The Government of Denmark announced a series of moves aimed at addressing the climate and nature impact of the country’s agricultural sector, including plans to introduce a carbon tax on emissions from livestock. The initiative forms part of a new “Green Tripartite” agreement, including the government, environmental organizations, agricultural sector associations and unions.

Agriculture has emerged as a major focus area for sustainability and climate action, as the sector accounts for a significant proportion of global greenhouse gas (GHG) emissions, and among the most difficult areas to address climate impact. According to the UN’s Food and Agriculture Organization, while meat, milk and eggs provide 34% of the protein consumed globally, total emissions from global livestock represent 14.5% of all anthropogenic GHG emissions. The livestock sector faces several other environmental challenges, ranging from deforestation to land and water use, in addition other sustainability issues such as ethical treatment of animals.

The sector’s environmental impact has been difficult to address, however, particularly due to the effect and cost of regulations on farmers. In the EU, for example, several key climate-focused initiatives, such as the recently passed Nature Restoration Law, have been delayed or adjusted over the past several months following protests from farmers focused largely on the cost and impact of environmental rules and regulations.

Denmark’s new initiative includes the introduction of a carbon tax on livestock, the first in the world, according to the government, beginning in 2030. Under the new program, livestock producers will be charged an effective tax of DKK 120 (USD$17) per ton of CO2e at the initiation of the tax, ramping to DKK 300 (USD$43) in 2035.

According to the government, the proceeds from the livestock tax will be returned to the industry in 2030 – 2031 in the form of a transition support pool to support the green transition of the sector, with use of proceeds to be revisited in 2032.

The agreement also includes the launch of a new DKK 40 billion (USD$5.7 billion) Green Area Fund targeting initiatives such as afforestation, extraction of low-lying land, strategic land acquisition, in addition to plans to develop 250,000 hectares of forest, and a new DKK 10 billion (USD$1.4 billion) subsidy scheme for the storage of biochar.

In total, the government estimated that the new initiatives will reduce emissions by 1.8 million tonnes of CO2e in 2030.

Tax Minister Jeppe Bruus said:

“As Minister of Taxation, I am proud that the green tripartite is today presenting an agreement that contains an ambitious CO 2 e-tax on Danish agriculture. With the agreement, we will reach our climate goals in 2030, and we will take a big step closer to becoming climate neutral in 2045. We will be the first country in the world to introduce a real CO 2 e-tax on agriculture. Other countries will be inspired by it.”

Following the announced agreement, EY EMEIA Sustainability Tax Leader Alenka Turnsek called the new package a “critical step towards Denmark meeting its Paris agreement target and goals under the Global Biodiversity Framework,” but noted that unilateral nature of the carbon tax on livestock “raises questions about its potential disproportionate impact on Danish farmers, suggesting that an EU-wide carbon pricing mechanism might be more suitable.”

Turnsek added:

“With global food security concerns and the expected increase in demand for food, particularly meat, governments must find ways to reduce the agricultural sector’s GHG emissions and other negative environmental impacts. This includes both product and demand-side measures. A well-funded transition in production, along with a change in consumer behaviour, is crucial to achieving the Paris Agreement and Global Biodiversity Framework targets covering GHG emission reductions and also  managing water and other ecosystem resources sustainably to meet future food needs and create resilient food systems.”