Danish green economic instruments evaluated

Government hails effectiveness of wide use of environmental taxes, product charges, deposits

An official survey of economic instruments used for environmental protection in Denmark concludes that the country's range of ecotaxes has been crucial to environmental protection. The English-language report claims that economic instruments now contribute 18% of all government revenue, with vehicle and energy taxes accounting for 85% of this.

Denmark prides itself on being a European leader in its use of environmental economic instruments. It began introducing energy taxes in the 1970s, and the diversity and level of measures has grown substantially since, in particular through a tax reform in 1994. The government's tool box now includes taxes, product charges, user fees, deposit systems and subsidies, which are applied to waste, carbon and sulphur dioxide emissions, pesticides, sewage, drinking water, nickel-cadmium batteries and disposable tableware.

Prepared for the Danish environment ministry and environmental protection agency by national firm Cowi Consulting, the report finds that the fiscal instruments in force are generally efficient, with a revenue collection rate of about 95%. However, it says that most tend be degressive, affecting lower income groups more, often requiring countervailing fiscal measures in parallel. It also notes that it is Danish policy to lower employment taxes as environmental taxes are raised. Revenue from Danish environmental taxes and charges is "never earmarked" for specific purposes it says, but remains a general tax receipt.

Follow Up:
Danish environment ministry, tel: +45 32 66 01 00. The ministry is due to post the report on its web site soon.

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