Consequences of the Danish law on CO2 allowances for the development of the energy sector in Denmark - Scenario analyses
The overall aim of the project was to determine what effect the energy policy introduced through the law on CO2-quotas would have on the development the energy sector in Denmark.
The purpose of the project is to investigate the consequences of the Danish Law on CO2 Allowance for the development of the energy sector in Denmark. The background for the project is that allocation of CO2 allowances to electricity utilities and large CO2 emitting companies has become an important measure in the climate change policy and the energy policy in Denmark. These entities are intended to achieve the majority of Denmark's GHG reduction obligations according to the Kyoto Protocol. The individual entity can comply in different ways - through technological reductions at their own plant; fuel switch, emissions trading, or through CDM or JI. As a point of departure, their strategies will be based on costefficiency for the entity, and there is no guarantee that the chosen strategies are the most appropriate from society's point of view. The project includes: 1) Interviews with selected entities, uncovering their strategies to comply with targets. 2) Case analyses, covering different strategies, including an analysis of the preconditions for the strategy chosen (CO2 price, fuel price, regulation…), and a preliminary analysis of its consequences. 3) Scenario analyses of the consequences for society of different strategies for the economy of society, the economy of the entity, energy safety, environment and cost efficiency, scope of energy savings, employment and technological development in Denmark. The project will serve as input for the authorities when evaluating the effects of the CO2 allowance regulation, and for the entities in their strategic considerations
The energy policy is a marketbased approach where the individual stakeholders choose how they will react within the boundaries of the allocated quotas. Options include the purchasing of quotas on the open market, investment in CDM/JI activities, the implementation of energy efficiency initiatives or fuel substitution. The focus of the study was on how the affected companies reacted to the implementation of a CO2-quota. This was done by undertaking a series of interviews that resulted in a stakeholder analysis of companies encompassed by the CO2-quota law. A series of national consequences of the law on CO2-quotas were then determined based on the stakeholder analysis. According to the results of the stakeholder analysis the following consequences were determined for the periods 2005-2007 and 2008-2012 as a result of quota regulation: 1) In the electricity production sector no additional investments will be made in energy efficiency initiatives or fuel substitution projects than were already planned before quota regulation was introduced. 2) The heating sector will carry out isolated energy efficiency projects, but generally these are not socio economically viable. 3) Industry will carry out isolated energy efficiency initiatives and renewable energy projects. Only 1.2 million tonnes of CO2 will be reduced annually through these initiatives compared to the estimated annual shortfall of 8 - 13 million tonnes CO2 The shortfall will be made up through the purchase of quotas on the open market. This study indicates, therefore, that quota regulation will make a limited contribution to further initiatives in energy efficiency and renewable energy. If furthcr energy efficiency initiatives are desired it will be necessary to implement other regulatory incentives. With regards to the industrial sector the study shows that a quota price greater than EURO 7.5/tonne will result in energy efficiency initiatives being socio-economically feasible. Interviews with international concerns that own Danish companies indicated that quota regulation may, in the long-term, have a negative effect on foreign-owned companies in Denmark if these companies have stricter quotas than their competitors in the EU or if they are in competition with companies based outside the EU. In the short-term quota regulation could mean that there will be no expansion of production in Denmark
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Contact
Teknikkerbyen 31
DK-2830 Virum, Denmark
www.ramboll.dk
Hansen, Elsebeth , 45988300, ebh@ramboll.dk
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