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Omkostningseffektive tiltag i de ikke-kvotebelagte sektorer

Summary and conclusions

• The Climate Strategy and the background for the analysis of policies and measures
• Danish emissions of climate gases and the climate deficit 2008-12 16
• Efforts so far
• Reduction potential in the non-ETS sectors
• Description of other measures examined for the non-ETS sectors
• Technology development and long-term reductions possibilities / requirements
• Climate considerations in plans, programmes and decisions

The Climate Strategy and the background for the analysis of policies and measures

This is a status report of the considerations regarding potentials for and costs of reducing emissions of greenhouse gases in the non-trading sectors. In connection with preparation of the national Energy Strategy, further cost-effective, domestic initiatives may appear.

A cost-effective strategy to meet Danish commitments under Kyoto Protocol depends on the choice of policies and measures, including use of the European Union Greenhouse Gas Emission Trading Scheme (EU ETS) and the flexible mechanisms (JI/CDM credits).

In connection with the Danish Climate Strategy, a socio-economic assessment was completed of a large number of technologically feasible domestic policies and measures to reduce greenhouse-gas emissions. The analyses showed that the relatively few domestic measures, which are relatively cheap and have a good reduction potential, are primarily within the energy-intensive sectors, including production of electricity in particular. These sectors are extensively covered by the EU ETS. The reasons why the cheapest reductions opportunities are to be found in these sectors include that they have traditionally been exempted taxes, or have been granted tax relief, while the non-ETS sectors (primarily energy consumption by transport and households) have been subject to higher CO₂ and energy taxes. Emissions of greenhouse gases by agriculture have not been regulated, but in this regard regulation of nitrogen consumption in the plans for the aquatic environment in particular has indirectly led to a reduction in emissions of nitrous oxide from the sector.

However, the Climate Strategy does not contain an exhaustive list of possible national measures to reduce Danish emissions of greenhouse gases. Therefore, the Danish Environmental Protection Agency (Danish EPA) has carried out a new screening of the reductions potentials in new cost-effective national initiatives outside the ETS sectors which can help make up the Danish climate deficit in 2008-12. The cost-effectiveness of the initiatives has been assessed using a benchmark of DKK 180 per tonne CO₂ equivalents, based on an expected future allowance price of DKK 150 per tonne. The benchmark represents a cut-off price for new domestic measures in the non-ETS sectors.

The sectors examined are: the transport sector, agriculture, forestry, waste, and industrial gases as well as the non-ETS part of the energy sector and industry, including energy generation at plants of less than 20 MW rated thermal input, small industrial enterprises, and energy consumption by households. More than 30 different policies and measures have been examined in this report.

Danish emissions of climate gases and the climate deficit 2008-12

The projection which formed the basis of the report to the European Commission in June 2005 on demonstrable progress has been updated in connection with the Danish National Allocation Plan for 2008-12. The primary changes are:

• A political agreement in June 2005 on future energy savings initiatives (corresponding to a reduction of about 2 mill. tonnes CO₂ eq. per year).
• The projection for the off-shore sector has been adjusted (downwards by about 1 mill. tonnes CO₂ eq. per year).
• An updated overall energy projection has been completed which is based on new energy projections from the International Energy Agency (from Nov. 2006) and new assumptions on the price of CO₂ allowances.

The projection is a "business-as-usual" projection, which includes measures that have already been adopted. The new projection appears in reports by the National Environmental Research Institute of Denmark (2006) and the Danish Energy Authority (2006b) and is summarised in Table 1. It can be seen that without further measures Denmark's total emissions of greenhouse gases are expected to average at about an annual 68 mill. tonnes CO₂ equivalents in 2008-12.

In its Kyoto accounting, Denmark has decided to include CO₂ removals from sinks pursuant to article 3.4 of the Kyoto Protocol. It has been estimated that this will reduce the climate deficit by about 2 mill. tonnes per year in 2008-12. In addition there is the contribution from forests planted after 1990 of almost 0.3 mill. tonnes per year, which will also be included in the Kyoto accounting. In total, sinks are expected to contribute by about 2.3 mill. tonnes per year in 2008-12.

Table 1: Trend in total Danish emissions of greenhouse gases 1990-2010 in mill. tonnes CO₂ eq.

¹ Reference year for CO₂ , methane, and nitrous oxide is 1990. In accordance with the Kyoto Protocol, 1995 has been chosen as the reference year for industrial gases.

