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Denmark Sets First-Ever Carbon Tax on Agriculture

Denmark is set to become the first country in the world to impose a tax on greenhouse gas emissions from livestock to combat climate change. Starting in 2030, Danish livestock farmers will be taxed for the methane emissions produced by their cows, sheep and pigs. This policy aims to reduce Denmark’s greenhouse gas emissions by 70% from 1990 levels by 2030.

Denmark Sets First-Ever Carbon Tax on Agriculture

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Denmark has committed to a legally binding target of cutting greenhouse gas emissions by 70% from 1990 levels by 2030.

Agriculture is a major contributor to Denmark’s greenhouse gas emissions projected to account for 46% of the country’s total emissions by 2030.

The decision follows a five-month negotiation process involving stakeholders including the Danish Agriculture and Food Council, the Danish Society for Nature Conservation, the Danish Food Federation (NNF), the Danish Metal Workers’ Association, and the Confederation of Danish Industry.

A broad consensus was reached late on Monday, ensuring that the interests of farmers, industry representatives, labor unions and environmental groups were considered.

Starting in 2030, farmers will be charged 120 Danish krone (€16 or $17.2) per metric ton of carbon dioxide equivalent (CO2e).

The tax will rise to 300 Danish krone (€40 or $43) per metric ton of CO2e by 2035. Farmers will receive an income tax deduction of 60%, effectively reducing the cost per metric ton of CO2 to 120 krone initially and 300 krone by 2035.

The government will provide around Dkr40 billion (€5.3 billion or $5.7 billion) in subsidies to help farmers adjust their operations to meet the new requirements.

The plan includes a huge investment in reforestation and land set-asides, 250,000 hectares of agricultural land will be reforested by 2045.

140,000 hectares of lowland will be set aside by 2030 to further reduce nitrogen emissions. The government will buy out certain farms to reduce overall emissions providing an exit strategy for farmers who may struggle to adapt to the new regulations.

The carbon tax is expected to reduce emissions by 1.8 million tonnes of CO2e in its first year of implementation in 2030.

Denmark will be the first country to implement a carbon tax on livestock emissions. The tax is part of Denmark’s strategy to become climate neutral by 2045.

From 2030, Danish farmers will pay a tax of 300 kroner ($43) per ton of CO2 equivalent emissions, which will rise to 750 kroner ($108) by 2035.

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However, due to a 60% income tax deduction, the effective tax rate will start at 120 kroner ($17.3) and increase to 300 kroner by 2035.

Methane is a potent greenhouse gas, trapping 87 times more heat than carbon dioxide over a 20-year period.

Livestock are methane emitters contributing about 32% of human-caused methane emissions globally. In Denmark, agriculture is the largest source of emissions, accounting for 22.4% of the country’s climate footprint.

Cows, in particular, are contributors producing around 6 metric tons of CO2 equivalent per year.

New Zealand had planned a similar livestock tax but scrapped it following strong opposition from farmers and a change in government policy.

Denmark’s move positions it as a leader in agricultural climate policy, setting a precedent for other countries to follow.

The tax is expected to reduce emissions by 1.8 to 2.6 million tons by 2030, helping Denmark achieve its climate goals.

The Danish government will invest 40 billion kroner ($5.7 billion) to support the agricultural sector’s transition to more sustainable practices.

The policy was developed through negotiations involving the government, farmers, industry representatives and environmental groups. It is supported by major stakeholders including the Danish Society for Nature Conservation.

The tax will be implemented in 2030, allowing time for the necessary administrative systems to be set up and for farmers to adapt.

A Green Land Fund will be established to finance the green transition in agriculture. This includes reforesting 250,000 hectares of farmland and extracting 140,000 hectares of lowland by 2030.

Consumers may see an increase of about two kroner (30 cents) per kilogram of beef, which could encourage reduced meat consumption and change towards plant-based diets.

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