Short- and long-term impacts of the energy crisis in Sweden

Little analysis has been done on the impacts on households of the changing energy landscape in the EU and the potential effects of policy measures meant to alleviate negative impacts. Sweden provides a real-world setting for this work, where policy for a social welfare state that promotes equality intersects with spiking energy costs from regional war and other impacts.

The authors used a model of distributional impacts of EU policy to show different socioeconomic groups’ welfare based on decisions on household spending for electricity, heating and transport, focusing on Swedish data within the EU context. Their findings have implications for the long-term efforts to transition to fossil-fuel free societies and reducing climate-changing emissions.

Highlights

• Lower to middle income groups are most affected by energy price increases in Sweden, with an average welfare impact of –3.8%.
• Heating fuel costs are not affected as much as electricity and transport fuel costs due to expanded use of district heating.
• Directly supporting the lowest income households instead of maintaining fuel tax reduction schemes could offset a large share of negative welfare impacts from the energy price crisis.
• A support mechanism for low to middle income groups (deciles 1 to 5) should target the groups most affected by the price increases (deciles 3 to 5).

Correction (10 May 2023): This brief was amended to more accurately represent Sweden’s net-zero goal.