentives was in
return used to finance an extended R&D programme for the second and third generations of renewable
fuels.
The total tax exemption for renewable fuels was not thought to stimulate the introduction of new
technology and more efficient domestic fuel production, but was mainly seen as just another agricultural
subsidy. The full potential for blending of 5% ethanol and RME into conventional petrol and diesel was
reached with only a partial exemption from energy tax (and a total exemption from CO2 tax), which
decreased the reduction of the tax income with some 300 MSEK per year.27 The increase in the use of E85
slowed down, however, as the competition from petrol became tougher with the new taxation. Despite
this, the exemption from energy tax was completely removed at the end of phase one.
27
As suggested in an evaluation made by the Swedish Environmental Protection Agency and the Swedish Energy Agency
[53].
The somewhat decreased commitment and incentives for introduction of first generation renewable
fuels made them interesting in pure form only where political, promotional and air quality motives
existed, mainly for use in vehicle fleets owned by authorities and companies in urban areas where these
benefits were most apparent. The law on increasing the number of filling stations supplying alternative
fuels was not fully implemented, which made pumps appear only in limited numbers in cities. This was
also where most flexifuel and bi-fuel personal cars, and short-range heavy vehicles and buses dedicated to
methane or ethanol were used. Diesel was replaced by RME or FT-diesel in some vehicles and machines.
At the end of phase one, new models of ethanol and methane vehicles were ready for methanol and
hydrogen blends, respectively.
Domestic production of wheat ethanol and RME was the main contribution of renewable fuels to the
Swedish market, but the weaker economic incentives with bad prospects for E85, and an awaited lowering
of the EU import tax for ethanol, stopped the plans for new domestic plants. Filling stations for methane
were mainly built in urban areas, where natural gas could be supplied by the pipeline, and where biogas
production could get support from the waste-handling regime.
The slowed down market introduction initially gave a more advantageous economic and political
scope for R&D of new alternatives, both on a national and on a regional level. The funding for the on-
going pilot projects for wood ethanol and gasification was increased and a demonstration stage was
reached before the end of phase one. Accordingly, the projects could be extended, and significant
production of fuels from biomass and black liquor was demonstrated. In addition, a research centre for
production of FT-diesel from biomass was established, co-financed by the Swedish Energy Agency and
local authorities and companies in the Sundsvall region. 28 A similar project related to methane
production in Göteborg was also set up. Distribution and use of hydrogen in blends with methane used in
gas engines, and as a pure gas in fuel cell vehicles was demonstrated on a small-scale, where by-product
hydrogen from the process industry could be used. 29 Vehicle tests and demonstrations with methanol,
DME and FT-diesel were also performed in co-operation with several vehicle manufacturers. This had
important impacts on the structural elements of the system, such as formal and tacit knowledge,
regulations and attitudes.
As the commitment to the first generation of renewable fuels and vehicles was decreasing and the R&D
support for the second and third generations was increasing, there was a debate about the choice of
national strategy and the environmental benefits of different fuels. The first generation of renewable fuels
was questioned due to high costs and limited production potential, indicating that tacit knowledge was
gained among actors, including users and potential users of alternative fuel vehicles, and professionals in
fuel distribution and R&D. When investing in physical artefacts, most filling stations tried to prepare for
coming alternative fuels like methanol, DME, FT-diesel, and sometimes hydrogen. As a consequence,
claims were made for further adjustments of regulations.
The most important contributions to the build-up of structural elements during the first phase were the
development of formal and tacit knowledge, and regulations and attitudes related to the demonstration of
various fuels and vehicles. At the same time as the environmental performance of transport fuels was
discussed in public, the legitimacy of the incumbent regime was weakening. A large increase in formal
28
See [70].
29
Hydrogen blended with methane is sometimes called hythane, or e.g. H8 or H20 depending on the percentage of
hydrogen in the blend.
knowledge was seen in R&D, and the number of professional actors involved was expanded. Investments
in physical artefacts, such as pilot plants, fleet vehicles and filling stations were not concentrated on a
particular fuel, thus paving the way for several alternatives.
5. Alternative fuels in Sweden 2013–2020
The main external factor characterising the second phase was the high price of primary oil and gas,
and the low and stable price of primary coal. 30 The debate on climate change was continuing, but the
international trade with GHG emission permits was still in its infancy. Biomass was increasingly used
in the heat and electricity regimes, which increased the competition for the resource. In the
electronics regime, the use of methanol fuel cells instead of batteries became common in some
mobile applications.
Internationally, the regime trend towards increasing sales of hybrid and light-weight vehicles was
continuing, and plug-in hybrids and pure electric cars were introduced on the market. Niche technologies,
such as methanol and DME as well as hydrogen fuel cells were introduced on several markets, and mainly
used in fleet vehicles. Synthesized fuels, especially FT-diesel, were produced in large quantities from coal
and natural gas and sold on the world market. An increasing demand for renewable fuels worldwide raised
the price of ethanol. For political reasons, the EU import tax for ethanol was lowered, implying that
ethanol from tropical regions could compete with European production.
5.1. Market-oriented scenario
5.1.1. Growth path – legitimation through market formation

