Denmark’s energy revolution began with the shock of the 1970s oil crises, where prices quadrupled in a few days, and the country got the wake-up call it needed to start turning around its energy system. After four decades of progressive reforms—aimed first at securing supply and later at decarbonizing the economy—Denmark has become an example of how to transition to a low-carbon economy by combining market-based and regulatory approaches. Danes now enjoy a strong, secure energy supply and economic growth increasingly decoupled from energy consumption, and the country has set the goal of becoming independent of fossil fuels by 2050.
To understand this transformation, we need to go back to the first oil crisis in 1973, when world oil prices spiked dramatically, and 90 percent of Danes’ energy supply was imported. In response to the crisis, Denmark’s policymakers turned to the rich oil and gas reserves of the North Sea in a bid for energy independence over the course of the 1980s (before climate science was fully understood). At the same time, a diversification process was started; oil was gradually in the first phase replaced with coal and natural gas and in the second phase added with and replaced by bioenergy and wind. District heating systems based on combined heat and power production were also expanded into homes and businesses.
The oil crisis produced a strong social mandate for change, and forged a series of political national energy agreements using a holistic, integrative planning approach —something Denmark, to a degree, has pioneered. Four decades of progress rests on parliament continuing to build cross-parliamentary support. This political license, in turn, liberates policymakers to focus on the long-term. Denmark’s current energy 2012–2020 agreement continues the transformative process: redoubling the country’s deployment of renewable energy as fossil fuels are phased out.1
Today, around 40 percent of Denmark’s electricity supply is sourced from wind; which is a remarkable achievement given wind’s fitful nature.
Greening the energy supply is one part of the strategy. The other is increased energy efficiency. By 2013, the country consumed about a third less energy per unit of GDP compared to 1990. Danes enjoy a high standard of living with a comparatively small carbon footprint.
Denmark’s goal is to become independent of fossil fuels by 2050—a steep challenge. The government is pursuing a policy of “green realism”—focusing on cutting clean energy costs and raising competitiveness via market-based instruments. But, Denmark cannot do the job alone; a conducive international policy environment is needed, which is why Denmark actively seeks strong global climate action.
Denmark actively worked to secure the ambitious global climate agreement at the UN climate conference in Paris in December 2015 (COP21). At the same time, Denmark cannot rely solely on the UN system to mitigate climate change. Denmark is already engaged in close bilateral cooperation with a number of emerging economies to promote the development of clean, efficient energy systems. In 2014, Denmark also exported energy technology to the value of DKK74.4 billion (USD$11.2 billion), and we have ambitious plans to keep expanding new energy technology markets.
European solutions are also needed. Realizing the national 2050 goal means more exchange of supply with our neighbors to remedy fluctuations in clean energy supplies. Denmark needs to open up and, together with the rest of the EU, increase cross-border trade and market integration. The success of Danish energy policy is increasingly reliant on greater European cooperation and co-regulation. Steps have already been taken towards a Europeanization of energy policies, with EU energy targets for 2030 set and a process underway to establish an energy union that will seek to integrate European energy systems across the national borders.
The EU has pioneered the use of market mechanisms in meeting emissions targets through the EU Emissions Trading System (ETS), with strong support from Denmark. Today, almost half of Danish emissions are covered by the EU ETS. The price of carbon has the potential to provide cost-effective incentive for emissions reduction initiatives in the private sector.
The EU 2020 Climate and Energy package sets a goal for the EU to cut its emissions by 20 percent by 2020 compared to 1990 levels. Some of these emissions are covered by a joint EU reduction target in the ETS, while Denmark is obliged to reduce emissions in the sectors outside of the ETS by 20 percent from 2005 to 2020. The EU has set a 2030 emissions reduction target of at least 40 percent which Denmark expects to make a significant contribution to fulfilling.
As ambitious as Denmark’s energy policies are, they do not yet go far enough to meet its international obligations. Denmark has already come a long way down the road toward decarbonization of the energy economy, yet there is a need to cut emissions across the economy, including transport, agriculture, and individual heating. Denmark has been successful by being determined but practical, by seeking cost-efficient and competitive solutions, and by integrating energy with other social and economic goals. Denmark has pioneered a clean energy revolution, but, it is a revolution still in motion.
References
- Danish Energy Agreement for 2012-2020. International Energy Agency [online] (2013) http://www.iea.org/policiesandmeasures/pams/denmark/name-42441-en.php.
