Denmark: Outlier or pioneer?

Denmark may be the only European nation to have more pigs than people, but it is seemingly unafraid to rock the boat when it comes to helping its farmers turn green.

Having become the first country to publish a national roadmap for normalising plant-based diets last year, it followed this up in June by becoming the first country in the world to impose a carbon tax on agriculture​.

If approved by the Danish parliament later this year as expected, farmers will pay 300 Danish krone (€40) per tonne of carbon dioxide from 2030, rising to 750 krone (€100) from 2035.

There is, however, a deduction of 60% to limit the financial burden on farmers while maintaining “a strong incentive…to use the most climate-efficient operating methods and technologies”.

In the long term, this should allow “the most climate-efficient group of farmers to eliminate the tax burden,” says the Danish government’s official agreement. The tax rate and deduction will be reviewed after two years.

The average Danish cow produces six tonnes of CO₂ equivalent per year, according to green think-tank Concito, meaning at the initial deduced tax rate of 120 krone, farmers will incur a charge of about 720 krone, or €96.50, per cow.

A blessing for the agtech business case? ​

Just like the government, agri-tech investors are hoping this is sufficiently high to encourage farmers to adapt new and latent technologies. “This should make more [agtech] business cases investable simply because the attractiveness for the farmer increases,” says Theis Malmborg, co-founder of Noon Ventures, a Copenhagen-based fund focused on environmental and climate technologies.

The farmers who find it hardest to adapt will receive government support from 2030, with the tax revenues directly channelled into investments in climate technology, green initiatives, and restructuring production on these farms.

Although farming groups oppose it, by the time the tax begins in 2030, the Danish government estimates livestock emissions could already have fallen by up to 2.6m tons per year, equivalent to 9% of the country’s total emissions.

“If the planned reductions are not realised, the parties agree that there must be corresponding CO2 reductions of up to 2.2m tons in 2030 by other measures in the agricultural area,” says the government.

Agriculture contributes around 28% of Denmark’s total greenhouse gas emissions with the country committed to halving this by 2030.

To help incentivise farmers ahead of the tax’s launch, the government is putting money into new agricultural technologies, such as a subsidy pool worth 10bn krone (€134m) for the storage of biochar produced from manure by pyrolysis. The government will also repurpose some EU agricultural support to promote technology change.

“The whole architecture of the climate tax revolves around climate mitigation technology,” says Niklas Sjobeck Jørgensen, a food and bioresources advisor at the think tank Green Transition Denmark.

The government has listed nine carbon mitigation techniques already approved for the tax, including biogas production, feed changes, and reduced fertiliser use. Pipeline technologies such as slurry cooling, nitrification inhibitors, and precision fertilisation are highlighted as priority areas for further funding and research if they are to be approved by 2030.

Many of these technologies should be welcomed, says Jørgensen, yet he warns the tax will do little to reduce overall animal production as recommended by the UN. “There are a lot of issues related to intensive livestock production which is exactly what this tax will keep incentivising.”

While Denmark is the only country with existing plans for a carbon tax – New Zealand abandoned its own in the face of staunch opposition – Malmborg argues Denmark’s increased investment in new technologies result could benefit agricultural much wider.

“This is maybe more ideological than investor, but I do think when farmers abroad see that implementing new technologies not only helps them avoid carbon taxes but gives a healthier population of animals or better crops or higher yields, it will inspire or create those business cases that allows the technology to travel.”

Why Danish farmers are green tech optimists ​

Denmark has already earnt a reputation for widespread implementation of agricultural technologies that help it to produce three-times as much food as it consumes. “The ingredients in this recipe for success include proficient farmers who invest ambitiously in green optimisation,” says Jesper Riber Nielsen, director digital crops at SEGES Innovation.

This is seemingly true, with precision agriculture – for the precise application of inputs like fertiliser and pesticides – used on 66% of Danish farmland, according to a white paper by Food Nation Denmark.

There is now strong global demand for Danish agri-tech with more than 80% of its equipment – including robotics, sensors, and IT systems – exported to markets across Europe, Asia, and North America, according to a report by Deloitte and Kraka Advisory for the Danish Embassy in London.

According to the companies themselves, this stronghold can be explained by the “political goal of ensuring a green and sustainable agricultural sector through hard and soft regulation,” said the report.

Demand for organic food has boosted innovation​

Denmark has also seen a huge focus on organic production in recent years that has led it to have the largest share of organic food products in the world. 12% of its produce is now organic, compared to less than 3% in Britain.

This demand for organic food has boosted innovation in new agricultural technologies, the report said, as to keep organic prices competitive, farmers have demanded new solutions to help optimise their production.