The lobby organization for the Danish insurance and pensions industry “Insurance and Pension Denmark” has recently voiced their support for the Danish government’s proposal for an ambitious carbon-tax reform.

This is very positive, since most Institutional Investors tend to shy away from supporting critically important climate political initiatives, but now the Insurance and Pension Denmark takes the lead in the support of an increased carbon taxation.

We have a common task in Denmark to ensure that a Danish carbon tax leads to real climate improvements – and not just move climate emissions and jobs out of the country. The government’s proposal forms a good basis for striking that balance. Moreover, the tax alone is not enough, says CEO Kent Damsgaard, Insurance and Pension Denmark” (1)

Supporting key policy initiatives, such as carbon taxation, is one of the key recommendations that investors should follow, according to the Investor Network “Net Zero Asset Owner Alliance” (2,3). In the past, many government officials, green think tanks and UN representatives have all raised their support for geographically broad and higher carbon taxation reforms. In contrast, only few executives of private financial institutions have been equally vocal on this topic, with Goldman Sachs being an important exception (4).

Current carbon taxation
The EU Emissions Trading System (EU ETS) regulates 11.000 large European industrial companies and utilities. Around 350 Danish companies (e.g. cement, steel) are regulated by the ETS. The ETS carbon price currently trades for about DKK 600 per ton. Many industries are currently provided many free carbon allowances.

Danish companies which are not included in the EU ETS includes industries such as fishery, ferries, railway, smaller industries and agriculture. The emissions taxation system for these sectors is very fragmented but operates with an average tax of about DKK 180 per ton of CO2.

Government proposal
The Danish government’s carbon tax proposal means, among other things:

a) That Danish industrial companies that are not a part of the EU ETS are subject to a carbon tax of DKK 750 (~100 Euro/ton) in 2030 [Figure 1, left bar].
b) EU ETS-covered companies are subject to a tax of DKK 375 and thus a total expected carbon price including ETS-emissions purchases of DKK 1,125 (~150 Euro/ton) [Figure 1, middle bar]
c) A few companies within the ETS, and operating with “Mineralogical processes” with few alternatives to fossil fuels and covering sectors with high international competition (e.g. industries such as cement, glass and tiles) will receive a reduced tax of DKK 100 and thus a total expected CO2 price including EU ETS allowance purchases of DKK 850 (~115 Euro/ton) [Figure 1, right bar].

Also, the reform includes an EU ETS base price of minimum DKK 750 per ton by 2030, regardless of the actual EU ETS trading price. The reform should be gradually phased in starting by 2025 and be fully phased in by 2030 (5).

Figure 1: Proposal for CO2-taxation of different parts of the Danish industrial sector

Companies can apply for government subsidies to invest in lower-emission industry technologies, mainly through electrification, energy savings and carbon capture and storage (CCS). The proposal is expected to lead to total annual CO2-emissions reductions of around 3.7 million tons, where 2 million tons will be achieved by companies gradually replacing fossil fuel based technologies with CO2-free technologies and energy savings. Another 1.7 million tons will be achieved by implementing technologies capturing CO2 from high-emitting industries within the hard-to-abate sectors, such as cement production and waste incineration (Fig 2).

Figure 2: CO2-reductions will be achieved through a combination of low-carbon technology implementation and Carbon Capture and Storage efforts.

Currently, a large part of the companies within the EU ETS are provided with free emissions allowances from EU, so the actual total CO2-tax is much lower than indicated (6). However, as the European Commission in currently revising the EU ETS and planning for a gradual phase-out of free allowances, eventually the carbon pricing will reach the indicated levels of DKK 825/ton and DKK 1125/ton.

During the coming weeks the government proposal will be negotiated with the other members of the Danish parliament, and an agreement is expected before summer holiday. Later in the year, the government will present additional carbon tax reforms covering the agricultural and transportation sector.


1) Net Zero Asset Owner Alliance discussion paper: “DISCUSSION PAPER ON GOVERNMENTAL CARBON PRICING“, released July 2021 (LINK)
2) Net Zero Asset Owner Alliance discussion paper: “The Future of Investor Engagement”, released April 7, 2022 (LINK) ,
3) Insurance and Pension Denmark in support of government proposal for CO2-tax reform, released April 20, 2022 (Danish) (LINK)
4) Goldman Sachs’ commercially driven plan for sustainability. Published 15. December 2019. (LINK)
5) Government Tax proposal, released April 20, 2022 (Danish): (LINK)
6) Explanatory on EU ETS Emissions cap and allowances (LINK)