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Denmark will be the first country in the world with a climate tax on biological processes in agriculture

Denmark is setting a global standard for transitioning to carbon-neutral food and agriculture. A broad coalition of stakeholders have agreed on a landmark framework for transitioning to carbon-neutral food and agriculture – to a future of reaching climate and biodiversity goals while securing Denmark’s position of world-leading food production.

The agreement has been made between the Danish government, the Danish Agriculture and Food Council, the Danish Society for Nature Conservation, the trade union NNF, the Danish Metal Workers’ Association, Danish Industry and the National Association of Local Authorities. The agreement is a clear testament to Denmark’s unique capability for collaboration, managing to secure broad compromises on challenging issues.

Taxing greenhouse gas emissions from agriculture

By collaborating on the framework for the future use of the total Danish area, the parties have secured reductions of greenhouse gas emissions of 1.8 million tonnes of CO2e in 2030 – with a potential of up to 2.6 million tonnes. Furthermore, around one in six fields that today take up two-thirds of the total Danish area for agricultural production, will be transormed into forest or wild nature. It thus shows the way to making Denmark a modern agricultural country and provides concrete answers to agriculture’s climate and nature challenges.

The new climate tax on agriculture will land at DKK 300 per tonne of CO2 in 2030. In 2035, the tax will have increased to DKK 750. A basic deduction of 60 percent will be introduced on the average emissions, the purpose of the deduction being to give farmers an economic advantage if they are climate efficient.

The revenue from the tax will be returned to investments in green initiatives, climate technology and production transition. Investments must be targeted at the part of agriculture that has the most difficulty adapting.

The parties agree that Denmark must continue to have a strong and competitive agriculture and food sector in the future. The agreement accelerates the green development of Danish agriculture even further, taking into account that Denmark will continue to have a competitive industry with attractive business potentials and jobs.

Restoring nature and protecting water

A goal of at least 20 per cent protected nature is part of the agreement. The agreement will set aside 40 billion DKK in a new Green Area Fund that will buy up farmland and restore nature. The money will be used to support the restoration of 250,000 hectares of forest, the set-aside of 140,000 hectares of lowland soils, further land conversion and strategic land purchases, with a special focus on nitrogen reductions. The ambition is that this land can be included in projects with a focus on green initiatives.

The agreement also holds a paradigm shift in nitrogen efforts, where land conversion is the main engine for achieving Denmarks goals of the EU Water Framework Directive. The parties behind the agreement expect that the area conversion will lead to two-thirds of the Danish water bodies being on track to achieve the goal by 2027.

Further, a subsidy scheme totalling just over DKK 10 billion up to 2045 will be created for the storage of biochar produced by pyrolysis.

The agreement needs to be ratified by the Danish parliament in order to take effect. This is expected within a few months.

Read more about Denmarks climate ambitions here: Climate | Digital White Paper

The full agreement can be read (in Danish) here.