² The emissions of CO₂ have been calculated here under the Kyoto Protocol, as the removals of CO2 must be calculated as credits under articles 3.3 and 3.4 of the Protocol.

³ The reduction target of 54.8 mill. tonnes per year without correction for the expected compensation of about 1 mill. tonnes per year for the special Danish reference year issue.

⁴ Preliminary figures reported to the EU 15 January 2007.

Figure 1 shows the break-down by different economic sectors. It can be seen that the energy sector is by far the greatest source of emissions of greenhouse gases, followed by the transport and agricultural sectors^[2]. A large part of the energy sector is subject to the ETS. Only reductions potentials in the non-ETS area are in focus in this report.

Figure 1: Emissions of greenhouse gases broken down by economic sector in 2004 including energy consumption by the individual sector

Table 2 shows the break-down of expected future emissions of greenhouse gases by ETS and non-ETS sectors. It appears that the ETS sectors are expected to account for 44 per cent of the total emissions before further initiatives are implemented, while the non-ETS sectors account for 56 per cent.

The non-ETS sectors include agriculture, waste, industrial gases, transport as well as the non-ETS part of the energy sector and industry. The non-ETS energy sector is composed of energy-producing plant under 20 MW, including central-heating plants in households.

Table 2: Danish emissions of greenhouse gases broken down by ETS and non-ETS sectors, mill. tonnes CO₂ equivalents

Table 2 shows that the transport sector is the largest emitter of greenhouse-gas emissions in the non-ETS sector. Emissions by the transport sector comprise primarily CO₂. Emissions mostly arise from combustion of fuel by vehicles in the road-transport sector, as international shipping and aviation are not regulated by the Kyoto Protocol.

After the transport sector comes agriculture. By far the largest part of emissions from the sector are methane and nitrous oxide, which are formed by cows' digestion, during fertiliser management, and from nitrogen conversion on fields. CO₂ is emitted in connection with energy consumption by machinery, but it is also removed in vegetation, e.g. when trees grow.

Contributions to emissions of greenhouse gases by the waste sector are primarily composed of methane from decomposition of organic waste and from landfills. The last non-ETS sector is industrial gases. Industrial gases include HFCs, PFCs and SF₆, and are used as refrigerants, for example.

Efforts so far

Figure 2 shows efforts up to now and the future trends in emissions of greenhouse gases. Overall, emissions of greenhouse gases have fallen slightly since 1990.

Figure 2: Total past and future changes in emissions of greenhouse gases in the period 1990-2030 broken down by sector, index 1990=100

Emissions by the transport sector have, however, increased constantly and this trend is expected to continue. Several measures have been implemented which have meant that the growth in CO₂ emissions has been less robust than if the measures had not been implemented. In particular the EU's voluntary agreement with the motor industry, green registration tax and increased taxes on fuels are considered as being significant.

Despite the fact that the agricultural sector has not been subject to measures with the primary aim of reducing emissions of greenhouse gases, since 1990 emissions by the sector have been falling anyway. This is primarily due to implementation of the national action plans for the aquatic environment, which have affected emissions of nitrous oxide through increased exploitation of nitrogen in livestock manure, which in turn has led to a drop in commercial-fertiliser consumption.

Production by agriculture of energy crops and other biomass has also contributed to displacing the use of fossil fuels by the energy sector.

In the waste sector, previous subsidies for gas-collection equipment have had a significant effect on methane emissions from landfills. In addition, the obligation on municipalities to assign waste suitable for incineration to incineration has meant that the amount of organic waste sent to landfill has dropped and thus the potential for methane formation.

Over the years there has been much focus on energy consumption by the energy sector and therefore, indirectly, on the CO₂ emissions by the sector. Previously, introduction of energy and CO₂ taxes as a result of the Danish energy plans “Energi 21” and “Energi 2000” has influenced greenhouse-gas emissions by the sector.

Since 2001, a number of further initiatives have been implemented, which have influenced Danish emissions of greenhouse gases. These include the decision to establish two new offshore wind farms in connection with the energy agreement of March 2004 and the energy-savings agreement of 10 June 2005.  The aim of the plan is to reduce annual Danish energy consumption by 7.5 PJ up to 2013. This aim is to be realised by requiring grid and distribution companies within electricity, natural gas, district heating and oil to make more energy savings. As part of this, a market-oriented system has been introduced with goal management through specific savings obligations, and methods to calculate these savings have been developed. Reduction of energy consumption for heating is also an important area for efforts. In addition there is implementation of the EU ETS, which via allowance prices and increases in energy prices has led to a drop in energy consumption.

