Denmark proposes uniform CO2 tax for most businesses

Denmark’s government on Wednesday proposed a “uniform” carbon dioxide emissions tax for businesses. But not all companies will pay the same rate according to the proposal.

Climate activists outside Denmark's tax ministry
Climate activists outside Denmark's tax ministry, where a new CO2 tax proposal was presented on April 20th. Photo: Mads Claus Rasmussen/Ritzau Scanpix

The government proposal, entitled Grøn skattereform or Green Tax Reform, was presented by ministers on Wednesday.

“The ambitious CO2 tax which we are now presenting is… an important step on the way to fulfilling our climate targets. We must phase out gas and other fossil fuels and replace them with green energy,” climate, energy and critical supplies minister Dan Jørgensen said in a press statement.

The government claims that the measures included in the plan will reduce CO2 emissions by 3.7 million tonnes by 2030.

That represents around one third of the 9.4 million tonnes needed to hit the national target of a 70 percent reduction of total emissions by the end of the current decade.

Specifically, the government proposes a CO2 tax of 750 kroner per tonne of emission. Companies covered by an EU quota system will however receive a deduction and will only be required to pay half of the full amount, 375 kroner per tonne.

According to a government expert advisory board, the five largest CO2-emitting companies in Denmark are responsible for over 40 percent of the country’s industrial emissions.

A number of these companies could be due for additional deductions to the CO2 tax.

Companies in the “mineralogical processing” sector are to be given further discounts on the tax and will only pay 100 kroner per tonne of emissions, according to the proposal. Companies covered by this definition include Aalborg Portland and Rockwool.

“The tax for mineralogical processes etcetera is related to this sector being subject to competition and there is therefore a risk of relocation abroad due to a large tax increase,” the government writes.

“The sector is given a special tax with a natural expectation that genuine reductions towards the 2030 climate target are delivered,” it added.

Seven billion kroner has been set aside under the proposal for investment in green energy in the sector in a bid to reduce its emissions.

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Danish agricultural sector softens stance on emissions tax 

After years of firm opposition to any carbon tax on agriculture, the Danish Agriculture & Food Council (Landbrug & Fødevarer) interest organisation is changing tact on a likely tax on CO2 emissions in the sector.

Danish agricultural sector softens stance on emissions tax 

The organisation is to shift strategy from strongly opposing the tax to participating “constructively within negotiations” on a green agricultural tax reform, newspaper Berlingske reports. 

Despite the organisation’s change in stance, its chairperson Søren Søndergaard said he still maintains that taxing agriculture based on CO2 emissions is not sensible climate politics.

“But there has now been an election and there are [ongoing] negotiations to form a government. We can see that the parties that are close to the negotiations all want a CO2 tax on agriculture,” he told Berlingske.

The Danish Agriculture & Food Council (DAFC) therefore wants a seat at the table when the rules –which it accepts are coming — are set.

It has proposed five principles for reform. According to Berlingske, the principles strongly resemble the organisation’s longstanding arguments against a CO2 tax.

READ ALSO: Denmark proposes uniform CO2 tax for most businesses

Among its principles, DAFC wants to retain the 2021 reduction targets at 5 million tonnes of CO2 per year by 2030. Politicians are considered likely to push for a more ambitious schedule.

Other items on the organisation’s wishlist are measures to protect competitiveness and relocation of jobs; and a promise that funds collected from a CO2 tax will be reinvested in the food industry. It also wants incentives for farmers and companies.

The Liberal (Venstre) party, which could be part of a future government, was previously against the CO2 tax but has also changed its position.

“You can argue against a tax but you will not win,” Liberal leader Jakob Ellemann-Jensen told Danish Agriculture & Food Council representative earlier this month.

“It will happen, because there is a majority behind it,” he said.