EU’s carbon levy delay could cost Denmark €0.5 billion and slow decarbonisation efforts

According to the original report, postponing the EU’s new carbon levy for building and road transport emissions , the so‑called ETS2 , by one year to 2028 will have material fiscal consequences for member states and wider implications for industrial decarbonisation policy. Christian Stenberg, deputy permanent secretary of state at the Danish climate ministry, told POLITICO’s Sustainable Future Summit that “The delay will mean that we will lack that tool for one year. It will cost us quite a bit of revenue that we could have gotten,” adding the shortfall for Denmark is “About €0.5 billion.” For a small, trade‑exposed economy such as Denmark’s, he said, “For the Danish economy [it] is not little.”

The lost revenue matters for more than budget arithmetic. According to the original report, ETS2 was designed to extend a market‑based carbon price to emissions from buildings and road transport , sectors that are often harder and costlier to decarbonise than power , providing both an incentive signal to industry and a revenue stream that governments could recycle into low‑carbon investment, social compensation or industrial support. Delaying that price removes a predictable policy signal for manufacturers, energy suppliers and construction firms already planning product, investment and retrofit timelines.

Industry and policy responses to parallel EU measures underline the complexity operators now face. Reuters reporting shows EU institutions are actively reshaping related tools: negotiations to link carbon markets with the UK, changes to the Carbon Border Adjustment Mechanism (CBAM) that would exempt the vast majority of small importers, and proposals to shield exporting industries from undue competitive harm by using CBAM revenues for compensation. These shifts , including proposals to narrow CBAM’s scope to concentrate costs on the handful of importers responsible for most emissions , will alter which firms feel immediate price pressure and which do not, changing incentives across supply chains.

For businesses engaged in industrial decarbonisation, the combined effect is twofold. First, a deferred ETS2 postpones a clear domestic carbon price for buildings and road fuel demand, reducing the short‑term economic case for investments such as heat‑pumps, building fabric upgrades and low‑carbon transport fuels. Second, concurrent modifications to CBAM and market‑linkage plans mean cross‑border competitiveness signals are also shifting: some importers will face strengthened carbon costs while many smaller importers will be exempted, and linkage or compensation arrangements could blunt or delay cost pass‑through to certain exporters.

Policy makers thus face a trade‑off between political feasibility and the certainty markets need. According to the original report, Denmark’s quantified revenue loss is an immediate fiscal cost of that trade‑off. But industry forecasts and EU statements cited in related reporting suggest that revenue could have been earmarked for measures to accelerate low‑carbon deployment or to protect trade‑exposed sectors , uses that would have supported industrial decarbonisation and eased transition risks.

For corporate decision‑makers, the near‑term priority should be scenario planning that reflects both a later domestic ETS2 start and a differentiated CBAM landscape. Firms should stress‑test investment cases against a range of carbon‑price pathways, account for potential compensation mechanisms for exporters, and reassess supply‑chain exposure where only a subset of importers will bear border carbon costs. Government‑facing engagement remains important: industry bodies and large emitters can help shape the implementation details that will determine whether delayed policy translates into delayed abatement or simply deferred cost allocation.

Ultimately, the Danish estimate highlights a simple but consequential point for B2B stakeholders: timing matters. A one‑year postponement of a market instrument does not just shift revenue flows between budget years , it alters investment signals, risk assessments and the allocation of decarbonisation costs across industries.