Overall it is estimated that measures so far (measured from 1990) have meant that Danish emissions of greenhouse gases have fallen by about 27.6 million tonnes CO₂ equivalents per year compared with the figure without the reductions measures.

Reduction potential in the non-ETS sectors

The number of cost-effective measures outside the ETS sectors is expected to be relatively limited. However, it should be emphasised that it has not been possible within the timeframe to examine all initiatives and it may be possible that there are other cost-effective reduction possibilities which are not described in this report. The effect of the energy savings plan of 0.5 mill. tonnes CO₂ outside the ETS area has been included in the new projection and therefore has not been included here.

A list of possible new measures which cost society less than the benchmark of 180 DKK per tonne and realistically can be implemented are shown in Table 3. Depending on the instruments selected, it is estimated that the cost to the state budget of implementing all the initiatives which give a reduction of 1.3 mill tonnes CO₂ per year amounts to DKK 251-851 mill. up to 2012.

Table 3: Reduction potentials, macro-economic costs and the consequences for state finances of selected domestic measures

^{1) Estimated costs on basis of 2005 oil and gas prices.}

^{2) Improvement of old landfills costs society DKK -80/tonne and establishment of new costs less than DKK 120/tonne CO}₂ ^eq.

The measures that may contribute to reducing domestic emissions by 1.3 mill. Tonnes per yr. in 2008-12 include: Promotion of energy-efficient heat pumps, improvement of framework agreements for biogas, CO₂ reductions in non-ETS industry sectors, reductions in methane from gas motors, further exploitation of landfill gas, and documentation of the effects of changed cattle feed.

Promotion of energy-efficient heat pumps

Oil consumption by households is not covered by the ETS. Replacement of oil-fired boilers with electric heat pumps could result in a reduction in CO₂ emissions from the non-ETS sectors of an estimated 0.15 mill. tonnes CO₂ eq. per year in the period 2008-12. A combination of several measures could increase the spread of heat pumps; measures including type approval, energy labelling, more information, and subsidy campaigns. In the longer term the effect may be larger.

Improvement in framework conditions for biogas

With regard to biogas, it was expected that 40 new plants would have been built with the price guarantees agreed in the energy agreement of 2004. However, this expansion has more or less stopped. The current political agreement and legislation lays down electricity price guarantees for biogas plants established before the end of 2008. The costs have so far been financed by the PSO (Public Service Obligation) scheme.

In order to promote expansion, it has been determined that there is a need to set up better economic framework conditions. The following could be considered:

a) repealing the 2008 time limit for meeting the price guarantee conditions for new biogas plants,

b) Increase in the electricity price guarantee of DKK 0.4 per kWh which currently can be achieved after a plant has been in operation for 10 years,

c) Compensation mechanisms in relation to waste and manure management, odour reductions and improved exploitation of fertilisers,

d) Environmental approval could be tightened to ensure effective odour-prevention measures when locating new biogas plants.

Overall it has been estimated that it will be possible to reduce emissions of greenhouse gases by about 0.15 mill. tonnes per year on average in 2008-12.

Reduction of methane from gas motors

Emissions of methane and nitrous oxide by the energy sector are not covered by the allowances scheme, which applies only to emissions of CO₂. CHP plants fired by natural gas emit methane from gas motors. It is possible to install after-burning at these, and this removes at least 90 per cent of methane emissions from the plants as well as minimising the environmental impact from CO, VOC, and formaldehyde. The measure is estimated to have an annual reduction potential of 0.2 mill. tonnes in 2008-12.

The measure will not be financially viable unless subsidies or other incentives are provided. Several options to implement the measure have been examined.  The most administratively simple would be to change the Statutory Order on limiting emissions of nitrogen oxides, unburned hydrocarbons, and carbon monoxide etc. from motors and turbines in combination with a subsidy for installing after-burning.

Further exploitation of landfill gas

The goal of the Danish waste strategy has been to stabilise total waste quantities, to increase recycling of waste and to reduce landfilling of waste as far as possible. This means that all waste suitable for incineration must be assigned to incineration. In this way the amount of organic waste at landfills and the resulting methane formation at landfills has fallen considerably.  The majority of non-recyclable waste is incinerated with energy recovery. However, there remains a certain potential to reduce methane emissions from existing landfills.

