New green cars to be exempted from vehicle tax

The Government is working for Sweden to have an energy supply that is sustainable and makes efficient use of resources, and to have zero net emissions of greenhouse gases to the atmosphere by 2050. Long-term predictability and regard for the difficult economic situation have been guiding concerns in the Governments climate bill, which will shortly be laid before the Riksdag.

- The climate challenges can serve as an economic lever and provide opportunities for new jobs and increased exports. This is the time for us to invest in sustainable energy and smart technical solutions that make it possible to meet increased demand from a position of strength when the economy picks up, says Minister for Enterprise and Energy Maud Olofsson.

- Those who pollute must pay for their impact on the environment. The policy instruments must be economically efficient, technology-neutral and preferably internationally coordinated, avoiding too many rules for special cases. By putting a clear price tag on climate-affecting emissions, we make it clear that emissions have a cost that must be paid, says Minister for the Environment Andreas Carlgren.

- Were making the economic policy instruments in the energy and climate area tougher because this is the most effective way of achieving emission targets. However, the pace and timing of the tougher approach must reflect the sharp economic downturn. The changes must be implemented carefully and gradually so that households and companies have time to adapt. Attention must be given to the operating environment for jobs and enterprises, says Minister for Finance Anders Borg.

In previous budgets the Government has made extensive tax changes aimed at reducing emissions. When the Government soon presents its energy and climate bill, changes in various taxes and support will be presented aimed at reducing emissions of greenhouse gases by a further 2 million tonnes by 2020, in addition to the large reductions that current policy instruments are estimated to achieve. The approach should be that future tax increases for companies and households in the energy and environmental areas should be offset by corresponding tax relief.

• To stimulate and accelerate a transition to a more environment-friendly car fleet, the climate bill proposes that new green cars be exempted from vehicle tax for the first five years. The current green car premium will thus be replaced by long-term tax exemption. The amendment should enter into force on 1 January 2010, but be effective retroactively so as to apply to cars taken into service from 1 July 2009 onwards. The present definition of a green car will apply and passenger cars running on petrol and diesel that emit less than 120 grams of carbon dioxide per kilometre in mixed driving will also be exempted from vehicle tax. One difference compared with the present green car premium is that the tax exemption will apply not only to cars bought by private people but also to company cars and other cars bought by businesses.
• Taxation of emissions by increasing the relative weight of carbon dioxide in vehicle tax. The carbon dioxide component of vehicle tax will be raised from SEK 15 to SEK 20, which means that from 2011 onwards the tax will be raised by SEK 5 for each gram of carbon dioxide a car emits. New light goods vehicles, light buses and camper vans will be brought into the carbon dioxide-based vehicle tax system. The fuel factor will be lowered for diesel cars and the environmental factor will be replaced by a fixed monetary amount. In total, this will mean a reduction in the vehicle tax on diesel cars.
• The energy tax on diesel will be raised in two stages by a total of SEK 0.40 per litre. A first increase of SEK 0.20 should be made on 1 January 2011 and a second increase of SEK 0.20 on 1 January 2013. To compensate heavy traffic for increased tax costs resulting from increases in diesel tax, the vehicle tax on heavy goods vehicles and large buses should also be reduced.
• The tax on incineration of household waste should be eliminated from 1 September 2010. This tax was introduced on 1 July 2006 but has turned out to have an insignificant effect on behaviour and has only led to unnecessary transportation of household waste. The change will be financed by raising the general carbon dioxide tax by SEK 0.01 per kg of carbon dioxide.
• A two-stage phase-out of the present reduction in carbon dioxide tax for energy intensive companies (the '0.8 per cent rule') is proposed. In addition, the Government wants more far-reaching coordination of economic policy instruments aimed at plants covered by the EU emission allowance trading system.
• The reduction in carbon dioxide tax for heating in agriculture, forestry and aquaculture and in industries not covered by the EU emission allowance trading system will be curtailed. The tax level will be raised from 21 per cent to 30 per cent in 2011 and to 60 per cent in 2015. In addition, a decrease is proposed in the level of carbon dioxide tax refunds granted for diesel used in agricultural and forestry machinery.
• Over and above the annual adjustment in line with the consumer price index, the level of carbon dioxide tax should in future be adapted to the extent and at the rate that, together with other changes in economic policy instruments, deliver a total reduction of greenhouse gas emissions of an additional 2 million tonnes by 2020.