Denmark is one of the best-prepared EU Member States to manage the social impacts of the new carbon pricing system, ETS2. National estimates show that only 0.2–0.9% of households are energy poor, and the Danish welfare model already provides strong income support to protect the most vulnerable. Thanks to widespread use of district heating (serving over 40% of households) and rapid electrification in both heating and transport, the overall impact of ETS2 price increases is expected to be limited.
Vulnerability is concentrated in a small group of households – typically low-income, reliant on fossil heating, living in energy-inefficient homes, and located in rural areas with poor access to public transport.
This means Denmark’s climate planning must go beyond broad compensation schemes. Instead, it should focus on identifying and supporting those few who are most at risk. Targeted measures like the Energy Renovation Fund, Heat Pump Fund, and Cycling Fund could help around 6,000 households and 12,000 transport users, while cutting emissions by 25 kt CO₂ annually. To ensure long-term impact, Denmark can also build a monitoring framework that links income, housing, and transport data, helping policymakers track vulnerability over time and adapt measures as ETS2 evolves.
The findings presented stem from the EU project “Support to the Preparation of Social Climate Plans”, led by Trinomics in collaboration with a wider consortium of modelling experts and country teams. Copenhagen Economics led the work for Denmark as part of this consortium, contributing analysis and policy recommendations throughout the project, which ran from summer 2024 to the fall of 2025.
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