Debate entry published in Politiken's Climate Monitor on 21 February 2022 by advisors in Energy and Climate Annika Lund Gade and Julie Bangsgaard Abrahams from the Green Transition Denmark

The long-awaited first interim report from the expert group for a CO₂- tax was published on 8 February.

The report had a relatively narrow focus on how the tax could be relaxed for companies exposed to competition and completely forgot to touch on how taxes can close the most significant gap in Danish regulation of CO₂-discharge, namely the biomass.

Our import and burning of solid biomass is deeply problematic.

Danish consumption is of a size where it can in no way be called sustainable.

Because even though most of our imports have a sustainability stamp, the huge draw on the biomass resource for the Danish energy sector will result in less carbon storage in the forests (and thus a higher concentration of CO₂ in the atmosphere) and a deterioration of the forests' biodiversity.

An astronomical consumption

CO₂-the emission from biomass on Danish territory is an astronomical 19 million tonnes per year (2019), which is a good deal more than the emissions from our entire transport sector.

The principle is certainly that replanting takes place, whereby CO₂ is again sucked out of the atmosphere as the new trees grow up. But this happens with a large time delay, and it is crucial in the acute climate crisis we are in. There is no point in compensating CO₂- emissions today with uptake in coming decades.

But due to the international calculation rules for CO₂-discharges, the emissions from biomass are not included where CO₂'one is deduced. We use this to "export" our CO₂-emissions and brag about the reductions, which for a good part of the way are just loans in the carbon pools our ecosystems have built up over centuries.

An obvious solution

We lack an instrument that stimulates a rapid reduction in the burning of biomass and at the same time ensures that no new investments are made in biomass-based plants.

An obvious solution is a tax on biomass for energy production. It is actually an option that had political support 10 years ago, when it was decided to introduce a security of supply tax, which was however rolled back due to an unfortunate design of the part relating to wood burning.

Could it not be possible to muster support for a biomass tax today, when climate and biodiversity are even higher on the agenda?

The expert group for a green tax reform is not considering a biomass tax at all, but instead wants to capture CO₂ from burning biomass and storing it in our underground – so-called CCS.

The idea may sound attractive, since wood absorbs CO₂ out of the atmosphere, which we then store. But there is also a significant risk.

A subsidy for CCS from biomass can indeed result in continued and potentially increasing biomass imports, which count well in our national CO₂-accounting, but which entails an unsustainable drag on the global wood resource. It is not a green transformation of the Danish economy, but rather an unreasonable use of the international calculation methods that do not help the climate.

In addition, a CO₂- tax will make the tax-exempt burning of biomass relatively more advantageous and thus create an incentive for increased consumption, regardless of whether it happens with or without CCS.

Clear signal

One of the challenges is that a tax will mean price increases for heating customers, but this can be handled by financial compensation, just as we are in the process of deciding on compensation for those who are hardest hit by the current high energy prices.

At the same time, a clear signal should be given that no investment is to be made in new works. One could also ban CCS on biomass-fired plants, with a possibility of exemption if it can be shown that it does not lead to an extension of the life of the plant.

Another challenge that is also mentioned is the lack of alternatives, but we do not believe that there is cause for concern.

We are currently seeing a significant expansion in heating capacity via heat pumps and geothermal energy, which must be expected to continue and could cover the majority of our heating needs if planned and invested in time. It must also be expected that new energy storage technologies, increased energy efficiency and more intelligent use of energy can contribute to security of supply as biomass is phased out over the next 10-15 years.

In the Green Transition Denmark, we recommend that in the upcoming negotiations on a CO₂- tax also includes a tax on biomass.

We recommend a charge that starts at DKK 15-20/GJ and increases in the coming years. For private wood-burning, a charge is also introduced for the time spent burning in wood-burning stoves etc.

This can be done with a simple temperature sensor - we have already presented a concrete proposal for this. This avoids the disadvantages of the then government's proposal for firewood tax in 2013, for example that it would promote the burning of various waste rather than clean firewood.