Speech

Prime Minister Lars Løkke Rasmussen's Statement at Brookings on energy and green growth in Washington D.C. on 15 March 2011

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Thank you very much to Mr. Indyk for the introduction.

And also thank you to the Brookings Institution for hosting this event today. Denmark and Brookings have enjoyed excellent cooperation over the years on many areas of foreign and security policy, especially relating to cooperation between Europe and the United States.

The topic today, the Global Energy Agenda for the 21st Century, fits extremely well in this regard. I believe that energy security and the transition to a green economy will be one of the key strategic issues on our common transatlantic agenda in the coming years.

Denmark is tackling the clean energy challenge head on. Just a few weeks ago, the Danish Government put forward a new energy strategy where we set the goal that we should be independent from fossil fuels by 2050.

In both Europe and the United States, we are confronted with a very similar set of challenges:

First, we need to reduce our dependency on energy supply from volatile regions and unpredictable suppliers. The current increase in oil prices due to the instability and fundamental changes in the Middle East and Northern Africa has once again reminded us of our vulnerability. The current situation in Japan with the damaged nuclear power plant is another example of the challenges we face.

The price increases hurt our economies and risk becoming a brake on our efforts to achieve growth after the crisis. And many countries once again find that their options in terms of supply from other sources are limited. By maintaining a high demand for fossil fueled energy, we end up transferring massive amounts to societies and regimes that may not share our values.

Second, we are faced with the reality that the global demand for resources will increase significantly over the coming years. By 2050, the world’s population will have gone up by 50 percent. Energy demand is projected to increase by more than 30 percent in the coming 25 years. 90 percent of that growth will come from non-OECD countries with China accounting for 75 percent alone.

This will inevitably lead to intensified competition for scarce resources and further pressure on the price of fossil fuels.

Third, we need to reduce emissions to combat global warming.

And fourth, clean energy solutions and green technologies present a massive commercial opportunity that our businesses must be prepared to seize. This requires a strong focus on innovation, research and development.

In my view, these four challenges together make a compelling case for action. Status quo is not sustainable. We need to undertake a fundamental transformation of our economies, freeing ourselves from the much too high dependency on fossil fuels.

Yet, as we all know, change will not come by itself. The transition to a green economy will require a determined, long-term effort and difficult political decisions.

Our starting points are vastly different. But I believe that Denmark and the United States are natural partners in this effort.

Denmark brings to the table considerable experience from our progressive national energy policy over the past decades. We have shown that our economy can grow without increasing total energy consumption.

Now we are taking energy policy to the next level. We will show that economic growth can be achieved together with a phasing out of fossil fuels. And with less energy than today.

Danish companies have cutting edge expertise in everything from wind power, to energy efficient buildings, to waste solutions that will be important in the transition in the United States. And American companies are looking to invest in Denmark. I see great potential in expanding our commercial cooperation on clean energy.

Realizing the goal of a fossil-free economy is a daunting task. We are fully aware of that. But we believe that freeing ourselves from oil, coal and gas can be done.

Our new strategy – Energy Strategy 2050 – outlines how Denmark can turn this ambitious agenda into concrete action. I believe it is one of the first national roadmaps towards a fossil-free economy.

The strategy clearly states that our goal is independence from coal, oil and gas by 2050. This will help to maintain energy security, contribute to curbing global warming, and take advantage of the opportunities for green growth and new green jobs.

This could sound like an impossible task. But inaction also contains risks.

We have to be clear that becoming independent of fossil fuels will entail economic costs for households and businesses in the short and medium term. Renewable energy is not yet fully competitive with technologies based on fossil fuels. Furthermore, public revenue from taxes on fossil fuels – high in Denmark – will fall.

If we do not reduce our dependency, however, there is reason to believe that businesses, households and society as a whole will experience higher costs and more uncertainty in the longer term.

The strategy presents a range of concrete and detailed proposals for how to substitute black energy with green energy, expand renewable energy, and decrease energy consumption. Let me highlight a few of these proposals:

Wind turbines are already a cornerstone in Danish energy policy. Wind power will be further expanded in the coming years – especially in off shore wind farms.

Today, wind energy accounts for approximately 20 percent of our electricity.

The good thing about wind is that it is plentiful and cheap. On the other hand, it is highly unreliable. On a calm day, electricity produced by wind power will be low. On a stormy day, production will be high. Needless to say, modern societies cannot base their energy supply on weather forecasts. We need to ensure the highest degree of energy security – no matter the source.

So as we expand the role of wind power, we must make sure that energy security is not challenged. In the future, we have to find stable and cost efficient ways to store electricity. In short, we have to make electricity a smarter energy source than it is today.

One solution is smart grids which will improve energy management significantly. Smart grids will enhance communication between households and power plants.

As an integrated part of a smarter grid, electrical cars, for example, can be put to use as a decentralized storage facility. Or washing machines can be set to turn on at night time when power is plentiful. All in all, this will enable us to balance the changing production levels of electricity by wind turbines.

If we combine smarter infrastructure with more wind power capacity, we expect wind energy to double over the next 10 years – covering more than 40 percent of our electricity in 2020.

We will also initiate a large scale shift from coal to biomass at our combined heat and power plants – turning our heating system green. In 2020, more than half of our district heating will be produced from biomass, compared to around one third today.

Expansion of the district heating network in Denmark has made it possible to utilize excess heat from power plants. The share of district heating produced by combined heat and power plants is about 80 percent. The share of electricity from co-production is about 55 percent. In the United States, about 7 percent of electricity is co-produced with heat.

The expansion of combined heat and power has led to vast improvements of energy efficiency. And it is the most important explanation why energy consumption in Denmark has been almost stable for the last 30 years.

