Danish Energy is a non-commercial lobby organisation for Danish energy companies. Among other things, they want to reduce the Danish electricity tax, which is among the highest in the world. In 2017, the Danish government negotiated a new tax reform, and Dansk Energy wanted to put a lower electricity tax on the political agenda.
Client challenges
Danish Energy did not believe that the economic effects of a lower electricity tax were sufficiently documented, which weakened their ability to influence the political agenda.
Our approach and findings
We carried out an analysis that shed light on the economic effects of reducing electricity tax.
As part of the work, we discussed our analysis with representatives from the Danish Ministry of Taxation, and we used the same methods and data sources that are used on “Slotsholmen”.
The main conclusions of our analysis are:
- Compared to other tax cuts, a reduction in the electricity tax is an effective instrument for increasing labor supply and especially GDP. This is partly since the electricity tax - as opposed to ordinary income taxes, for example - also distorts the consumption decision.
- Unlike most other tax cuts, a reduction in the electricity tax will also reduce income inequality. This is because electricity consumption grows less than in proportion to income.
Benefits achieved for our client
Danish Energy used our work actively to communicate with both politicians, officials, and the media. And in the end, the electricity tax was reduced.
“In their work for Danish Energy, HBS Economics has shown solid socio-economic expertise and has an important focus on delivering a correct product. They have been very accommodating to our needs. We also appreciated their understanding of how problems are analysed at “Slotsholmen”, as well as their ability to conduct a good dialogue with relevant out of house experts. It gives us a lot of confidence in their work.”
- Torsten Hasforth, Senior Consultant, Danish Energy
