Proposal for a COUNCIL DECISION authorizing Sweden to apply reduced levels of taxation to electricity consumed by households and service sector companies situated in certain areas in the north of Sweden in accordance with Article 19 of Directive 2003/96/EC
Date: 2011-12-06
Institutions: European Commission
Subjects: Sweden, derogation from EU law, electrical energy, energy consumption, heating, household consumption, tax on consumption, tax relief, tertiary sector

EUROPEAN COMMISSION 

Brussels, 6.12.2011 
COM(2011) 852 final 

2011/0403 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorizing Sweden to apply reduced levels of taxation to electricity consumed by 
households and service sector companies situated in certain areas in the north of Sweden 
in accordance with Article 19 of Directive 2003/96/EC 

 
 
 
 
  
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Taxation  of  energy  products  and  electricity  in  the  Union  is  governed  by  Council  Directive 
2003/96/EC1 (hereafter referred to as the “Energy Taxation Directive” or the “Directive”). 

Pursuant to Article 19(1) of the Directive, in addition to the provisions foreseen in particular 
in  its  Articles  5,  15  and  17,  the  Council,  acting  unanimously  on  a  proposal  from  the 
Commission, may authorise any Member State to introduce further exemptions or reductions 
in the level of taxation for specific policy considerations. 

The objective of this proposal is to allow Sweden to apply, within defined limits, a reduced 
rate  of  excise  duty  on  electricity  consumed  by  households  and  service  sector  companies  in 
certain  areas  in  the  north  of  Sweden.  The  objective  of  this  measure  is  to  compensate  for 
higher heating costs in these areas caused by the specific climatic conditions of the region.  

The request and its general context 

Article 19(1)  of  the Directive envisages that the Council, acting unanimously on  a proposal 
from  the  Commission,  may  authorise  any  Member  State  to  introduce  further  exemptions  or 
reductions in the level of taxation for specific policy considerations. 

Council  Decision  2005/231/EC2  as  amended  by  Council  Decision  2006/503/EC3  authorises 
Sweden to apply a reduced rate of taxation to electricity consumed by households and service 
sector companies situated in certain municipalities listed in the annex to the Decision. The tax 
reduction  is  to  be  proportionate  to  the  extra  heating  costs  due  to  the  northern  location,  in 
comparison with the rest of Sweden and the reduced rate has to comply with the requirements 
of Directive 2003/96/EC, and in particular the minimum rates laid down in Article 10 of that 
Directive. This authorisation expires on 31 December 2011. 

By letter dated 8 June 2011, under Article 19 of the Directive, the Swedish authorities have 
informed  the  Commission  that  they  intend  to  continue  to  apply  this  reduced  tax  rate.  The 
reduction  shall  not  exceed  SEK  96/MWh,  or  EUR  10,404.  Sweden  has  requested  for  the 
reduction to be authorised for a period of six years, i.e. until 31 December 2017, which is the 
maximum period indicated in Article 19(2) of the Directive. 

Sweden  justifies  the  measure  by  environmental  as  well  as  regional  and  cohesion  policy 
objectives.  Sweden  underlines  the  fact  that  national  tax  rates  on  electricity  considerably 
exceed  the  minimum  levels  of  taxation  as  prescribed  in  Directive  2003/96/EC  and  that 
therefore  a  stronger  incentive  for  energy  efficiency  is  provided  through  the  tax  system  on 
national  level  than  required  by  the  EU  minimum  rates.  However,  according  to  the  Swedish 
authorities  this  high  general  level  of  taxation  can  only  be  maintained  if  the  northern  areas, 

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Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for taxation 
of energy products and electricity, OJ L 283 of 31.10.2003, p. 51. 
OJ L 72 of 18.3.2005, p. 27. 
OJ L 199 of 21.7.2006, p. 19. 
Based  on  the  exchange  rate  of  1  October  2010  (9,2183  SEK  =  1  EUR),  cf.  Art.  13(1)  of  Directive 
2003/96/EC. 

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which are placed at a competitive disadvantage due to climatic conditions, are afforded a tax 
reduction.  At  the  same  time,  the  measure  would  mitigate  differences  in  costs  of  heating 
between  different  parts  of  the  country  and  thereby  contribute  to  the  objectives  of  the  EU's 
regional and cohesion policies. 

As  regards  the  nature  of  the  disadvantage  caused  by  the  climatic  differences,  the  Swedish 
authorities  have  reiterated  the  statement  made  in  earlier  requests  that  heating  costs  are,  on 
average, 25% higher in the northern regions as the heating period in these areas is longer.  

The loss of  revenue ensuing from the  reduction of SEK 96/MWh  is estimated  to  amount to 
SEK 910 million p.a., or EUR 99 million. 

