More green cost-effectiveness urged on Danes

OECD finds loopholes in Copenhagen's generally progressive environmental approach

Denmark's use of economic instruments in environmental policy making has been singled out for praise by the Organisation for Economic Cooperation and Development (OECD), in its latest annual report on the state of the country's economy. But the report urges much more rigour on planners, concluding that environmental improvements could be achieved in a more cost-effective way.

The OECD is particularly critical of policies over water charges, carbon emissions, wind turbines, transport and waste management. On water, it notes that pollution reduction targets have been met for municipal water treatment and industrial discharges, where major tax rebates apply, while those for agriculture have not. It suggests the introduction of incentives for farmers to cut fertiliser use, taxes on net nitrogen discharges or the possibility of establishing a tradable permits scheme.

On the carbon question, Denmark's "ambitious" reduction strategy is generally lauded, but the OECD believes the existence of a widely-varying set of tax rates, with lower rates for heavy energy users, has led to the overall costs per tonne of carbon dioxide emissions abated becoming unnecessarily high. The OECD welcomes Denmark's pledge to gradually modify this structure as the Kyoto protocol comes into force.

On wind turbines, the OECD urges an end to implicit and explicit subsidies to a "once infant industry that, with a major presence in world markets, has now grown up". It hopes this will be achieved by the increasing use of domestic cap-and-trade schemes and emission taxation, integrated with the new green certificate system for renewable energy Denmark introduced earlier this year.

Follow Up:
OECD, tel: +33 14 524 1000. See also a summary of Economic Survey of Denmark 2000.

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