SW-5:Environmental Taxes on Fuels
Environmental taxes are levied on fuels based on their content of carbon dioxide, sulphur and nitrogen oxide, as well as on the equipment used. A number of full or partial exemptions from the tax apply to industrial companies, both within, and outside of companies participating in the EU Emissions Trading Sytem.
Environmental taxes have been levied on fuels since 1991 through the introduction of Government Bill 1991/92:150. Depending on the fuels and equipment used, taxes are levied on carbon dioxide, sulphur and nitrogen oxide.
A carbon dioxide tax is levied on the emitted quantities of carbon dioxide from all fuels except biofuels and peat. There are different tax rates depending on the amount of carbon dioxide each fuel emits. In general, the level of taxation is high for households and services and low for sectors subject to international competition (i.e. industry, agriculture and heat production through combined heat and power) .
The taxes are applied based on the carbon and sulphur content of the fuels and in principle levied on the wholesale company just upstream of the consumer. If a fuel consumer is eligible for tax deduction based on abatement options the fuel consumer is to prove they are eligible. This proof is verified by the Swedish Tax Office.
The general rate of carbon dioxide tax in 2011 is 105 öre per kg of carbon dioxide. Currently, Sweden is in a process of modifying their taxation system to ensure cost-effective taxation. Over the past years the level of the CO2 tax has been gradually increased. Carbon taxation of fuels used for heating purposes for EU-ETS and non EU-ETS installations differs.
- Since January 1st 2011 EU-ETS installations are exempt from the carbon dioxide tax (0 €/t CO2)
- Heat production in CHP installations pays 7% of the CO2 tax
Installations outside the EU-ETS currently pay 30% of the general carbon dioxide tax level. This reduced CO2 tax rate for industry outside the EU ETS will be subject to an increase to 60% of the general CO2 tax starting in 2015. The special provisions, giving a limited number of industrial and horticultural companies an additional tax relief (the so called 0.8 % rule) are phased out. The scheme was made more strict in 2011 and will be fully abolished in 2015 .
Furthermore, special rules apply to energy-intensive (*2)industrial operations, which allow a reduction of carbon taxes. This reduction amounts to the part of carbon taxes exceeding 1,2% of the retail value of manufacturers products, with the deduction of 70% of the carbon dioxide tax from the same retail value.
Aside from the CO2 tax, Sweden also has sulphur and nitrogen oxide taxes, which have indirect effects on energy efficiency. The sulphur tax is levied on sulphur emissions from coal, peat and oil. For oil, the tax rate is dependent on the actual mass percentage of sulphur in the oil. Oil containing less than 0,05 mass percent of sulphur is exempted from the tax. The nitrogen oxide tax is levied on emissions from boilers, gas turbines and stationary combustion plants supplying at least 25 GWh per annum. However, this tax is intended to be fiscally neutral and is repaid in proportion to each plant’s utilized energy, resulting in only the highest emitters to be net payers.
Electricity production is exempted from the environmental taxes.
Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.
Policy Instrument Type: Economic, Tax
Position in the PyramidAbout Us
Start Date: 1991
|Supports||Programme for Improving Energy Efficiency in Energy-Intensive Industries (PFE)||Effort Defining|
|Complements||Energy Audit Financial Support||Supporting Measure|
Swedish Tax Office
Swedish Environmental Protection Agency
Primary Objective: GHG Emissions
Financial incentive to reduce emissions of carbon dioxide, sulphur and nitrogen oxide from fossil fuels.
Industry, services, consumers
Driver of energy consumption or emissions affected by policy: Total energy use , total emissions, fuel mix
Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.
All industries, companies, individuals with several exemptions to EU ETS and energy-intensive companies.
Quantitative Target? no
Progress Monitored? yes
Verification Required? yes
Requirements on the Target Group
If a fuel consumer is eligible for tax deduction based on abatement options the fuel consumer is to prove they are eligible. This proof is verified by the Swedish Tax Office.
Support by Government
Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.
|Impact||Quantitative Estimate||Qualitative Estimate|
|Estimated effect on energy consumption or emissions||N/A||N/A|
|Estimated costs/benefits for industry||Costs for energy intensive industries are estimated to be as high as 4% of gross operating surplus ||N/A|
|Estimated cost for government||N/A||The Ministry of Finance monitors and reports revenues from the environmental taxes. Ministry of Environment reports the emissions. Ministry of Enterprise, Energy and Communication is responsible for the analysis on the taxes’ impact on trade and industry. There is however no combined comprehensive monitoring and reporting on the effects and progress of the environmental taxes.|
References & Footnotes
 Swedish Ministry of Finance (2011). Swedish energy and CO2 taxes – National design within an EU framework.
 M.S. Andersen, 2010. Europe’s experience with carbon-energy taxation. http://sapiens.revues.org/1072
 Hammar, H. and S. Akerfeldt, 2011 CO2 taxation in Sweden, 20 years of experience and looking ahead, Ministry of Finance, Stockholm.
(*1) A company is energy-intensive according to if the remaining tax (excluding sulphur tax), after the general tax reduction for fuels used for heating or the operation of stationary engines in manufacturing industries or market gardening, amounts to at least 0.5% of the value added by processing