Acemoglu, D., P. Aghion, L. Bursztyn, and D. Hemous (2009). The environment and directed technical change. NBER Working Papers Series 15451, National Bureau for Economic Research.
Christiansen, A. and J. Wettestad (2003). The EU as a frontrunner on greenhouse gas emissions trading: how did it happen and will the EU succeed? Climate Policy 3(1), 3–18.
Danish Ministry of Climate and Energy (2011). Energy strategy 2050: From coal, oil, and gas to green energy. Policy paper, The Danish Government.
Eichengreen, B. (1991, January). Is Europe an optimum currency area? NBER Working Papers Series 3579, National Bureau of Eco-nomic Research, Cambridge, Massachusetts.
Enkvist, P., T. Nauclér, and J. Rosander (2007). A cost curve for greenhouse gas reduction. McKinsey Quarterly 1, 34.
European Commission (2009, October). Investing in the development of low carbon technologies (SET-Plan). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions COM(2009) 514, The European Commission, Brussels, Belgium.
European Commission Staff (2009, October). A technology road-map for the communication on investing in the development of low carbon technologies (SET-Plan). Communication from the Com-mission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions SEC(2009) 1295, European Commission, Brussels, Belgium.
European Court of Justice (2001, March). PreussenElektra AG v Schhleswag AG. Judgment of the Court Case C-379/98, The Euro-pean Union, Luxembourg.
European Greens Party (2009). A green New Deal for Europe: Man-ifesto for the European election campaign 2009. Press release, The European Greens Party, Brussels, Belgium.
Frondel, M., N. Ritter, C. M. Schmidt, and C. Vance (2009). Econom-ic impacts from the promotion of renewable energy technologies:
The German experience. Ruhr Economic Papers 156, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Essen, Germany.
Hedegaard, C. (2010, September 30). Europe’s view on international climate policy climate. Speech at the Kennedy School of Govern-ment, Harvard University, Cambridge, Massachusetts.
Heymann, M. (1998). Signs of Hubris: the shaping of wind technol-ogy styles in Germany, Denmark, and the United States, 1940-1990.
Technology and Culture 39(4), 641–670.
Huberty, M., H. Gao, and J. Mandell (2011, April). Shaping the Green Growth Economy: a review of the public debate and the prospects for green growth. Copenhagen, Denmark and Berkeley, California: Mandag Morgen and the Berkeley Roundtable on the International Economy.
Jacobsson, S. and V. Lauber (2006). The politics and policy of en-ergy system transformation—explaining the German diffusion of renewable energy technology. Energy Policy 34(3), 256–276.
Jamasb, T. and M. Pollitt (2005). Electricity market reform in the Eu-ropean Union: review of progress towards liberalisation and
integra-tion. MIT-CEEPR Working Paper 05-003WP, MIT Center for Ener-gy and Environmental Policy Research, Cambridge, Massachusetts.
Krugman, P. (1993). Lessons of Massachusetts for the EMU. In Francisco Torres and Francesco Giavazzi, eds., Adjustment and Growth in the European Monetary Union. Cambridge University Press, Cambridge, United Kingdom.
Kamp, L., R. Smits, and C. Andriesse (2004). Notions on learning applied to wind turbine development in the Netherlands and Den-mark. Energy policy 32(14), 1625–1637.
Meyer, N. (2007). Learning from wind energy policy in the EU: les-sons from Denmark, Sweden and Spain. European Environment 17(5), 347–362.
Nordhaus, W. D. (2010, May). Designing a friendly space for tech-nological change to slow global warming. Working paper, Yale Uni-versity, New Haven, CT.
Palmer, K. and D. Burtraw (2005). Cost-effectiveness of renewable electricity policies. Energy Economics 27(6), 873–894.
Rosenthal, E. (2010). Portugal gives itself a clean-energy makeover.
The New York Times Green Blog 9 August, A1.
Schepelmann, P., M. Stock, T. Koska, R. Schüle, and O. Reutter (2009, September). A green New Deal for Europe: Towards green modernization in the age of crisis. Green New Deal Series 1, Green European Foundation and the Wuppertal Institute for Climate, En-ergy, and the Environment, Wuppertal, Germany.
