Climate policy for agriculture – explaining why Denmark introduced carbon pricing on agriculture

In a landmark decision from 2024, Denmark became the first country in the world to introduce carbon pricing on agricultural emissions. The ambition of getting to net-zero carbon emissions requires substantial reductions in the agricultural sector. But reducing emissions here is not straightforward. As Danish agriculture is a major industry with substantial exports, it raises the question: what brought about this dramatic and surprising policy change? Based on document analysis and interviews, this article explores explanations from historical institutionalism, political economy and politicization literature. The article finds that adopting long-term and clearly formulated net-zero targets required all sectors to contribute to emission reductions. This changed the political economy, allowing for sectoral cost profiles for climate transitions to be compared, with policy discussions on how to utilize first-mover advantages. Climate policy was high on the governmental policy agenda, and positive politicization created an opportunity for radical climate policy development. Crucially, a green transition of the agricultural sector is seen as a competitive advantage by the sector itself. Findings indicate that carbon pricing in agriculture needs to be part of a larger policy portfolio, with substantial funding and revenue recycling. Key policy insightsAdopting a net-zero target changed the political economy of the Danish climate transition. This allowed cost-profiles for climate transitions across sectors to be compared and for debating how to utilize first-mover advantages.Political competition for ambitious climate policy made radical policy development possible. Still, it is crucial that actors utilize the opportunity while it is still open.Carbon pricing for agriculture may be enabled by being part of a larger policy portfolio, with a broad policy mix, substantial funding and revenue recycling.The European Commission has displayed an interest in developing a carbon pricing mechanism for agriculture. Consequently, the EU may look to the Danish example. Adopting a net-zero target changed the political economy of the Danish climate transition. This allowed cost-profiles for climate transitions across sectors to be compared and for debating how to utilize first-mover advantages. Political competition for ambitious climate policy made radical policy development possible. Still, it is crucial that actors utilize the opportunity while it is still open. Carbon pricing for agriculture may be enabled by being part of a larger policy portfolio, with a broad policy mix, substantial funding and revenue recycling. The European Commission has displayed an interest in developing a carbon pricing mechanism for agriculture. Consequently, the EU may look to the Danish example.