Sweden has a long history of taxing fuel, but everything changed in 2022 when the government slashed gasoline taxes to counter rising fuel costs. The move was triggered by a 60% increase in gasoline prices between 2021 and mid-2022, fueled by global supply chain issues and the war in Ukraine.

By cutting fuel taxes and reducing biofuel mandates, Sweden managed to lower gasoline prices by 34% since 2022, bringing the cost of driving to one of its lowest levels in the past 25 years. A comparative study with Denmark showed that Sweden’s tax reductions played a major role in keeping fuel costs down.

While cheaper fuel has helped Swedish households save money at the pump, it also means they are now more exposed to global oil price fluctuations. Unlike before, when high taxes kept price swings under control, Sweden’s reliance on untaxed gasoline prices now means any future oil shock could hit consumers harder.

Key insights

• Gasoline prices have dropped significantly due to tax cuts and reductions in biofuel mandates, making driving more affordable.
• Electric vehicle sales have slowed, with new EV purchases falling from 38.7% to 35% of total car sales, reversing a long-term trend.
• Sweden’s climate goals are at risk, as more consumers opt for gasoline-powered cars, increasing CO₂ emissions and making it harder to reach the 2030 emissions reduction target.

Meet the author

Julius Andersson: Assistant Professor of Economics, Stockholm Institute of Transition Economics (SITE); affiliated researcher, Mistra Center for Sustainable Markets (Misum)

Contact

Email: julius.andersson@hhs.se
Phone: +46 (0) 70 108 12 30

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