Denmark’s recovery and resilience plan

Following an unprecedented crisis due to the pandemic, Denmark’s recovery and resilience plan responds to the urgent need for fostering a strong recovery and preparing Denmark’s economy for the challenges of the future. The reforms and investments in the plan will help Denmark become more sustainable, resilient, and ready to face the green and digital transitions. The Danish plan consists of 33 investments and 6 reforms. They will be supported by €1.5 billion in grants. 59% of the plan will support climate objectives and 25% of the plan will foster the digital transition.

The transformative impact of Denmark’s plan is the result of a balanced combination of reforms and investments which address the specific challenges of Denmark. The reforms will support the green transition of the economy, while most investments are targeted to increase energy efficiency, reduce CO2 emissions and foster the digital transformation. All reforms and investments have to be implemented in a timely manner, as the Regulation on the Recovery and Resilience Facility foresees they have to be completed by August 2026.

The plan will foster economic growth and create jobs. These estimates do not include the possible positive impact of structural reforms, which can be substantial. The plan is estimated to lift Denmark’s gross domestic product by 0.4% to 0.6% by 2026. This boost to the economy will bring up to 8,000 citizens into jobs. Denmark will benefit significantly from the recovery and resilience plans of other Member States, for instance through exports to these Member States. These spill-over effects account for 0.5 percentage points of the estimated impact in 2024. This demonstrates the added value of joint and coordinated action at the European level.

+ 0.4-0.6%

Positive impact of NextGenerationEU on Denmark's gross domestic product by 2026

+ 8,000

Jobs by 2026

0.5%

Gross domestic product benefits thanks to other Member States’ recovery and resilience plans in 2024

When designing the plan, Denmark’s authorities consulted national and regional social partners and stakeholders, while pursuing a close dialogue with the Commission ahead of the formal submission of the plan on 30 April 2021. On 17 June 2021, the Commission gave its green light to the plan. On this occasion, President von der Leyen symbolically transmitted the Commission’s assessment to Prime Minister Frederiksen during a visit to Copenhagen. The plan was in turn adopted by the Council on 13 July opening the door to its implementation and financing.

Green transition

In the area of climate and environmental policies, Denmark faces several challenges. Firstly, Denmark has set an ambitious GHG emissions reduction target of 70% by 2030 relative to the 1990 level, and climate neutrality by 2050 at the latest, which will require significant investments and reforms across the economy, notably through the installation of new renewable energy capacity. Secondly, energy consumption increased in the years up until 2020, which highlights the need for additional policy and measures to foster energy efficiency. Lastly, challenges remain to develop sustainable transport, through easing road transport bottlenecks, ensuring the electrification of railways and building infrastructure encouraging electricity-based transport.

Key measures for the green transition

The green measures amount to €923 million (59%) of the total Danish RRP. The two largest single green investments or reforms are the investment window (€163million) of the green tax reform component and reprioritisation of the registration tax of vehicles and low electricity tax on charging vehicles (€141million), in the sustainable transport component. Together with the research program in green solutions (€94 million) and measure related to carbon rich soils (€89 million), these four investments and reforms will boost the green transition and make up more than half of all the green investments in the RRP. Lastly, energy efficiency measures will account for € 235 million. The Danish plan will provide support to private buildings and public buildings, but also to energy efficiency of SMEs.

Example project: Green Tax reform

The most iconic measure of the plan is arguably the green tax reform. This reform consists in an increase in taxes on businesses’ energy consumption in the short term. The energy consumption tax will be replaced by a targeted GHG emission tax that is under preparation.

Digital transition

Digital challenges for Denmark include the lack of sufficient progress in raising the low share of ICT specialists in the workforce, the inclusion of women in digital jobs, careers and entrepreneurship anda growing shortage of talent with advanced digital skills, for instance in areas such as artificial intelligence, high-performance computing, cybersecurity and machine learning.

Key measures for the digital transition

Denmark’s recovery and resilience plan supports the digital transition with investments in the digitalisation of SMEs and the public administration. Tax schemes will support frontloading digital investments of Danish companies, extending rural broadband coverage and pursuing digitalisation of the healthcare sector. An SME digitalisation scheme will support the digitisation efforts of smaller-size companies. A new digital strategy will further digitalise the public administration and prepare the country for the future challenges in areas such as cybersecurity and artificial intelligence. Additionally, the plan will support the development of solutions to store and reuse personal information by public administrations and increase the share of public innovation fostered by public and private partnerships.

Example project: Fostering digitalisation and trade of Danish Small and Medium Enterprises (SMEs)

As part of the Danish RRP, the SME’s digital support scheme is expected to help small and medium companies overcome barriers to investing and using new and advanced technology and e-commerce solutions through the new digital strategy. With a budget of € 8.7 million, the measure will support at least 550 SMEs by the end of 2023 in an effort of scaling-up a proven successful scheme.

Economic and social resilience

Key macro-economic challenges for the Denmark’s economy include sluggish productivity growth as well as start-ups and small and innovative companies struggling to scale up and grow. Furthermore, R&D activity remains concentrated in a small number of large firms in a few sectors. The targets for digital and green transitions require significant investments and reforms across the whole economy.

Key measures for economic and social resilience

Key measures in reinforcing economic and social resilience firstly concern the health sector, where the plan will underpin inter alia management system for stocks of critical supplies, further rollout of telemedicine, healthcare services also for persons on the margins of society and the study of effects and side effects of COVID-19 vaccines.

Secondly, the plan reinforces economic and social resilience by fostering green and digital investments mainly of SMEs, through tax incentives thereby frontloading private investments to achieve the twin transition. Support for R&D could help to strengthen economic resilience through fostering R&D spending to smaller companies. The Danish RRP comprises investments in infrastructure to ensure critical medical supplies and in IT solutions so as to maintain broad access to healthcare, thereby contributing to social resilience.
Thirdly, the RRP should reinforce the resilience of Denmark and its capacity to absorb economic shocks. This is notably ensured by the measures in the healthcare system and the digital projects. The plan includes measures supporting SMEs, such as a digitalisation fund to strengthen SMEs’ digital transition and trade.
The objectives of the initiatives in the plan reflect both short- and long-term perspectives, with the aim of supporting the Danish economy in the recovery from the pandemic, as well as supporting Denmark’s long-term growth and the green transition. For instance, several of the initiatives can be expected to have a positive effect on the long-term growth potential of the Danish economy. Public investment in energy efficiency, green heating and carbon capture storage, and sustainable road transport are expected to increase long-term productivity and potential GDP.

Example project: Strengthen the digitalisation of the Danish healthcare system

As part of the plan, Denmark will strengthen digital solutions in the healthcare sector, with a view to better treatment, efficiency gains and better inclusion of vulnerable groups (€ 1.9 million).
Increased use of video consultations can offer benefits in terms of less physical contacts between patients and doctors and between patients, potentially reducing the risk of contracting infections. This also applies in case of quarantine situations. With ageing populations, this aspect becomes ever more important. Telemedicine offers potential for stronger patient engagement, including through questionnaires and individualised communication between doctors and patients. Telemedicine can be of particular relevance when treating persons on the margin of society such as the homeless or patients severely marked by old age. This will require special considerations, including easier logon functionality and other solutions. This can contribute to a more inclusive society.
The plan is consistent with relevant country-specific challenges and priorities identified in the European Semester, the annual cycle of coordination and surveillance of the EU’s economic policies. For a detailed explanation of the European Semester see the following link: The European Semester explained | European Commission (europa.eu)