The commitment to introducing alternative transport fuels on the market, and the stable economic
incentives guided the direction of search among several types of regime actors. Particularly farmers,
forestry and pulp and paper industry saw opportunities to develop their businesses to provide raw material
for the second generation of renewable fuels. They engaged in developing more efficient raw material
extraction and co-financed a number of R&D projects in renewable fuel production, with additional
support from energy utilities and vehicle and equipment manufacturers. Following the industry interest,
state funding was increased as well. Local authorities interested in new promising businesses in their
regions were competing to get the projects. ‘Gas cities’ that for a long time had been using methane filling
stations and vehicles were more positive to methane and direct use of hydrogen in vehicles, while other
regions preferred liquid fuels like methanol and FT-diesel. Wood ethanol had the advantage of an existing
infrastructure and vehicles, while methanol and FT-diesel also were gaining market shares through
blending into petrol and diesel.
The customers had been used to a few different kinds of alternative vehicles and fuels that worked as
‘battering-ram technologies’. It was generally accepted that the dependence on petrol and diesel in the
transport sector had to be broken, and that the trying-out of alternatives was necessary. The debate on
climate change together with the increasing number of actors within domestic production and use of
second generation alternatives also created an interest for technology-specific economic incentives,
30
As proposed in [19].
resulting in continued growth for some of the most promising alternatives. The general tax exemptions
were removed, but through political negotiations on agricultural policy and co-operation within the
farmers' organisations, the existing production systems for wheat ethanol and RME was guaranteed
prolonged support, hence mitigating the competition from imported ethanol.
5.1.2. Stagnation path – lock-in of first generation renewable fuels

The building-up of domestic raw material supply, production and distribution of wheat ethanol, RME and
biogas resulted in numerous advocates of these technologies. The combined production of ethanol and biogas
resulted in an alliance of stakeholders promoting similar solutions where biogas production already was in
place. Together with the multitude of users of vehicles dedicated to ethanol and methane, this created a strong
opinion that these fuels were environmentally friendly enough. Other alternatives, like methanol and DME,
were not seen as more beneficial, and production was still struggling with technical problems. The general
exemption from energy tax had to be removed due to the high cost associated with large volumes. In addition,
domestic ethanol struggled with increased competition from imported ethanol, as the import tax was lowered.
There was no political scope for technology-specific economic incentives in favour of the second and
third generations of renewable fuels. The possibility to import process technology for production of these
fuels was rejected, as it was poorly adapted to Swedish conditions and suffered from a lack of domestic
advocates and tacit knowledge. Endogenous forces within the emerging technological system were not
sufficient and legitimation could not only be based on experience of foreign actors. New domestic
production of ethanol from wood still struggled with costs due to insufficient technical maturity, and
large-scale production of ethanol in tropical regions suffered from sustainability problems. When the need
for large-scale alternatives to petrol and diesel eventually became obvious, import of synthesized fuels
from coal and natural gas turned out to be necessary. At the same time, subsidies for domestic production
and use of renewable fuels were questioned for being too costly and not contributing to the needed
substitution of petrol and diesel.
5.2. Technology-oriented scenario
5.2.1. Growth path – knowledge formation and expectations

