Increasing the levy on aggregates in Denmark

Original title: En forhøjelse af råstofafgiften i Danmark: Samfundsøkonomisk analyse

​Aggregates such as sand and gravel are a non-renewable resource and a vital component in construction, agriculture and other sectors.

​​The non-renewable nature of aggregates is one of the reasons why extraction of aggregates is a regulated industry in Denmark. Extraction of aggregates requires a license and payment of a levy to the state.

​At the same time, extraction gives rise to noise, dust, and heavy traffic to and from the quarry, which can become a nuisance to surrounding neighbours and households.

​The Danish Regions, the authority charged with overseeing this area, raised the possibility of compensating neighbouring households, for example through increasing the existing levy on aggregates and redistributing (some of) the revenue due to the state to households. An increase in the levy would, however, increase costs for both the extraction industry and for the companies that use aggregates in their production.

​Against this backdrop, Danish Regions contracted Copenhagen Economics to investigate the socio-economic consequences of an increased levy, with a particular focus on the construction sector.

We find that:

We estimated that an increase in the levy from DKK 5.27 to DKK 10 per m3 would reduce the GDP-contribution of the relevant sectors by DKK 43 million per year through lower sales in Denmark. While the law a priori excludes exports from the levy, some industry stakeholders are uncertain of how this provision is applied. Consequently, the possibility of some additional impacts arising from an increased levy on exports could not be ruled out completely.

The study is commissioned by The Danish Regions


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