Schools that do not get enough students through exams could see their budgets docked. Jon Buscall reports.
Plans to link senior high-school funding to enrolment and exam results have upset academics and teachers.
The controversial system is already in place in universities, putting departments under pressure to attract more students and raise exam passes.
The government has yet to persuade its coalition partners to back the proposed reform to senior highs - which cater for 16 to 19-year-olds - but is hoping to push it through parliament before the summer recess.
Professor Peter Harder, director of English studies at Copenhagen university and four other professors have urged the government to drop the plan. The five jointly authored a report on the future of Danish schooling commissioned by the education ministry.
Professor Harder said: "Financial viability will become the main parameter for education. The risk is that schools' attention will be redirected to attracting and keeping applicants rather than ensuring the quality of education."
Gorm Leschly, chairman of the Danish National Union of Upper Secondary School Teachers, said he fears such a system will leave schools in remote areas unable to compete financially. Lower pupil numbers would force them to close and students would have to travel to urban areas.
To survive, schools will be forced to put money into marketing and recruiting students instead of teaching, he said.
Universities do not get funding for all students enrolled, only for those who pass exams or gain credits. They must therefore ensure students get through courses. Departments have to estimate student passes each year. If they don't meet their quota of passes their funds are cut.
But Professor Harder conceded that the system had pushed pass rates up at universities. "More students pass despite the reduction in teaching hours, reading lists and written feedback."
There may be more upheaval in store for schools, however, following a stinging attack on the Danish school system in a report by the Organisation for Economic Co-operation and Development.
Released by the Danish ministry of education in May, it recommended more testing of pupils and systematic self-evaluation by schools. It also questioned the quality of teacher training.
The report was scathing about the lack of clear curriculum goals and absence of a "test culture". Many children reach ninth grade without understanding what is expected of them.
Education minister Ulla Tornaes has promised to consider the OECD's recommendations, but stressed the report "supports many of the changes we made to school law last year".
However, Ms Tornaes said: "We need more diagnostic tests to show how individual students are performing and identify areas for improvement."