It has been estimated that establishing gas recovery at a further nine landfills in Denmark and improving six existing landfill gas plants would overall reduce emissions of greenhouse gases by 0.06 mill. tonnes per year in 2008-12. In order to achieve this it would be necessary to introduce a subsidy scheme for test pumping at chosen landfills and to improve the existing gas recovery plants.

Documentation of the effect of changed cattle feed

Since 1990 the composition of feed for cattle has changed, and this has reduced their methane emissions. The reduction has been estimated at about 0.1 tonnes per year from 1991-2001. In order to incorporate this in Kyoto accounting there is a need for further documentation via literature studies and model simulations. It has been estimated that this will cost almost DKK 1 mill.  The measure will also help increase knowledge about the importance of the composition of feed for livestock's digestive system and thus its effect on methane emissions.

Energy savings in buildings

Targeted efforts in order to ensure further realisation of cost-effective energy savings in existing buildings has been estimated to provide a potential non-ETS CO₂ reduction of 0.06 mill. tonnes per year. The government's national energy has proposed an annual DKK 20 mill. from 2007-10 and DKK 5-10 mill. thereafter earmarked for targeted campaigns.

CO₂ reductions in the non-ETS industry sector

Increased incentives for CO₂ reductions by the non-ETS sectors have been estimated to have a potential contribution to reductions in greenhouse-gas emissions of about 0.6 mill. tonnes per year in 2008-12. The initiatives could be either 1) a pool for targeted subsidies for enterprises of DKK 200 mill. per year from 2007-9, or 2) tax amendments.

Depending on the extent of the subsidy pool / tax amendments, there may be a need for supplementary measures in order to meet the 0.6 mill. Tonnes.

Description of other measures examined for the non-ETS sectors

A number of other initiatives have also been considered. These all have in common that they will not be cost-effective with the estimated price of allowances, or that there is insufficient evidence for their effect to enable their implementation in the short term.

• Stronger focus on emissions of greenhouse gases from agriculture
• Conversion of car taxes in a more CO₂-friendly direction
• Increased use of biofuels
• Introduction of biocover when decommissioning old landfills
• Increased use of renewable energy

The following is a description of a number of further reductions opportunities in the non-ETS sectors.

Agriculture:

The following specific further initiatives could have a positive effect on greenhouse gas emissions from the agricultural sector in the longer term.

1. Possible climate effect from implementing the Water Framework Directive in Denmark. As the specific initiatives to be implemented have not yet been decided, the effect on emissions of greenhouse gases from agriculture is uncertain.

2. Possible climate effects of the new approval scheme for livestock farms. Calculations by the Danish Institute of Agricultural Sciences on the climate effect of new reductions requirements for ammonia, requirements for covers on manure containers and requirements for better feed efficiency have shown that new livestock legislation is expected to have a slight but uncertain effect on emissions of greenhouse gases.

3. Increased knowledge. In line with the drop in emissions from the energy sector, agriculture will become more prominent in accounting for an increasing proportion of the total greenhouse gas emissions, unless extra efforts are made. Many of the climate measures which are possible within agriculture (for reductions in methane and nitrous oxide from livestock production and fertilizer management), have not been adequately described technically and economically. Climate-effective measures should be combined and incorporated as part of the future environmental policy initiatives in agriculture. Furthermore, enhanced research and development efforts could help limit emissions of greenhouse gases from agriculture in the longer term. In 2006, DKK 32.8 mill. were earmarked for new knowledge about the climate, agriculture and the environment under the government's food research programme.

Analyses recommended for agriculture include: further analyses of the effect of changed cattle feed, methane oxidation from manure storage, the effect of air-tight covers on manure storage, improvements in calculation methods, including the difference in nitrous-oxide emissions from commercial and livestock fertilisers, research into nitrification inhibitors and biotechnologies which can reduce climate impacts etc. Moreover, there is a need for more intense research into carbon sequestration in Danish agricultural soil as well as into exploiting agricultural crops and residues for energy purposes.

Transport:

Within the transport sector a new screening of measures has been carried out. The potential for cost-effective CO₂ reductions is poor except for changed vehicle tax. The Danish EPA has completed a project, analysing scenarios for revenue-neutral conversion of vehicle taxes in a more environmentally friendly direction. Results show that it is possible to achieve a socio-economic gain and uncertain CO₂ savings of 0.04-0.7 million tonnes/year by introducing road pricing, and differentiating between driving in the countryside and in the city. This initiative, however, would require an extensive change in vehicle taxation and the CO₂-effect would be relatively  small in the short term.

