Income Tax Notification

Denmark to Implement world’s first Carbon Tax on Livestock

Denmark hopes to lower methane, a potent greenhouse gas, by taxing livestock farmers, the first country to ever do so. Aiming at emissions from pigs, lambs, and cows, the tax starts in 2030. The tax is supposed to reduce Denmark’s 1990 greenhouse gas emissions by seventy percent by 2030.  

Farmers will start by paying 300 kroner ($43) per ton of CO2 equivalent to help cover costs. By 2035, this amount will rise to 750 kroner ($108), with a 60% income tax deduction. The proposal also allocates 40 billion kroner ($3.7 billion) for environmental projects, including reforestation and wetland development.

The Danish government plans to encourage the growth of the agriculture sector through significant subsidies and finance major green technology initiatives. By 2030, the approach should lower CO2 emissions by 1.8–2.6 million tons yearly.

Denmark’s legislation on livestock taxes follows New Zealand’s decision to remove a similar tax due to farmer opposition. Meanwhile, Denmark’s parliament, the Folketing, must approve the tax. Danish Foreign Minister Lars Lokke Rasmussen and other politicians emphasize its importance for Denmark’s environment and its goal of carbon neutrality by 2045. With two-thirds of Denmark’s land used for agriculture, the new approach aims to balance economic viability with environmental sustainability, leading to significant changes in the sector.

The First Carbon Tax Ever Levied on Livestock

Denmark, the first nation to do so as it targets a significant source of methane emissions, one of the most powerful gases driving global warming, will charge livestock producers for the greenhouse gasses released by their cows, sheep, and pigs from 2030.

Taxation Minister Jeppe Bruus stated that the goal is to reduce Denmark’s greenhouse gas emissions by 70% from 1990 levels by 2030. Highlighting the innovative nature of the agreement, Denmark’s Farming Minister Jacob Jensen said,

“We are writing a new chapter in Danish agricultural history.” The proposal is designed to support the nation’s commitment to eco-friendly farming. It provides substantial incentives to encourage a green transition in the agricultural sector.

How will this Carbon Tax be Implemented?

Danish cattle ranchers will pay taxes of 300 kroner ($43) per ton of carbon dioxide equivalent by 2030. By 2035, the tax will rise to 750 kroner ($108). However, with a 60% income tax reduction, the true cost per ton would start at 120 kroner ($17.3) and rise to 300 kroner by 2035.

While carbon dioxide often gets more attention for its role in climate change, methane traps over 87 times more heat over 20 years, according to the U.S. National Oceanic and Atmospheric Administration. Since 2020, methane emissions from landfills, oil and gas infrastructure, and livestock have increased significantly. The U.N. Environment Program reports that livestock contribute about 32% of human-caused methane emissions.

Bruus stated, “We will be the first country in the world to introduce a real CO2 tax on agriculture,” adding Denmark “will be the big step closer in becoming climate neutral in 2045.” She hoped other nations will follow suit.

New Zealand had planned to introduce similar legislation in 2025. However, the law was repealed due to strong opposition from farmers and a shift from a centre-left to a centre-right government. Instead, New Zealand will exclude agriculture from its emissions trading system and explore other methods to reduce methane levels.

However, most of the methane produced by livestock, about 90%, comes from their digestion process and is released as burps. This methane mainly comes from cows. The remaining 10% of methane from pig and cow farms typically comes from manure ponds.

What way of Ecological Footprint is Denmark Foreseeing? 

Denmark intends to fund reforestation and the building of wetlands, among other environmental projects, with forty billion kroner ($3.7 billion). By 2045, the government will also set aside 140,000 lowland areas and contribute €5.3 billion to reforest 250,000 hectares of agricultural land.

Denmark’s action follows months of demonstrations by farmers throughout Europe against policies and actions they claim are causing them to go bankrupt due to climate change mitigating their efforts. These initiatives seek to capture CO2 and reduce nitrogen pollution, a major environmental problem in Denmark’s coastal waters.

With today’s agreement, Danish Foreign Minister Lars Lokke Rasmussen said, “We are investing billions in the biggest transformation of the Danish landscape in recent times.” According to CNN, although some farmers have objected, the Danish dairy sector has generally welcomed the arrangement.

The Danish Society for Nature Conservation, the country’s biggest environmental group, described the tax agreement as “a historic compromise.”

“We have succeeded in landing a compromise on a CO2 tax, which lays the groundwork for a restructured food industry -– also on the other side of 2030,” its leader Maria Reumert Gjerding stated after the sessions they attended.

Typical Danish cows generate six metric tons (6.6 tons) of CO2 equivalent annually. Denmark, a big exporter of dairy and pork, also taxes pigs even though cows emit significantly less than pigs. Although the tax needs to be authorized in the 179-seat Folketing, or parliament, the law is anticipated to pass after the broad-based agreement. With 1,484,377 cows in the Scandinavian nation as of June 30, 2022, Statistics Denmark reports a little decline from the year before.

How has the Agriculture Sector Embraced this New Policy?

Among businessmen and farmers, the tax has elicited conflicting responses. Head of the Danish Society for Nature Conservation Maria Reumert Gjerding said of the accord, “a historic compromise.” She said, “We have succeeded in landing a compromise on a CO2 tax, which lays the groundwork for a restructured food industry –– also on the other side of 2030.”

On the other hand, some farmers find the policies taxing. Speaking with CNN, Danish farmers’ association Bæredygtigt Landbrug chairman Peter Kiaer described the accord as “pure bureaucracy.” He voiced worry about how it would impede green technology agriculture initiatives.

For the Danish Association for Sustainable Agriculture, the agreement is “useless”, nonetheless.

In a news statement, it said: “A sad day for agriculture”.

“As a farmer, I feel uncomfortable because we are taking part in an uncertain experiment“, said Peter Kiaer, president of the group, remembering New Zealand’s rejection of such an idea in the face of farmers objecting.

How is Denmark Addressing Farmers’ Concerns with New Livestock Tax?

Funding has been set aside to research and invest in new technologies to help farmers and the agriculture sector in this significant change. The agreement especially calls for the financing of DKK 10 billion for the manufacturing and storage of biochar via pyrolysis and additional financial prospects anticipated to materialize.

Farmers will be eligible for a 60% income tax credit, so the real cost per tonne will start at 120 crowns and rise to 600 crowns by 2035. Subsidies will be available to assist changes in farm operations.

With the agreement, two-thirds of the total Danish land area used for agricultural production today would be drastically cut to provide more space for nature and forests, benefiting the environment. By 2030, the levies imposed on cattle ranching are estimated to lower the overall CO2e emissions by 1.8-2.6 million tons annually.

Conclusion

Denmark is set to implement the world’s first carbon tax on livestock in 2030, aiming to cut greenhouse gas emissions by 70% from 1990 levels. Farmers will pay a tax starting at 300 kroner ($43) per ton of CO2 equivalent, rising to 750 kroner ($108) by 2035, with a 60% tax reduction. This initiative, part of a broader environmental strategy, reflects Denmark’s commitment to achieving carbon neutrality by 2045 and could influence global climate policies.

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