- Email: [email protected]
The Kyoto mechanisms and technological innovation
ARTICLE IN PRESS
Energy 31 (2006) 2325–2332 www.elsevier.com/locate/energy
The Kyoto mechanisms and technological innovation Henrik Lund Department of Development and Planning, Aalborg University, Fibigerstraede 13, 9220 Aalborg, Denmark
Abstract Climate change response, including the implementation of the Kyoto targets as the first step, calls for technological innovation of future sustainable energy systems. Based on the Danish case, this paper evaluates the type of technological change necessary. During a period of 30 years, Denmark managed to stabilize primary energy supply, and CO2 emissions decreased by 10%, during a period of 20 years. However, after the introduction of the Kyoto Mechanisms, Denmark has changed its strategy. Instead of continuing the domestic CO2 emission controls, Denmark plans to buy CO2 reductions in other countries. Consequently, the innovative technological development has changed. This paper evaluates the character of such change and makes preliminary recommendations for policies to encourage the use of the Kyoto Mechanisms as an acceleration of the necessary technological innovation. r 2006 Published by Elsevier Ltd. Keywords: Energy policy; Kyoto protocol; Climate change; Technological innovation
1. UN climate change policies and the Kyoto Mechanisms One of the important agreements in several declarations, including the Kyoto Protocol, has been to promote and coordinate the collaboration between the countries in the necessary technological development. Meanwhile, the Kyoto Protocol has introduced three new instruments, known as the Kyoto Mechanisms, which allow industrialized countries to reach their targets by becoming involved in the CO2 emission control of other countries, instead of controlling their own emissions. Such instruments may intensify international collaboration on technological innovation. However, it has been feared that these new instruments would rather be used by industrialized countries for neglecting part of the agreement, which would then lead to a slow-down in technological development At the United Nations Conference on Environment and Development in Rio de Janeiro in 1992, more than 150 governments, including the major industrial and developing countries, agreed on a framework convention on climate change. The objective of the convention was to stabilize the concentration of greenhouse gases (GHGs) in the atmosphere at a level that prevents climate changes caused by mankind. GHGs, especially carbon dioxide, are expected slowly to cause increased temperatures on earth. The main idea of the convention was to establish a framework for dealing with climate change policies. Thus, the convention established a secretariat and committed the parties to collect information on GHG emissions, conduct action plans to avoid climate Tel.: +45 96 35 83 09; fax: +45 98 15 37 88.
E-mail address: [email protected]. 0360-5442/$ - see front matter r 2006 Published by Elsevier Ltd. doi:10.1016/j.energy.2006.01.010
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change, and inform the other parties on such initiatives. In addition to the establishment of the framework, the industrialized countries committed themselves to conduct policies to limit their emissions of GHGs with the objective of stabilizing the CO2 emissions by the end of the century and maintain the emission level of 1990 [1]. One key element of the protocol is to initiate the parties to help one another with the technological development. The issue of innovation in relation to the Kyoto Protocol, including the design of proper means to promote appropriate technological development, has been discussed by various research groups [2–6]. This paper evaluates the character of technological change and makes preliminary recommendations for policies to encourage the use of the Kyoto Mechanisms as an acceleration of the necessary technological innovation. The Rio 1992 Convention was based on a series of long negotiations and previous UN conferences. One of the key documents was ‘‘Our Common Future’’, the report from the World Commission on Environment and Development from 1987, known as the ‘‘Brundtland Report’’ [7]. The Brundtland Report describes the growth in both population and resources, such as the burning of fossil fuels. (See Fig. 1). The Brundtland Report emphasizes the differences in the primary energy supply between the industrialized and the developing countries (See Fig. 2). In 1984, 25% of the world population consumed 70% of the total energy supply, while the remaining 75% of the population were left with 30%. If the total population was to have the same consumption per inhabitant, as the Organization for Economic Co-operation and Development (OECD) member countries have on average, it would result in an increase in the 1984 world energy demand from 10 TW (equal to approximately 315,000 PJ/year) to approximately 30 TW. An expected increase in the population from 4.7 billion in 1984 to 8.2 billion in 2020 would even raise the figure to 50 TW. The Brundtland Report presents two different scenarios: a high-energy scenario and a low-energy scenario. The high-energy scenario represents a 2030 ‘‘business as usual’’ situation resulting in a demand of 35 TW. Both from the viewpoint of resources and climate change, this is considered a highly risky future development. Consequently, the Brundtland Report recommends the low-energy scenario, resulting in a world energy demand of 11 TW in year 2020. According to this scenario, the industrialized countries must cut their demand from 7 TW in 1984 to 4 TW in 2020, leaving room for the developing countries to increase their demand from 3 TW in 1984 to 7 TW in year 2020. So far, the development of the world energy demand has not followed the low-energy scenario of the Brundtland Report (See Fig. 3). The total demand has increased from 10 TW in 1984 to 12.6 TW in 1998. The average consumption of the OECD countries has increased from 6.2 kW/inhabitant to 7.1 kW/inhabitant, while the average of the former East European countries has decreased from 5.5 to 3.8 kW/inhabitant. The population of the industrialized countries has only increased slightly from 1.2 to 1.3 billion. In the developing countries, both average demand and population have increased, resulting in a total increase of the demand from 2.9 TW in 1984 to 4.8 TW in 1998. In the Rio Declaration, the industrialized countries committed themselves to slow down their emissions of GHGs. Thus, this first step was in accordance with the recommendations of the Brundtland Report.