At the beginning of the second phase, the Swedish market for renewable fuels was largely built on
domestic production, but the awaited expansion had not come off. Advocates of wheat ethanol did not
receive much attention, as it was mainly seen as a low percentage blend in petrol. The debate on the choice
of fuels was more focused on alternatives with potential for more efficient production and larger economic
and environmental benefits. As cellulosic ethanol and gasification processes for production of methanol,
DME, FT-diesel, methane and hydrogen from cellulosic biomass and black liquor could be scaled up,
farmers, forestry and pulp and paper industry saw the opportunity to supply a beginning renewable fuel
industry with raw materials. In collaboration with energy utilities, and vehicle and equipment
manufacturers that also had been involved in the national R&D, they were increasingly involved in
financing new production plants. On the user side, methanol benefited from a successful introduction in
the electronics regime and legitimation through experience in small-scale applications.
Biogas and natural gas were still used in vehicle fleets, but in parallel, experimentation for conversion of
methane to new fuels was in progress. At several locations hydrogen was blended into methane or used in
fuel cell vehicle fleets, as had been demonstrated during the first phase. By-product hydrogen was supplied
by the process industry, but some hydrogen and methane from biomass gasification were also used.
Experiences from markets and demonstrations of a variety of alternative fuels and vehicles could be
used in the development and introduction of new alternatives. Early adaptations in distribution made
flexibility high and investments modest for most filling stations. The political scope for technology-
specific economic incentives in favour of second and third generation alternatives was large enough for
this to be implemented during the second phase. As an effect, several types of alternative fuels and
vehicles were sold on the Swedish market, with preferences diverging geographically according to
regional interests. Solutions for second generation renewable fuels could also be exported.
5.2.2. Stagnation path – lack of actors

