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Thomas Larsen

Danish investment in green growth

For years, the Nordic countries have had focus on the fact that growth and sustainability are not mutually exclusive. In Denmark two new key reports propose complete independence from fossil fuels and increased focus on green growth.

Apr 07, 2011

On Friday 25 March, 2.4 million Danes were glued to the television to follow the final of the talent show X-Factor. In the middle of the show, however, the television news was 'allowed' to send its 9 o'clock broadcast, and then an enormous containership from A.P. Møller - Mærsk suddenly loomed up on the screen.

"Emma Mærsk", as the ship is called, must, like the rest of the fleet from the world-famous shipping company, learn to sail more environmentally correct. In the report from the shipping company's headquarters on Esplanaden in Copenhagen, one of the top executives, Eiving Kolding, explained that his bonus in the future will be dependent on his delivering significant reductions in the ships' CO2 emissions.

Both he and others from the shipping company stressed that they expected to be able to save money on this exercise, and that they were also counting on capturing more customers, who increasingly want to buy services from companies who work actively to increase sustainability.

After that they cut over to a representative from a major environmental organisation who received the announcement from A.P. Møller – Mærsk with a standing ovation.

Historic change

The environmental people's cheers are understandable. Only a few years ago not many would have imagined that Denmark's famous blue shipping company would take the plunge as a green stakeholder, but the sudden change at the A.P. Møller – Mærsk Group is anything but random. The shipping company has consciously chosen to embrace the new environmental and climate agenda, as a large number of global companies are doing today.

When Nils Smedegaard Andersen, CEO of A.P. Møller – Mærsk, attended the World Economic Forum's annual meeting in the Swiss alpine town of Davos at the end of January, he spent most of his time talking about sustainability. A great number of heads of the world's largest companies and industries did the same, and together they illustrated that a watershed shift in industry is underway.

Without boasting too much it can be stated that many of the frontrunners are to be found in the Nordic countries, where the idea of sustainability caught on early and has the strongest roots in both businesses and with the politicians.

In all the Nordic countries, the parliamentarians are focused on formulating goals for how the fight against climate change, efforts for a better environment and the design of a solid business case form a coherent whole. If this is successful, the Nordic countries can maintain and strengthen their competitive advantage in the new green economy in the years to come.

New energy strategy

In Denmark the development is underlined by the fact that, in the last few months, Prime Minister, Lars Løkke Rasmussen's non-Socialist-Liberal government, has launched two major and important plans that have sustainability and the green economy as major focal points.

Earlier in the spring, the government published the document – ”Energy Strategy 2050” – which, amongst other things, contains goals for how Denmark will become independent of fossil fuels and switch over to a green energy supply.

The strategy describes a number of means which will make Denmark a green sustainable community with a stable energy supply. By 2020 alone, the use of fossil fuels in the energy sector will be reduced by 33 percent, compared to 2009, by replacing fossil fuels with renewable energy. In addition, the gross energy consumption in 2020 will be lowered by 6 percent compared to 2006, due to a strong focus on energy efficiency.

When Climate and Energy Minister, Lykke Friis, calls attention to the government's strategy, she also stresses that the government has put pressure on the EU, amongst others, to make tougher demands for the reduction of CO2 emissions from cars, ships and planes. And she envisages that electric cars will play a key role, particularly as battery technology improves, but she also makes it clear that it will take time before electric cars can be accommodated intelligently and profitably in the energy system.

Change-over takes time

According to Lykke Friis, there are many weighty arguments in favour of Denmark being able to free itself from fossil fuels by 2050:
The change-over will obviously benefit the climate. The change-over will reduce dependence on the countries which have oil and gas, and thus Denmark will achieve a greater autonomy in foreign policy and independence from dubious and unstable regimes.

Finally, the change-over will work as a buffer against the sharp price increases in fossil energy which are expected as still more people on earth are demanding more energy.
Lykke Friis refers in this connection to figures from the EU's Danish Climate Commissioner, Connie Hedegaard, who has stated that the EU countries' energy bill for imported oil in 2010 alone rose by DKK 400 billion.

The strategy does not contain a complete timetable up to 2050 and this has triggered criticism from the opposition. Opposition politicians think that the government should have shown in more detail how the target of independence from fossil fuels will be achieved, as critics accuse the government of failing to set sufficiently ambitious targets for reducing energy consumption.

On behalf of the government, Lykke Friis has argued that there must be room to get smarter on the road towards the ultimate goal, and therefore it makes no sense with a detailed plan up until 2050.

The minister stressed that energy reductions must occur at a pace so that, for example, homeowners and businesses can manage to adapt. And she argues that it is most cost effective to choose new energy-efficient solutions wherever there will still be a need to replace equipment or renovate buildings. If the pace is forced, well-functioning equipment may have to be scrapped, and this will make the transition unnecessarily expensive.

Finally, she insists that all initiatives must be financed, that there is a need to take account of business competitiveness, and that the change-over must not knock a hole in the Treasury.

Skirmishes between government and opposition cannot hide the fact that virtually all politicians at Christiansborg are in agreement to focus on goals to reduce dependency on fossil fuels and create a more sustainable future.

Green Growth in Growth Forum

That sustainability has long since moved on from being the agenda for long-haired hippies and eco-flippers is shown by another new initiative from the government. This initiative illustrates that sustainability today is being incorporated into the individual countries' growth strategies.

Recently the government's Growth Forum published a report that contains proposals for a new growth strategy for Denmark. The participants in the Growth Forum - which includes top executives from the country's largest companies - suggest that politicians should follow 10 main recommendations.

The 10 points are about "profitable green growth", and among the specific proposals is that Denmark's head start in the energy sector must be better exploited, and more must be done to ensure a more efficient use of energy.

The report repeated a number of points from the "Energy Strategy 2050" about how the phasing out of fossil fuels and increased use of renewable energy will tackle global climate change and improve security of supply.

In addition, it is stated that a more efficient use of energy will reduce energy costs' share of GDP and make the Danish economy more resilient for future increases and fluctuations in energy prices.

Specific recommendations

The specific advice of the Regional Growth Forum includes:

Overhaul of energy tax. This may include helping to support reduction of fossil energy, provide enhanced community economic efficiency, sound public finances, boost competitiveness and help to develop renewable energy and ensuring a continued incentive to improve energy efficiency.

  • More energy efficiency. Implement cost-effective measures for energy efficiency, including adjustment of building standards.
  • Renewable energy must be competitive in relation to fossil fuels. This can happen through continued user-paid subsidies for renewable energy production.
  • Develop long term procurement plans for renewable energy in order to attract relevant producers/investors, and improve tender procedures to achieve a cost-effective expansion of renewable energy.
  • Transmission capacity between Denmark and neighbouring countries must be strengthened. Denmark will work to include the Danish electricity market in an integrated internal market for energy in the EU. It will be a particular challenge that future energy systems be based on renewable energy where production fluctuates - especially wind power - and there will be a need to develop intelligent power systems and strengthen power transmission capacity in both Denmark and the EU.
  • The strategic focus in research, development and demonstration programmes in the energy sector must be strengthened.

If you read the new reports, you will get a clear picture of a watershed shift, which has, therefore, also led to a new course for the gigantic and polluting container ships on the oceans. There may be disagreement about the pace. But the green course is fixed.

The views expressed are those of the author.

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