The European Commission has cleared a €1.04 billion Danish state aid programme designed to permanently retire agricultural and forestry land from production in order to reduce greenhouse gas emissions and improve biodiversity outcomes.

The scheme allows Denmark to compensate landowners who voluntarily stop farming or forestry activities on eligible land. The objective is to lower agricultural emissions while reducing nitrogen and phosphorus runoff into rivers, lakes and coastal waters.

Permanent Land Extensification and Wetland Restoration

At the core of the programme is the permanent “extensification” of farmland. Under this approach, land taken out of production will no longer be tilled, and the use of pesticides and fertilisers will cease. In many cases, wetlands will be restored to re-establish natural hydrological conditions, helping soils retain carbon and improving ecosystem resilience.

Projects may also finance practical adjustments to land use. This includes creating or relocating fencing so that limited grazing can continue in designated areas, supporting biodiversity and landscape management without returning the land to intensive agricultural production.

The scheme also extends to certain forest areas. Landowners may receive additional compensation if they permanently halt timber production on forest land that is hydrologically linked to agricultural areas. Once forest land is set aside under the programme, it cannot be returned to commercial production, even if ownership changes in the future.

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Financial Support Through 2030

Support will be delivered through direct grants or benefits in kind, such as technical advisory services and the purchase of goods or services required for implementation. The scheme can cover up to 100 percent of eligible costs.

Eligible expenses include non-productive environmental investments, compensation for permanent income loss resulting from land retirement, and legal, administrative and surveying costs related to land consolidation. The programme will run until 31 December 2030.

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State Aid Approval and Climate Objectives

The European Commission assessed the proposal under EU state aid rules, which regulate when governments can provide financial support without distorting competition within the single market. The Commission concluded that the Danish programme meets these conditions and contributes to environmental and climate objectives aligned with EU policy.

Denmark’s initiative reflects a broader European strategy that links agricultural reform, climate mitigation and biodiversity restoration. By permanently reducing intensive land use in targeted areas, the scheme aims to deliver measurable emissions reductions while strengthening ecosystem health across vulnerable landscapes.

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