The Swedish government plans to reduce electricity tax and introduce a high-cost protection scheme to shield households from soaring electricity prices. However, expert Mats Nilsson criticizes the move as mere 'symbolic politics', arguing that the measures will have limited impact compared to Norway's more substantial support. Energy Minister Ebba Busch defends the initiative as a necessary emergency measure while aiming to fix the energy system fundamentally.
Swedish Government's Electricity Tax Cut Criticized as Symbolic
Swedish Government's Electricity Tax Cut Criticized as Symbolic
The government aims to lower electricity tax and introduce a high-cost protection scheme against high electricity prices for households.
- "I believe the Swedish price cap will be insignificant," says expert Mats Nilsson, dismissing the proposal as "symbolic politics."
The government plans to implement the reduced electricity tax and high-cost protection for households in the fall of 2025 and throughout 2026.
According to the government and its partner, the Sweden Democrats, the current situation affects "hard-working people" who find it "difficult to predict their electricity costs and are economically strained by high electricity prices." It also prevents electricity-intensive companies and industries from establishing themselves in southern Sweden.
However, a 20% reduction in electricity tax and a high-cost cap of 1.50 SEK per kilowatt-hour will have a limited effect, says Mats Nilsson, an electricity market analyst and associate professor of environmental economics at Södertörn University.
- "The high-cost protection will occasionally remove some price peaks, but my assessment is that it is too high to have any significant impact."
One reason is that the Norwegian price cap is almost four times lower, set at 0.4 SEK per kilowatt-hour.
- "Norwegians will continue to consume electricity, likely more, without being price-sensitive at all, as the Norwegian state covers all costs over 40 öre. This means that Swedish electricity exports to Norway will increase and probably remain very high. I believe all analysts agree on this."
Merely Symbolic Politics
According to Mats Nilsson, the Swedish price level will rise due to Norway, but it will not often exceed the 1.5 SEK threshold.
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"It's just symbolic politics," he says, adding:
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"The Norwegian electricity support, without a doubt, will be very costly for the state. Only an oil-rich nation can afford it."
Ebba Busch, Minister of Energy and Business, states that having a high-cost protection is an emergency measure and that the government is fundamentally fixing the Swedish energy system.
- "When electricity prices were at their worst under the red-green government, they were around 3 SEK. And even more. So we have had situations where we were significantly worse than 1.5 SEK."
To address this, Nilsson suggests merging electricity areas.
According to Nilsson, what would have truly impacted Swedish consumers is if Sweden followed Denmark's lead and reduced electricity tax by 95%. He believes the current reduction of nearly ten öre per kilowatt-hour, about 20%, is insufficient.
- "If they had done like Denmark, it would have been a reform that made me feel 'this government knows what they are doing.'"
Ebba Busch describes the government's proposal as "a substantial tax reduction."
- "We also want money for welfare. We want money for other things. And then it's about addressing the root problem, not just compensating."