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European Commission approves Sweden's tax exemption for high blend biofuels

The European Commission (EC) has approved Sweden's state aid application for tax exemption for clean and high blend biofuels. The decision means that transportation fuels such as E85, rapeseed-based biodiesel, and HVO, which are not covered by the reduction obligation, can continue to be tax-exempt in Sweden during 2021.

A filling pump with different diesel options, regular fossil diesel, HVO100 and rapeseed derived biodiesel.

The European Commission (EC) has approved Sweden’s state aid application for tax exemption for clean and high blend biofuels. The decision means that transportation fuels such as E85, rapeseed-based biodiesel, and HVO, which are not covered by the reduction obligation, can continue to be tax-exempt in Sweden during 2021.

Earlier this year the Swedish government submitted a so-called pre-notification to the European Commission (EC) for the application for an extension in 2021 of the current state aid approval for liquid biofuels that expires December 31, 2020. The European Commission has approved the application, however, the decision is only valid for one year.

The background to this is the Commission’s position that food-based biofuels only partially contribute to the common environmental objectives and can therefore not be considered compatible with the internal market after 2020. Extended State aid approval has therefore only been granted for a short period.

According to a Swedish government statement, the decision contributes to the development towards more sustainable transport and to make Sweden less dependent on fossil fuels. The government will continue its advocacy work within the EU so that biofuels, even after 2021, can be favoured over fossil fuels.

This is done, among other things, within the framework of the ongoing review of the energy and environmental support guidelines, which contain provisions on support for biofuels. The Government also intends to continue working to ensure that the Energy Tax Directive and other relevant parts of the EU regulations enable cost-effective control against reduced greenhouse gas (GHG) emissions.

In June 2020, the Commission approved a 10-year prolongation tax exemption (2021-2030) of two schemes, for biogas and bio-propane respectively, with two modifications: i) limiting the tax exemption to only non-food based biogas and ii) extending the tax exemption to non-food based bio-propane.

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