On Monday 18 November, a broad majority in the Danish Parliament voted in support of the Green Tripartite Agreement in its entirety. This comes after months of negotiations between the country’s major parties, farmers, the industry, trade unions and environmental groups which saw The Green Tripartite agreement announced in June.
Climate Tax on Agriculture
- The climate tax on agriculture will be 300 DKK (€40) per ton of CO2e in 2030, increasing to 750 DKK (€100) by 2035. A basic deduction (tax break) of 60% will be applied to the average emissions from different types of livestock, providing an economic advantage to climate-efficient farmers.
- After the deduction (tax break), the effective cost will be 120 DKK (€16) per ton of CO2 e in 2030, and 300 DKK (€40) in 2035.
- Revenues from the tax will be channelled back to the sector and reinvested into green initiatives, climate technology, and production transformation, targeting the agricultural sectors facing the most difficulty transitioning.
- There is a consensus that the Danish government should work at the EU level to ensure collective regulation of agricultural emissions through an emissions trading system for agriculture (ETS). The national tax in Denmark will eventually align with such a system.
- According to Danish think tank Concito, the average cow in the country produces six tonnes of CO2e per year, meaning livestock farmers will have to pay under €100 per cow in 2030, and under €250 from 2035.
Additional elements of the agreement
- Approximately 40 billion DKK (€5.4 billion) will be allocated to a new fund called The Green Landscape Fund (“Den Grønne Arealfond”). The Green land Fund will channel money into reforesting 250,000 hectares of farmland by 2045 and extracting 140,000 hectares of lowland by 2030 to make at least 20% of Denmark’s nature protected.
- The partners expect that converting more agricultural land to forests will enable two-thirds of Danish waters to meet the EU Water Framework Directive (WFD) goals by 2027, with efforts for the remaining waters initiated “with a clearly defined path” towards fulfilling the WFD and achieving good ecological status by 2030.
- The government will work to allocate 9.4 billion DKK (€1.2 billion) for restoring 70,000 hectares of carbon-rich peatlands. To encourage farmers to give up their peatlands, a CO2e tax on emissions from carbon-rich peatlands of 40 DKK (€5.36) per ton will be introduced starting in 2028. This tax will only apply to farmers who do not wish to participate in the peatland restoration.
- Plant-based transition: During the negotiation, parliament agreed to add 420 million kroner (€9M) to the Plantefonden between 2025 and 2030. But the fund is now permanent (it was previously set to end in 2030) and can see the investment value jump to one billion kroner (€85.5M). Denmark also committed to advocating for an EU-wide plant-based action plan.
Nitrogen pollution reductions
After intense negotiations a higher ambition on nitrogen pollution was agreed which will see nitrogen emissions from agriculture reduced by 13,780 tonnes by 2027. Despite the increased ambitions, the agreement is unlikely to secure sufficient reductions in time for Denmark to comply with the hard 2027 deadline under the EU Water Framework Directive to ensure ‘good ecological status’ in its coastal waters. Today, only five of Denmark’s 109 areas have this status and the European Commission has already made it clear that no more extensions are available (Denmark has already pushed the deadlines the maximum three times).
Implementation
Much of the actual planning and implementation of the enormous changes to land use in Denmark will be done in local coastal water councils, or ‘local tripartites’ as the agreement calls them. Here, municipal authorities and local groups organising the farmers and green civil society will plan and implement conversions based on their local knowledge. The resulting plans have a hard deadline by the end of next year and must accumulated cover the political ambitions.
In 2026, there will be an evaluation of the land use change and the resulting improvements to the coastal ecosystems. Based on this, nitrogen emission quotas and other types of regulation might be introduced in the agriculture sector in 2027 to force through pollution reductions if the voluntary measures prove insufficient to go all the way. The efforts will also be adjusted as necessary in 2029 and every three years thereafter.
Impact
Copenhagen is a significant exporter of pork and dairy, and agriculture is currently expected to account for 46 percent of emissions by 2030. Experts believe the carbon tax will slash 1.8 million tonnes of that in 2030, its first year of operation, enabling Denmark to meet its target of cutting 70 percent of its total emissions by that year.
If it is assumed that the goals of the policy are met, the best available modelling estimates the following impacts:
- Emissions leakage of 3.5% to 12.3%
- To have no impact on the volume of crop production
- To decrease the value of crop production by 1.1%
- To decrease the volume of cattle production by 4.7%
- To decrease the value of cattle production by 2.1%
- To decrease the volume of pig production by 3.4%
- To decrease the value of pig production by 2.6%
- 50% of the tax applied to cattle to be passed through
- 26% of the tax applied to pigs to be passed through
- To cost the Danish economy 2.125 billion DKK
- To reduce 2.4 mt CO2e of GHG
- To tax the average dairy cattle 700 DKK
- To tax the average non-dairy cattle 175 DKK
- To tax the average sheep 50 DKK
- To tax the average lamb 25 DKK
- 3% of crop farmers to be highly threatened by bankruptcy
- 12% of cattle farmers to be highly threatened by bankruptcy
- 3% of pig farmers to be highly threatened by bankruptcy
- To reduce the profit of conventional crop farmers by 2%
- To reduce the profit of conventional dairy farmers by 19%
- To reduce the profit of conventional pig farmers by 4%
Background
In 2020 there was broad political agreement to introduce a carbon tax in response to Denmark’s agricultural sector failing to reduce its greenhouse emissions over the past decade. Agriculture is Denmark’s largest source of emissions, contributing 22.4% of the country’s total carbon emissions, compared with 15.6% ten years ago – a share which has increased as other sectors have reduced their emissions. And if left unabated, the sector will account for 46% of its emissions by the end of the decade – this is why addressing agriculture is key for the country to meet its legally binding target of cutting emissions by 70% by 2030 (from a 1990 benchmark). Denmark also wants to address nitrogen pollution due to damage to coasts and fjords, where oxygen levels have reached alarmingly low levels due to nutrient runoff from fertilisers. The country isn’t on track to meet the targets set by the Water Framework Directive by 2027.