A proposed carbon tax in Denmark could significantly lower carbon emissions, but will also alter the nature of agriculture in the county.

Denmark is considering a proposal that would see it introduce a carbon tax on agricultural production, but it has raised concerns about farmers’ livelihoods. Could it really happen?

In late February, an advisory group commissioned by the Danish government suggested the implementation of a carbon tax to meet the country’s climate goals and EU commitments.

The experts told lawmakers that a levy of 750 krones ($109) per tonne of emitted CO2e would be the most effective way to curb agricultural emissions, which make up 22.4% of the country’s total climate footprint.

This could help the country achieve its legally binding target of reducing greenhouse gas emissions by 70% by 2030 (from a 1990 baseline), helping it cut 2.4-3.2 million tonnes of CO2. The variation depends on the taxation model adopted by the government – the advisors also considered lower taxes of 375 and 125 krones per tonne.

But the proposed measures have also generated fears of unemployment and food price hikes, with 2,000-8,000 jobs said to be at risk, based on the tax threshold. Beef, for example, could see markups of 1.4-4.5 krones (20-65 cents), given it is the food group associated with the highest emissions.

“It is crucial that we implement the green transition of the agricultural sector in a way that ensures that we have a competitive food industry in the future, with business potential and job opportunities,” Stephanie Lose, Denmark’s minister for economic affairs, tells Green Queen. “Denmark must set an example and show the world how an economically sustainable green transition of the agricultural sector can be successfully carried out,” she adds.

If the government adopts the proposal into law, it would make Denmark the first country to introduce a carbon tax. But could it actually go through? And what will it mean for farmers and the food industry?

Why Denmark needs a carbon tax

Denmark is a major exporter of pork and dairy, both industries that have a high carbon footprint. Its citizens also eat too much meat – three times as much as the latest dietary guidelines recommend (350g per week).

This is detrimental to the country’s climate goals, which include reducing emissions by 110% from 1990 levels by 2050, and reaching net zero by 2045. The emissions from beef consumption alone make up 45% of the country’s emissions reduction target – and agriculture itself is expected to balloon to account for 46% of its total emissions by 2030.

It’s why the aforementioned dietary guidelines recommend a plant-rich diet. In fact, in October, the country became the first in the world to introduce a national action plan to transition towards a plant-based food system. The strategy includes training chefs in both public and private kitchens on the preparation of vegan meals, a greater focus on plant-based diets in the education sector, expanding exports of locally produced vegan food, and investing more in R&D for this sector.

Denmark’s relationship with meat is complicated. A large EU-wide survey last year revealed that two-thirds of Danish consumers eat meat, while another quarter are pescatarians or flexitarians. And, while 48% had reduced their meat consumption over the previous year, this was the lowest among the 10 countries covered in the survey. For those who did cut their intake, health was the major motivator (chosen by 39%), followed by the environment (37%).

However, 63% said they’d support campaigns to reduce meat and dairy consumption, 54% would back a farmer transition towards plant-based food, 48% would be happy to see meat and dairy subsidies reduced (the joint highest in the survey), and 61% felt reducing taxes on low-emission foods is a good idea.

A carbon tax would take things a step further. “Our government has set up a ‘Green tripartite’, which consists of the government and relevant parties representing different interests regarding climate, environment, businesses in the agricultural sector, labour market parties, etc.,” explains Lose. “The setup draws on inspiration from the tripartite agreements in the Danish labour market. The Green tripartite will discuss the design of a carbon tax on the agricultural sector, amongst other things.”

In 2022, a parliamentary majority agreed to implement a 750-krone tax per tonne on industrial companies by 2030, but while it evaluated the possibilities of a similar tax on food, the government concluded that taxing production itself is a “more targeted and cost-effective” way of meeting its climate goals.

Mitigating the impact of a carbon tax on farmers

The carbon tax is now in an extended political negotiation, which is likely to end in an agreement at some point this year, according to Torsten Hasforth, chief economist at Danish green think tank Concito. “That agreement is very likely to have some kind of tax element,” he tells Green Queen. “How [much], exactly, is uncertain.”

So, what of the cattle and pig producers, who stand to lose up to 20% of their production volumes under the harshest tax conditions. “Cows are of course a major source of methane emissions. Therefore, a tax on agricultural greenhouse gas emissions has a large effect on meat and dairy farmers,” says Hasforth.

“The agricultural sector employs a small proportion of the Danish workforce, so the number of jobs affected is small. The Danish economy, in general, experiences a shortage of workers – not the opposite – so the economy-wide effect will be small,” he explains.

“There will of course also be meat and dairy production in the future, but a higher efficiency and consolidation caused by a carbon tax will lead to the loss of some jobs.”

So how can the government safeguard the futures of these farmers? The expert group that came up with the proposal also laid out some measures to curb the effects of the tax, Hasforth explains. “This includes support for extensive reforestation and rewetting of peatlands – measures that will compensate farmers indirectly for their loss arising from a carbon tax,” he says.

The aforementioned EU survey revealed that Danish respondents were the least concerned nationality when it came to price concerns around plant-based meat and dairy analogues. Hasforth suggests that a majority of the population acknowledges the environmental impact of the agricultural sector, and supports a greener transition. “This, of course, is a policy which very directly affects farmers. So, amongst them, there is an understandable concern about the consequences of such a measure,” he adds.

He says it’s important for all nations to set their economies on a path of rapid decarbonisation: “As the agricultural sector and the effect of land use has a significant effect on greenhouse gas emissions, it is unavoidable that the agricultural sector starts contributing.”

As for Denmark’s carbon tax, Hasforth feels it would be a boost to an efficient green transition – not just locally, but also for other countries: “Hopefully, it might be an approach which can be copied by other nations.”

Original source: https://www.greenqueen.com

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