Denmark's Fourth National Communication on Climate Change Annex B Measures and the effect of efforts 1990-2001
This Annex consist of the following two sub-annexes: Annex B1: Data sheets for measures that affect greenhouse gas emissions and removals Taxes and duties The data sheets for taxes and duties that affect greenhouse gas emissions include:
Energy The data sheets for existing measures that still exist and measures that have ceased to exist or have been replaced in the energy sector and that affect greenhouse gas emissions include: Existing: 1) EU CO2 allowances on electricity and heat production (including the business and domestic sectors) 2) The Biomass Agreement 3) Price supplement for suppliers of environmentally friendly electricity 4) Tenders for offshore wind turbines 5) Scrapping scheme for old wind turbines 6) Energy research Initiatives that are no longer in place or have been replaced: 7) National CO2 allowance scheme for producers of electricity 8a) Subsidies for the production of electricity (RE) 8b) Subsidies for the production of electricity (wind turbines) 9) Giving priority to electricity from combined heat and power plants 10) Compulsory offshore wind turbines 11) Scrapping scheme for old wind turbines and wind turbines in an inappropriate location 12) Renewable energy island - Samsø 13) Subsidies for facilities producing renewable energy 14) Subsidies for investments in energy savings in industry 15) Subsidies for conversion of older dwellings to combined heating and power 16) Subsidies for the promotion of linking to coal-fired CPH 17) Subsidies for energy savings in dwellings for pensioners Transport The data sheets for measures in the transport sector that affect greenhouse gas emissions include: x) Increased fuel tax y) Green owner taxes on motor vehicles 1) Information campaign on the fuel consumption of new cars 2) Low-energy driving techniques 3) Action for compliance with current speed limits 4) Establishment of intermodal installations 5) Promotion of environment-friendly freight transport 6) Reduced travelling time for public transport 7) Spatial planning The business sector The data sheets for measures in the business sector that affect greenhouse gas emissions include: z) EU CO2 allowances (a proportion of the energy consumption and process emissions of the business sector are included in the EU allowance regulation, cf. the datasheet concerning this under Energy) 1) Agreements on energy-efficiency improvements in the business sector 2) Savings activities by electricity grid, gas and district heating companies (incl. for the domestic and public sectors) 3) Tax on HFCs, PFCs and SF6 4) Regulation of use of HFCs, PFCs and SF6 5) The enterprise scheme (HFCs) 6) Circular on energy-efficiency in state institutions 7) Electricity Saving Trust (Elsparefonden) - campaigns and A-club to promote efficient appliances (incl. electricity-heat conversion and efficient appliances in households). Agriculture and Forestry The data sheets for measures in the agriculture and forestry sector that affect greenhouse gas emissions include: 1) Action Plan for the Aquatic Environment I+II and Action Plan for Sustainable Agriculture 2) Action Plan for the Aquatic Environment III 3) Ban on the burning of straw on fields 4) Ammonia Action Plan and new Statutory Order on Manure 5) Planting of windbreaks 6) Biogas plants 7) Subsidies for private afforestation on agricultural land 8) Public afforestation (state, counties, and municipalities). The domestic sector The data sheets for measures that affect the domestic sector's contribution to greenhouse gas emissions include: z) EU CO2 allowances (some of the domestic energy consumption - electricity and heating - are subject to EU allowance regulation, cf. the data sheet for this under Energy 1) Energy labelling of small and large buildings (incl. the public sector and businesses) 2) Energy labelling of electrical appliances. Waste The data sheets for measures that affect greenhouse gas emissions from waste include: 1) Obligation to send combustible waste to incineration (in practice a ban on land-filling) 2) The Waste tax 3) Weight- and volume-based packaging taxes 4) Subsidy programme - Enterprise Scheme (special scheme for businesses) 5) Increased recycling of waste plastic packaging 6) Implementation of the EU landfill directive 7) Support for (construction of facilities for) gas recovery at landfill sites 8) Subsidy programme for cleaner products Annex B2: Executive summary of the efforts analysis and section summing up the effects of the measures analysed. B1: DATA SHEETS FOR MEASURES THAT AFFECT GREENHOUSE GAS EMISSIONS AND REMOVALSClick here to see Annex B1 Table Denmark's Fourth National Communication on Climate Change Annex B2 The Effort AnalysisSUMMARYSince 1990, a broad range of national policies and measures have been implemented in Denmark that have impacted on emissions of greenhouse gases. Some initiatives have been implemented with CO2 reduction as the primary aim, while other initiatives have been motivated by other aims. The Effort