An effective, inclusive and comprehensive strategy for a decarbonised economy

Denmark has been a frontrunner in policies that reduce greenhouse gas emissions and now plans to achieve carbon neutrality by 2050. Emissions of greenhouse gases peaked in the mid-1990s and have since declined by about 47 million tonnes. Achieving carbon neutrality will require additional cuts of a similar amount. Denmark plans to frontload this effort and more than halve its emissions by 2030. Achieving these ambitious targets would contribute to global efforts to control climate change, but the transition towards carbon neutrality will have large macroeconomic consequences and entail significant financial risks. Rapid changes in consumer behaviour, large amounts of private and public investments, and a reallocation of labour across sectors will be required. The impact of climate policy on public debt will be increased by unavoidable spending to protect the country from changing weather patterns. This makes it crucial to adopt well-designed policies that contain both types of costs and promote the benefits of adaptation to climate change. This chapter outlines a cost-effective, inclusive and comprehensive strategy to decarbonise the Danish economy. It reviews progress so far, discusses macroeconomic consequences of climate policies, and recommends a package of policies.