The Danish government has confirmed that it plans to abandon a ‘green energy’ tariff that has been financing renewable-energy projects since 1998.

Ministers said that the scheme is “expensive and ineffective”, while the European Commission has complained that the tariff violates EU rules because foreign producers do not get the same support as Danish producers.

The 11% Public Service Obligation (PSO) tariff added to Danish residents’ electricity bills will be scrapped, leaving the Government with what its critics describe as “a massive financial loss that will have to be found elsewhere”. The PSO is used to finance initiatives such as wind and solar power, and its price is set quarterly by the state-owned Energinet.dk group.

Climate Minister Lars Christian Lilleholt said: “The PSO tariff is expensive and ineffective. We have long believed that the rising costs are unsustainable, and now it is abundantly clear that we have to find an alternative.” The Danes are said to pay the highest energy bills in Europe.