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Danish experiences
Søren Dyck-Madsen
The Danish Ecological Council - DEC
Revenues from environmentally
related taxes in per cent of GDP
Distribution of the Danish Tax
Revenue in 2000 in billion DKK
Income taxes
Company taxes
Green taxes
Land tax
VAT
Others
2004
2002
2000
98
96
94
92
90
88
86
84
82
80
78
76
74
72
70
% of GDP
Danish Green Taxes in % af GDP
6
5
4
3
2
1
0
Green taxes can be high without
harming industrial competitiveness
1: Finland
2: USA
3: Sweden
4: Denmark
5: Taiwan
6: Singapore
7: Switzerland
8: Iceland
9: Norway
10: Australia
Ranking of world growth competitiveness according to a 2003
report by the World Economics Forum
Some examples of Danish Green taxes

Tax on Organic Chlorinated Solvents

Tax on Growth Promoters (Antibiotics) accompanied
by a voluntary agreement with Agriculture

Danish Transport Taxes
Annual Consumption of Taxed
Organic Solvents
Tonnes per year
1400
1200
1000
800
600
400
200
0
1992
1993
1994
Dichlormethan
1995
Trichlorethylen
1996
1997
1998
Tetrachlorethylen
The (small) Tax on Organic Solvents was introduced in 1996
Tax on Growth Promoters / Antibiotics
Mio. DKK
40
35
30
25
20
15
10
5
0
1997
1998
1999
2000
2001
2002
2003
Cars per 1000 Inhabitants in 1995
Cars per 1000 inhabitants in 1995
0
Po land
Gr eece
Hung ar y
Po r t ug al
Ir eland
C z ech r ep .
D enmar k
Sp ain
Jap an
NL
UK
F inland
N o r way
Swed en
B elg ium
F r ance
10 0
195
211
220
258
270
302
340
351
360
363
366
371
386
411
418
433
Iceland
445
A ust r ia
447
Schwit z er land
457
N ew Z ealand
463
A ust r alia
465
C anad a
467
Ger many
It aly
600
500
400
300
200
495
552
U SA
563
Luxemb o ur g
563
Number of Danish Vehicles
2.000.000
1.800.000
1.600.000
1.400.000
1.200.000
1.000.000
800.000
600.000
400.000
200.000
Private cars
Vehicles 2.000-3.500 kg
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
0
Driven Kilometers
Mio. driven km
40.000
35.000
30.000
25.000
20.000
15.000
10.000
5.000
0
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
”Rules” for an
Environmental Tax Reform

Should target relevant and important environmental
problems and be effective to reduce those problems

Should be distributional neutral – increasing green
taxes should be followed by reducing other taxes in a
way so that the poorest will not be hit the hardest

Should be revenue neutral – a reform is not created
to increase state incomes and might not be accepted
by the public if increasing the overall tax burden

Should additionally reduce environmentally harmful
subsidies
Environmental problems to be
Targeted by Economical Instruments
Green House gases – especially CO2 –
but also industrial GHG’s like SF6, HCFC
 Overuse of natural ressources
 Too much traffic
 Too much energy used
 Protecting ground water
 Use of hazardous Chemicals
 Too much waste produced
 Avoid urban sprawl

A real Danish tax shift
Experiences and Recommendations

Green taxes are very useful targeting environmental
problems and recommended by EU-Commission, the
OECD and many others

But it is hard to create public understanding and
acceptance for green taxes as part of an
environmental tax reform in the public and in industry
Information and Public Acceptance

It is therefore very important to give good information
about the environmental problems that is going to be
targeted and to underline that Environmental tax
Reforms do have two sides:

Taxes on environmental harmful products, behaviour,
land-use and non-renewable resources

Spending of revenues from the green taxes to lower
taxes on labour, secure the social fair economic
distribution, secure industrial competitiveness,
subsidising environmental actions like improving
energy efficiency and others
Revenues

Some green taxes do create revenues even though
the tax itself are meant to reduce the tax base

Other green taxes are meant to be reduced to zero
as the tax fulfils it’s own purpose and eliminates the
use of the product
How to Spend the Revenues

Earmarking of revenue for environmental purposes –
which will increase the overall tax burden

Revenue in the State Budget to finance overall State
expenditures. Expenses for environmental purposes
are decided in the State Budget

A mixture of the two – which can be very convenient
in practical politics
Returning of Revenues should fulfil
several goals

