The document summarizes Denmark's experience with implementing green taxes on environmentally harmful products. Some key points: - Green taxes in Denmark include taxes on energy products, motor vehicles, and other environmental harmful products. These taxes accounted for around 8% of total tax revenue in 2012. - Introducing green taxes aims to correct negative externalities but must balance administrative costs and impacts on businesses. Taxes are often passed onto consumers which can increase cross-border shopping. - Specific Danish green taxes discussed include taxes on fuels, vehicles, fertilizers, pesticides, and packaging. Revenue from pesticide and packaging taxes has increased in recent years.

1. Experience of designing
and implementing taxes on
environmentally harmful
products in Denmark
Torbjørn Christensen
Senior advisor

2. Green taxes in Denmark
2
In Denmark there are green taxes on
• Energy products
• Environmental harmful products
• Motor vehicles
The taxation of energy products is harmonised by the energy
taxation directive in the EU.
The directive sets minimum levels of taxation.

3. Green taxes in per cent of GDP in Denmark
3Source: Ministry of Taxation
0
1
2
3
4
5
0
1
2
3
4
5
00 01 02 03 04 05 06 07 08 09 10 11 12
In 2012 the revenue from
green taxes were about 69
billion DKK (9 billion euros)
Green taxes account for
around 8 per cent of total
taxes in 2012
Percent Percent
Years

4. Introducing green taxes I
4
• The optimal tax on a environmental harmful products is a
Pigovian tax, where the tax equals the negative externality
caused by the product
• A broad tax base will decrease distortions
• Introducing a tax on a limited base can have very high
administrative costs
• For control
• To avoid evasion
• A green tax can increase the administrative burdens for
companies as well as impose higher production costs
• A simple legislation can make the administrative cost more
manageable

5. Introducing green taxes II
5
• A green tax can be more costly for some companies than
others
• In some cases these companies can get reimbursement of
the tax to reduce their costs
• This differentiation can raise a question about state aid
• State aid in the EU requires an approval by the EU
Commission
• The registered companies pay the tax to the authorities
however the tax is often passed on the consumers through
higher prices
• Therefore a tax can increase the cross-boarder shopping
(petrol and wood)

6. Green taxes in Denmark – taxes on energy
6
The tax is based on the energy content of the taxable products and the
tax base includes:
• Petrol
• Mineral oils
• Coal
• Natural gas
• Electricity.
Taxes on CO2, NOx and SO2 are defined as environmental taxes.

7. Green taxes in Denmark – taxes on motor
vehicles
7
• Registration tax
• Circulation tax (tax on ownership) – annual tax based on the
fuel consumption of the car (for older cars it is based on the
weight of the car)
• Countervailing duty – a tax on diesel cars
• Tax on diesel cars without ‘particle filter’
• Sur charge for private use of vans

8. Green taxes in Denmark – environmental taxes
8
Besides the environmental taxes on CO2, NOx and SO2 Denmark also has
environmental taxes on:
• Waste and raw materials
• Water and wastewater
• Pesticides, CFCs, PVC and phthalates
• Packaging, disposable tableware and carrier bags
• Nitrogen fertilizers, growth promoters, mineral phosphorus.

9. Tax on fertilisers
9
• The tax on fertilisers was introduced August 1, 1998
• It is related to the rules on the use of fertilisers from farming
• Farms are exempted from the tax since they are regulated by other
legislation, where they have to keep a report of their use of fertilisers
• The tax is therefore seen as a protective rule
• The rate is 5 DKK (0,7 euro) per kg of nitrogen
• The revenue was 22 million DKK (3 million euro) in 2013

10. Tax on pesticides
10
• The tax on pesticides was introduced January 1, 1996 and changed on
July 1, 2013
• Before it was a value-based tax on the retail price
• For goods used to control insects, snails and so on the tax was 35% of the retail
price, including the tax itself
• For goods used to control plant growth, plant illness and so on the tax was 25% of
the retail price, including the tax itself
• For other goods used to control algae and so on the tax was 3% of the retail price,
including the tax itself
• The revenue was 475 million DKK (64 million euro) in 2011
• The change of the tax was agreed upon in 2012, and the farmers started
to react to the new and higher tax which gave a higher revenue in 2012
• Now it is amount-based differentiated by health and environment criteria

11. Tax on packaging
11
• The Danish tax on packaging consists of a tax on packaging (weight-
and volume-based), disposable tableware, carrier bags and PVC-foil
used for food
• The purpose of the tax is to reduce the amount of waste and create an
incentive to use less packaging in general and use more environmental
friendly alternatives
• The revenue is around 1 billion DKK (135 million euro) in 2013
• Companies who produce taxable goods with the purpose of sale have
to register with the authorities
• The registered companies must determine the taxable amount and pay
the tax
• The weight-based tax on packaging was abolished from 2014, mainly for
administrative reasons.

12. Revenue from the tax on pesticides and the tax
on packaging
12
0
27
53
80
107
133
160
0
200
400
600
800
1,000
1,200
2005 2006 2007 2008 2009 2010 2011 2012 2013
Tax on pesticides Tax on packaging
Years
Millions
DKK
Millions
euro