Denmark To Finance Green Transition With New Passenger Tax

The Danish government has confirmed plans to introduce a new air passenger tax on domestic and international routes that it claims will “turbocharge the green transformation of aviation.”

The proposed tax will be phased in from 2025 and be fully implemented by 2030. The cost is expected to average at DKK70 ($10) per passenger in 2025, rising to an average of DKK100 in 2030.

However, the total amount will vary based on flight duration, with shorter journeys taxed at about DKK60 per passenger by the start of the next decade, and long-haul flights at approximately DKK390. Transit passengers will be exempt from the tax.

The government says the move is expected to generate revenues of DKK1.2 billion and the proceeds will be “partially returned” to the aviation industry through investments in green aviation. These include helping to finance an ambition of using 100% sustainable fuels on domestic flights by 2030.

“The aviation sector in Denmark must—just like all other industries—reduce its climate footprint and move toward a green future,” says Denmark’s Climate, Energy and Supply Minister Lars Aagaard. “We want to create that change so that the green planes also become a reality.”

Additional funds raised from the new tax will be channeled back into the industry to support the development of green technology, the government adds. Proceeds will also go toward supporting elderly people in Denmark.

Ministers have acknowledged that the passenger tax will hit smaller regional airports harder than the country’s large airports, as tax must be paid both ways on a domestic flight. The government has therefore set aside DKK550 million for “measures targeted at Danish airports.” This support is expected to include funding for sustainable aviation fuel infrastructure and the continuation of a route development program set up to attract new international flights.

European Union (EU) state aid rules mean that operating aid can be provided to airports with fewer than 200,000 passengers annually, meaning that Esbjerg, Midtjylland and Sønderborg are expected to qualify. Bornholm Airport has also been deemed eligible for public sector support by the European Commission.

Details of the planned taxation come as Denmark’s aviation market is yet to fully recover from the effects of the pandemic, data provided by OAG Schedules Analyser shows, with domestic capacity at around 76% of 2019 levels and international at almost 87%. The Danish government says a “pit stop” will be carried out in 2027 to evaluate the success or failure of the new tax.

Speaking to Aviation Week, Aarhus Airport Senior Director of Route Development and Marketing David Surley pointed out that the sector is already actively working on sustainability measures and expressed concern about the diversion of tax revenue to senior citizen pension support and social welfare, instead of directly funding aviation initiatives.

“There is broad confusion as to how this has come about or is justified,” he says. “Industry players at large—at Aarhus, at other airports, at airlines and travelers—would like to see an aviation tax aligned to aviation initiatives in full and not redirected to state coffers.

“The EU already has robust green targets under its Europe-wide climate directive, so there are concerns about differing goals and objectives, where many in the industry believe an internationally aligned approach with economy of scale is optimal.”

Surley also highlights the potential impact on demand amid the ongoing need for regional economic development, tourism, accessibility and trade investment. He says the tax could “test the nerve of investing airlines.”