Swedish Government Warns Of Ecologically Motivated Tax Increases

by Ulrika Lomas, Tax-News.com, Brussels

12 February 2009

The Swedish government has announced that tax increases are inevitable as part of Sweden’s proposed new energy policy.

The policy's long-term goals, announced on February 5, state that the ecological sustainability, competitiveness and security of supply of Swedish energy must be dramatically improved by 2020.

In a release, the Swedish government warned that incremental tax increases on the least environmentally-friendly activities would be needed in order to reduce greenhouse gas emissions by 40%. The document warned that taxation, particularly on fuel, would be required in order to subsidize the expensive transition towards the target of 50% renewable energy.

Other proposals include a higher carbon dioxide tax and the phasing out of most or all tax exemptions. Ultimately this is intended to send across the message to businesses and consumers that they will need to move with the tide or pay the price.

Under Sweden’s proposed energy policy, heating with the use of fossil fuels would be phased out in its entirety by 2020, and a vehicle stock that is independent of fossil fuels created by 2030. The proposals warn that drastic energy efficient improvements within Swedish households would be mandatory, albeit subsidized.

“A five-year program for more efficient energy use will be implemented, based on the Energy Efficiency Inquiry’s proposals. The program will be allocated an additional SEK300m (USD36m) per year, supplementing the present policy, and will be funded within the framework of energy tax revenue,” states the proposals.

Further outlining the funding of the transition the statement says:

“General economic policy instruments are fundamental to enact the long-term energy policy; this includes carbon dioxide tax, international emissions trading and certificates for renewable electricity. Economic policy instruments will be gradually developed and exemptions restricted as far as possible, taking into account the risk of carbon leakage and the competitiveness of the Swedish business sector. These policy instruments must be supplemented both by investments in technological development and information and measures to break down institutional barriers to renewal.”

“A progress review will be conducted in 2015 to analyze actual energy balance and cost developments, as well as climate impact in relation to the targets and the state of knowledge regarding climate change. The progress review will not concern the policy’s strategic direction but may lead to adjustments to policy instruments and tools.”

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