• 

Operation of the measure 

The measure is granted in the form of a reduced tax rate. This reduced rate applies directly 
when the tax is levied.  

• 

Scope 

The Swedish authorities have stated that the geographic differentiation was introduced on the 
basis of objective data relating to average temperatures. On this basis, a reduced tax applies in 
all  the  municipalities  of  the  counties  of  Norrbotten,  Västerbotten  and  Jämtland  and  in  the 
municipalities of Sollefteå, Ånge, Örnsköldsvik, Ljusdal, Malung, Mora, Orsa, Älvdalen and 
Torsby. The measure is limited to households and service sector companies since only these 
groups pay the full energy tax on electricity. As on the other hand the electricity consumed by 
the manufacturing industry is in any case taxed at a lower rate, the measure in question does 
not affect companies from this sector. 

According  to  the  Swedish  authorities  the  measure  affords  the  beneficiaries  in  the  northern 
parts of the country the same conditions as the same consumer groups in southern Sweden.  

• 

Arguments  of  the  Swedish  authorities  concerning  the  impact  of  the  measure  on  the 
internal market 

The Swedish authorities do not think that the measure would affect the proper functioning of 
the internal market. They consider that, although the measure might have an effect on trade 
between  Member  States  by  reducing  the  costs  of  service  sector  companies  in  the  North  of 
Sweden, this effect would remain limited as most service-sector companies normally operate 
within a limited geographical area. 

• 

Existing provisions in the area of the proposal 

Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the  Community  framework 
for the taxation of energy products and electricity. 

Assessment of the measure under Article 19 of Directive 2003/96/EC 

• 

Specific policy considerations 

Article 19(1), first subparagraph, of the Directive reads as follows:  

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"In addition to the provisions set out in the previous Articles, in particular in Articles 
5, 15 and 17, the Council, acting unanimously on a proposal from the Commission, 
may  authorise  any  Member  State  to  introduce  further  exemptions  or  reductions  for 
specific policy considerations." 

The measure envisaged by Sweden consists in reducing excise duty on electricity consumed 
by households and service sector companies in the north of Sweden. The Swedish authorities 
underline  two  objectives  of  the  measure.  First,  they  submit  that  the  reduced  tax  rate  has  an 
indirect positive environmental effect by allowing the application of a higher overall tax rate 
than  would  otherwise  be  possible.  In  this  regard,  the  Commission  notes  that  environmental 
protection  requirements  as  such  are  already  an  integral  part  of  Directive  2003/96/EC5  and 
therefore  do  not  in  themselves  qualify  as  specific  policy  considerations.  However,  the 
Directive does not, in a general way, allow for addressing the specific needs of regions with 
very  particular  climatic  conditions.  In  such  a  context,  the  aim  of  contributing  to  the 
maintenance  of  a  relatively  high  level  of  taxation  by  avoiding,  through  a  reduced  rate, 
otherwise excessive burdens in regions subject to such conditions can therefore be considered 
a specific policy consideration. 

Secondly,  Swedish  authorities  submit  that  the  reduction  approximates  the  overall  costs  of 
heating  for  consumers  in  the  north  of  Sweden  with  the  costs  borne  by  consumers  in  other 
parts of the country and therefore pursues regional and cohesion policy objectives.  

On  this  count,  equally,  the  requested  authorisation  can  be  considered  as  based  on  specific 
policy considerations. 

• 

Consistency with the other policies and objectives of the Union 

The general tax rate on electricity applicable to households and service sector companies in 
Sweden is SEK 283, or EUR 30,70, per MWh, compared to an EU minimum rate of 1 EUR 
per MWh for non-business use6. With the proposed reduction, the applicable rate in the north 
of Sweden is at least SEK 187 per MWh or EUR 20,29 per MWh. Since the levels of taxation 
on electricity are well above the minimum rate both in the north of Sweden and in the rest of 
the country, it is plausible to assume that the tax reduction in question does in fact indirectly 
contribute to the achievement of a higher overall level of environmental protection in the way 
described by the Swedish authorities. 

In this context, the aim of the measure is to partly counterbalance the higher costs of heating 
in the areas to which the reduced tax rate applies. According to the Swedish authorities, the 
climatic  conditions  in  these  areas  lead  to  a  consumption  of  electricity  that  is,  on  average, 
around 25% higher than in the rest of the country, mainly due to a longer heating period.  

In this regard, the Commission notes that on the basis of recent electricity prices in Sweden 
the price reduction following from the proposed measure would be significantly less than 25% 
for all relevant consumer groups. Based on the most recent price data available from Eurostat, 

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Cf. in particular recitals (6) and (7). 
On the basis of Art. 11(4) of Directive 2003/96/EC Member States may limit the scope of the reduced 
level of taxation for business use. As stated above, Sweden in fact applies the tax rate for non-business 
use to both households and service sector companies. 

