Denmark sets precedent with first-ever agricultural carbon tax

Following a five-month negotiation with farming and conservation groups, the Danish government has introduced Europe’s first-ever agricultural carbon tax. This sustainability strategy, alongside efforts like low carbon farming, is hoped to help the country reduce emissions by 70 percent before 2030. 

How will it work?

From 2023, farmers must pay 120 Danish kroner (€16) per metric tonne of emitted carbon dioxide equivalent. The farmers would have been due to pay a higher rate, but the cost has been reduced since they will be entitled to an income tax deduction of 60 percent. 

From 2035 onwards, farmers will have to pay 300 kroner (€40). Ultimately, cattle farmers in Denmark will be charged nearly €100 per year for the greenhouse gas emissions from each of their cows. The average Danish cow produces approximately six tonnes of CO2 equivalent annually.

This means the lower tax rate of 120 kroner would incur a charge of around 720 kroner or €96.50. In addition to the agricultural carbon tax, the Danish Government will also be providing €5.3 billion to reforest 250,000 hectares of agricultural land by 2045. They will set aside 140,000 of lowlands by 2030 and buy out certain farms to minimise nitrogen emissions. 

Background on the tax

The tax was first proposed in February by government-commissioned experts to assist Denmark in reaching a legally binding 2030 emissions target. The negotiations were between the Danish Society for Nature Conservation, the Danish Metal Workers’ Association, the Danish Food Federation (NNF), the Danish Agriculture and Food Council, and the Confederation of Danish Industry. 

The five associations are now placing urgency on lawmakers to approve the deal, which should be reviewed and adopted following the summer holidays. Stephanie Lose, Economy Minister, said that this agreement will form the basis for a historic restructuring and reorganisation of Denmark’s land and food production.

The capital of Denmark, Copenhagen, is a dairy and pork export giant, with agriculture forecast to account for approximately 46 percent of emissions by 2030. Experts believe the carbon tax will cut 1.8 million tonnes of that in its first year of operation, 2030. With this in mind, Denmark will be able to achieve its emissions target. 

Denmark will be the first country globally to introduce a real carbon dioxide tax on agriculture. They hope that other countries will be inspired by this. Early in June 2024, New Zealand scrapped plans to introduce a similar tax following criticism from farmers. Although Danish farmers had expressed concerns the country’s sustainability objectives could force them to cut jobs and reduce production, they said the compromise makes it possible to maintain their business. 

Conclusion 

Denmark’s introduction of the first-ever agricultural carbon tax in Europe represents a major milestone in global sustainable development. By implementing this groundbreaking policy, the country not only demonstrates its commitment to climate action but sets a precedent for other nations. 

As the world continues to grapple with the urgent need to address climate change, this bold initiative provides a replicable model for integrating sustainability into national policy. Hopefully, this historic move inspires other countries to adopt similar measures so we can collectively move towards a more sustainable future.