World Primary Energy Consumption 400 RES
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kW / inhabitant
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"Middle Income"
3000 4000 Million inhabitants
"Low Income"
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Fig. 2. Distribution of the world primary energy supply in 1984.
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Fig. 3. Distribution in world primary energy supply in 1998.
The Kyoto Protocol [8] from 1997 divides the parties into ‘‘Annex B countries’’ (similar to industrialized countries) and ‘‘Non-Annex B countries’’ (similar to developing countries). Following the recommendations from the Brundtland Report and the first steps of the Rio Declaration, the Annex B countries are obliged to reduce their CO2 emissions by specific numbers. The non-Annex B countries are allowed to increase their energy demands, but have agreed to pay attention to the CO2 emissions and reduce them as much as possible. Meanwhile, in the Kyoto Protocol, a number of new instruments, known as the Kyoto Mechanisms, were introduced. Until then, the industrialized countries were requested to implement decreases in energy supply and CO2 emissions within their own domestic supply. In the meantime, the Kyoto Protocol introduced three ways of fulfilling the obligations of the industrialized countries (Annex B parties) by decreasing CO2 emissions somewhere else. The three mechanisms are:
Emission Trading (ET) (article 6): Between Annex B countries, including the huge available quotas in the former Soviet countries. Joint Implementation (JI): Implementation of projects in one Annex B country (most probably East European) financed by another Annex B country. Clean Development Mechanism (CDM) (article 12): Implementation of projects in Non- Annex B countries financed by Annex B countries.
The Kyoto Mechanisms make it possible for industrialized (Annex B) countries to buy quotas or finance projects in other countries, instead of decreasing their own CO2 emissions.
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2. Danish climate change policies Denmark is an Annex B country which has made a radical change in strategy after the introduction of the Kyoto Mechanisms. Before the Kyoto Protocol, Denmark was conducting a policy of limiting CO2 emissions by decreasing the domestic burning of fossil fuels [9–16]. Energy security and climate change responses were major objectives for the Danish energy policy. These objectives have been expressed through various energy plans adopted by the Danish Parliament [17–22]. However, after the introduction of the Kyoto Protocol, the new Danish Government has changed its strategy [23]. Based on the expectation of very low costs accompanying the implementation of CO2 emissions (5–8 h/t) outside Denmark and/or the acquisition of quotas, the plan is to increase domestic CO2 emissions instead of decreasing them. This is a very radical change of the Danish energy policy. Through nearly three decades, Denmark has been able to stabilize the primary energy supply. Today, the energy consumption is the same as in 1972, when the first oil crisis started. (See Fig. 4). The figure illustrates how a situation of complete oil dependency in 1972 has changed into a differentiated fuel supply, including a high percentage of natural gas and renewable energy sources. This was achieved in a period of normal economic growth. Consequently, Denmark has been able to disconnect growth in wealth and energy demand. (See Fig. 5). In the same period, Denmark began to exploit domestic oil and gas resources, and replaced oil by coal, natural gas, and renewable energy, in such way that today Denmark is self-sufficient in oil and gas. Renewable energy sources constitute more than 10% of the primary energy supply, and wind power produces more than 20% of the electricity demand of the country. Both the stabilization of energy demands and the expansion of renewable energy sources have led to a minor decrease in the emissions of GHGs in Denmark. As shown in Fig. 6, the actual Danish CO2 emissions have been fluctuating because of differences in weather conditions and import/export of electricity. When adjusted for such fluctuations, the CO2 emissions have decreased from 61.1 Mt in 1980 to 53.8 Mt in 2001. Compared to the total GHG emissions of 78 Mt CO2-equivalent, the emissions have decreased by nearly 10% during a period of 20 years. According to the Annex B of the Kyoto Protocol, the EU countries have committed themselves to reduce the GHG emissions by 8% on average. According to the internal burden sharing of the EU, Denmark is committed to reduce its emissions by 21% [24,25]. Meanwhile, it has never been totally clear if the numbers of the Danish reference year 1990 refer to the actual emissions or the import/export-adjusted emissions. Since Denmark imported quite a lot of electricity in 1990, this has turned out to be very important. Compared to the adjusted figure, the Danish target is 45 Mt/year, while compared to the actual emissions the target is 40 Mt/year. Both targets are illustrated in Fig. 6. Until recently, it was the policy of the Danish Parliament to implement the Kyoto target by reducing CO2 emissions, according to the official energy plan ‘‘Energy 21’’ [21]. Energy conservation and an increase in the share of renewable energy sources were the primary instruments used. The implementation of Energy 21
Danish Primary Energy Supply 1200 1000
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Fig. 4. Primary energy supply in Denmark.
