Sweden Halts New Green Guarantees After Northvolt Bankruptcy
The Swedish government has announced it will not seek authorization for new guarantees in 2026, citing investment uncertainties and risk assessments. This decision comes amidst a backdrop of declining green energy projects and subsidy issues in Europe, and follows the high-profile bankruptcy of Northvolt, which is expected to cost European taxpayers significantly.
In 2024 and 2025, state guarantees for green industrial investments surged from 10 billion Swedish krona (€910 million) to 80 billion krona (€7 billion). However, both Northvolt and Stegra, owned by Vargas Holding, relied heavily on these subsidies and EU funding. The bankruptcy of Northvolt, a battery manufacturer, and the challenges faced by Stegra, a green steel production company, have raised concerns.
Stegra's difficulties included denied government funding and iron ore sourcing issues. As of August 11, 2025, approximately 27 billion Swedish krona (€2.45 billion) in guarantees have been issued, excluding Northvolt's terminated agreements. By the end of 2024, 83% of Swedish government credit guarantees were granted to these two troubled companies.
Sweden is ending its green credit guarantees in 2026, honoring only existing commitments. The decision to not seek new authorizations reflects the government's response to the recent bankruptcies and investment uncertainties. The cost of Northvolt's collapse to European taxpayers is expected to be significant, highlighting the need for careful risk assessment in future investments.