Schmalensee, R. and R. N. Stavins (2011). Renewable energy stand-ards: less effective, more costly, but politically preferred to cap-and-trade? Grist.org 11 January.
Schreurs, M. and Y. Tiberghien (2007). Multi-level reinforcement:
Explaining European Union leadership in climate change mitiga-tion. Global Environmental Politics 7(4), 19–46.
The European Commission (2001, March). Completing the inter-nal energy market. Communication from the Commission to the Council and the European Parliament COM(2001) 125, The Euro-pean Commission, Brussels, Belgium.
The European Commission (2007a). An energy policy for Europe.
Communication to the European Parliament and European Coun-cil SEC(2007) 12, Commission of the European Communities, Brussels, Belgium.
The European Commission (2007b, November). A European strat-egy energy technology plan (SET-Plan). Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions COM(2007) 723, The European Commission, Brussels, Belgium.
The European Commission (2010). Energy infrastructure priori-ties for 2020 and beyond - a blueprint for an integrated European energy networ. Communication from the Commission to the Euro-pean Parliament, the Council, the EuroEuro-pean Economic and Social Committee and the Committee of the Regions COM(2010) 677, The European Commission, Brussels, Belgium.
World Energy Council (2010). 2010 Survey of Energy Resources.
World Energy Council.
Zachmann, G. (2011, January). Is European climate policy the new CAP? Bruegel Policy Brief 2011/01, Bruegel, Brussels, Belgium.
© Berkeley Roundtable on the International Economy June 15, 2011
Prepared by Jakob Riiskjaer Nygård
DENMARK
COUNTRY CASE ANALYSIS
Introduction
In 2006 the Danish Prime Minister presented the ambi-tious goal of eliminating fossil fuels from the Danish en-ergy mix. The recently published “Enen-ergy Strategy 2050”
sets a target date of 2050 for achieving that goal and outlines a roadmap for getting there. What has enabled Denmark to pursue a strategy of eliminating fossil fuels from its economy without sacrificing growth? And why did Denmark adopt that objective? The answer to the first question is that a stable coalition between industry, civil society and government was formed following the oil crisis in the 1970s, and in a concerted effort it drove a relatively coherent transformation of the Danish energy sector over the following 30 years – today enabling the pursuit of fossil-fuel independence. The answer to the second question is that the emergence of a Danish clean-tech sector, coupled with the building global awareness of disruptive climate change and related emerging clean tech markets, linked the policy objectives of energy security, economic growth and climate change mitigation under the overarching goal of realizing a fossil-free economy.
This paper will divide the story of Danish energy policy into four phases and argue that the policies of the first two periods fostered the industry, infrastructure and energy mix that, combined with domestic political pres-sure and international developments, caused the policy change that enabled the fourth, emerging period.
The first part of the story – covered below in “green growth part I: energy security” – emerges in response to a highly oil-dependant economy shocked by the oil crises of the 1970s. This led to the first explicit formulation of Danish energy policy. This first phase of the story is char-acterized by the primary political objective of achieving energy security, thus insulating the economy from future energy price shocks and sustaining economic growth.
The second part of the story – covered below in “green growth Part II: The Auken years” – emerges from the elec-tion in 1993 and is characterized by the increasing im-portance of environmental priorities pursued by the new minister for energy and the environment, Svend Auken – not as a substitute for energy security, but as a layer on top of it. The policies pursued during the first two parts of the story had the derivative effect of decoupling emis-sions and economic growth.1 As such we characterize this period as green growth in the sense of growth compatible
with emissions reductions. The third part of the story – covered in “green growth part III: liberalization” – is a sort of intermezzo in the overall story of Danish energy policy.
It emerges from a combination of EU liberalization pres-sure and the 2001 election of a right-wing government eager to further this liberalization agenda. The fourth and currently emerging part of the story – covered below in
“green growth part IV: The fossil-free economy” – is initi-ated by the same right wing government’s sudden shift in energy policy in 2006 toward elimination of fossil fuels from the energy mix. This emerging phase is character-ized by the political objective of moving away from a fos-sil fuel-based economy, with the explicit objective of sup-porting a green export economy. As such, we characterize the emergence of this fourth part of the story as growth driven by emissions reductions.
Throughout the story, economic growth and energy security can be considered the primary policy objectives.