Social impacts should be neutral or slightly positive

Industrial effects on competitiveness should be
neutral or at least not so heavy that they forces the
companies to close down or move abroad

Should be revenue neutral – or a very well targeted
way of raising revenue needed instead of increasing
other taxes such as income taxes
Revenues can stabilise green politics

Revenues are not the normal goal for green tax
reforms

But do consider the revenues anyway since revenues
tend to be rather steady while governments change

But argue always with the benefits for the
environment, for the national economy and for the
employment
Public acceptance is the key problem
for an Environmental Fiscal Reform

Inform about the environmental problems the EFR is
going to target
 Make the use/returning of the revenue very clear
 Neutralise regressive effects in income distribution
 Neutralise negative effects on industrial
competitiveness
 Consider to use parts of the revenue for additional
environmental purposes in order to ”give people
something for the money” - But do remember that
revenues from green taxes can be used for better
hospitals too
Broad political coalitions in order
to avoid misuse of green taxes

Because of the difficulties for the public to understand
the construction of a green tax reform it is advisable
to seek a broad coalition behind the green taxes in
order to make the reform more stable and predictable
for both households and especially for industry.

A broad coalition also minimises the risk that one or
more parties do misuse the visible parts of the green
tax reform against the present government in an
election campaign – as we saw in the Danish
elections 2001.
The DEC 2002 proposal
for a Danish Green Tax reform

The Danish Environmental problems should be reduced

The income distribution should not be changed

Industry’s competitiveness should not be harmed

The total tax burden on households and industry should
be neutral

More jobs should be created

In economic terms the proposed Danish Tax Reform
would shift additionally 9% of the total Danish tax
revenue from income taxation to environmental taxes
gradually from 2002 to 2010 – so the total revenue from
environmental taxation in 2010 will make up about 18,5%
of the total tax revenue.
Energy and GHG’s

Increase tax on extraction of oil and natural gas in the North Sea
Increase carbon tax
Increase energy tax for electricity in households
Increase energy tax for oil, coal and natural gas in households
Phase out rebates on carbon tax for energy extensive industry
Lower rebates on carbon tax for energy intensive industry
Taxing Carbon emissions from flaring from oil platforms

All numbers in billion DKK -






1 billion DKK is apx. 33.5 billion HUF
+ 3.7
+ 3.8
+ 6.3
+ 8.5
+ 1.7
+ 1.9
+ 0.3
Transport









Increase taxes on Petrol and diesel
Introduce road pricing differentiated according to environmental
performance of cars
Increase steps in the environmental car owner tax (steps moved 5 km/litre)
Increase registration tax for energy ineffective cars
Remove tax rebates for transport to job
Tax fuel for airplanes and ferries/ships
Tax diesel vehicles without particle filters – Reverse for installation of filters
Tax fuel use for Public transport – Reverse as subsidy for labour
costs for drivers
Tax energy extensive electrical appliances and subsidy energy effective
Neutral
+ 1.0
+ 10.8
+ 2.0
+ 1.0
+ 2.0
+ 5.3
Neutral
Neutral
appliances
Others









Increase tax on pesticides
Industry pays full tax on piped water
Increase tax on chlorinated solvents
Tax unwanted chemicals
Increase tax on solid waste
Increase tax on waste water
Tax advertising, e.g. handouts, fliers, commercials, brochures
Increase tax on PVC and phthalates
Tax high pressure treated wood and timber
+ 0.1
+ 0.7
+ 0.0
+ 3.0
+ 0.7
+ 0.5
+ 4.0
+ 0.1
+ 0.0
Remove Environmentally Harmful
Subsidies




Reorganize or remove subsidies for agriculture
Remove subsidies for energy based on fossil fuels or nuclear
More jobs and a broadened tax base gives an effect
Savings in expenditures for environmental damage
Use of the Revenue / Neutrality
Reduce the rate of ordinary income tax low bracket from 5,5 % to 1,0 %
Increase the income tax threshold with 5.000 DKK
Reduce the VAT on organic food products and ecolabelled products
Social compensations by increasing child allowances, educational aid, retired
peoples pensions and other social allowances
- 30.3
- 8.0
- 2.0

Compensation for higher green taxes to industry according to labour expenses
Funding for introducing cleaner technology
Changing taxation and write offs for environmental friendly investments
- 6.2
- 2.5
- 1.5

Increase investments in railway, tram, metro, bus light rail
- 1.0

All together






- 6.0
- 57.5
www.ecocouncil.dk/english/