Analysis1 reports on Denmark's effort related to the reduction of greenhouse gas emissions undertaken on national level in the period 1990-2001, and the costs of this effort. Under the Kyoto Protocol and the EU's subsequent Burden Sharing Agreement, Denmark has undertaken to reduce greenhouse gas emissions by 21% in 2008-2012, compared to 1990 levels2 One of the additional requirements of the Kyoto Protocol is that the use of flexible mechanisms must be supplemental to domestic action. The calculation of the total Danish effort is relevant in this connection. It is therefore relevant to consider the effects of Denmark's efforts both in relation to the Kyoto accounting, and in relation to the total effect -regardless of whether the emissions reductions have been in Denmark or abroad. In relation to the Kyoto accounting, which is based on the CO2 impact associated with the specific emissions in Denmark, it is expected that part of the effect of the energy sector initiatives will be offset by increased electricity exports. This means that the CO2 emissions linked to the exported electricity component have a negative impact on Denmark's Kyoto accounting, rather than on that of the electricity importing country. Choice of measures The Effort Analysis report aimed to include the most important environment and energy policy measures implemented in the period 19902001 that have had a significant effect on greenhouse gas emissions. Please note that many of the measures have not been planned and adopted with the aim of contributing to the fulfilment of Denmark's Kyoto obligation, but derive from the political objective from 1990 (in the “Energy 2000 action plan) of reducing CO2 emissions from Denmark's energy consumption by 20% between 1988 and 2005. Thus the Effort Analysis does not evaluate the implemented initiatives against their original objective, but rather in rela-tion to reducing greenhouse gases, and how much the implemented initiatives will contribute to the binding Kyoto objectives that exist today. The chronological definition of the initiatives is not always straightforward. Some initiatives were introduced prior to 1990, but the implementation (and associated reduction in greenhouse gas emissions) has taken place after 1990. This is the case, for example, for the conversion to natural gas and for Action Plan for the Aquatic Environment I. The calculations in the Effort Analysis only include the CO2 reductions that have taken place after 1990. FIGURE B2-1: DEVELOPMENTS IN TOTAL CO2 EQUIVALENT EMISSIONS, WITH AND WITHOUT THE MEASURES UNDER ANALYSIS (PRODUCTION-BASED CALCULATION) 1 The reduction requirement in the figure has been calculated as Denmark's legal obligation. i.e. the figure has not been corrected for the particularly large electricity imports in the 1990 base year. However, in 2002 the (Environment) Council and the Commission adopted a political declaration stating that the calculation of the assigned amounts (measured in tonnes) in 2006 shall take into account Denmark's statement in connection with the Burden Sharing Agreement in 1998, e.g. stating that Denmark's reductions shall be seen in relation to an adjusted 1990 level. When this factor is taken into account, the reduction requirement would be reduced by up to 5 million tonnes annually. 2 The reduction calculated in 2001 includes the full effects, i.e. it includes the CO2 reductions that domestic actions have led to in other countries. Denmark's effort in the period 1990-2001 The Effort Analysis evaluates the effects of measures implemented in the period 1990-2001 in relation to the actual emissions in 2001, and in relation to the expected average annual emissions in 2008-2012, as laid down in the base projection used as a basis for the Danish climate strategy from February 2003 (i.e. the previous `with measures' projection, which only took into account the effects of measures implemented or adopted before the Climate Strategy). Initiatives adopted after 2001 are therefore not included in the results of the Effort Analysis, and hence these results cannot be used as a total status report for the Danish efforts in relation to the Kyoto target. The Effort Analysis reports on and calculates the Danish initiatives by considering their total effect, regardless of whether they have resulted in reductions in emissions in Denmark or abroad. However, the analysed initiatives have also been assessed in relation to Denmark's international obligations under the Kyoto Protocol, based on the CO2 impact associated with the specific emissions in Denmark. Figure B2-1 illustrates how much greater Denmark's CO2 emissions would have been in 2001 and in 2008-12 if the initiatives ana-lysed had not been implemented. As Figure B2-1 shows, the initiatives under consideration are estimated to give rise to CO2 reductions of approx. 20.6 million tonnes per year in the 2008-12 period. This expresses the total effect of Denmark's effort in the 1990-2001 period. It also shows (see below) that part of the effect of energy sector initiatives is expected to be offset by increased electricity exports, such that in relation to the Kyoto emission accounting, the initiatives under consideration are estimated to lead to CO2 reductions of approx. 