Throughout the story, economic growth and energy security can be considered the primary policy objectives.
But where emissions reductions are a derivative effect in the first parts of the story, they are seen as a vehicle of the primary objectives in the final part of the story.
1 Green growth part I: energy security (1973 – 1993)
1.1 Initial policy drivers
The first Danish energy plan of 1976 emerged in the context of an economy highly dependent on oil, a civil society highly supportive of wind energy and critical of nuclear energy, and the limitations and opportunities in-herent in Danish geography and existing infrastructure.
Its primary objective was to achieve energy security for an economy highly dependent on imports of oil, in order to insulate the economy against any future shocks like the one caused by the oil crises of the 1970s. In other words, energy security was seen as a prerequisite for economic stability and growth.
1 Emissions in this case are computed according to the IPCC method, which does not reflect the emissions “hidden” in the outsourcing of heavy industries to Asia, etc., as a result of globaliza-tion. For a discussion of this issue see Wang and Watson (2008).
This caveat of course applies to all western economies.
1.2 The toolkit: policy tools for energy independence In the context of an economy 90% dependent on import-ing oil for its energy supply, it is easy to understand why the 1970s oil crises forced the issue of energy security onto the political agenda. The three energy plans enacted during this period (1976, 1981 & 1990) employed a range of policies to achieve energy security, which can be cat-egorized under four headings: substitution and explora-tion; support for alternative sources of energy; energy efficiency; and infrastructure investment. (Mendonca, Lacey, and Hvelplund, 2009; Hadjilambrinos, 2000)
Figure 1: The historical development in electricity production by fuel reveals the integration of natural gas and renewables at the expense of oil and coal since 1994.
Electricity production by fuel 1994-‐2009
Source: DEA 2010:11 100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Figure 2: The actual historical energy use corrected for climate variability and energy use related to international electricity trade reveals the steady increase of renewables and natural gas at the expense of coal and oil since 1980.
Gross energy consumption by fuel 1980-2009
Source: DEA 2010:18 100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Renewable Energy Waste, Non-degradable
1.2.1 Substitution and exploration
The electricity industry responded independently to the oil crisis by beginning a transition from oil to coal as the primary fuel in electricity production. Oil and electricity taxes were enacted to support the shift and within a few years the electricity industry had almost completely sub-stituted coal for oil, a condition that would persist until the mid 1990s. It can be argued that this substitution does not eliminate the issue of energy security, in that coal has to be imported as well. However, there is no OPEC in world coal markets, which makes dependence on coal
imports significantly more desirable than dependence on imports of oil. In the 1990s the share of natural gas in electricity production and heat generation gradually in-creased. Figures 1 and 2 show electricity production and final energy consumption by fuel historically. (Hansen, 2003; Grohnheit, 2001; De Lovinfosse, 2008).
Related to the gradual substitution of fuel input, ex-ploration of natural gas and oil in the North Sea was ac-celerated, which helped achieve the objective of energy security, as Denmark increased its production of both, and finally became a net exporter of oil and natural gas in 1995, see figure 3 below. According to the Danish Energy Authority, Denmark is expected to remain a net exporter of natural gas until 2020 and oil until 2018. (DEA 2010;
DEA 2011:16)
1.2.2 Support for alternative sources of energy Substitution and exploration largely achieved the objective of energy security. Another important element of the first energy plan however, was to explore alternative sources of energy. Initially, nuclear energy was the favoured option of policy-makers and the electricity industry, but a strong and broad coalition of civil society movements opposing nuclear power and supporting wind power successfully stalled plans to develop nuclear capacity, and in 1985 Par-liament passed a moratorium on nuclear energy. “In 1979, energy and environmental politics, in that order, were the two policy areas (out of 20), which most Danes consid-ered themselves ‘very interested’ in” (Andersen 2008:17).2 The coalition strongly favoured wind rather than nu-clear energy, and with a geography that enabled wind – a flat country with lots of wind potential – and a history of experimenting with windmills dating back to the 1890s, the result was a gradual increase of wind as a share of elec-tricity production (see figures 2, 3, 4 and 5).
Early policies supporting local cooperative ownership helped strengthen public support for wind power produc-tion and ease barriers to implementaproduc-tion of projects. By
Figure 3: Production of primary energy measured by energy content.