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Danish Energy Intensity 200 GDP PES Intensity
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Index 1972 = 100
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Fig. 5. Danish Energy Intensity.
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Danish CO2 emissions and Kyoto Targets Actual
70.0
Corrected Kyoto
60.0 Mt/year
50.0 40.0 30.0 20.0 10.0 0.0 1980
1990
2000
2010
2020
2030
Fig. 6. Actual and corrected Danish CO2 emissions compared with the Kyoto targetsyears 2008–2012.
would lead to a fulfilment of the Kyoto targets in year 2010 and a 50% reduction in CO2 emissions in year 2030 (See Fig. 7). 3. The character of technological change The implementation of technological change in the Danish energy system has been based on the principles of emphasizing energy conservation, expanding combined heat and power production (CHP) and increasing the share of renewable energy. Opposed to traditional power stations, these new technologies are widely distributed throughout the areas of consumption and have therefore been characterized by the following. The implementation of new technologies has been carried out by multi-purpose organizations. Electricity savings had to be implemented by private households and industries with other main objectives and with little interest in electricity consumption. Before, investments in supply technologies were carried out by singlepurpose organizations, such as utility companies and gas supply companies. Investments were implemented by many independent organizations, and technical solutions differed from one place to another. Sometimes new and partly unsafe and not well-proven technologies were implemented.
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Danish CO2 emissions and the New Climate Strategy 80.0 70.0 60.0 Mt/year
50.0 40.0 Corrected
30.0
Kyoto 20.0
Energy 21
10.0
New Policy
0.0 1980
1990
2000
2010
2020
2030
Fig. 7. New Danish reference CO2 emission compared with former ‘‘Energy 21’’ policy.
Maintenance of such new technologies depends on the ownership and organization. Along with the implementation of new technologies, new types of organizations emerged. Maintenance of biogas plants and straw-fired district heating systems, for example, resulted in new organizations in which corporations of farmers owned the production facilities, while corporations of district heating consumers owned the distribution facilities. Altogether, the technological change was characterized by a change from undifferentiated solutions, implemented by few single-purpose organizations, into differentiated solutions, implemented by many multipurpose organizations. For more information, consult [26,27]. These technologies are also characterized by the fact that they are long-lasting, if not everlasting. Fossil fuels are limited in time, while energy conservation, CHP and renewable energy measures have everlasting potentials.
4. The change in Danish climate change policies In February 2003, the new Danish Government issued a new climate change policy based on an extensive use of the Kyoto Mechanisms [23]. According to the analyses behind the new policy, the CO2 emissions are expected to increase from 54 Mt in 2001 to 65 Mt in 2010. The reference scenario is compared to the former ‘‘Energy 21’’ strategy in Fig. 7. According to the new climate strategy, a Danish lowest-cost implementation of a mixture of domestic reductions and the use of the Kyoto Mechanisms will be identified and implemented. From analysing the potential of buying CO2 quotas from former Soviet countries and the influence of such quotas on the world market prices of the Kyoto Mechanisms, prices between 40 and 60 DDK/t CO2 (5–8 h/t) are expected. Only very few domestic measures can compete with such price levels. Therefore, the potential of implementing long-term technologies, like the ones mentioned above, is very small. Among the domestic technologies that may have a chance is the replacement of coal by natural gas, characterized by a strong short-term potential but with limited potential in the long term, and injection of CO2 into oil fields, still an unproven technology. Innovative sustainable technologies, such as renewable energy, further expansion of CHP and energy conservation, are hardly included in the strategy. For example, further investments in offshore wind farms are considered too expensive and should be stopped, according to the analysis of the strategy. Consequently, the strategy will result in a delay in the development of technological innovation of future sustainable energy systems. Instead, the strategy finds it more cost-effective to buy CO2 quotas and employ CDM and JI projects.
