Analyses focus on current issues of particular relevance to Danmarks Nationalbank’s objectives. The analyses may also contain Danmarks Nationalbank’s recommendations. They include our projections for the Danish economy and our assessment of financial stability. Analyses are targeted at people with a broad interest in economic and financial matters.
Carbon taxes can be increased without affecting economic and financial stability
A global green transition is necessary to maintain a robust Danish economy with stable prices and financial stability in the long term. Even if the transition requires significantly higher carbon taxes than planned, this will not pose substantial challenges for the Danish economy and the financial sector. This reflects that most Danish economic activity takes place in industries with low carbon emissions, and that a basic allowance has been introduced for carbon taxes in industries with considerable emissions. The result is based on a new methodology developed by Danmarks Nationalbank for assessing the economic and financial risks of the green transition. The methodology combines transition scenarios with data on firms and their borrowing.
Key messages
Why is it important?
Climate change and the green transition may pose a challenge to Danmarks Nationalbank's objectives of stable prices and financial stability. It is therefore important for Danmarks Nationalbank to understand how and by how much climate change and different scenarios for the green transition affect the economy and the financial system.
Main chart
Additional carbon taxes and subsidies for carbon capture and storage (CCS) have a very limited impact on Danish GDP, around ±0.1 per cent.
Note:
Gross domestic product (GDP) measures the value of all goods and services produced in a country in a year.
Source:
DREAM through GreenREFORM and own calculations.