Government presents package of measures to address rising fuel and electricity prices as a result of the invasion of Ukraine

Russia’s illegal, unprovoked and unjustifiable invasion of Ukraine has now continued for nearly three weeks. The Government’s response is based on a three-track approach: support to Ukraine, sanctions on Russia and strengthening Sweden.

“Today we are presenting an exceptional package of measures to address the price increases we are now experiencing as a result of Russia’s invasion,” says Mr Damberg. “The situation remains uncertain, and prices are volatile. Therefore, we see the need to support consumers at this acute stage, while taking measures to continue to reduce our fossil dependency.”

Short-term measures

1. Tax on diesel and petrol will be temporarily reduced from June to October 2022. Fuel tax on diesel and petrol will be temporarily reduced to the lowest level permitted under EU regulations. This means that the price of petrol and diesel at the pump will be just over SEK 1.30 lower per litre in addition to the tax reduction of SEK 0.50 that will be introduced in May. The Government suggest that the proposal apply from 1 June to 31 October. The total cost of this measure is estimated at SEK 3.7 billion.

2. A new compensatory payment for fuel costs will be introduced for private individuals. The compensatory payment is for private individuals who own a car. The support will amount to SEK 1 000 per car owner. People who own a car and live in municipalities located in regional policy support areas 1, 2 and 3 will receive an additional compensatory payment of SEK 500. For the most part, this applies to sparsely populated and rural areas where distances travelled are long. The basic premise is that the compensatory payment is paid automatically. The total cost of this measure is estimated at SEK 4 billion.

3. Additional funds will be allocated to the appropriation for the climate bonus. To continue to promote the transition to environmentally friendly vehicles, reduce dependency on fossil fuels and meet rapidly increasing sales of climate bonus cars (primarily electric), the appropriation for the climate bonus will be increased by SEK 3.9 billion. Therefore, a person who buys an electric car will continue to receive SEK 70 000 in financial support.

4. The compensatory payment for electricity costs will be extended for another month in southern and central Sweden. The compensatory payment will be extended with lower payment levels for the month of March in electricity price areas 3 and 4 in southern and central Sweden, where prices have increased the most. Reimbursement will be provided to households whose electricity consumption is from 400 kWh to 2 000 kWh per month. The lower limit will be reduced in comparison with the earlier compensatory payment so as to include households with lower electricity consumption. The compensatory payment will be from SEK 100 to SEK 1 000 and include approximately 2 million households. The total cost of this measure is estimated at SEK 900 million.

5. The housing allowance for families with children will be temporarily increased from July to December 2022. To particularly protect households in financial difficulties from dramatic price increases, a temporary extra child allowance will be introduced for families with children that are, or later this year will be, eligible for housing allowance. The extra child allowance will be equivalent to 25 per cent of the preliminary housing allowance and will at most amount to SEK 1 325 per month. The total cost is estimated at SEK 500 million.

Long-term measures

6. New and simplified travel deductions. Current travel deductions will be replaced with a tax reduction based entirely on the distance between the home and workplace. Neither transport mode nor the cost of travel will have any bearing on the reduction. It is estimated that 260 000 more people will be able to benefit from the tax reduction in comparison with current travel deductions. This is part of a proposal that the Government will refer to the Council on Legislation for consideration later this week. The goal is for the new rules to enter into force on 1 January 2023.

7. The reduction obligation will be frozen. The reduction levels for diesel and petrol for 2023 will be frozen at the 2022 levels. The Government will circulate a proposal for consultation with the goal that it enter into force on 1 January 2023. The Government also intends to bring forward the Swedish Energy Agency’s task to re-examine whether the reduction levels for diesel and petrol should be adjusted from 2024. A report on this task will be presented by 15 September 2022.

8. The GDP indexing of diesel and petrol will be suspended. The annual indexation of diesel and petrol tax rates was suspended in 2021 and 2022. It is proposed that this also apply in 2023. The Government will circulate a proposal for consultation with the goal that it enter into force on 1 January 2023. The cost of this measure is estimated at SEK 900 million for 2023.