In other words: Oil and natural gas production are past their peaks and expected to be exhausted by 2018 and 2020 respectively.
Primary energy production 1980-2009
Source: DEA 2010:6
Crude Oil Natural gas Renewables
1980 ´85 ´90 ´95 ´00 ´05 ´09 1400
1200 1000 800 600 400 200 0 PJ
2 Translated by author.
the early 1990s 120,000 people, out of a total population of roughly 5 million, were registered as owners of wind tur-bines – either individually or through cooperatives (Men-donca, Lacey, and Hvelplund, 2009). While the trend of local ownership has been reversed since the late 90s, it was a crucial part of the initial success of wind power deployment and helped build a foundation and broaden grassroots support for the strong wind power industry that exists in Denmark today spearheaded by the global leader in windmill markets, Vestas. Political support for renewables consisted of electricity taxing schemes, in-vestment subsidies, and RD&D support for renewable energy. The total share of renewables gradually increased to roughly 27% of electricity production and 20% of final energy consumption in 2009. (Hansen 2003; DEA 2010;
Hvelplund 1997; Toke 2002; Loring 2007; Karnøe and Buchhorn 2008; Toke, Breukers, and Wolsink 2008) 1.2.3 Energy efficiency
The third category of energy policies during the first pe-riod of Danish energy policy was energy efficiency poli-cies. By mandating energy efficiency in buildings, tax-ing delivered energy, and subsidiztax-ing energy efficiency measures; Denmark reduced specific heat demand by nearly 40% between 1981 and 1997. Overall CO2 inten-sity has been cut by 50% from 1980 to 2006 (Grohnheit 2001; DEA 2009). Crucially, as pointed out above, the share of natural gas in electricity production and heat generation increased as energy efficiency policies re-warded combined heat and power (CHP) plants using natural gas and biomass. This brings us to the final cat-egory of energy policies during the first part of the story:
infrastructure investment. (Grohnheit, 2001)
Figure 4: The number of windmills deployed increased steadily from 1980 to 2000 but began declining as development shifted to off-shore projects. The cumulative capacity however, kept increasing.
Cumulative wind capacity 1980-2009
Source: DEA 2010:9
Capacity (MW)
# of Windmills
1980 1990 2000 2008 2009
7000 6000 5000 4000 3000 2000 1000 0
1.2.4 Infrastructure investment
The development of district heating grids began in the 1950s but was accelerated as energy policy became ex-plicit during this first part of the Danish energy story.
Furthermore, it enabled the introduction of natural gas and CHP plants in electricity production, as a large dis-tribution network for natural gas was unnecessary – the distribution grid was already in place in the shape of dis-trict heating and electricity grids, to which CHP plants could be connected (Grohnheit, 2001). This massively de-creased the capital costs of a natural gas grid, thus render-ing it a desirable policy option. As we shall see below, the widespread existence of district heating grids in Denmark becomes crucial in understanding the current policy shift.
1.3 Results
As alluded above, the exploration of oil and natural gas in the North Sea went a long way towards achieving the ob-jective of energy security during the 1980s. This is not to say that energy security lost priority. Energy security in order to sustain economic growth remained the primary priority of Danish energy policy, and although becoming a net exporter of oil by 1995 meant that the Danish econ-omy would now also benefit from future increases in the price of oil, the fact that oil is traded in a world market means that oil-consuming parts of the economy would still be exposed to any future ‘oil shocks’. In that sense, becoming a net exporter of oil acted as a sort of hedge for the overall economy, but further diversification of the
en-Figure 5: On-shore capacity increased rapidly during the 90s while off-shore capacity began increasing on the early 00s and again in the late 00s. The total share of wind in inland electricity production grew steadily until the mid 00s.
Wind power's share of electricity 1980-2009
Source: DEA 2010:9
Off-shore Capacity (MW)
3500
3000
2500
2000
1500
1000
500
0 MW
25 %
20 %
15 %
10 %
5 %
0 % 1980 ´85 ´90 ´95 ´00 ´05 ´09
On-shore Capacity (MW) Wind power share of total inland production (%)
ergy mix to ensure stable economic growth in the rest of the economy remained a central driver of energy policy.