The Danish price of water includes four elements: The costs of processing and distributing the water, the price of the waste water treatment (see next section), the water tax and the VAT. These result in a high price for water in Denmark. For households, the water tax is added to the costs of processing and distribution and the costs for the treatment of the waste water, resulting in a very high price for consumers and hence in an incentive to save water. It is believed that the change in consumer behaviour to use less water is more a factor of the high cost of water than an ecological awareness.
The average price charged to the consumer in 1997 was 26.0 DKK (approx €3.49) per m3. Of this total, 5.1 DKK (€0.68) went to the suppliers and 4.0 DKK (€0.54) to a special water tax. The remainder was shared between sewage treatment plants (11.6 DKK (€1.56)) and state (5.2DKK (€0.70)). The total price charged in 1997 ranged from 13 DKK (€1,74)per m3 to 45 DKK (€6.04) per m3, a factor greater than 3 (DEPA, 2002).
Using the sum of the price to the suppliers and to the special water tax (9.1 DKK (€1.22)), and assuming a total abstraction of 457 mill. m3, a total of 4,159 million DKK (€558 million) was used for water supply in 1997 (DEPA, 2002).
For industry, the water tax is reimbursed, but this does not mean that water savings has not been accomplished, as the consumer price for water even without the water tax is sufficiently high to trigger water saving incentives.
The revenue for the water tax was in 2005 1.4 billion danish kroner (€188 million) (Fuhrmann, 2006).
The average cubic metre price for collective water services, paid by consumers, including the purchasing tax (25%) and the taxation on drinking water and wastewater, increased from 18.5 DKK (€2.48) in 1993 to 39.4 DKK (€5.28) in 2003. Speck et al. (2006) suggest the increase is due to greater financial contributions to the wastewater area, purchase tax increase and introduction of the taxes on waster supply and waste water services.
The Danish water tax has been very effective in triggering huge savings of water in the waterworks companies. They have to pay the tax for lost water exceeding 10% of the water actually produced. For the waterworks the price for lost water from the pipes initially is very low, since it amounts only to the marginal costs of producing the water. By making them pay the water tax, the marginal price for lost water exceeding 10% almost rose six-fold, forcing the waterworks to pay a lot of attention of water savings and actually do a lot of repairing on the pipes (Dyck-Madsen et al., 2003).
A problem cited by the DEPA is that the water tax is collected for all water use in households without respect to water shortages, generating protests in the parts of Denmark that do not suffer from water shortage. A criticism of the revenue generated by the water tax, similar to all green taxes in Denmark, is that all the revenue goes into the state budget to cover general state expenditures as opposed to using the revenue for additional environmental protection, specifically for ground water protection. To improve water savings, the Danish government should continue to inform citizens on ways to save water and encourage them to equip houses with water-saving toilets and water meters (Dyck-Madsen et al., 2003).
Danish Environmental Protection Agency (DEPA), 2002, Groundwater Protection in Selected Countries, Environmental Project no. 667, 2002. Available at: http://www.mst.dk/udgiv/Publications/2002/87-7972-025-0/html/kap17_eng.htm
Dyck-Madsen, S., Barras, V., 2003, Denmark: Danish Water tax with complex effects, Green Budget News #5 - November 2003. Available at:
Furhmann, John, 2006. Personal communication by email. John Fuhrmann < firstname.lastname@example.org > Danish Ministry for the Environment.
Speck, S., Skou Andersen, M., Nielsen, H.O., Ryelund, A., and Smith, C., 2006, The Use of Economic Instruments in Nordic and Baltic Environmental Policy 2001-2005, TemaNord 2006:525, Nordic Council of Ministers, Denmark.