Tax hike on electricity sparks criticism from stakeholders in Sweden’s energy sector

In the lead-up to the 2022 elections, Ebba Busch, leader of the Christian Democrats, called for a reduction in electricity taxes. Similarly, Elisabeth Svantesson stated that she could take charge of lowering the tax if Mikael Damberg did not. Johan Persson, leader of the Liberals, also promised a tax cut. However, for the second consecutive year, the government has instead raised the tax.

This year’s hike is 1.5 öre per kWh, following a more substantial increase last year of 4.5 öre per kWh, inclusive of VAT. Over the two-year period, the tax has risen by 12 percent for households, translating to an additional cost of around four billion kronor for electricity consumers across the country.

Busch defends the increase by balancing the desire for tax cuts against the pressing need for investment in the electricity system, which she describes as “unstable.” She argues that these economic factors conflict with one another in budgeting priorities.

The tax hike is attributed to a longstanding “indexation” of electricity taxes, which has continued regardless of the administration in power. However, during the election campaign, promises were made to lower the tax, and the Tidö parties later committed to pausing this indexation to avoid further tax increases—a proposal that garnered support from numerous stakeholders.

Criticism has been directed at the government, including from Energy Companies, which are responsible for executing parts of the green transition and electrification efforts. They argue that lowering taxes on fossil fuels while increasing them on electricity undermines efforts to promote electrification and could jeopardize climate goals.

Busch acknowledges that higher electricity prices may hinder electrification efforts but maintains that the focus must be on stabilizing the electricity system as part of the goal to achieve net-zero emissions by 2045. Nonetheless, she reaffirms the commitment to eventually reduce the electricity tax.