Denmark Announces Aggressive Carbon Tax

Since December of 2019, when Denmark wrote GHG reductions into national law, we have been waiting for the first draft of implementation. This week it was presented, and as usual some like it, and some do not. Danish national media outlet dr.dk reports a summary of the following details:

“Companies that do not pay for their pollution in the EU quota system must pay DKK 750 ($109) per tonne of CO2 they emit. This applies to the vast majority of companies in the industry sector.

“A small group of large emitters are today exempt from Danish CO2 tax and pay CO2 quotas in the EU. In the future, they will have to pay DKK 375 ($55) extra per tonne. This is in addition to the DKK 750 ($109) that the government expects the quota price in the EU to be in 2030. The EU price is currently about DKK 600 ($87) per tonne.

“For an isolated group of companies that emit the most CO2, there is a reduced price of DKK 100 ($15) per tonne of CO2. It also comes on top of the EU quota price. This applies, for example, to the Aalborg Portlandcement factory, but also to the country’s brickworks, Rockwool and glass manufacturers such as Holmegaard.

“However, the large emitters also get a discount in the EU, so the actual cost of quotas here is around DKK 300 ($44) per tonne.”

This plan is for heavy industry and businesses. In the fall, a plan for agriculture and transportation will follow. The country’s current very fragmented emission regulations for all sectors amounts to an average tax of about DKK 180 ($28) per tonne of CO2.

In 2019 I wrote about the largest emitters in the country, and in terms of emissions, over the last 5 years not much has happened within the group of largest emitters. Aalborg Portland is by far the largest emitter. In 2020, it emitted just over 2 million CO2 tonnes, out of the industry total in Denmark of just over 6.5 million tonnes of CO2, according to Statistics Denmark.

It’s the rebate for the big players that spawn the arguing. On one side, it is argued that there should not be any difference from small to large emitter, and the same price should apply to all. On the other side, it is argued that these very large companies have invested a lot of money in reducing their carbon footprint, and the plans are slowly being implemented, so in order to prevent these companies closing or moving abroad, a hefty rebate is in order.

Of course, the criticism of this new carbon tax plan is heard the loudest, and in concert with the problems of finding space for the enormous amounts of wind (onshore is faster than offshore) and solar installations needed to get off fossil fuels (especially Russian natural gas) the voices preventing unprecedented fast action gets a bit shrill. This is not to say that arguments for protecting the natural environment where these renewable energy systems are installed are not valid, it’s just that we should have thought about this decades ago, and we are simply out of time.

Another argument is that the national grid is not ready for the shift to almost exclusively fluctuating electrical power. Reports show that billions have to be invested in the next half a decade to fix this. To this point, a couple of unknowns might soon be ready to ease the pain. Battery storage as the most obvious, but so far expensive, option, and Virtual Synchronous Generation as a new exciting technology that makes intermittent energy inverter controls electronically imitate the stabilizing features of conventional generators, thus reducing the amount of batteries and peaker plants needed. In addition to this, electric transportation and many energy-hungry aspects of industry and household (think heating and cooling) can be intelligently controlled to offload power from the grid when wind and/or solar power is excessive.

In 2021, Danish electricity consumption across all sectors was 31.2 terawatt-hours (TWh). By 2030, this is expected to reach at least 63 TWh. Yes, fossil fuels contain a lot of energy! It takes a lot of wind and solar to replace it. Even though wind and solar has been built out at an incredible pace in Denmark over that last 5 years, the combined capacity has to maybe quintuple before a complete, abundant, and stable supply of renewable energy is secured.

Granted, the work ahead to reach the Danish goal of 70% greenhouse gas reduction in 2030 — compared to 1990 levels — is humongous, but it is in fact possible. It is very hard to assess whether the current decision makers in Denmark are hitting the exact right numbers, but it is a game of combining aggressive agendas and preventing Danish industry and know-how to leave the country. The goal is to try and show the world how this transition can be done, without just exporting the problems to somebody else.