Environmental compensation includes a range of activities intended to counterbalance such negative impacts of development projects that remain in the environment after all preventive and corrective measures have been fully implemented. Sweden, being a member state of the European Union (EU), must implement environmental compensation under EU directives such as the Habitat Directive. However, like in other countries, implementation is not yet widespread in Sweden, and new practices and guidelines remain to be developed both nationally and at European level. This need is all the more urgent considering that the European Commission estimates that, within the EU, about 100,000 hectares of land is converted from its natural state each year. The aim of this paper is to describe current environmental-compensation practices in Swedish road and railway projects and to discuss issues of vital importance to the development of compensation policy, such as what to compensate for, how much, and how. A national inventory was performed, for the first time in Sweden, to identify compensation measures in road and railway projects. Data were collected from a national mailing list including 141 officials at county administrative boards (CABs), internal e-mail correspondence within the Swedish Transport Administration and databases of court decisions. The inventory focused on compensation measures ordered by virtue of the Swedish Environmental Code. In addition, two case studies were carried out to investigate the planning of compensation measures. The results showed that CABs and courts rarely order compensation in infrastructure projects, even though this is possible under Swedish law. Between 1999 and 2012, 37 cases (i.e. permits issued) were found for which compensation was ordered. Of these cases, 76% concerned compensation for encroachments on minor habitats such as small ponds and cairns. No CAB ordered compensation for non-protected areas. Compensation ratios were never explicitly mentioned in permits, but in practice a ratio of 1:1 (often measured as area or length) was usually applied. The compensation measures typically consisted in recreating the same kind of natural asset that was affected, in a location close to the damaged area. In the two cases specially studied, the road and railway planning processes were not properly adjusted to integrate compensation issues, resulting in unnecessary bureaucracy and insufficient co-ordination between different projects, such as between the environmental-impact assessment process and the compensation process or between closely related sub-projects in the same region. To meet the EU’s goal of no net loss of biodiversity, we suggest that policy requirements should be made stricter and that incentives for voluntary compensation should be created. In line with the goals of Swedish national transport policy and the European Landscape Convention, account should be taken of social and cultural aspects, and there should be a shift from a narrow focus on individual projects to a broader planning approach, since this would allow compensation measures to be taken where they can deliver the greatest environmental benefits.