The decreased commitment to introduce alternative vehicles and fuels during the first phase had
resulted in a lack of confidence among potential customers, and renewable fuels were not seen as a real
option. One important argument that was brought up in the debate was that CO2 emissions should be
reduced in other sectors, rather than in the transport sector. Biomass use was established in the heat and
electricity regimes, and resource competition was a crucial issue. The weak market incentives had not
created any interest among regime actors, who did not see a future market. R&D had been extensive, but
the industry involvement was limited and commercialisation did not seem feasible.
Further on, despite exemptions from CO2 tax, the first generation of renewable fuels could not compete
with tropical ethanol, and with an increased import of synthesised fuels from coal and natural gas. In
response to this, the built-up national competence redirected their interest towards coal gasification, which
had been an important niche in the 1970s and 1980s. Technology for coal gasification was imported and
adjusted to Swedish conditions, which also led to an increasing import of coal.
6. Summary and conclusions
In this paper, we use a socio-technical scenario approach to illustrate how policy choices made today
may affect the development of alternative transport fuels in Sweden until 2020. With the present situation
as a starting point, we first introduce two different possible scenarios for 2007–2012. The scenario
policies differ mainly on two points with direct connection to market formation and knowledge
development: (i) the commitment and economic incentives aiming at a rapid market expansion for the first
generation of renewable transport fuels and (ii) the economic resources allocated to R&D of the second
and third generations of renewable fuels. Compared to the market-oriented scenario, the balance between
the two points is shifted towards R&D in the technology-oriented scenario.
In the market-oriented scenario, domestic production and a relatively widespread use of alternative transport
fuels and vehicles create actors in the form of raw material suppliers, producers and users that advocate the
alternatives. Limited formal knowledge is gained, but legitimacy for alternatives to petrol and diesel is created.
Physical artefacts are adjusted to fit the first generation of renewable fuels. In the technology-oriented scenario
authorities and researchers are key actors. A high technical competence is built up in connection with pilot
production plants and demonstrations of the second and third generations of renewable fuels. Petrol and diesel
are questioned, while the early alternatives are criticised for high costs and limited potential.
The structural elements built up during the first phase are used as a base for the elaboration of the
second phase, 2013–2020. This starts with a bifurcation of both scenarios, where one path from each is
characterised by stagnation and one from each is characterised by growth, with regard to the introduction
of the second and third generations of renewable fuels in Sweden (Fig. 3). In the growth paths, the
changes in structural elements lead to further growth and cumulative causation within the emerging
technological systems; they are to a decreasing degree dependent on exogenous forces. In the stagnation
paths, this is not the case. In the market-oriented scenario, the multitude of actors involved in the first
generation of renewable fuels and the lack of domestic knowledge in the second generation are crucial
issues. In the technology-oriented scenario, there is no experience with renewable fuels among a large
number of actors, and the weakened market incentives make industry interest limited. At the end of the
studied period, the results in terms of alternative fuel use for the two stagnation paths are similar in that
import of synthetic fuels made from natural gas and coal becomes necessary. The results of the two growth
paths are also similar, showing a great variety in the use of renewable fuels.
The scenarios demonstrate the diverging outcomes that could result from different policy choices.
Structural elements related to one or several emerging technological systems are built up in a process of
competition and co-evolution. Forces endogenous and exogenous to the overall system of renewable fuels
interact to determine further changes of the system; diverging paths are possible due to how external
developments are interpreted by various actors within the system. In the market-oriented scenarios, we
illustrate consequences of breaking the dominance of entrenched technologies and demonstrating a
growing market potential for alternatives, but also the risks of a large focus on market stimulation and first
generation renewable fuels. In the technology-oriented scenarios, we point out the value of keeping
variety among niches in this stage of the transition through funding of research and development of new
technology, but also the risks of a poorly developed market.31 ,32
The socio-technical scenarios give the possibility to illustrate the mechanisms identified in the technical
change literature and in the previous development of alternative transport fuels in Sweden. The relatively
short time span makes it possible to directly relate the scenarios to upcoming policy choices, making them
realistic with reference to the present situation. Limitations are mainly the dependence on assumptions
regarding exogenous forces, and the arbitrariness in the choice of scenario characteristics. However, being
transparent in the mechanisms used and the choices made, the methodology can give important advice on
how to relate to technology diversity in the policy making process. Investigating the effect of different
background scenarios (exogenous forces of change) is an interesting option for further work.
In conclusion, if policy is implemented without taking the dynamic forces within the system into account,
there is a risk that any measure leads the system into a dead end. But if policy strives to balance the development
in different parts of the technological system while making use of various prevailing forces of change, a
multitude of different efforts can contribute to the development of a more sustainable transport system.
Acknowledgements
The work was funded by the Swedish Energy Agency, Göteborg Energy Ltd. Research Foundation,
Chalmers Environmental Initiative (CEI) and CPM (the Competence Centre for Environmental
Assessment of Product and Material Systems). An earlier version of the paper was presented at the 4th
European Meeting on Applied Evolutionary Economics in Utrecht, the Netherlands, in May 2005. We are
grateful for remarks brought up there, as well as for valuable comments from Staffan Jacobsson, Duncan
Kushnir and from two anonymous referees.
31
Here we choose these relatively pure scenarios, but other choices can also be made, for instance with other exogenous
forces.
32
These points are also argued in [73], then analysed in terms of functions.
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Karl M. Hillman (formerly Jonasson) is a PhD student researching environmental assessment methodologies and technical change processes,
and how emerging technologies could be assessed regarding their contribution to long-term environmental improvements. During his PhD, he has
focused on alternative transport fuels and vehicles.
Björn A. Sandén is Associate Professor and conduct research and teaching mainly in the areas of Environmental assessment of emerging
technologies, innovation system studies (analyses of drivers and barriers of technical change) and technology and climate policy. He is a member
of Chalmers Centre for Energy Research (CEC) and Chalmers Innovation Centre (RIDE).

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Technological Forecasting & Social Change 75 (2008) 1279 – 1302

Exploring technology paths: The development of alternative

2.1. System innovation and innovation systems

2.2. Co-evolution, competition and system boundaries

2.3. Socio-technical scenarios

3. Present situation for alternative fuels in Sweden

3.1. Market support

3.2. Fuel production and supply

Petrol 5 508 000 8940 49.24

3.3. Research and development

3.4. Future policy choices

4. Alternative fuels in Sweden 2007–2012

4.1. Market-oriented scenario

4.2. Technology-oriented scenario

5. Alternative fuels in Sweden 2013–2020

5.1. Market-oriented scenario

5.1.1. Growth path – legitimation through market formation

5.1.2. Stagnation path – lock-in of first generation renewable fuels

5.2. Technology-oriented scenario

5.2.1. Growth path – knowledge formation and expectations

5.2.2. Stagnation path – lack of actors

6. Summary and conclusions

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