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5. Conclusions and recommendations Introduced in the Kyoto Protocol in 1997 and emphasized in the Johannesburg Summit in 2002, the CDM and JI mechanisms together with the Quota Trade have come to play a major role in the implementation of GHG emission controls. In industrialized countries, there is a tendency to change strategies. Instead of implementing cleaner technologies, some industrialized countries consider to fulfil their obligations by investing in CDM and JI projects in other countries. Denmark seems to be an example. For 30 years, Denmark pursued an Energy Policy of implementing cleaner technologies in Denmark, showing remarkable results on the international stage. Energy conservation measures and the expansion of CHP production have decreased demands. Natural gas and renewable energy sources have replaced the use of oil and coal, including wind power which has expanded to cover approximately 20% of the Danish electricity supply. As a result, the primary energy supply has been stabilized over a period of more than 30 years. Furthermore, Denmark has been in the process of fulfilling the obligations of CO2 emission reduction according to the international agreements of the EU and the Kyoto Protocol. Until recently, the Danish energy policy has aimed at continuing the strategy of cleaner technologies. However, in 2002, the Danish Government stopped a number of energy efficiency initiatives. Instead, in 2003, CDM and JI projects were proposed as instruments to meet international agreements. Consequently, the primary energy supply and CO2 emissions will once again increase in Denmark. If such strategies were to be conducted by industrialized countries in general, it would influence the world development in a direction opposite to the recommendations of the Brundtland Report. Industrialized countries would raise their energy demand and CO2 emissions instead of decreasing them. The obligations to reduce CO2 emissions would be fulfilled, first by implementing JI projects or buying quotas in the former Soviet countries, and secondly, by using CDM in the developing countries. Such a strategy would either be unsuccessful in reducing energy demands and CO2 emissions or it would increase the differences between the rich and the poor countries rather than decreasing them. Furthermore, Climate Change response calls for intensive technological innovation of future sustainable energy systems. Such innovative technological development would suffer from the fulfilment of this strategy.
References [1] United Nations. Rio Declaration on Environment and Development. Rio de Janeiro, 1992. http://www.un.org/documents/ga/ conf151/aconf15126-1annex1.htm. [2] Sanden B A, Azar C. Near-term technology policies for long-term climate targets–economy wide versus technology specific approaches. Energy Policy 2005;33(12):1557–76. [3] Jakeman G, Hanslow K, Hinchy M, Fisher B S, Woffenden K. Induced innovations and climate change policy. Energy Econ 2004;26(6):937–60. [4] Christiansen AC, Wettestad J. The EU as a frontrunner on greenhouse gas emissions trading: how did it happen and will the EU succeed? Climate Policy 2003;3(1):3–18. [5] Buchner B, Carraro C, Cersosimo I. Economic consequences of the US withdrawal from the Kyoto/Bonn Protocol. Clim Policy 2002;2(4):273–92. [6] Christiansen A C. Climate policy and dynamic efficiency gains: a case study on Norwegian CO2-taxes and technological innovation in the petroleum sector. Clim Policy 2001;1(4):499–515. [7] United Nations. Our Common Future, report from the World Commission on Environment and Development. Oxford: Oxford University Press; 1987. [8] United Nations. Kyoto Protocol to the United Nations Framework Convention on Climate Change. Kyoto, 1997. http:// www.un.org/millennium/law/xxvii-23.htm. [9] Christensen P, Lund H. Conflicting views of sustainability: the case of wind power and nature conservation in Denmark. Eur Environ 1998;81–6. [10] Clark W W, Jensen J D. The role of government in privatization: an economic model from Denmark. Int J Technol Manage 2001;21(5–6):540–55. [11] Lund H. Implementation of energy-conservation policies: the case of electric heating conversion in Denmark. Appl Energy 1999;64(1–4):117–27. [12] Lund H. Choice awareness: the development of technological and institutional choice in the public debate of danish energy planning. J Environ Policy Planning 2000;2:249–59.
