Monday, May 21, 2007

Danish-Style Energy Policy

About a month ago, the Wall Street Journal had an article on Denmark's approach to energy. The Danes are rock stars in the world of energy efficiency and conservation, their overall energy consumption is identical to what it was 30 years ago:

While America's energy consumption rose 40% over the same thirty-year period, the U.S. GDP quadrupled. Danish population went up 7% while US population went up 38% over the thirty-year period. U.S. population growth roughly tracked growth in energy consumption, while the Danes have gotten more energy efficient over the last thirty years (7% growth in population, zero growth in energy consumption). The kicker of course is the much faster growth in the U.S. economy.

Besides energy there are other forces at work to explain the much faster GDP growth in the U.S.: at 5.5M, Denmark's population is smaller than the SF Bay Area, and as a state with generous social welfare benefits, taxes are quite a bit higher than the U.S. Show an average American the above graph, they would likely say that for the given the growth in GDP, a 40% rise in energy consumption is acceptable. Denmark's economy has not grown as fast as the U.S., but they have had solid growth, and by European standards fairly low unemployment. With global warming increasingly becoming a problem, and with India and China poised to start consuming a lot more energy, the Danish approach has been attracting a lot of attention from policy makers worldwide.

Before we delve deeper into Danish energy policy, let's revisit a few head-to-head comparisons between the U.S. and Denmark. By some estimates Electricity and Heat generation account for about 40% of CO2 emissions in industrialized countries -- representing the largest source of emissions. The graphs below give a breakdown of Electricity and Heat generation for the U.S. and Denmark. Denmark is among the largest Wind Energy producers in the world, and in the graphs below Wind falls under "other" sources. For both Electricity and Heat generation, the combined shares of Biomass, Waste and Wind/Other in Denmark are impressive:

In terms of emissions per capita, Denmark is down 13% over the last 30 years, while the U.S. is producing 7% less emissions per capita over the same time period:

Now we turn to some hallmarks of Danish Energy policy as discussed in the WSJ article.

"But in Denmark, much of the country's energy sector is in the hands of nonprofit cooperatives, with residents as shareholders, which makes it easier for government to direct policy with little opposition from business interests."

Municipalities in California are starting to consider public power as a solution to their energy woes. The combination of rising electricity prices, the state's power crisis from a few years ago, and lower prices in LA, Palo Alto, Sacramento, Santa Clara and other localities with municipal power, have made public power a possibility in other parts of the state. Maybe what social scientists refer to as the external locus of control, is waning!

"'We redesigned the whole manufacturing process to save energy,' says Søren Eriksen, technical director of Danish Crown, a meat company that produces $11 billion of pork and beef annually. 'Everything is reused.' ... Danish companies pay 43% more per megawatt hour of electricity than companies in the U.S., 24% more than in France and 19% more than in England, according to Dansk Industri, an industry trade association."

In recent posts I highlighted the ineffcient use of energy in the U.S. Chemical industry, and energy arguments in favor of Organic agriculture. In Denmark, the high-cost of energy means that industries have no choice but be as energy efficient as possible:

The downside is that the high cost of energy (and labor costs) has made Denmark less-competitive in energy-intensive industries. U.S. industries seem to be trying to get ahead of climate change legislation and the ones who have the foresight will come up with cost-effective, innovative and game-changing technologies that promote energy-efficiency.

"A Dane buying a new car must pay a registration fee of approximately 105% of the car's value, plus additional taxes on fuel. ... Taxes now make up more than half of Danish households' electricity bills; prices at the gas pump doubled once fuel taxes took effect."

The car tax is a non-starter in the U.S.: Americans love their cars and mass transport sucks in most parts of the country. Any politician who even suggests a tax increase of that scale will be vilified. In a related article, the Journal featured Copenhagen and Amsterdam as bicycle nirvanas, places where more than a third of commuters go to work by bike. Copenhagen is launching more initiatives aimed specifically at encouraging even more bikers. Heck the Dutch PM sometimes bikes to work! A quick glance at a list of bike-friendly cities in the U.S. reveals mostly college towns, with a few large cities further down the list. I have to admit being impressed by the fact that Mayor Daley of Chicago bikes to work -- probably not in the winter :-)

"To build on the success of the new heating system, the government introduced a new building code in 1979 that forced people to build their homes with thicker insulation and tighter-sealing windows that would preserve energy. The building code is tightened periodically. It lowered Denmark's heating bill by 20% between 1975 and 2001, even though some 30% more heated floor space in buildings and homes was built during that period, according to the Danish Energy Authority."

Coincidentally, the NYTimes Magazine has an excellent article on this topic. By tightening building codes over the last decade, Green Building and Architecture has become a reality in parts of Western Europe. While U.S. politicians have been talking about ethanol, climate change, and more efficient cars, Green Architecture is an area which is ripe for discussion. In a future post, I will analyze energy use in the construction sector.

While parts of the Danish approach are non-starters in the U.S., its still interesting to see how this relatively small European country has chosen to address its energy challenges. More importantly, Denmark's energy policy has drawn a lot of interest from other countries. From an American perspective, all is not lost. As I pointed out in a previous post, sound energy policy already exists in the U.S.
Consider the case of California:

Power use per person has remained roughly stable in the state since the 1970s, even as it has doubled in the rest of the country (see chart above). As a result, California's greenhouse-gas emissions per person are on a par with those of Denmark. Relative to the size of its economy, they are lower.
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