Sweden ROT tax deduction reform proposed to boost energy efficiency

Carolina Larsson, CEO of Swedisol, is advocating for a reform of Sweden’s ROT tax deduction to prioritize energy-efficient home improvements. According to a Swedisol survey, six out of eight Swedish parliamentary parties support restructuring the deduction to promote measures such as insulation, climate shells, and energy-efficient technology.

While the ROT deduction was originally introduced after the 2008 financial crisis to reduce black-market labor, the Swedish National Audit Office has noted that it has become an expensive subsidy with socio-economic benefits that do not match its cost. Currently, the deduction is frequently used for aesthetic upgrades or expansions, and over half of the benefit goes to high-income households. Nationally, the cost of the deduction reached 22 billion SEK.

Proponents argue that reforming the deduction could help Sweden meet EU energy efficiency requirements, reduce peak electricity demand during cold months, and lower long-term electricity grid costs by decreasing the need for massive infrastructure investments.