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[13] Lund H, Mu¨nster E. Modelling of energy systems with a high percentage of CHP and wind power. Renewable Energy 2003;28(14):2179–93. [14] Maeng H, Lund H, Hvelplund F. Biogas plants in Denmark: technological and economic developments. Appl Energy 1999;64(1–4):195–206. [15] Remmen A. Greening of Danish industry - Changes in concepts and policies. Technol Anal Strategic Manage 2001;13(1):53–69. [16] Lund H. A green energy plan for Denmark - Job creation as a strategy to implement both economic growth and a CO2 reduction. Environ Resource Econ 1999;14(3):431–9. [17] Danish Government. Danish Energy Policy 1976. Copenhagen: Danish Ministry of Trade; 1976 [in Danish]. [18] Danish Government. Energy Plan 81. Copenhagen: Danish Ministry of Energy, 1981 [in Danish]. [19] Danish Government. Energy 2000. Copenhagen: Danish Ministry of Energy; 1990. [20] Danish Government. Energy 2000. A Plan of Action for a Sustainable Development. Copenhagen: Danish Ministry of Energy; 1990. [21] Danish Government. Energy 21, The Danish Government’s Action Plan for Energy. Copenhagen: Ministry of Environment and Energy; 1996. [22] Danish Government. Energy 2000 - Follow-up: a plan of action for a sustainable development. Copenhagen: Danish Ministry of Energy; 2004. [23] Danish Government. Draft for Climate Strategy for Denmark. Copenhagen: Danish Ministry of Finance; 2003. [24] European Council (2002/358/EC). Council Decision of 25 April 2002 concerning the approval, on behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfilment of commitments thereunder. Official J L 130 , 15/05/2002 P. 0001 - 0003. Luxembourg: European Parliament; 2002. http://europa.eu.int/ eur-lex/pri/en/oj/dat/2002/l_130/l_13020020515en00010020.pdf. [25] European Council. Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (Text with EEA relevance). Luxembourg: European Parliament; 2003. http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber. [26] Hvelplund F, Lund H, Serup KE, Maeng H. Demokrati og forandring (Democracy and Change). Aalborg: Aalborg University Press; 1995. [27] Hvelplund F, Lund H. Feasibility studies and public regulation in a market economy. Aalborg: Department of Development and Planning, Aalborg University; 1998.
Energy 31 (2006) 2325–2332 www.elsevier.com/locate/energy
The Kyoto mechanisms and technological innovation Henrik Lund Department of Development and Planning, Aalborg University, Fibigerstraede 13, 9220 Aalborg, Denmark
Abstract Climate change response, including the implementation of the Kyoto targets as the first step, calls for technological innovation of future sustainable energy systems. Based on the Danish case, this paper evaluates the type of technological change necessary. During a period of 30 years, Denmark managed to stabilize primary energy supply, and CO2 emissions decreased by 10%, during a period of 20 years. However, after the introduction of the Kyoto Mechanisms, Denmark has changed its strategy. Instead of continuing the domestic CO2 emission controls, Denmark plans to buy CO2 reductions in other countries. Consequently, the innovative technological development has changed. This paper evaluates the character of such change and makes preliminary recommendations for policies to encourage the use of the Kyoto Mechanisms as an acceleration of the necessary technological innovation. r 2006 Published by Elsevier Ltd. Keywords: Energy policy; Kyoto protocol; Climate change; Technological innovation
1. UN climate change policies and the Kyoto Mechanisms One of the important agreements in several declarations, including the Kyoto Protocol, has been to promote and coordinate the collaboration between the countries in the necessary technological development. Meanwhile, the Kyoto Protocol has introduced three new instruments, known as the Kyoto Mechanisms, which allow industrialized countries to reach their targets by becoming involved in the CO2 emission control of other countries, instead of controlling their own emissions. Such instruments may intensify international collaboration on technological innovation. However, it has been feared that these new instruments would rather be used by industrialized countries for neglecting part of the agreement, which would then lead to a slow-down in technological development At the United Nations Conference on Environment and Development in Rio de Janeiro in 1992, more than 150 governments, including the major industrial and developing countries, agreed on a framework convention on climate change. The objective of the convention was to stabilize the concentration of greenhouse gases (GHGs) in the atmosphere at a level that prevents climate changes caused by mankind. GHGs, especially carbon dioxide, are expected slowly to cause increased temperatures on earth. The main idea of the convention was to establish a framework for dealing with climate change policies. Thus, the convention established a secretariat and committed the parties to collect information on GHG emissions, conduct action plans to avoid climate Tel.: +45 96 35 83 09; fax: +45 98 15 37 88.
