A tax was first proposed in February by government-commissioned experts to help Denmark reach a legally binding 2030 target of cutting greenhouse gas emissions by 70 per cent from 1990 levels.

The centrist government late on Monday reached a wide-ranging compromise with farmers, industry, labour unions and environmental groups on policy linked to farming, the country’s largest source of CO2 emissions.

“We will be the first country in the world to introduce a real CO2 tax on agriculture. Other countries will be inspired by this,” Taxation Minister Jeppe Bruus of the centre-left Social Democrats said in a statement on Tuesday.

While subject to approval by parliament, political experts expect a bill to pass following the broad-based consensus.

The deal proposed taxing farmers 300 Danish crowns (C$58.77) per tonne of CO2 in 2030, increasing to 750 crowns (C$146.92) by 2035.

Farmers will be entitled to an income tax deduction of 60 per cent, meaning that the actual cost per tonne will start at 120 crowns and increase to 300 crowns by 2035, while subsidies will be made available to support adjustments in farm operations.

The tax could add an extra cost of 2 crowns per kilo (2.2 pounds) of minced beef in 2030, Minister for Economic Affairs Stephanie Lose told public broadcaster DR. Minced beef retails from around 70 crowns per kilo (C$13.71) at Danish discount stores.

New Zealand this month scrapped plans to introduce a similar tax after facing criticism from farmers.

But while Danish farmers had expressed concerns that the country’s climate goals could force them to lower production and cut jobs, they said the compromise makes it possible to maintain their business.

“The agreement brings clarity when it comes to significant parts of the farmers’ conditions,” the L&F agriculture industry group said.

—Additional reporting by Alison Withers and Stine Jacobsen

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Denmark, a major dairy exporter, could become the first country in the world to price agricultural emissions, including methane emissions from burping cows, a move that has broad political backing.

Methane, a more potent greenhouse gas than carbon dioxide, is a natural byproduct of digestion in cows and other ruminants that is released into the atmosphere.

The Nordic country has pledged to reduce emissions by 70 per cent by 2030 compared to 1990 levels.

More than half of Denmark’s land is farmed, with agriculture accounting for about a third of the country’s carbon emissions, according to Danish climate think tank Concito.

Farming has not yet been subject to any climate regulations, but the industry has expressed concerns that a carbon tax would force them to reduce production and close farms.

Instead, farmers and the dairy industry have advocated the use of additives that stop the fermentation process inside the cows’ stomach, preventing the production of methane.

The government set aside 518 million Danish crowns (C$101.9 million) to finance the feed additive, which is expected to reduce methane emissions from the country’s roughly 550,000 dairy cows by 30 per cent in 2030.

Such additives have been met with skepticism from Danish politicians and animal welfare groups, as it is still unclear whether it would meet Danish animal welfare standards.

Netherlands-based nutrition company Royal DSM had a feed additive approved by the EU in 2022.

This type of feed additive, sometimes called by trade name Bovaer, was approved for use in Canada early this year to general approval from beef and dairy groups.

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Denmark, a major pork and dairy exporter, could become the first country in the world to levy an emissions tax on farming, a move that has broad political backing in the country, after New Zealand last year pushed back such a tax to the end of 2025.

A carbon tax on farmers could help Denmark achieve its legally-binding 2030 target of cutting greenhouse gas emissions by 70 per cent from 1990 levels.

But such a measure would also mean higher costs for farmers and as a consequence reduce production by as much as one-fifth, a government-commissioned group said in a report on Wednesday.

A tax of 750 Danish crowns (C$147) per million tons of carbon dioxide (CO2) emitted would have the biggest impact. The group also considered lower taxes of 375 crowns and 125 crowns.

“These models are based on something very disappointing, namely that climate reduction can only come by reducing production,” Peder Tuborgh, CEO of dairy producer Arla Foods, told Reuters.

Tuborgh said new technologies had helped Arla’s 9,000 farmers in Denmark, Sweden, England, Germany and Benelux reduce emissions by 1 million tons in the last two years.

“There is an innovation path,” he said. “We would like to continue that journey, rather than having to shut down our production.”

More than half of Denmark’s land is farmed, with agriculture accounting for about a third of the country’s carbon emissions, according to Danish climate think tank Concito.

The agriculture sector has become a political battleground as the European Union strives to meet its net zero emissions target by 2050. Farmers across the bloc have been protesting for weeks, saying they are facing rising costs and taxes, red tape, and excessive environmental rules.

The scenarios laid out by the government advisors would reduce agricultural production by between six per cent and 15 per cent, with cattle and pig production falling by around 20 per cent under the harshest taxation scenario.

“It will be relatively dramatic if we chose to go down that path,” Jais Valeur, CEO of Europe’s biggest pork producer Danish Crown, told TV2.

“It’s key that we encourage our best farmers to become better so that we can lead the way for a sustainable transition,” he said.

–Reporting for Reuters by Isabelle Yr Carlsson, Louise Rasmussen and Stine Jacobsen.

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