This study examines why the Danish CO2 tax system has remained a substantial tax break on industry. Denmark was part of the “First Wave” of countries to introduce a CO2 tax, as were the other Nordic countries, in the 1990s. However, the Nordic CO2 tax structure remained a substantial tax break and low tax burden, andwas distorted because of the large tax break of the CO2 tax burden on industry. The Danish government tried to increase the burden of the CO2 tax on industry, but this attempt failed owing to problems of international competitiveness and the country’s relationship with the EU and the other Nordic countries. The structure of the CO2 tax burden was very regressive, which meant it was too heavy for the low-middle income groups. Therefore, the center-right government introduced a “Tax Freeze” (Skattestoppet) in 2002, to avoid increasing the tax burden on the low-income groups. Nevertheless, the “Tax Freeze” failed to secure the flexibility of the tax policy, and accelerated the real estate bubble precipitated by the Lehman shock in 2008. In order to cover for the reduction in income tax since the 1990s, an environmental taxation was introduced, and then subsequently increased. However, it has become more difficult to acquire additional CO2 tax revenue, needed because of the reduction in income tax. The low-middle income groups did not support the increase in CO2 taxation, because it was not implemented to improve the environment, but rather to generate additional tax revenue. Therefore, the Danish CO2 tax system has recently been reconsidered.