E-mail address: [email protected]. 0360-5442/$ - see front matter r 2006 Published by Elsevier Ltd. doi:10.1016/j.energy.2006.01.010
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change, and inform the other parties on such initiatives. In addition to the establishment of the framework, the industrialized countries committed themselves to conduct policies to limit their emissions of GHGs with the objective of stabilizing the CO2 emissions by the end of the century and maintain the emission level of 1990 [1]. One key element of the protocol is to initiate the parties to help one another with the technological development. The issue of innovation in relation to the Kyoto Protocol, including the design of proper means to promote appropriate technological development, has been discussed by various research groups [2–6]. This paper evaluates the character of technological change and makes preliminary recommendations for policies to encourage the use of the Kyoto Mechanisms as an acceleration of the necessary technological innovation. The Rio 1992 Convention was based on a series of long negotiations and previous UN conferences. One of the key documents was ‘‘Our Common Future’’, the report from the World Commission on Environment and Development from 1987, known as the ‘‘Brundtland Report’’ [7]. The Brundtland Report describes the growth in both population and resources, such as the burning of fossil fuels. (See Fig. 1). The Brundtland Report emphasizes the differences in the primary energy supply between the industrialized and the developing countries (See Fig. 2). In 1984, 25% of the world population consumed 70% of the total energy supply, while the remaining 75% of the population were left with 30%. If the total population was to have the same consumption per inhabitant, as the Organization for Economic Co-operation and Development (OECD) member countries have on average, it would result in an increase in the 1984 world energy demand from 10 TW (equal to approximately 315,000 PJ/year) to approximately 30 TW. An expected increase in the population from 4.7 billion in 1984 to 8.2 billion in 2020 would even raise the figure to 50 TW. The Brundtland Report presents two different scenarios: a high-energy scenario and a low-energy scenario. The high-energy scenario represents a 2030 ‘‘business as usual’’ situation resulting in a demand of 35 TW. Both from the viewpoint of resources and climate change, this is considered a highly risky future development. Consequently, the Brundtland Report recommends the low-energy scenario, resulting in a world energy demand of 11 TW in year 2020. According to this scenario, the industrialized countries must cut their demand from 7 TW in 1984 to 4 TW in 2020, leaving room for the developing countries to increase their demand from 3 TW in 1984 to 7 TW in year 2020. So far, the development of the world energy demand has not followed the low-energy scenario of the Brundtland Report (See Fig. 3). The total demand has increased from 10 TW in 1984 to 12.6 TW in 1998. The average consumption of the OECD countries has increased from 6.2 kW/inhabitant to 7.1 kW/inhabitant, while the average of the former East European countries has decreased from 5.5 to 3.8 kW/inhabitant. The population of the industrialized countries has only increased slightly from 1.2 to 1.3 billion. In the developing countries, both average demand and population have increased, resulting in a total increase of the demand from 2.9 TW in 1984 to 4.8 TW in 1998. In the Rio Declaration, the industrialized countries committed themselves to slow down their emissions of GHGs. Thus, this first step was in accordance with the recommendations of the Brundtland Report.
World Primary Energy Consumption 400 RES
1000 PJ
300
Nuclear Ngas
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Oil Coal
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0 1900
1920
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1960
Fig. 1. World primary energy supply.
1980
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kW / inhabitant
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"OECD"
0
1000
"OPEC"
2000
"East Europe"
"Middle Income"
3000 4000 Million inhabitants
"Low Income"
5000
6000
Fig. 2. Distribution of the world primary energy supply in 1984.
kW / inhabitant
World Primary Energy Supply 1998 8 7 6 5 4 3 2 1 0
"OECD"
0
1000
"OPEC"
"East Europe"
"Middle Income"
2000 3000 4000 Million inhabitants
"Low Income"
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6000
Fig. 3. Distribution in world primary energy supply in 1998.
The Kyoto Protocol [8] from 1997 divides the parties into ‘‘Annex B countries’’ (similar to industrialized countries) and ‘‘Non-Annex B countries’’ (similar to developing countries). Following the recommendations from the Brundtland Report and the first steps of the Rio Declaration, the Annex B countries are obliged to reduce their CO2 emissions by specific numbers. The non-Annex B countries are allowed to increase their energy demands, but have agreed to pay attention to the CO2 emissions and reduce them as much as possible. Meanwhile, in the Kyoto Protocol, a number of new instruments, known as the Kyoto Mechanisms, were introduced. Until then, the industrialized countries were requested to implement decreases in energy supply and CO2 emissions within their own domestic supply. In the meantime, the Kyoto Protocol introduced three ways of fulfilling the obligations of the industrialized countries (Annex B parties) by decreasing CO2 emissions somewhere else. The three mechanisms are:
Emission Trading (ET) (article 6): Between Annex B countries, including the huge available quotas in the former Soviet countries. Joint Implementation (JI): Implementation of projects in one Annex B country (most probably East European) financed by another Annex B country. Clean Development Mechanism (CDM) (article 12): Implementation of projects in Non- Annex B countries financed by Annex B countries.
