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Economic Instruments in Environmental Protection in Denmark
1. Introduction
Background
The merits of economic instruments in environmental protection are increasingly acknowledged on a world-wide scale. The European Union increasingly emphasises their potentials, and EU Member States have increased the use of economic instruments in their environmental policies.
Developments in Denmark largely reflect this trend. In the 1970s and early 1980s, environmental policy and environmental legislation in Denmark was largely dominated by command-and-control legislation. This emphasised end-of-pipe solutions, rather than prevention and control, and very few economic instruments were used in environmental policy in Denmark.
During the late 1980s, and specifically during the1990s, an increasing number of economic instruments have been put in use. Furthermore, they have become more directly targeted towards specific environmental issues. The general tax reform of 1994 was an important break-through in this development. The tax reform, among other things, aimed to increase the use of environmental taxes and charges in order to decrease income taxes.
Objective
The objective of the report is to provide a comprehensive, thorough, and up-to-date status of the use of economic instruments in environmental protection in Denmark. The report will thereby provide a means of experience sharing vis-à-vis CEE countries in particular.
Report outline
The report is organised as follows:
Chapter 2: The overall framework. This chapter provides a brief description of the overall context in which economic instruments in environmental protection are applied in Denmark. It considers the economic, administrative, institutional, and political framework, and it provides a brief environmental statue.
Chapter 3: Economic instruments in environmental protection. This chapter contains a conceptual discussion that aims to clarify and explain the typology used in this report.
Chapter 4: Overview of economic instruments in Denmark. This chapter provides an overview and a categorisation of all the economic instruments in use in environmental protection in Denmark. It explains important explanatory policy developments such as the tax reform, and it illustrates the contribution from the economic instruments to the government budgets.
While the first three chapters are fairly general and conceptual, the next four chapters are very instrument specific. They provide a comprehensive description of the economic instruments that are in actual use in Denmark and that have an environmental effect. The descriptions are organised according to the following main headings:
Chapter 5: Product taxes and charges.
Chapter 6: Effluent taxes
Chapter 7: User fees
Chapter 8: Deposit refund systems
The description of each instrument follows an identical outline:
 | Purpose. The purpose of the specific instrument is described. |
| Tax base. The tax base is identified and described. This relates to both the object for taxation and to the units applied for the calculation of the tax. |
| Collection and revenue. Means and methods for collection of the tax are described. This also includes the means of enforcement and control. The revenue from the tax is summarised. |
| Assessment. The instrument is briefly assessed. The assessment considers the functioning of the instrument in question vis-à-vis its underlying rationale and objective. The assessment does not aim to be fully comprehensive. Rather, it aims to identify the major features’ effects and critical issues in regard to the specific instrument in question. This includes also possible distributional effects. |
Denmark applies a wide range of subsidy schemes in the field of environmental protection. The chapter on subsidies provides an overview of these schemes:
Chapter 9: Subsidies. This chapter provides an overview of the 26 environmental subsidy schemes in effect in Denmark. The chapter highlights important general features of the Danish use of subsidy schemes. It provides a categorisation of the schemes, and it gives a more in-depth description of some of the major schemes.
The following chapter contains a more thorough description of the implementation aspects of the use of economic instruments in environmental protection in Denmark:
Chapter 10: The implementation of economic instruments in Denmark. This chapter provides a thorough analysis and description of the implementation of economic instruments in environmental protection in Denmark. The chapter describes the organisation of the implementation process; the public authorities and other actors involved. Further, it identifies the principles that govern the implementation process, and the important conditions to achieve an effective implementation.
Chapter 11: A case study of the Danisk energy sector. This provides an in-depth analysis of the use of economic instruments in the energy sector. The motivation for a more detailed analysis of the energy sector is that the several specific taxes are used in the energy sector, and that the revenue from these taxes is quite substantial. Further, the sector is also the single most important receiver of subsidies. The in-depth analysis of the energy sector takes into account other regulatory measures, as well as the organisational, market-determined, and legislative conditions of the sector. The taxes and subsidies in force are thereby analysed in a comprehensive and integrated manner.
Use of the report
The report has been structured to facilitate its use as a handbook. Therefore, the outline and contents of the specific chapters enable readers of the report to consult only selected chapters and sections. This means, however, that repetitions inevitably occur.