Sweden’s government to slash tax on petrol and diesel

Sweden's government has announced plans to slash tax on petrol and diesel next year, cutting revenues by an expected 5.6 billion kronor (€500m).

Sweden's government to slash tax on petrol and diesel
Energy Minister Ebba Busch announces plans to cut tax on petrol and diesel at a press conference on Thursday. Photo: Claudio Bresciani / TT

Energy Minister Ebba Busch called the measure “important, necessary, and long-awaited” at a press conference held alongside Oscar Sjöstedt, finance spokesperson for the far-right Sweden Democrats. 

“We know that many families are having a tough time right now,” she said. 

The government is proposing to cut the tax on petrol by 1.64 kronor per litre, and the price of diesel by 43 öre per litre in 2024, which, if an extra measure to cut tax on agricultural diesel is included, will cost a total of 6.5 billion kronor. 

Sjöstedt said the amount that the price would actually change at the pump would depend on global fuel markets as well as government taxation. 

“Of course, something can happen that can neutralise the impact of a tax reduction, but it could just as well have a boosting effect,” he said. “The difference is that that, all things being equal, the tax will be lower.” 

In the run-up to last September’s election, the Moderate, Christian Democrat and Sweden Democrat parties all promised to cut the price of fuel at the pump quickly, with parties promising cuts of as much as 10 kronor per litre for diesel and 5 to 6 kronor per litre for petrol. 

Sjöstedt defended the government’s failure to drive through cuts in the price of this magnitude. 

“None of our parties got their own majority and that means that you can’t get 100 percent of your policies through, but have to compromise,” he said. 

Fuel taxes are a key part of the arsenal governments have to reduce carbon dioxide emissions from the transport sector and the current government’s decision to sharply reduce the biofuels obligation — the share of biofuels mixed in with petrol and diesel — is the main reason why Sweden is now on track to miss key emissions goals. 

At the press conference, Busch said that she could not give any assessment on what impact the tax cuts she was announcing would have on emissions. “That’s a calculation we have not yet made,” she said.

However, in an analysis document released alongside the announcement, the government estimated that the change would increase emissions by about 350,000 tons in 2024 and 490,000 tons in 2025. 

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EXPLAINED: How high will heating bills be this winter in Germany?

The cost of energy is expected to rise again this coming winter, even though the government's price cap is supposed to be in effect until April 2024. Here's what households can expect.

EXPLAINED: How high will heating bills be this winter in Germany?

The onset of winter will raise concerns for many in Germany about the cost of heating their homes, with memories of last year’s rocketing prices and concerns over domestic gas supply resurfacing. 

But, compared to last year, the energy prices have now largely stabilised, though they are still higher than in 2021.

The stabilisation in prices is partly thanks to the government’s energy price cap which came into force earlier this year to cushion the blow of soaring energy prices by capping electricity costs at 40 cents per kilowatt-hour and natural gas at 12 cents.

READ ALSO: Germany looks to extend energy price cap until April 2024

The federal government plans to maintain this cap until the end of April, though this could be extended even longer, if necessary. 

How high are heating costs expected to go this year?

For the current year, experts from co2online expect somewhat lower heating costs than last year.

Heating with gas, for example, is expected to be 11 percent cheaper in 2023 than in 2022, costing €1,310 per year for a flat of 70 square metres. 

The cost of heating with wood pellets will drop by 17 percent to €870 per year, and heating with heating oil will cost 19 percent less and amount to €1,130.

According to co2online, the costs for heating with a heat pump will drop the most – by 20 percent to €1,1105. The reason for this, according to co2online, is a wider range of heat pump electricity tariffs.

Tax hikes in January

Starting January next year, the government will raise the value-added tax on natural gas from seven to nineteen percent.

Alongside this, the CO2 price, applicable when refuelling and heating, will also increase.

According to energy expert Thomas Engelke from the Federal Consumer Association, these increases will mean that a small single-family household with three or four people that heats with gas would then pay about €240 more per year for gas.

“That’s a lot”, he said. 

Another additional cost factor to consider is that network operators also want to raise prices. However, the federal government plans to allocate €5.5 billion to cushion this increase for consumers as much as possible, so how such cost increases will ultimately affect consumers is currently hard to estimate.

READ ALSO: Why people in Germany are being advised to switch energy suppliers

Overall, it can be said that, from January, consumers will have to brace themselves for higher energy costs, even though massive increases are currently not expected.

Consumer advocate Engelke advised customers to closely examine where potential savings could be made this upcoming winter: “Those who are now signing a new gas or electricity contract should inform themselves and possibly switch. Currently, you can save a few hundred euros. It’s worth it. On the other hand, you should also try to save as much energy as possible this winter.”