The Kyoto Mechanisms make it possible for industrialized (Annex B) countries to buy quotas or finance projects in other countries, instead of decreasing their own CO2 emissions.
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2. Danish climate change policies Denmark is an Annex B country which has made a radical change in strategy after the introduction of the Kyoto Mechanisms. Before the Kyoto Protocol, Denmark was conducting a policy of limiting CO2 emissions by decreasing the domestic burning of fossil fuels [9–16]. Energy security and climate change responses were major objectives for the Danish energy policy. These objectives have been expressed through various energy plans adopted by the Danish Parliament [17–22]. However, after the introduction of the Kyoto Protocol, the new Danish Government has changed its strategy [23]. Based on the expectation of very low costs accompanying the implementation of CO2 emissions (5–8 h/t) outside Denmark and/or the acquisition of quotas, the plan is to increase domestic CO2 emissions instead of decreasing them. This is a very radical change of the Danish energy policy. Through nearly three decades, Denmark has been able to stabilize the primary energy supply. Today, the energy consumption is the same as in 1972, when the first oil crisis started. (See Fig. 4). The figure illustrates how a situation of complete oil dependency in 1972 has changed into a differentiated fuel supply, including a high percentage of natural gas and renewable energy sources. This was achieved in a period of normal economic growth. Consequently, Denmark has been able to disconnect growth in wealth and energy demand. (See Fig. 5). In the same period, Denmark began to exploit domestic oil and gas resources, and replaced oil by coal, natural gas, and renewable energy, in such way that today Denmark is self-sufficient in oil and gas. Renewable energy sources constitute more than 10% of the primary energy supply, and wind power produces more than 20% of the electricity demand of the country. Both the stabilization of energy demands and the expansion of renewable energy sources have led to a minor decrease in the emissions of GHGs in Denmark. As shown in Fig. 6, the actual Danish CO2 emissions have been fluctuating because of differences in weather conditions and import/export of electricity. When adjusted for such fluctuations, the CO2 emissions have decreased from 61.1 Mt in 1980 to 53.8 Mt in 2001. Compared to the total GHG emissions of 78 Mt CO2-equivalent, the emissions have decreased by nearly 10% during a period of 20 years. According to the Annex B of the Kyoto Protocol, the EU countries have committed themselves to reduce the GHG emissions by 8% on average. According to the internal burden sharing of the EU, Denmark is committed to reduce its emissions by 21% [24,25]. Meanwhile, it has never been totally clear if the numbers of the Danish reference year 1990 refer to the actual emissions or the import/export-adjusted emissions. Since Denmark imported quite a lot of electricity in 1990, this has turned out to be very important. Compared to the adjusted figure, the Danish target is 45 Mt/year, while compared to the actual emissions the target is 40 Mt/year. Both targets are illustrated in Fig. 6. Until recently, it was the policy of the Danish Parliament to implement the Kyoto target by reducing CO2 emissions, according to the official energy plan ‘‘Energy 21’’ [21]. Energy conservation and an increase in the share of renewable energy sources were the primary instruments used. The implementation of Energy 21
Danish Primary Energy Supply 1200 1000
R.E.
N-gas
Coal
Oil
PJ
800 600 400 200 0 1972
1980
1988
1996
Fig. 4. Primary energy supply in Denmark.
2001
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Danish Energy Intensity 200 GDP PES Intensity
180
Index 1972 = 100
160 140 120 100 80 60 40 20 0 1972
1980
1988
1996
2001
Fig. 5. Danish Energy Intensity.
80.0
Danish CO2 emissions and Kyoto Targets Actual
70.0
Corrected Kyoto
60.0 Mt/year
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Fig. 6. Actual and corrected Danish CO2 emissions compared with the Kyoto targetsyears 2008–2012.
would lead to a fulfilment of the Kyoto targets in year 2010 and a 50% reduction in CO2 emissions in year 2030 (See Fig. 7). 3. The character of technological change The implementation of technological change in the Danish energy system has been based on the principles of emphasizing energy conservation, expanding combined heat and power production (CHP) and increasing the share of renewable energy. Opposed to traditional power stations, these new technologies are widely distributed throughout the areas of consumption and have therefore been characterized by the following. The implementation of new technologies has been carried out by multi-purpose organizations. Electricity savings had to be implemented by private households and industries with other main objectives and with little interest in electricity consumption. Before, investments in supply technologies were carried out by singlepurpose organizations, such as utility companies and gas supply companies. Investments were implemented by many independent organizations, and technical solutions differed from one place to another. Sometimes new and partly unsafe and not well-proven technologies were implemented.