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this  reduction  ranges  from  3,1%  to  6,8%,  depending  on  the  level  of  consumption  of  the 
households and companies concerned7.  

The amount of the relief therefore remains below the additional costs of heating in the regions 
concerned. As a result, the fiscal incentive to use energy efficiently is maintained at a level at 
least equal to the one prevailing in the rest of Sweden. 

It can thus be concluded that the measure is compatible with the health, environment, energy 
and transport policies of the Union.  

Under the circumstances described, the measure also appears acceptable in view of the proper 
functioning of the internal market and the need to ensure fair competition. In particular, due to 
the remote nature of the areas to which it applies and the fact that it is limited to households 
and service sector companies, it is not expected that it will lead to significant distortions of 
competition or changes in trade patterns between Member States. Finally, it is recalled that a 
tax  reduction  for  the  areas  in  question  has  been  in  operation  for  thirty  years  without  this 
giving  rise,  as  far  as  the  Commission  is  aware,  to  any  problems  in  relation  to  the  proper 
functioning of the internal market or other objectives of EU policy. 

• 

Period  of  application  of  the  measure  and  development  of  the  EU  framework  on 
Energy Taxation 

The  Commission  suggests  that  the  period  of  application  is  set  to  the  maximum  allowed  by 
Directive  2003/96/EC,  i.e.  six  years.  This  period  seems  appropriate  in  order  to  provide  the 
businesses and consumers concerned with a sufficient degree of certainty. 

As  far  as  the  future  development  of  the  existing  legal  framework  and,  more  concretely,  the 
proposal  for  a  revision  of  Directive  2003/96/EC  submitted  by  the  Commission  on  13  April 
2011 [COM(2011)169] is concerned, it is recalled that the adoption of this proposal would not 
lead to an alteration of current rules in a manner relevant to the operation of the authorisation 
proposed here. There is thus no need to provide for particular safeguards in the matter.  

State Aid rules 

After  the  reduction  envisaged  by  the  Swedish  authorities,  the  tax  rate  on  electricity  in  the 
regions concerned will still respect the minimum level of taxation  pursuant to  Article 10 of 
Directive 2003/96/EC. Moreover, the Council authorisation  will apply  from  1 January 2012 
until 31 December 2017 (thus less than 10 years). The measure therefore falls under the so-
called  General  Block  Exemption  Regulation  (Regulation  (EC)  No  800/2008)8  and  is,  by 
consequence, exempt from the prior notification requirement. 

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8 

Source:  Eurostat  price  figures  for  2nd  semester  2010.  Figures  are for  non-industrial  use  of  categories 
DA (consumption less than 1 000 kWh) to DE (consumption more than 15 000 kWh).  
Commission  Regulation  (EC)  No  800/2008  of  6  August  2008  declaring  certain  categories  of  aid 
compatible with the common market in application of Articles 87 and 88 of the Treaty (General block 
exemption Regulation), OJ L 214, 9.8.2008. 

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2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

Consultation of interested parties 

This proposal is based on a request made by Sweden and concerns only this Member State. 

Collection and use of expertise 

There was no need for external expertise. 

Impact assessment 

This proposal concerns an authorisation for an individual Member State upon its own request. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

The proposal aims at authorising Sweden to derogate from the general provisions of Council 
Directive 2003/96/EC and to apply, within defined limits, differentiated levels of taxation on 
electricity.  

Legal basis 

Article 19 of Council Directive 2003/96/EC. 

Subsidiarity principle 

The field of indirect taxation covered by Article 113 TFEU is not in itself within the exclusive 
competence of the EU within the meaning of Article 3 TFEU. 

However,  the  exercise  by  Member  States  of  their  concurrent  competences  in  this  field  is 
strictly  circumscribed  and  limited  by  existing  EU  law.  Pursuant  to  Article  19  of  Directive 
2003/96/EC, only the Council is empowered to authorise a Member State to introduce further 
exemptions  or  reductions  within  the  meaning  of  that  provision.  Member  States  cannot 
substitute themselves for the Council.  

The proposal therefore respects the principle of subsidiarity.  

Proportionality principle 

The proposal respects the principle of proportionality. The tax reduction does not exceed what 
is necessary to attain the objective in question. 

Choice of instruments 

Instrument proposed: Council Decision. 

Article 19 of Directive 2003/96 makes provision for this type of measure only. 

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4. 

BUDGETARY IMPLICATION 

The  measure  does  not  impose  any  financial  and  administrative  burden  on  the  EU.  The 
proposal therefore has no impact on the EU budget. 