In the national energy proposal from January 2007, the government set out that the proportion of biofuel for transport is to be increased to 10 per cent in 2020. The government is ready to stipulate sub-targets for earlier than 2020, provided that substantially, economically competitive and environmentally sustainable technologies have been developed. In order to support the target of increased use of biofuels by transport, it is intended to enhance measures already adopted, for which the government has previously earmarked an extra DKK 200 million to develop second-generation bio ethanol plant up to 2010. Therefore, there will be efforts to ensure that before 2010 a full-scale test plant is established in Denmark. Moreover, DKK 60 million has been allocated for the period 2007-2009 for a test scheme involving the use of bio diesel in limited ’fleets’ of vehicles, e.g. in public transport or in the public sector.

Waste:

In order to examine the opportunities of achieving further reductions in methane emissions from Danish as well as foreign landfills, the Danish EPA and private parties from the waste sector has supported a project under the EU LIFE programme. LIFE funding of more than DKK 4 mill. for the project: ”BIOCOVER Reduction of Greenhouse Gas Emissions from Landfills by Use of Engineered Biocovers” was approved by the Commission in autumn 2005. The project could possibly reduce methane emissions from Danish landfills by a further 0.2-0.3 mill. tonnes CO₂ eq. at a cost considerably below the benchmark, if the expected results can be demonstrated and a requirement in Denmark for covers can be introduced. The project will not be completed until 2008, however, and documentation of the effect will not be available until that time.

Energy:

The government’s vision is that, in the long term Denmark will be entirely independent on fossil fuels - coal, oil and natural gas. Instead, Denmark will be using renewable energy.

The government will secure an effective set of market-based initiatives which, in line with the development of new technology, will increase the proportion of renewable energy and curb the use of fossil fuels. The proportion of renewable energy will be increased to at least 30 per cent of total energy consumption in 2025.

Further to its visionary energy policy, in spring 2007 the government will prepare a specific programme on how this development is to be implemented and how to ensure that measures to reduce emissions by the non-ETS sectors in 2008-12 will contribute by at least 1.3 mill. Tonnes CO₂ eq./year in 2008-12.

Industrial gases:

Denmark has adopted a statutory order on phasing out industrial gases in 2006 and 2007. This goes further than the Regulation on industrial greenhouse gases from the Commission, but Denmark has been permitted to retain the special Danish regulations until 2012. This means that the increase in emissions of greenhouse gases in Denmark can be stabilised.

Technology development and long-term reductions possibilities / requirements

Efforts against climate change mean that the use of fossil fuels will be gradually phased out over the coming decades. The EU environment ministers have indicated that global negotiations on reductions commitments after 2012 will involve working towards industrial countries reducing emissions compared with 1990 by 15-30 per cent in 2020 and 60-80 per cent in 2050. Implementation of the phasing out requires development of both existing and new technologies as well as expansion of renewable energy.

The more long-term technology-development opportunities for the climate area have been incorporated as a central element in the government’s report on promoting environmentally efficient technology as well as in the follow-up to the energy strategy. Therefore, this report does not describe these opportunities in more detail.

In connection with using funds from the globalisation fund, the government has decided to set up a new energy-technological development and demonstration programme (EUDP), to replace the existing energy research programme. The new programme will focus on demonstrating energy technology on a larger scale. In connection with the energy policy proposal ’a visionary Danish energy policy’ the government has also decided to double public funding for research, development and demonstration of energy technology so that from 2010 an annual total of DKK 1 bn. will be earmarked for this purpose.

Climate considerations in plans, programmes and decisions

In addition to the measures with a direct effect on climate, for which costs can be quantified, there are a number of other, generally voluntary measures, which indirectly could contribute to reducing climate impacts, but whose effects and costs are hard to quantify. These include:

4. Climate assessments of proposed legislation, plans and programmes,

5. Climate in local agenda 21 plans, and

6. Information on reductions opportunities for selected target groups.

In light of long-term adaptation, it may be advantageous to implement these measures so that a broader range of players is involved in contributing to climate efforts in the longer and shorter terms. The measures are also compatible with the broader climate commitments in the Climate Convention and the Kyoto Protocol.

As part of this, the government has decided to set up a ’one tonne less’ campaign, to be run in 2007 and 2008. The campaign will provide information on how individuals can help reduce CO₂ emissions in their daily behaviour, how much this helps and in what way.

Fodnoter

^[2] Agriculture includes agriculture and forestry.

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Version 1.0 Maj 2007, © Miljøstyrelsen.