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Danish CO2 emissions and the New Climate Strategy 80.0 70.0 60.0 Mt/year
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Fig. 7. New Danish reference CO2 emission compared with former ‘‘Energy 21’’ policy.
Maintenance of such new technologies depends on the ownership and organization. Along with the implementation of new technologies, new types of organizations emerged. Maintenance of biogas plants and straw-fired district heating systems, for example, resulted in new organizations in which corporations of farmers owned the production facilities, while corporations of district heating consumers owned the distribution facilities. Altogether, the technological change was characterized by a change from undifferentiated solutions, implemented by few single-purpose organizations, into differentiated solutions, implemented by many multipurpose organizations. For more information, consult [26,27]. These technologies are also characterized by the fact that they are long-lasting, if not everlasting. Fossil fuels are limited in time, while energy conservation, CHP and renewable energy measures have everlasting potentials.
4. The change in Danish climate change policies In February 2003, the new Danish Government issued a new climate change policy based on an extensive use of the Kyoto Mechanisms [23]. According to the analyses behind the new policy, the CO2 emissions are expected to increase from 54 Mt in 2001 to 65 Mt in 2010. The reference scenario is compared to the former ‘‘Energy 21’’ strategy in Fig. 7. According to the new climate strategy, a Danish lowest-cost implementation of a mixture of domestic reductions and the use of the Kyoto Mechanisms will be identified and implemented. From analysing the potential of buying CO2 quotas from former Soviet countries and the influence of such quotas on the world market prices of the Kyoto Mechanisms, prices between 40 and 60 DDK/t CO2 (5–8 h/t) are expected. Only very few domestic measures can compete with such price levels. Therefore, the potential of implementing long-term technologies, like the ones mentioned above, is very small. Among the domestic technologies that may have a chance is the replacement of coal by natural gas, characterized by a strong short-term potential but with limited potential in the long term, and injection of CO2 into oil fields, still an unproven technology. Innovative sustainable technologies, such as renewable energy, further expansion of CHP and energy conservation, are hardly included in the strategy. For example, further investments in offshore wind farms are considered too expensive and should be stopped, according to the analysis of the strategy. Consequently, the strategy will result in a delay in the development of technological innovation of future sustainable energy systems. Instead, the strategy finds it more cost-effective to buy CO2 quotas and employ CDM and JI projects.
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5. Conclusions and recommendations Introduced in the Kyoto Protocol in 1997 and emphasized in the Johannesburg Summit in 2002, the CDM and JI mechanisms together with the Quota Trade have come to play a major role in the implementation of GHG emission controls. In industrialized countries, there is a tendency to change strategies. Instead of implementing cleaner technologies, some industrialized countries consider to fulfil their obligations by investing in CDM and JI projects in other countries. Denmark seems to be an example. For 30 years, Denmark pursued an Energy Policy of implementing cleaner technologies in Denmark, showing remarkable results on the international stage. Energy conservation measures and the expansion of CHP production have decreased demands. Natural gas and renewable energy sources have replaced the use of oil and coal, including wind power which has expanded to cover approximately 20% of the Danish electricity supply. As a result, the primary energy supply has been stabilized over a period of more than 30 years. Furthermore, Denmark has been in the process of fulfilling the obligations of CO2 emission reduction according to the international agreements of the EU and the Kyoto Protocol. Until recently, the Danish energy policy has aimed at continuing the strategy of cleaner technologies. However, in 2002, the Danish Government stopped a number of energy efficiency initiatives. Instead, in 2003, CDM and JI projects were proposed as instruments to meet international agreements. Consequently, the primary energy supply and CO2 emissions will once again increase in Denmark. If such strategies were to be conducted by industrialized countries in general, it would influence the world development in a direction opposite to the recommendations of the Brundtland Report. Industrialized countries would raise their energy demand and CO2 emissions instead of decreasing them. The obligations to reduce CO2 emissions would be fulfilled, first by implementing JI projects or buying quotas in the former Soviet countries, and secondly, by using CDM in the developing countries. Such a strategy would either be unsuccessful in reducing energy demands and CO2 emissions or it would increase the differences between the rich and the poor countries rather than decreasing them. Furthermore, Climate Change response calls for intensive technological innovation of future sustainable energy systems. Such innovative technological development would suffer from the fulfilment of this strategy.
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