Birch Sørensen has served as chairman of the Danish Economic Councils (2004–2009) and of the Danish Climate Council (2014–2018). Like many other economists, he was critical of the fact that the most widely used economic models address the economy solely as a circuit involving households and businesses, without considering climate and the environment.

With the growing focus on these issues, more economists began to change their perspective. As early as the 1970s, William Nordhaus (b.1941) developed the first models to link economic growth with CO₂ emissions, a contribution that was recognised with the Nobel Prize in Economics in 2018.

Today, green economic models have become indispensable, not least because climate, environment and nature are key to understanding the economy.

The idea for the GreenREFORM model arose in 2016, when Birch Sørensen, as chairman of the Climate Council, saw the need for a Danish instrument for calculating economic and environmental effects of policies across sectors, from energy and transportation to agriculture and waste.

Subsequently, he and a team of colleagues began to develop the model. Meanwhile, with a different research team, he initiated an effort to calculate Denmark’s green gross domestic product (GDP), by adjusting the traditional GDP to include environmental costs, the value of nature’s services and changes to the country’s natural capital: the resources and ecosystems that the economy is based on, from forests and fish stocks to clean water and a stable climate.

By incorporating environmental data, the GreenREFORM model makes it possible to assess the effects of, for example, a CO₂ tax, an electricity tax or methane regulation in agriculture across the economy – from company expenses to household costs and government revenue – as well as the climate impact. The model can be used to test different policy scenarios and show how economic growth affects the environment.

In developing the new economic model, Birch Sørensen and his colleagues worked with the DREAM group, an independent research institution founded in 1997 to develop economic analytical instruments. In 2019, the Social Democratic Minister of Finance Nicolai Wammen (b.1971) announced that the ministry was going to be a green powerhouse and allocated a substantial amount for further development of the model for use across government ministries.

In 2023, the Ministry of Finance declared the GreenREFORM model ready for use. Thus, a research idea has become
part of the climate policy infrastructure. It enables the continual publication of documentation, presentations and articles, including about agricultural and energy taxes, to document how individual initiatives impact the economy and the environment as a whole. This was a key milestone, since Birch Sørensen’s ambition from the outset was to develop a model that would serve as an integrated tool for the authorities.

The GreenREFORM model makes it possible to calculate and debate green growth – or the lack of it. In 2024, the model saw its first use as an official part of political decision-making in Denmark, when the task group for a green tax reform and the Agreement of Green Denmark based key analyses on its calculations. The model is now also being adopted by other countries wishing to integrate economic policy and climate policy.

In 2023, Birch Sørensen and his colleagues presented the first calculations of Denmark’s Green GDP at a conference at Christiansborg Palace, and in 2025 Routledge published a book by the group on the development of Denmark’s green GDP.

The chapter is written by Dorthe Chakravarty.