Abolished indexation of energy tax on electricity

On 22 April, the Ministry of Finance presented a referral proposal to abolish the indexation of the energy tax on electricity from 2025 onwards.

– It is positive that the government has now put forward a proposal to permanently abolish the indexation of the energy tax on electricity. The energy tax on electricity has increased sharply in recent years due to index increases and, together with VAT, will amount to 53.5 öre per kilowatt hour in 2024. It is unreasonable that electricity customers should have to pay an ever-increasing proportion of their electricity consumption in the form of taxes and fees year after year. Abolishing the indexation also facilitates electrification in sectors such as transport, says Erik Thornström, responsible for taxes and policy instruments at Energiföretagen Sweden.

According to the consultation memorandum, it is proposed that the annual indexation of the energy tax on electricity be permanently abolished. The Ministry of Finance justifies this with the recent years’ high electricity prices and inflation, and that electricity prices should not be increased further by indexing the energy tax on electricity. The tax rate for the energy tax on electricity is proposed to remain at the 2024 level, i.e. 42.8 öre per kilowatt hour consumed. The changes are proposed to enter into force on 1 January 2025.

The proposal is estimated to lead to the energy tax on electricity being 1.2 öre per kilowatt-hour lower in 2025 than if indexation were to continue (1.5 öre per kilowatt-hour including VAT). For a household in a villa with an annual electricity consumption of 20,000 kilowatt hours (“villa with electric heating”), the proposal is expected to reduce electricity costs by SEK 300 in 2025 (including value added tax). In total, household costs for energy tax on electricity including VAT are estimated to decrease by SEK 0.6 billion in 2025.

The proposal is being considered together with several other referral proposals before the budget bill for 2025, which is planned to be presented in September. However, the government reserves the right to adjust the scope and design of the proposal depending on the financial situation, budget space and funding needs, as well as the discussions in the final work on the budget bill.