The three-party coalition government, which includes the Social Democrats, Liberal and Moderate parties, reached agreement on the tax hike as part of a green spending deal with the Socialist People’s Party, the Conservative People’s Party, the Red Green Alliance and the Social Liberal Party. 

The deal will see tax on diesel increased by half a kroner per litre from the start of 2025, with owners of diesel cars compensated in the first two years by a reduction in the udligningsafgiften or “equalisation tax”, meaning that only those who drive frequently or long distances will see their costs increase. 

“If you drive less than 20,000 kilometers per year, there will be a small cut in your costs. If you drive further, it will be a little more expensive,” Denmark’s climate minister, Lars Aagaard, from the Moderate Party, said at a press conference announcing the deal. “It will become a little but more expensive at the pump. On the other hand, your ongoing payment for having a car will be slightly less in the first few years.” 

The government estimates that hiking the tax on diesel will reduce greenhouse gas emissions by 0.4 million tonnes of CO2 in 2025 and 0.3 million tonnes of CO2 in 2030.

The tax is significantly lower than the 0.9 kroner hike in the diesel tax recommended by the Danish Climate Council, but Aagaard said that this was necessary given the risk that truck drivers might opt to fill up their tanks elsewhere. 

“We have adopted a tax which will lie between those of our two large neighboring countries, Sweden and Germany. It is not put into the world to bother people,” he said.

“We all have to remember that in 2027 it will get a step up because we are implementing the European rules. Those who sell fuel must buy CO2 allowances. The tax system is also dynamic, so we are looking at neighbouring countries.”