Information Technology and Energy Minister Anna-Karin Hatt announced the country's governing center-right Alliance has proposed extending the incentives three more years beyond their scheduled 2013 expiration in its spring budget bill, which was introduced Monday.
The government's vision, she said, is for Sweden to be climate neutral by 2050 and to have a company car fleet that is independent of fossil fuels by 2030.
"To ensure that it pays to choose a green car for anyone who has a company car, this is a great way to get more really good green cars on the market," she said. "If more company car owners choose the green car, we can gradually get a more environmentally friendly car and eventually phase out fossil fuels."
A companion proposal, meanwhile, would also extend an existing Swedish tax exemption for renewable biofuels.
"We need more green cars but we also need to increase the use of renewable fuels our roads," Hatt said. "Therefore, the government has now also announced that we will extend the tax exemption for renewable and clean biofuels, including E85 and biogas, so that these also after 2013 will remain exempt."
Under the budget proposals, buyers of electric cars, plug-in hybrids and natural gas-fueled cars will continue to pay 40 percent less in taxes over the nearest comparable conventional car, up to a nationwide total of 16,000 vehicles per year.
The government earlier had announced the introduction of a compulsory quota system of ethanol content in gasoline and fatty-acid methyl ester, or biodiesel, in diesel fuel.
Starting in 2014, fuel companies will be required to have a certain minimum percentage of renewable fuel in the gas and diesel they sell. The quotas seek to double current standards to 10 percent for gasoline and 7 percent for diesel.
The tax break extensions were met with general praise from Jonas Abrahamsson, chief executive of the Swedish subsidiary of German energy company E.ON, Volkswagen Sweden chief Stone Forsberg and Jacob Lagercrantz of the Swedish Association of Green Motorists.
The trio published a commentary in the Swedish daily Svenska Dagbladet in which they said that while the tax measures are welcome, they criticized the country's efforts to encourage alternative fuel cars as "characterized by impulsive investments and short-termism."
They warned the quota system will need to be retooled to make it work in the Swedish market, where sales of biogas and E85 cars have declined since 2010 while the share of electric hybrids has stagnated.
They suggesting a system of tradable certificates similar to those used in the country's electricity market to support renewable energy development.
The fact that Hatt didn't announce the tax break extension until just before the government was set to unveil its budget indicates political tensions over the measures are causing dissent between the liberal Center Party and the Conservative Party within the governing Alliance, the daily Norrtelje Tidning reported.
"It's not hard to guess that it is the Center Party driving (the policy) while the Conservatives resist," the newspaper said.