Logo Leicom ITEC AG
Spiegelung Gebäudefassaden Spiegelung Gebäudefassaden

CO2 tax on cows: Denmark as a pioneer in Europe

22.10.2024

Denmark is about to introduce the world’s first CO2 tax directly applied to agriculture and livestock, sectors responsible for a significant share of the country’s carbon emissions. Before the end of the year, the Danish parliament is expected to pass a measure imposing a tax of 300 Danish kroner per ton of CO2 equivalent emitted by farmers. This tax will take effect in 2030 and rise to 750 kroner by 2035.

The goal of this tax is to exert direct economic pressure on farmers, encouraging them to improve the efficiency of their farms and adopt measures to reduce greenhouse gas emissions. Farmers who invest in emission-reducing technologies, such as biogas production, can benefit from tax exemptions or reductions. The Danish tax system allows for a 60% deduction on taxable emissions, meaning companies that significantly reduce their emissions pay less tax. This mechanism aims to promote the transition to more sustainable and lower-emission agricultural practices.

Furthermore, the Danish government has allocated around 1.3 billion euros to support farmers in the green transition.

According to the FAO, livestock accounts for about 12% of global emissions. Switzerland reports a value of 10%, with approximately 80% coming from cattle farming. On average, Danish cows emit 5.6 tons of CO2 equivalent per year, according to the Danish green think tank Concito. This figure differs from the estimates of the Swiss Federal Office for the Environment (FOEN), which calculates 3 tons of CO2 equivalent per cow, aligning with other unofficial sources that estimate 4 tons for dairy cows and 2.5 tons for beef cattle. However, the profit per animal is similar, though it can vary significantly depending on farm management, technologies used, and market conditions.

Various Danish sources estimate profits of around 590 euros for 2023, while in Switzerland, according to Agrar Forschung Schweiz, it ranges between 460 and 920 euros. To give an idea of the tax: assuming emissions of 4 tons of CO2 equivalent per cow under standard conditions, the Danish tax in 2030 will range from €50 for the most environmentally friendly farmers (with a 25% reduction in emissions) to €160 for those who take no measures. By 2035, the tax will increase to €120 or up to €400.

With the introduction of this tax, the transition to greener solutions becomes inevitable; however, even the most eco-friendly farmers will face a profit reduction of between 15% and 30%, leading to dissatisfaction among industry operators.

Next newsletter article, week 43:

Optimizing infrastructures to reduce emissions-->