15.6 million tonnes per year in the 2008-12 period. A number of the initiatives implemented have been aimed at reducing CO2 emissions from Danish electricity consumption. However, Danish electricity production is integrated into the Northern European electricity market, and the effect of initiatives in the electricity sector are – and are expected to continue to be – partially offset by increased exports of fossil fuel electricity production from Denmark. Estimation of the size of this effect is subject to extreme uncertainty. Based on a rudimentary assumption that 50% of the effects of the electricity sector initiatives will be offset by electricity exports, approx. 5.0 of the 20.6 million tonnes of CO2 will be offset by increased electricity exports. This estimate is subject to significant uncertainty and depends, for example, on the future expansion of production capacity in the Scandinavian countries (cf. the background report, “Energy policy initiatives in the 1990's: Costs and CO2 effects3) The Effort Analysis' `without measures' calculation of CO2 emissions per sector is shown in Table B2-1. TABLE.B2-1: OVERVIEW OF TOTAL GREENHOUSE GAS EMISSIONS AND THE TOTAL REDUCTIONS DIVIDED BY SECTOR (FOLLOWING THE SECTOR DIVISION OF THE CLIMATE STRATEGY) IN MILLIONS OF TONNES OF CO2 EQUIVALENTS PER YEAR
1 1990/95 indicates the emissions in the base year. CO2, CH4 and N2O emissions have 1990 as the base year, while the industrial gases have 1995 as the base year. No corrections have been made for 2 Source: Emissions figures (base, current in 2001 and projections for 2008-12: Danish Ministry of the Environment 2003) 3 These 16.7 million tonnes CO2 per year include the full effects, i.e. they include the CO2 reductions that domestic actions have led to abroad. 4 For the energy sector measures the full reduction is specified. The Danish Energy Authority estimates that approx. 5.0 of these 20.6 million tonnes CO2 annually will be offset by increased electricity exports based on the calculation assumptions of the climate strategy. Denmark's Fourth National Communication on Climate Change The Effort Analysis estimates that Denmark's “without measures CO2 emissions in 2008-12 would have been 95.7 million tonnes CO2 annually. Denmark's legal reduction obligation of 21% in relation to 1990 levels corresponds to emissions in 2008-2012 being reduced to approx. 54.9 million tonnes CO2 annually20. Denmark would have therefore fallen short of this goal by 40.7 million tonnes CO2 annually in 2008-2012 if the initiatives analysed had not been implemented. In summary, the effect between 2008-2012 of the initiatives analysed would be 15.6 million tonnes annually, after taking into account that 50% of the electricity sector initiatives are expected to be offset by electricity exports. As mentioned above, the total reduction effects, in Denmark and abroad, from the implemented domestic initiatives can be estimated at 20.6 million tons annually. Therefore it can be concluded that Denmark has already made significant progress domestically. Extensive Danish electricity imports from Norway and Sweden in the 1990 base year led to unusually low Danish emissions. If the effects of these imports are compensated for, it would allow Denmark to reduce Danish emissions by approx. 5 million tonnes less than specified above. In 2002, the (Environment) Council and the Commission adopted a political declaration stating that the calculation of the permitted emission volumes (measured in tonnes) in 2006 shall take into account Denmark's statement in connection with the Burden Sharing Agreement in 1998, e.g. stating that Denmark's reductions shall be seen in relation to an adjusted 1990 level. Costs of measures The costs of the CO2 reduction have also been estimated in the Effort Analysis, but only for selected measures. The choice of these measures has largely been governed by which measures CO2 costs had previously been calculated for. The estimate is based on a cost-benefit analysis of the total costs and benefits for each measure, excluding the value of the reduction in CO2 emissions. An expression of the total socio-economic costs per tonne of reduced CO2 emissions (also called the initiative's CO2 shadow price) can be found by comparing the total net costs of the initiative against the estimated resultant CO2 reduction. The total CO2 reduction has been used, i.e. regardless of whether this CO2 reduction took place in Denmark or abroad (consumption-based calculation). This corresponds to the method used in previous analyses carried out by the Danish Ministry of Finance and others in 2001, by the Economic Council in 2002, and in cost estimations used in the Government's climate strategy from 2003. Please note that the introduction of the EU's CO2 allowance scheme (EU-ETS) from 2005 changes the framework conditions for large parts of the energy sector and energy-intensive