We will also explore the technical and economic potential for further use of biogas from our farming sector – turning manure into green energy.

One of the really difficult challenges is reducing fossils in transportation. But we are starting with an increase in the use of bio-fuels in our transport systems, making 10 percent bio-fuels mandatory by 2020.

And electrical cars are exempt from taxation until 2015. This may sound like a small measure. But in a Danish context, this is actually a considerable subsidy considering our very high automobile taxes.

We will take measures to increase energy savings even further.

Already, a house built in 2008 only uses half the energy compared to a house built in 1977. New energy standards for buildings – both old and new – will take us further down this road. By 2020, energy consumption in new buildings must be 75 percent lower than today.

We will continue to invest in research and development. From 2007 to 2010, we doubled our investments in energy R&D. We will continue to invest substantially over the coming years.

Where do these measures take us?

By 2020, 33 percent of total energy consumption in Denmark will be covered by renewables. Today, it is approximately 20 percent.

In short, we expect to increase the share of green energy in our economy by more than 50 percent in less than 10 years. At the same time, we aim to reduce our energy consumption by 6 percent.

This will be a significant step towards a fossil-free economy and lay down the tracks for a new green economy in Denmark.

As I have mentioned, green technology is not competitive compared to fossil fuels. Subsidies are necessary and will continue to be so over the years. Going green will come with quite a price tag in – hopefully – the short run.

In the long run, however, I believe that the broader economic and political benefits of a new green economy will outweigh these costs. You could argue that this is a necessary investment for the future.

To succeed beyond 2020, however, we are faced with some important technical milestones along the way. I see five such milestones:
1. Costs of large scale renewable technologies must be lowered. The unit costs of wind power, solar and other technologies must be reduced compared to today.
2. The potential of biomass must be fully utilized.
3. We have to find cost efficient alternatives to fossil fuels in transportation.
4. Transmitting and managing electricity must be improved if we are to make electricity the future cornerstone of our energy system.
5. Fossil technologies must be improved. For example by making coal a cleaner technology than today for example through Carbon Capture Storage.

And as we progress down this path, we must be ready to capitalize on the significant business opportunities that the green transition presents.

We believe that turning Denmark into a green energy zone will have a significant positive impact on our green businesses.

Our new strategy will contribute to making Denmark an even more attractive “large scale” test facility for green technology. We aim to be a leading test location for both Danish and international businesses, for example in electrical cars, second generation bio-fuels, wind turbines and smart grids.

Today, Denmark is already the number one exporter of green tech within the EU. Over the past 10 years, Danish exports of green tech has increased much faster than exports of ordinary goods. This underlines the importance of the green tech sector as an engine for growth and job-creation in Denmark.

An important part of our approach is our use of energy taxation schemes. Energy taxes have changed the behavior of Danish businesses and households and raised awareness of saving energy. In Denmark, taxes on energy – including on CO2 – make up about 2 percent of GDP.

You could argue that taxes and subsidies are not the obvious tool to use, particularly in a period of modest growth and job creation. But in Denmark, it is part of the explanation for why we are among the leading countries in terms of energy efficiency.

Let me illustrate this through an everyday example: A gallon of gasoline currently costs around 4 dollars at the local gas station here in Washington. I know many of you think this is expensive. But in Copenhagen, a Danish consumer will pay more than 8 dollars for the same gallon!

It is important that energy taxes are used in an intelligent way by promoting societal and public goals and not jeopardizing the competiveness of our businesses. This is a real challenge as global competition intensifies.

Finding the right balance in terms of taxation is extremely difficult in all countries. And I am not arguing that Denmark has found the perfect model. But broadly speaking we see energy taxes as a cost effective way of increasing efficiency and stimulating the development of new technologies.

Our current approach in Denmark is heavily influenced by our experience since the energy crises of the 70’ies and the late 80’ies. The oil price shocks taught us the hard way the importance of energy security and the need to save energy and increase our efficiency.

Since then, we have been successful in combining economic growth with saving energy. From the late 70’ies and until 2008, Denmark’s economy grew by almost 80 percent while energy consumption was held almost stable.

As the Danish Government puts forward its ambitious strategy for 2050, we are doing so in the context of a popular mindset built on these experiences. We have a more or less stable consensus - both societal and political - that energy savings and green energy are important for Denmark’s future.

One of the more curious steps that were taken in 70’ies was the introduction of “car free Sundays”. In a period from 1973 to 1974, driving your car was actually prohibited on Sundays except for emergency purposes. Danish roads were empty. Children were actually playing on our highways!

The net savings were probably modest. But the Sundays played an important role in generating awareness in Denmark of energy as a scarce and costly asset. This helped create an understanding of the need for energy savings and efficiency.

As we seek to address today’s challenges of growth, energy dependency and climate change, it is clear that our national efforts cannot stand alone. We need more international cooperation.

The UN has to be the global framework for progress on the green agenda. With the successful outcome of COP16, which builds on the basic agreements from Copenhagen, we have created a foundation for further action, including at COP17 later this year and the Rio+20 summit in 2012.

It is said that the private sector will have to deliver 80 per cent of total investments needed to reach global climate goals. We need stronger engagement from businesses and investors in the green growth agenda.

To facilitate this, the Danish government has taken the initiative to create a public-private partnership called the Global Green Growth Forum. The Forum will bring together key politicians, business leaders, major investors and experts to find economically viable and practical solutions.

Bringing on board these stakeholders might be the key challenge in our global energy agenda for the 21st century.

Denmark is doing its part. By leading by example and showing that growth and fossil fuel independence can be combined. And by promoting practical international cooperation and working with friends such as the United States.

I thank you for your attention.