Economic Council urges emissions taxes as the primary tool for the green transition.
Denmark’s Economic Council Chairmanship released its 2025 environmental economic report on 9 December 2025, highlighting that taxes on greenhouse gas emissions are a more cost-effective and precise tool for promoting the green transition than differentiated value added tax (VAT) rates.
The report, part of the Council’s annual review of Economics and Environment, covers several policy areas key to Denmark’s climate and environmental goals. It recommends that the state finance coastal protection only where national interests are at stake, to avoid slowing broader climate adaptation efforts.
The Council also advises against using differentiated VAT for environmental purposes, calling it administratively complex and less cost-efficient than other instruments. The report examines the health impacts of PFAS contamination from past use in fire-fighting foam, linking exposure to lower birth weights and higher risks of kidney and breast cancer in certain age groups.
Finally, the analysis finds that subsidies for heat pumps deliver limited social benefit, as up to two-thirds of aid goes to homeowners who would have purchased the pumps regardless. Targeting support to owners of oil-fired heating systems would be more effective.
