This post is by Lærke Kjærbye-Thygesen, policy officer, food and bioresources, at Green Transition Denmark, and Niklas Sjøbeck Jørgensen, senior policy officer, food and bioresources, at Green Transition Denmark.
A historic agreement. That’s how Denmark’s latest political agreement – the Green Tripartite Agreement – is being described, as it introduces the world’s first carbon tax on agriculture.
In December 2023, the Danish government established a ‘green tripartite’ of agriculture, environmental and industry groups to find long term solutions to its climate and environmental challenges. After lengthy negotiations, an informal tripartite agreement was reached in June. With a parliamentary majority, the government expected the process of transforming this agreement into something more concrete to be straightforward. However, the negotiation was protracted, marked by debate, protests from environmental groups and an unlikely alliance of opposition parties from different wings. Despite these challenges, almost a year later, the Green Tripartite Agreement was signed on 18 November.
So, what are the key elements of the agreement? Here are the four defining areas of Denmark’s latest announcement:
1. The world’s first carbon tax
It certainly is historic that Denmark will introduce a carbon tax on agriculture, with the revenue going straight back into the sector. Starting in 2030, the tax will be €40 per tonne of CO2e from livestock, rising to €100 in 2035. But a 60 per cent base deduction means the actual tax rate will be much lower, just €16 per tonne in 2030 and €40 in 2035. As a result, the tax may fall short of driving the structural transformation needed to shift agriculture away from industrial animal production.
A few production adjustments and the use of technologies, some of which are already widely used, will in some cases be sufficient to exempt farmers from paying the tax altogether. However, there is a risk that this could undermine the carbon tax by allowing large scale industrial livestock production to continue business as usual or to invest further in technology and expansion. This could create a long term lock-in to industrial livestock production rather than incentivising more structural production changes.
2. Nitrogen pollution finally on the agenda
Another key battleground during the negotiations, between the government and an alliance of opposition parties from the left and right, was the urgent need for a reduction of nitrogen pollution. This year was the second consecutive year of historic oxygen depletion in Danish waters. The opposition’s demands were largely met in the end, with a reduction goal of 13,780 tonnes by 2027. Despite these planned reductions, Denmark is still set to breach the EU Water Framework Directive, which requires all water bodies to reach ‘good status’ (good chemical and ecological status) by 2027. Currently only five out of 109 Danish waters meet this standard and recovery for some areas could take decades.
3. A new approach to land use
The Green Tripartite Agreement aims to enhance nature, tackle biodiversity loss and improve coastal ecosystems through land use changes. To achieve this, a green area fund of €5.8 billion will be created. More than 15 per cent of Denmark’s agricultural land will be set aside, for the creation of 250,000 hectares of new forests and the rewetting of 140,000 hectares of carbon rich peatlands. Strategic land acquisition will be initiated for purposes including nitrogen reduction and land consolidation.
The changes will be driven by voluntary action by landowners through incentive schemes. However, experts question whether the incentives for farmers to give up land are strong enough to meet the targets. The agreement states that strict nitrogen regulation will come into force in 2027 if the voluntary schemes are not used, but the type of regulation is uncertain and will be decided in 2025.
4. Technological solutions have been prioritised
The agreement provides a further €65 million in subsidies for feed additives, such as Bovaer, and €1.3 billion for biochar storage through pyrolysis, a process that turns organic material into a stable form of carbon for long term storage in soil. There are dilemmas surrounding the use of these technologies. For example, while studies indicate that Bovaer can reduce methane emissions from dairy cows by up to 30 per cent, its use alone is not cost effective or sufficient to meet global commitments. While these technologies have a methane-reducing effect, they are not a panacea and may come with their own risks, such as incentivising more intense production practices. A structural transformation in agriculture, reducing livestock numbers, would be a far more effective and forward thinking solution.
Technology and voluntary measures are heavily relied on
The Green Tripartite Agreement is an important step forward for the green transition, particularly with its carbon tax and major land use changes. Other countries should take note that it is possible to put a price on agriculture’s climate impact without widespread uproar. Hopefully, the changes to how we use land will lead to a reduction of industrial livestock farming. But, still, the agreement relies too heavily on technological solutions and voluntary measures. Though historic in some respects, its long term success will depend on implementation and whether it can drive the necessary structural changes in the agricultural sector.
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