industry, such that the calculation method cannot be used to assess future measures within these areas where quotas have been imposed. The introduction of the allowance scheme means that CO2 emissions from the sectors subject to allowances, including electricity production, will be unequivocally determined by the total amount of allowances accounted in accordance with the Kyoto Protocol. The calculations of the shadow values for the areas subject to allowances, up until the 2008-12 period where the new Kyoto regime will have entered into force, thus serve purely illustrative purposes. The introduction of the open international electricity market since the late 1990s means it is no longer certain that for example such as the expansion of renewable energy will reduce CO2 emissions from Danish electricity producers correspondingly, as it may be an advantage for producers to export electricity rather than reduce production. Where this is the case, CO2 emissions will be reduced in other countries instead. This is a major issue in relation to calculating how great an effect the measures will have in relation to the base projection. Please note that the CO2 allowance scheme will increase the European electricity price and thus increase the profitability of electricity savings compared to the situation today. Note that no attempt has been made in the Effort Analysis to incorporate any positive effects on security of supply, technology development and commercial development, nor has it been possible to include the value of all environmental impacts. This is due to the difficulty of quantifying and valuing these effects, which in principle should be included. The value of the reductions in SO2 and NOx emissions resulting from the measures has been included, but the valuation of these physical reductions is very uncertain. This report uses the same valuations as the climate strategy. Since the calculations were carried out, the National Environmental Research Institute, Denmark (NERI) has published new, higher valuations for the cost of the negative impacts of SO2 and NOx emissions. Using these new, updated assumptions from NERI – and with nothing else changed – the calculations would have resulted in lower CO2 shadow prices for several measures. Table B2-2 shows that the shadow costs for the selected measures vary substantially, and for most of the measures are higher than the indicator of DKK 120 per tonne CO2 specified in the Government's climate strategy. In the energy sector, the “Grant for conversion of apartments for the aged to cogenerated heat and power, “Grants for solar heating, heat pumps, and biomass and “Building labelling measures are estimated to have been associated with the highest costs in relation to their CO2 reduction, while the “Grant to cover CO2 tax (agreement scheme) and “Expansion in decentralised cogeneration of heating and power have been associated with the lowest costs. TABLE B2-2: HISTORICAL CO2 SHADOW PRICES FOR SELECTED MEASURES (CONSUMPTION-BASED CALCULATION)
1 The shadow price has been calculated based on the total CO2 reduction. 2 This measure has also lead to improved comfort for those who have changed to CHP. This is believed to have been part of the political motive for the measure. However, no attempt has been made to value this gain. 3 Weighted average. This shadow price covers three initiative areas with very different shadow prices. Solar heating (DKK 5,700 /tonne CO2 ), Heat pumps (DKK 650/tonne CO2) and Biomass (DKK 600/tonne CO2). 4 The effect and the shadow price have been estimated for 2001 based on the nominal tax increase from 1990 to 2001. Assuming there are no changes in demand, and constant real prices and taxes, it will also be possible to use this estimate for the 2008-12 period. Note that these assumptions are not fully compatible with the assumptions about changes to fuel prices associated with the energy measures. 5 The CO2 reduction has been calculated for all fuel consumption, i.e. fuel consumption for both passenger cars and trucks. However the shadow price has only been calculated for fuel consumption in passenger cars, corresponding to the calculations carried out in connection with the Government's 2003 Climate Strategy. 6 Industrial gases are used for many purposes. The illustrated shadow price has been calculated, as an example, for the costs of replacing HFC gases with more environmentally-friendly refrigerants in industrial refrigeration plant, the biggest consumption group within the affected industrial gases. Note that the calculations are generally subject to significant uncertainty and it has not been possible to include all the socio-economic effects in the calculations. For example, the benefit of increased comfort associated with the transition to CHP has not been included in the calculation of the net costs for the “Grant for conversion of old dwellings to cogenerated heat and power initiative. Many of the measures will also have a positive effect on the security of the energy supply, which has not been valued. Please refer to the annex report to the Effort Analysis and to “Energy policy measures in the 1990s: Costs and CO2 effects for further description of the conditions and assumptions underlying the calculation of the shadow price for each measure. Uncertainty and sensitivity analyses Both the CO2 reductions and shadow costs for the analysed measures are subject to significant uncertainty due to the complexity and scope of the calculations alone. The following key issues in relation to the uncertainty of the results should be highlighted:
In addition to the uncertainty associated with determining the expected reductions, there is also significant uncertainty linked to determining the socio-economic prices for the various effects included in such an analysis. With regard to the socioeconomic energy prices, the same fuel price assumptions have generally been used as were used in the Government's 2003 Climate Strategy. To give an indication of the significance of central assumptions, table B2-3 contains a few examples showing how much the shadow price varies in response to potential changes to the key background parameters. For a more complete and systematic presentation of the sensitivity analyses for the individual measures, please refer to “Energy policy measures in the 1990s: Costs and CO2 effects”. Effects Estimate of reductions So as to estimate the effect an initiative has had on greenhouse gas emissions, the change compared to a reference scenario must be assessed. The reference scenario is based on the base projection of CO2 emissions carried out in connection with the Danish climate strategy from February 2003. As a rule this projection is assumed to reflect the effect of the initiatives analysed. As regards the individual initiatives, how great the increase in emissions would have been if the initiative in question had not been introduced has thus been estimated. The initiatives have typically been assessed individually, i.e. in some cases the interaction effects between some initiatives have not been taken fully into account. Reductions in energy consumption due to tax increases, for example, can have effect the use of energy production from wind turbines and vice versa. Furthermore please note that all initiatives in the energy area have been calculated based on one and the same reference development (base projection from February 2003). The base projection is characterised by all calculations being based on a world with existing regulation, including e.g. existing taxes and duties. In principle calculations should also take into account the order in which the different initiatives have been – or will be – introduced as each initiative may affect the other initiatives both with regard to effect and costs. This has not been possible to do within the scope of the Effort Analysis. The emission inventory method under the Kyoto Protocol uses the energy production or the actual emission of CO2 in Denmark, as opposed to in the Energy 2000 emission inventory, which is based on CO2 impacts caused by energy consumption in Denmark. This is a crucial difference as regards initiatives that either affect the demand for electricity or the production of environmentally-friendly electricity. Electricity production (and therefore CO2 emissions) in Denmark is determined by the price development in the electricity market and cannot be controlled directly through national initiatives. TABLE B2-3: SENSITIVITY ANALYSES FOR SELECTED MEASURES – EXAMPLES
1 The CO2 reduction has been calculated for all fuel consumption, i.e. fuel consumption for both passenger cars and trucks. However the shadow price has only been calculated for fuel consumption in passenger cars, corresponding to the calculations carried out in connection with the Government's 2003 Climate Strategy. This factor also applies to the sensitivity analysis for “Increases to fuel taxes. One of the additional requirements of the Kyoto Protocol is that the use of flexible mechanisms has to be supplemental to domestic action. Therefore two estimates of Danish efforts are in principle relevant – one estimate on achieved emission reductions in Denmark compared to the inventory calculations under the Kyoto Protocol, and one estimate of the total effect of the Danish efforts under the Kyoto Protocol, regardless of whether an initiative has led to reductions in emission in Denmark or abroad. With the introduction of the open international electricity market in the late 1990s, it is not a given fact that for example extension of renewable energy will reduce CO2 emissions from Danish electricity producers correspondingly, as it may be an advantage for Danish electricity producers to export electricity instead of limiting their production. To the extent that this is the case, CO2 emissions will decrease in other countries instead of in Denmark. This is a central issue of concern as regards calculating how great the effect of initiatives will be when compared to the base projections. The Danish electricity production in the Northern European electricity market, and the effect of initiatives for