Conservatives come from a variety of backgrounds, and yet seem to all agree on a particular set of economic ideas. Doubtlessly, when taking an effective stance on public policy, we do not shy away from insisting that a market-based solution is almost always the most effective solution.
So let’s discuss Denmark. Denmark’s government is a conservative coalition comprised by Venstre, a centre-right party, the Conservative Party (Konservative Folkeparti), and The Danish People’s Party. Each of these parties have made statements concerning their climate stances, and all three emphasize that the government does have a role to play in addressing climate change, and that reducing dependence on carbon-intensive sources for energy is always desirable for the environment and for the economy.
The Conservative Party in Denmark asserts that every tax increase for environmental purposes should be offset by tax cuts in other areas, while Venstre emphasizes that environmental levies should not increase the tax burden, but merely create an incentive for environmentally-friendly behaviour. Both of these parties emphasize the ‘polluter-pays’ principle and understand the market impacts of not addressing the climate problem.
What is the result, then? Denmark currently uses a carbon-tax system for most carbon-intensive sectors, while also recognizing its obligation to cooperate with the EU’s ETS cap-and-trade system. Denmark currently boasts one of the cleanest energy environments in the world, and Copenhagen in particular is one of the most effective cities in terms of reducing the environmental impacts of transport and other forms of carbon-intensive infrastructure.
Denmark is obligated to follow the cap-and-trade system that the European Union has put in place (ETS). Its carbon-tax system exists in parallel, creating exemptions and provisions for industries that may be affected by the ETS. The Danish carbon pricing system covers all fossil fuel usage at USD 31 per tonne, making sure to keep an ample balance that affects consumer behaviours but does not detrimentally affect its market competitiveness.
The fact that the ETS exist allows Denmark to be flexible with its carbon pricing. Its economic partnerships exist with other states that maintain their own carbon pricing schemes; meanwhile all are affected by the ETS. To this degree, Denmark’s environmental policies are not only a matter of environmental benefit, but also a matter of engaging in a climate-aware market, where adapting to these realities creates a benefit.
As it stands, the Danish government agreed to the goal of reducing CO2 emissions by 40% in 2020 compared to their 1990 levels, focusing primarily on transport and energy usage, wherein they intend to completely phase out fossil fuels and switch to renewable energy by 2035. A variety of diverse approaches have been used- meeting ETS obligations as well as placing a tax on internal energy consumption. The government has ensured that in light of this, no new taxes would be put in place for businesses. With special respect to transport, the Danish government has also stated its intention for revenue-neutral taxation for cars so as to encourage environmentally friendly options.
The Danish government essentially sees this as long-term planning. While minimizing short term economic risk to the greatest extent, the 40% reduction by 2020 marks a stepping stone towards a diversified economy which is less reliant on fossil fuels and able to participate in a market where sustainable technology and renewable energy are the norms. Without sacrificing any economic competitiveness, Denmark managed to reduce its per capita CO2 emissions by 15% from 1990 to 2005.
There are many things we can learn from Denmark. It has managed to reduce CO2 emissions effectively, and managed to create an environment where the market and infrastructure are easily adaptable to a low-carbon system. It has managed to take the best elements of the ETS, and create provisions where it may hurt businesses, all the while ensuring that its own carbon tax is one that does not profit off of tax revenue, but rather puts it right back into the economy. And most notably, this is all being done under the governance of a conservative, centre-right coalition.
Vladislav Yakovlyev is a student at the University of Toronto