Denmark agrees on ‘green conversion of road transport’

10 December 2020

10 December 2020 The multi-party Danish government has agreed on a ′green conversion of road transport.’ The agreement is expected to achieve 775,000 zero and low-emission cars on Danish roads by 2030, with a 1-million tonne reduction of CO2 emissions by 2025 and 2.1 million tonnes by 2030. ′The agreement ensures a significant increase in the number of green cars. 775,000 green cars in 2030 is a very big boost compared to the number of green cars on the roads today. The agreement also ensures security for car owners, so that everyday life for ordinary families can be connected throughout Denmark,’ said Denmark’s minister of taxation, Morten Bødskov. The registration tax applied to new cars in Denmark is value-based and amounts to 85% of the car’s taxable value up to DKK 197,700 (€26,500), and 150% for the value above, according to the ACEA 2020 Tax Guide. The parties have agreed that an extra tier will be introduced, whereby a lower 25% tax rate will be applied to the car’s value up to DKK 65,000 in 2021. The 85% tax rate will then be applied up to the slightly higher value of DKK 202,200 in 2021, with the 150% rate above that level. Phasing in green cars In September 2020, Denmark announced plans to reduce emissions by 70%, and become carbon neutral by 2050. The governing parties, therefore, agreed that a reorganisation of car taxes must also support the increased uptake of ′green’ cars and be based on both the value of the car and CO2 emissions. Given this, under the new agreement, the registration tax on zero- and low-emission cars will be phased in more gently than was previously planned. This means that buyers of these cars in 2021 will have to pay approximately DKK 81,400 less in registration tax than they would have done, according to a release by the Skatteministeriet, the Danish ministry of taxation. For zero-emission cars, 40% of the registration tax will be payable in the years 2021 to 2025. This then increases by eight percentage points per year to 80% in 2030. The assumption is that the percentage of the registration tax rate that is payable will increase by four percentage points per year until 2035, thereby amounting to 100%. Cars that emit less than 50g CO2 per km (predominantly plug-in hybrid electric vehicles), will be phased in with a 45% tax liability in 2021. The percentage will increase by five percentage points per year to 65% in 2025, and by three percentage points per year to 80% in 2030. A further increase of four percentage points per year is assumed, thereby reaching 100% in 2035. In addition, the tax on electricity for charging cars will continue to be lower, meaning that the owners of electrically-chargeable vehicles (EVs) will have to pay, on average, DKK 2,550 less per year. ′Now we are taking another important step towards meeting the government’s ambitious 70% target. I am particularly pleased that we have agreed to slow down the phasing in of taxes on green cars. This supports that green cars are still economically attractive until the technology has made them even cheaper to produce,’ commented Bødskov. The initiatives set out in the agreement are estimated to secure 775,000 green cars on Denmark’s roads by 2030. However, in March, the Danish council on climate change, an independent advisory group to the government, stated that at least one million green cars would be needed by 2030 to meet emissions targets. The parties agree with this ultimate ambition and will therefore take stock in 2025, and discuss whether further initiatives will be needed to reach this target. A final decision on the phasing-in of registration taxes for green cars to 2030 and beyond will also be made at this point. Denmark has a heavy dependence on car and road taxes, which add up to roughly DKK 50 billion per annum, accounting for 2.3% of Denmark’s gross domestic product. Meeting the one-million target therefore means Denmark has to count the costs of a swift change to green cars. Banning ICE cars Back in October 2018, Denmark proposed a ban on the sale of new petrol and diesel vehicles, while also proposing an end to the sale of hybrids following a grace period. The country wants to implement the new rules on internal combustion engines (ICE) from 2030, while consumers will still be able to buy petrol or diesel hybrid models until 2035. Following this, every car sold in the country must be driven by electric power, in part if not fully. The parties involved in the new agreement agree that a ban on the sale of new diesel and petrol cars by 2030 will be an important step towards a green transport sector. However, a blanket ban on the registration and sale of new diesel and petrol cars in Denmark is not legal under current EU law. The parties have therefore agreed to work at the EU level to develop a plan to phase out new ICE cars and introduce a stop date for their sale on the European market. This would then give ambitious countries like Denmark the opportunity to take the lead and introduce a ban on ICE vehicles, as well as promoting the necessary infrastructure and alternative fuels. The full agreement on the ′green conversion of road transport’ can be viewed here.