The development of the Swedish district heating sector with a market share of 54% in the heat market for buildings in the residential and service industry, is discussed. The district heat is generated using waste incineration, industrial surplus heat, biomass, and fossil combined heat and power (CHP). It reduces carbon dioxide emissions by 63 to 87% lower than in European cities and towns using natural gas and fuel oil to heat buildings. The district heat sector involves about 140 companies with 540 networks located in 220 municipalities. District heating systems have been started to obtain heat sinks for future municipal CHP plants. National energy policy program for reducing the oil dependence and carbon dioxide emissions has boosted the growth of the sector to meet the energy demand of buildings.