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How will Denmark’s 2030 carbon tax impact farming?

12 Jul 2024

Denmark has announced plans to implement Europe’s first carbon tax on agriculture from 2030, targetting the farming sector’s CO2 emissions. How will it be implemented and how have farmers reacted?

In June 2024, the Danish government announced an agreement to tax carbon emissions from agriculture. Starting in 2030, farmers will be taxed 120 Danish kroner (€16) per metric tonne of CO2 equivalent emitted. In 2035, the taxation will increase to 300 kroner (€40) per metric tonne.

Green Tripartite established to negotiate tax for GHG emissions

The Green Tripartite was established in 2023 by the Danish government to negotiate a tax to tackle the problem of greenhouse gas emissions (GHG) produced by Danish agriculture, which have not fallen for over 10 years.

The Tripartite is made up of various arms of the Danish government, including several ministers, the Danish Agriculture and Food Council, the Danish Nature Conservation Association, the Danish Food Federation, the Danish Metal Workers’ Association, and the Confederation of Danish Industry.

After negotiations during the first half of 2024, the tax agreement was announced in June. In a press release from the Danish Ministry of Economic Affairs, tax minister Jeppe Bruus outlined how Denmark will be the first country in the world to introduce a “real” (carbon dioxide equivalent tax) on agriculture. He added that other countries would be inspired to follow suit.

Economy minister Stephanie Lose also commented on the agreement, via a tweet on X. Lose said the agreement would form the basis for a historic restructuring and conversion of Denmark's land and food production.

‘A ticking time bomb’ for Denmark’s farmers?

The Danish Agriculture and Food Council also issued a statement on the agreement. Chairman of the council, Søren Søndergaard acknowledged the fact that negotiations were very complicated but emphasised DAFC’s role in shaping the agreement to support climate-efficient practices without stifling agricultural productivity.

He outlined how before the announcement, the idea of the tax was a "ticking time bomb" for Danish agriculture, potentially threatening jobs and livelihoods in rural areas. However, now that the tax has been agreed upon, he said it has become more tolerable and manageable for the industry.

Søndergaard highlighted the Council's success in negotiating a model where farmers employing approved climate measures can avoid the tax.

"The idea of a tax is not something that has grown with us. But we have succeeded – against all odds – in getting a tax model where the farmer who makes use of approved and economically sustainable climate solutions can completely avoid the tax. That is unquestionably the most important thing,” he said.

Additionally, Søndergaard underscored the necessity of streamlining bureaucratic processes to accelerate climate action and called for a professional basis for preparing climate accounts at the farm level before the tax's implementation, ensuring the system is mature by 2030.

Estimated savings: 1.8 million tonnes of CO2 in 2030

According to the Danish government, tax proceeds will be returned to the agricultural sector between 2030 and 2031 to aid the green transition, with future allocation reviewed in 2032.

In addition to the tax, the government plans to invest €5.3 billion to support various land management projects and reforest 250,000 hectares of agricultural land by 2045.

Experts estimated that these initiatives would result in a reduction of 1.8 million tonnes of CO2e in 2030, enabling the country to cut 70% of its total emissions for the year, as reported by Politico.

61% reduction in emissions needed to align with the Paris Agreement

According to the Food and Agriculture Organization of the United Nations (FAO), in 2015 approximately 6.2 billion tonnes of CO2 equivalent emissions were produced by livestock agrifood systems, contributing around 12% of global emissions.

A 2024 report by researchers from Harvard University, New York University, Leiden University, and Oregon State University outlined that by 2036, a 61% reduction in global livestock emissions from current levels must be achieved to align with the objectives of the Paris Agreement, an international climate change treaty.

Surveying 210 experts across 48 countries, the report identified various national responsibilities, proposing that emissions from livestock should peak before 2025 in high-income and middle-income countries, and after 2030 in low-income countries.

The findings emphasised a nuanced approach, acknowledging nations' different capacities and consumption patterns, and called for reducing both livestock production and consumption.

The report also underscored the importance of shifting towards plant-based diets, especially among consumers in high-income countries.

The farming sector pushes back: 300% increase in farmer protests in Europe

Since the Paris Agreement came into force in 2016, many countries and organisations have committed to achieving net zero emissions by 2050.

In 2023, the European Union adopted the Regulation on the Governance of the Energy Union, which aims to reduce net GHG emissions by at least 55% by 2030 and includes various climate, energy, transport, and taxation policies. If achieved, this will enable the EU to become the first climate-neutral continent by 2050.

However, these policies have faced widespread opposition and as farmer-led protests increase globally in response to growing tensions over agricultural policies, Europe has become a central hub for agricultural unrest. According to Maplecroft, as of April 2024, out of the 5,728 farmers’ protests that have been recorded globally, 4,000 took place in Europe alone, constituting a 300% increase in incidents for the region, compared to the whole of 2023.

Since late 2023, headlines across Europe have frequently featured these ongoing protests, which have intensified as tensions heighten over stricter environmental regulations, cheap food imports, and changing supply chain dynamics, according to Maplecroft's research. The protests call for changes in current EU policy and increased support for European agriculture.

In early February 2024, farmers used their tractors to block roads in Brussels and pelted the European Parliament with eggs, while in France farmers blocked key roads into Paris and other highways across the country for over a week, only lifting the roadblocks following the French government's proposal of over €400 million to address the farmers concerns regarding low earnings, stringent regulation, and perceived unfair competition from overseas. However, just weeks after the government's offer, French farmers once again took to the streets of Paris in their tractors, carrying flags from Rural Coordination, the farmers' union that staged the protest, demanding simpler regulations and further governmental support.