limiting the need for fossil electricity production is – and is expected to be – partially countered by an increase in exports of fossil electricity production from Denmark. Estimation of the size of this effect is subject to extreme uncertainty. A rudimentary assumption is that, 50% of the effects of the electricity sector initiatives will be offset by electricity exports. This estimate is subject to significant uncertainty and depends, for example, on the future expansion of production capacity in the Scandinavian countries (cf. the background report, Energy policy initiatives in the 1990's: Costs and CO2 effects (Danish Energy Authority, 2005). Emission reductions The estimated reductions for measures for the year 2001 and the annual average in the period 2008-12 is presented in table B2-4 below. Please note that CO2 reductions in the period 2008-2012 are expressed both from an energy consumption and energy production angle. The energy consumption angle ia based on the assumption that all CO2 reductions will be allotted to Denmark, while reductions based on the energy production angle alone concern changes in actual emissions from Danish areas. TABLE B2-4 OVERVIEW OF REDUCTION CONTRIBUTIONS OF MEASURES IN 2001 AND EXPRECTED CONTRIBUTIONS AS ANNUAL AVERAGE REDUCTION IN THE PERIOD 2008-2012 (MILLION TONNES CO2 EQUIVALENTS)
1 In addition to the voluntary agreement with the automobile industry, measure include the green owner tax, information campaigns, energy labelling etc. 2 Reductions as a consequence of the increased taxes on both energy products and fuel are estimated for 2001. Reductions for 2008-12 are based on the assumption that taxes and fuel prices actually re 3 Includes the NPO action plan from 1990, Action Plan for the Aquatic Environment I from 1987, Action plan for sustainable agriculture from 1991 and Action Plan for the Aquatic Environment II from 1998. See NERI, 2003 for a more detailed description of the action plans and their effects. Table B2-4 includes a row with further energy measures. Table B2-5 includes a number of initiatives without cost estimates that also significantly affect Denmark's CO2 emissions. These measures have not been studied in more detail in connection with the Effort Analysis - either because their overall objective has not been to reduce CO2 emissions or because insufficient data were available for a proper assessment of the measure's effects within the budget framework. In another context how much these additional measures would contribute to CO2 reductions in 2008-12 has been assessed. The effect 2008-12 is estimated on the basis of energy statistics from 2001 combined with assumptions used in calculations for the Climate Strategy. The results of this assessment can be seen in table B2-5. The measures analysed are assessed to have reduced approx. 16.7 million tonnes CO2 in total in 2001. Furthermore it is assessed that Denmark – seen from the so-called energy production angle – would have emitted approx. 15.6 million tonnes CO2 more on average per year in the period 2008-12, is the measures analysed had not been implemented. Moreover the measures analysed will lead to further reductions in 2008-12 of approx. 5.0 million tonnes CO2 per year, however this will be countered by the emissions from the increased electricity exports made possible by the measures implemented. The total emission of CO2 seen from the so-called energy consumption angle would thus have been approx. 20.6 million tonnes greater without the measures. TABLE B2-5 OVERVIEW OF THE ESTIMATE OF CO2 REDUCTIONS FROM FURTHER ENERGY MEASURES
1 It has been assumed that these measures are primarily fully implemented and that 2001 reductions correspond to the reduction stated for 2008-12. 2 This measure entails an increase in emissions of the greenhouse gas methane. In the estimate of CO2 reductions for 2008-12, an increase in methane corresponding to 0.3 million tonnes CO2 equivalents has been included. The estimate of CO2 reductions in 2008-12 from the energy policy of the 1990s includes an increase in methane corresponding to 0.1 million tonnes CO2 equivalents. Notes 1 The Effort Analysis is published in the report ”Danmarks udledning af CO2 – indsatsen i perioden 1990-2000 og omkostningerne herved (Denmark’s CO2 Emissions – Efforts in the Period 1990-2000 and the costs involved) – Main and Annex Report, Statement from the Danish EPA no. 2 and 3, 2005 (in Danish). 2 However, in 2002 the (Environment) Council and the Commission adopted a political declaration stating that the calculation of the assigned amounts (measured in tonnes) in 2006 shall take into account Denmark’s statement in connection with the Burden Sharing Agreement in 998, i.a. stating that Denmark’s reductions shall be seen in relation to an adjusted 990 level, and that the adoption of additional common European measures is assumed. 3 Danish Energy Authority 2005, Published electronically in May 2005 on the Authority's website (http://www.ens.dk/graphics/Publikationer/Energipolitik/
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