The EU has in recent years adopted several regulations which concerns animal welfare and in Sweden a review of the legislation is currently under way. A majority of consumers in Sweden as well as in the EU would like to have more information about the conditions under which animals are farmed and believe that further improvements of the conditions of farm animals are needed. Given the great interest in animal welfare, the purpose of this report is to examine how differences in legislation with respect to the from an animal welfare perspective most important aspects affect the profitability of Swedish farmers. This is done primarily by reviewing existing literature in order to address the following questions.

• How should animal welfare be defined and operationalized? Presently, no consensus exists neither concerning a generally accepted definition nor concerning how different aspects of animal welfare should be weighed against each other. Trade-offs must always be made between animal welfare aspects as different housing systems generally have both advantages and disadvantages.
• What are the major legislative differences between Sweden and the EU in terms of the from an animal welfare perspective most important aspects? Sweden has several minimum requirements that go beyond the EU legislation. Examples include the ban on unfurnished cages (from 2012 also in EU) and the prohibition of beak–trimming for laying hens and larger space requirements for chickens and pigs.
• How do these differences in legislated minimum requirements affect the physical performance? More stringent animal welfare legislation may indirectly affect production costs by changes in mortality, feed consumption, feed conversion, etc. There are, for example, several Swedish minimum requirements related to pigs and dairy cows that may be expected to have a positive effect on performance.
• What differences in production costs exist between Swedish and foreign livestock producers and to what extent can these differences be attributed to from an animal welfare perspective important differences in legislated minimum requirements? More stringent animal welfare legislation may affect production costs both directly through changes in input requirements and indirectly through changes in physical output. Swedish livestock producers in many cases have higher costs than competing producers in the EU and these cost disadvantages can partly be explained by differences in the legislation concerning from animal welfare perspective important aspects.
• How is the profitability of livestock producers affected by legislative differences between Sweden and other countries concerning from an animal welfare perspective important aspects? Unless more stringent legislative requirements lead to improved productivity, producers need to receive a higher price. A trade-off between between market share and premium always has to be made. The possibility of obtaining a high premium for statutory minimum requirements (encompassing all domestic production) is therefore more limited than for non-statutory animal welfare aspects marketed in niche markets. The general difficulty of assessing animal welfare and communicate this to consumers further limits the possibilities of obtaining a high premium. The stringent Swedish legislation is primarily communicated to consumers by highlighting that the products are domestically produced, something that not only encompasses animal welfare aspects.