265electricity shortage in the coming years.

The discrepancy between this reality and the public debate in Sweden concerning Hybrit is striking. Despite the issues raised above, no one within the political or economic establishment, beyond the authors, has raised any concerns. On the contrary, the Hybrit firms are heralded as environmental heroes by the media; the Swedish prime minister inaugurated Hybrit’s pilot plant in 2018 and stated: “I am very happy and proud to be here today. In Sweden we show the way forward as we are pursuing what can become the greatest technology transition in 1000 years” (Affärer i Norr, 2018). When €320 billion of EU money is up for grabs for making use of hydrogen gas, and when funds can be matched, combined, and recombined into a pseudo-economy in which economic laws of scarcity no longer exist, no one has any incentives to question the process. Risky and reckless ventures are perceived and discussed as opportunities for the simple reason that someone else is bearing all the risk. These funds result in large-scale subsidy entrepreneurship that make destruction of capital rational because it is much easier to put up your own money if you obtain public funds for doing so. In this sense, the Hybrit case and the large-scale experimentation with hydrogen gas that is currently taking place in Europe resemble the painful and expensive experiences regarding biogas and ethanol from cellulose described previously. There are many examples of how such policies have turned into veritable disasters. We hope that our concerns are exaggerated and that we will be proven wrong.

5.7

EU Funds Result in Environmental Nationalism

Ironically, the presence of large EU funds for innovation and sustainability seems to result in a form of environmental nationalism. Hybrit and similar initiatives in Sweden state boldly that their aim is to contribute to Sweden becoming an economy that is completely free of fossil fuels. While this may sound like a noble cause, most environmental problems, including air pollution and climate change, are after all global problems that require coordination between different countries. If one country lowers its emissions at the expense of a substantially lower cut in emissions elsewhere, the net contribution of such an initiative is in fact negative. We may C. Sandström and C. Alm

266end up with a form of environmental nationalism through which countries pride themselves in optimizing emissions at the local or national level while the overarching effect is negative. The funds available from the European Union for different member states and firms to apply for result in precisely this form of suboptimization. Ironically, the presence of pan-European support structures leads to a form of environmental nationalism that leads to the absence of sustainable development.

6

Conclusion

This chapter has reviewed and discussed two historical examples in which interventionist innovation policies have failed: biogas in Sweden and ethanol from cellulose (Sekab). These cases stand in stark contrast to ideas about an entrepreneurial state successfully taking on Knightian risk and pursuing new opportunities.

While it is clear from the descriptions above that the presence of public funds has initiated risk-taking and ventures into new technologies, it has clearly also been unsuccessful. Interestingly, an important reason for this seems to be that the studied cases in fact contained too much risk. A combination of large, public funds seems to have made these organizations immune to risk. Biogas and ethanol from cellulose were, in reality, poorly calculated speculations over oil price fluctuations using hundreds of millions of taxpayer’s money. Once it became clear that potential was in fact limited, activities were not closed down. On the contrary, investments continued more than a decade later as public money could still be obtained for doing so. Public funds create a peculiar incentive structure that in reality makes it rational to destroy one’s own resources. Elementary microeconomics teaches that investments continue as long as marginal revenues exceed marginal costs. This investment rule is distorted by public funds that provide a marginal revenue that effectively nullifies the costs and risks. The hidden costs, however, are very real, as we see the crowding out of other economic activities. Also, the presence of multiple, large public funds to apply for at the local, regional, national, and EU levels creates a fertile ground for corruption in the long run. The combined effect of multiple funds available at different levels and for different ends (social, regional, environmental, and economic) needs to be discussed