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Policy: Sweden
Policy Objectives In 2006, an environmental excise duty was introduced in Sweden. The government has been actively involved in developing the policy along with the Ministry of Environment while the Swedish Road Administration is responsible for administering the vehicle duty. The environmental excise duty is part of a two-pronged strategy: First, the policy is part of a larger strategy to respond to increasing road traffic and rising recognition of transport’s role in climate change and environmental impacts. As a result, in 2003 the government included road transport as a central feature in climate policy and initiated a climate strategy for the road sector. Key elements of the strategy were the recognition that radical change was necessary both over the short and long-run. Tax incentives for CO2 efficient cars were therefore introduced to encourage a shift towards more efficient vehicles and greater use of renewable fuels. The second part of the strategy is to eliminate societal dependency on oil particularly, for the transport and energy sector by 2020 translating into 40-50% reductions in the transport sector. The environmental vehicle excise duty plays an important but small role in a much wider strategy not only to combat climate change but achieve energy self-sufficiency (Borup, 2007).
Policy Structure The duty is comprised of a base charge of 360 SKR plus a CO2 charge of 15 SKR per gram of CO2 exceeding 100 grams per kilometre (g/km). This charge applies for typical petrol passenger vehicles, while for alternative fuelled vehicles the carbon charge is 10 SKR gCO2/km. For instance, a petrol vehicle with average emissions of 198 gCO2/km (2003 figures) would be charged 1830 SKR while a low emissions vehicle of 120 gCO2/km would be charged approximately 660 SKR. Diesel vehicles are charged both a lower base tax and carbon charge while having less strict emission control requirements of NOX and PM10. Given that new passenger vehicles in Sweden are priced in the order of 100000 – 200000 SKR the duty comprises a rather small portion of the overall cost. Nevertheless, Borup (2007) argues that the tax should be viewed as part of a wider strategy particularly the government’s efforts to establish and diffuse the concept of the “green car” (‘miljöbilar’) across Swedish society. Implementation & Operation The policy required three years from identification in 2003 to full implementation in 2006. Key players in the implementation included the central government, Ministry of Environment and the Commission Against Oil Dependency. The tax is operated by the Swedish Road Administration. Major Impacts From July 2005 to 2006, the total share of more efficient cars (emissions less than 120 gCO2/km) increased from 2.9 – 12.8% (Klimataktuellt, 2006, 2007 in Borup, 2007). In April 2007, this figure increased to 14.3% with the amount of new cars with emissions less than 120 gCO2/km increasing by a factor 3 from 2006. As a result, average CO2 emissions for new cars decreased from 198 gCO2/km in 2003 to 191 gCO2/km in 2006 (Borup, 2007). Moreover, from 2005 to 2006, gasoline consumption decreased by 3.6%, diesel consumption increased 2.7% and ethanol-fuel consumption increased by a factor 3 but still remains a small share of total fuel consumption (Borup, 2007). It is not clear to what extent these changes can be attributed to tax incentives for more efficient vehicles instead of other factors such as increasing oil prices. Although positive changes have occurred, the Swedish car fleet remains heavier and more fuel consuming than other European countries with the total number of new registered vehicles increasing rather than falling (Borup, 2007). Despite increasing uptake of cleaner vehicles there has been an upward trend in the purchase of heavier and more powerful vehicles with higher CO2 emissions before the VED was implemented in 2006. Figure 3-2 shows that the purchase of vehicles greater than 1500 kg has increased from 8% in 1990 to over 50% in 2003. Conversely, the share of vehicles registered less than 1300 kg has decreased from 52% in 1990 to 13% in 2003 (Kågeson 2005; Borup 2007). Although the purchase of smaller vehicles has increased since the VED was implemented, new fuel efficient cars are proportionally less than the uptake of heavier larger cars in Sweden. Figure 3-2. Trend in registrations of new passenger vehicles by weight (kg) from 1990 – 2003 Source: Kågeson 2005; Borup, 2007 Although similar trends prevail across Europe the car fleet in Sweden is among the heaviest with Saab and Volvo two of the heaviest passenger vehicle manufacturers in Europe. Figure 3-3 illustrates that the average CO2 emissions in Sweden were approximately 198 gCO2/km compared to a low in Portugal of approximately 152 gCO2/km. Figure 3-3. Average CO2 emissions from cars in selected EU countries 1994 - 2002 Source: Kågeson, 2005; Borup, 2007 Due to these trends, the environmental excise vehicle duty was viewed to be a key instrument to promote the concept of green vehicles most recently defined by the Swedish government as: The introduction of the excise duty is viewed to have contributed to greater public awareness of green vehicles reflected in the term frequently used in mass media (Borup, 2007). Latest Reforms As of 2006, a rebate of 6000 SKR was introduced for diesel vehicles with reduced particulate emissions (via particle filters). Although a change of government occurred in 2006, the policy instrument remains relatively intact. In 2007, the new government introduced a 10.000 SKR rebate on new efficient cars and are proposing higher taxes on CO2 and gasoline (Borup, 2007).
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