Denmark should sharply increase carbon tax to meet emissions target: government adviser

COPENHAGEN (Reuters) - Denmark should sharply increase its carbon tax to help meet the cost of reaching its 2030 target to cut greenhouse gas emissions by 70% from 1990 levels, the Danish Council on Climate Change said on Monday.

The council is the main independent adviser to the Danish government on climate change and its proposal for a much higher carbon tax immediately drew criticism from industry, with business representatives saying some companies would be forced to leave Denmark.

The council said the cost of cutting emissions by 70% from 1990 levels by 2030, one of the world’s most ambitious climate targets, was manageable and would be around 15 billion to 20 billion Danish crowns ($5.35 billion) annually from 2030, which is less than 1% of GDP.

“We can make the green transition happen without it costing a whole lot or affecting our welfare to a significant degree,” said Peter Mollgaard, chair of the council, which provides recommendations to the government.

Denmark, which has pioneered wind power, is broadly seen as a leader in efforts to tackle climate change and many of its peers are closely following what the small Nordic state is doing to achieve its targets.

Mollgaard said the most important tool would be an increase in carbon taxes, and recommended an increase to 1,500 crowns per ton of carbon dioxide equivalent, from just 170 crowns currently.

However, such a tax is unpopular among businesses, which fear it will hurt their competitive position and encourage companies to move to countries with lower or no taxes.

“The climate council’s proposal is so far-reaching that we’re just going to move CO2 emissions abroad and get lower growth and fewer jobs,” said the Confederation of Danish Industry (DI) in response to the proposal.

The council recommended that companies severely hit by the higher tax that do not have the possibility to reduce emissions would be compensated, but DI said it was highly uncertain whether such a scheme could be implemented.

Danish lawmakers have already agreed on a 70% reduction target, but details on how exactly this will be achieved are still to be negotiated and passed by parliament. It is still uncertain whether higher carbon taxes will be part of the plan.

“Of course, a type of levy and tax is going to be part of our action plan,” Dan Joergensen, Denmark’s climate minister told Reuters.

Joergensen said he was aware of the impact such high taxes could have on industry, but stressed he would not implement taxes that would force large companies out of Denmark.

“It would look good on our carbon emissions and be good for the percentage - but it wouldn’t be good for Denmark, so of course we won’t do that.”

So far Denmark has reduced emissions by 38% compared with 1990 and is on track, with currently passed legislation, to achieve a 45% reduction by 2030, according to the council.

Using existing technology, Denmark could achieve a 60% reduction emissions by 2030, the council said, but the remaining 10% would come from new technological advances.

“It speaks to the size of this challenge and how important it is to begin the research into and development of new methods,” Joergensen said.

Reporting by Stine Jacobsen; Additional reporting by Nikolaj Skydsgaard. Editing by Steve Orlofsky and Susan Fenton