The rising cost of living has become a pressing issue for residents across Denmark, as reports indicate two significant factors contributing to these expenses: electricity prices and new air travel taxes. According to the Danish Utility Regulator, average electricity costs saw a slight increase, reflecting broader economic shifts and unsettled energy markets.
Electricity prices crept up from 2.71 kroner per kilowatt hour (kWh) in 2023 to 2.73 kroner per kWh in 2024, according to the report. This increase, though minor, has sparked concerns about energy affordability, especially as these prices remain significantly elevated compared to averages from past years. Economist Brian Friis Helmer of Arbejdernes Landsbank stated, “During the 2010s, electricity cost around 2.30 kroner per kilowatt hour.” This historical perspective highlights how far electricity bills have strayed from pre-pandemic norms.
Despite the changes, there's some silver lining: the price of electricity has decreased by 30 percent since the peaks of the energy crisis encountered in 2022. Households consuming around 4,000 kWh annually would have seen their electricity bills hover just under 11,000 kroner last year, which reflects savings of 4,600 kroner since the highs of 2022. While this offers relief, Helmer clarifies, “Compared to before corona, their electricity cost is around 1,500 kroner more.”
The variability of electricity prices throughout the day and by season contributes to the complexity of living costs. Weather conditions, particularly Denmark's dependence on wind power and energy sources, induce fluctuations. For example, the country faced notable increases during low wind conditions, where prices spiked up to 11 kroner per kWh last December. Interestingly, 2024 also marked significant periods of negative pricing, where energy was effectively free, albeit this didn’t translate directly to consumer savings due to added taxes and transport costs.
Alongside energy costs, 2024 introduced Denmark's new air travel tax, which took effect on January 1. This new levy aims to address both market equity and environmental goals. The initial tax is set at 70 kroner per passenger, which will gradually increase to approximately 100 kroner by 2030. The tax differentiates rates based on flight distance, with domestic and intra-European flights facing the most significant increases, as Jacob Pedersen, aviation analyst at Sydbank, notes. "It makes it more expensive to fly and airlines will naturally try to pass the additional cost on to passengers. All other things being equal, this means fewer people will choose to fly."
While passengers flying longer distances may not feel the pinch as much, the impact of this new tax could be more pronounced on shorter flights. For example, flights to European locations will incur lower tax rates compared to longer-haul routes, which are structured under “medium distance” and “long distance” categories. By 2030, domestic flights will bear increased costs of up to 50 kroner, affecting travel choices.
The tax was introduced partly to reduce Denmark's overall emissions and finance greener domestic flight initiatives, signaling the Danish government’s commitment to sustainability. Tax Minister Jeppe Bruus echoed the need for alignment with neighboring countries stating it is “comparable with neighbouring countries,” reinforcing the broader push for environmental responsibility. This assertion places Denmark’s actions within the European dialogue around flight taxes aimed at mitigating climate impacts.
There are criticisms accompanying the tax implementation, particularly concerning its allocation of revenue. Opposition politicians argue funds should be more strictly earmarked for the aviation sector rather than risked for other social programs, such as elderly welfare. The anticipated effect on domestic travel is notable, with estimates indicating reductions of around 7 percent by 2025 and 9 percent by 2030.
The combined effects of climbing electricity costs and newly introduced air travel taxes are indicative of the general increase in living expenses faced by Danish citizens. While energy prices have stabilized beneath the crisis-era peaks, they remain well above historical averages, creating new stresses on household budgets. Meanwhile, higher air travel costs stand to alter both domestic and international travel behaviors for years to come.