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2011/0403 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorizing Sweden to apply reduced levels of taxation to electricity consumed by 
households and service sector companies situated in certain areas in the north of Sweden 
in accordance with Article 19 of Directive 2003/96/EC 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union, 

Having  regard  to  Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the 
Community framework for the taxation of energy products and electricity9, and in particular 
Article 19(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

Council  Decision  2005/231/EC10  as  amended  by  Council  Decision  2006/503/EC11 
authorises Sweden to apply, until 31 December 2011, a reduced rate of excise duty to 
electricity  consumed  by  households  and  service  sector  companies  in  certain  areas  in 
the north of Sweden pursuant to Article 19 of Directive 2003/96/EC. 

By  letter  of  8  June  2011  Sweden  requested  authorisation  to  continue  to  apply  a 
reduced  rate  of  excise  duty  to  electricity  consumed  by  the  same  beneficiaries  for  a 
period of six more years, i.e. until 31 December 2017. The reduction is to be limited to 
SEK96 per MWh. 

In the areas concerned, the costs of heating are on average 25% higher than in the rest 
of  the  country  due  to  the  longer  heating  period.  Reducing  the  costs  of  electricity  for 
households  and  service  sector  companies  in  these  areas  therefore  narrows  the  gap 
between overall costs of heating for consumers in the north of Sweden and those borne 
by  consumers  in  the  rest  of  the  country.  The  measure  therefore  contributes  to 
achieving  regional  and  cohesion  policy  objectives.  The  measure  moreover  allows 
Sweden  to  apply  an  overall  tax  rate  on  electricity  that  is  higher  than  what  would 
otherwise  be  possible  and  therefore  indirectly  contributes  to  the  achievement  of 
environmental policy objectives. 

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OJ L 283, 31.10.2003, p. 51. 
OJ L 72 of 18.3.2005, p. 27. 
OJ L 199 of 21.7.2006, p. 19. 

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(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

The  tax  reduction  should  not  be  larger  than  what  is  necessary  to  compensate  for  the 
additional costs of heating for households and service sector companies in the north of 
Sweden. 

The reduced rates of taxation will be above the minimum rates laid down in Article 10 
of Directive 2003/96/EC.  

In view of the remote nature of the areas to which it applies, the fact that the reduction 
should  not  exceed  the  additional  costs  of  heating  in  the  north  of  Sweden  and  the 
limitation of the measure to households and service sector companies, the measure is 
not  expected  to  lead  to  significant  distortions  of  competition  or  changes  in  trade 
between Member States.  

Consequently,  the  measure  is  acceptable  from  the  point  of  view  of  the  proper 
functioning of the internal market and of the need to ensure fair competition and it is 
compatible  with  the  European  Union’s  health,  environment,  energy  and  transport 
policies. 

In order to provide the businesses and consumers concerned with a sufficient degree of 
certainty  it  is  appropriate  to  authorise  Sweden  to  apply  a  reduced  rate  of  taxation  to 
electricity for consumption in the North of Sweden until 31 December 2017. 

It  should  be  ensured  that  the  authorisation  under  Decision  2005/231/EC,  granted  for 
similar  reasons  for  the  previous  period,  continues  to  apply,  without  creating  a  gap 
between the expiry of that Decision and the taking effect of this Decision, 

HAS ADOPTED THIS DECISION:  

Article 1 

1. 

Sweden  is  hereby  authorised  to  apply  a  reduced  rate  of  taxation  to  electricity 
consumed by households and service sector companies situated in the municipalities 
listed in the Annex.   

The  reduction  from  the  standard  national  rate  of  taxation  for  electricity  shall  be  no 
greater  than  what  is  necessary  to  compensate  for  the  extra  heating  costs  due  to  the 
northern location, in comparison with the rest of Sweden, and shall not exceed SEK 
96 per MWh. 

2. 

The reduced rates must comply with the requirements of Directive 2003/96/EC, and 
in particular with the minimum rates laid down in Article 10 thereof. 

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This Decision shall be applicable from 1 January 2012 and shall expire on 31 December 2017. 

Article 2 

Article 3 

This Decision is addressed to the Kingdom of Sweden. 

Done at Brussels, 

For the Council 
The President 

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Annex 

Regions 

Municipalities 

Norrbottens län  

Västerbottens län 

Jämtlands län 

All municipalities 

All municipalities 

All municipalities 

Västernorrlands län 

Sollefteå, Ånge, Örnsköldsvik,  

Gävleborgs län 

Dalarnas län 

Värmlands län 

Ljusdal,  

Malung, Mora, Orsa, Älvdalen 

Torsby 

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