In conversation with FORESIGHT, Lars Christian Lilleholt, Danish energy minister, discusses his plans for the country’s transition to a 100% renewable economy and why he believes Denmark can, and should, continue to decrease its emissions while cutting taxes and boosting jobs and growth.

Q: In April, the Danish government set out a new clean energy proposal. What are the main tenets of this strategy and how will the government turn these plans into reality?
A: “Energy for a Green Denmark” will turn our country into a low-emission society, completely independent of fossil fuels by 2050. The first step will be to supply at least 50% of our energy consumption with renewable energy sources by 2030. To achieve this and keep electricity bills down, we will introduce a variety of initiatives. We will build an integrated and flexible world class energy system. We will introduce competition to the renewable energy sector. We will build the biggest offshore wind farm in Danish history, which will be a blueprint for delivering offshore wind energy without public subsidies. We will also introduce tax reforms to promote the green transition and deliver socio-economic benefits and ensure competition in the field of energy saving initiatives. We will modernise the heating sector and strengthen research and exports in the field of energy technology. The majority of these initiatives will be realised from 2020 to 2024. After 2025, substantial additional funding will also be allocated to a renewable energy reserve. Given the uncertain nature of technology and price developments between now and 2030, we must avoid planning the precise details of our energy policy too far into the future in areas where it would be inexpedient economically. Instead, we will assess our efforts on a regular basis to ensure that the renewable energy goal for 2030 is reached at the lowest possible cost. Some time before 2024, the government will begin negotiations on an energy agreement for the following period. Q: Part of the plan is for the government to increase competition between green technologies. Will this ensure that the best long-term solutions are in place to reduce CO2 emissions as fast as possible?
A: The government is planning to allocate DKK 4.2 billion (€0.6 billion) from 2020 to 2024 to fund the public procurement of solar and wind energy and the testing of wind turbines. The Danish energy system is in the midst of a major evolution, powered by rapid market and technology developments. We must reap the fruits of this progress for optimum socio-economic benefit. Many technologies and solutions that are central to the transformation of our energy system are gradually becoming profitable. We anticipate that renewable energy will become feasible without subsidies within the foreseeable future. The heat pump market has already matured and can serve as a catalyst for the electrification of the heating sector. Significant advances in data and digitisation also hold great potential for the energy sector. With the aid of new technological solutions, the government will realise its ambitions without major additional expenses for society, citizens and businesses. This requires a change of course in Denmark’s energy policy whereby we use the market and technology, instead of subsidies and taxes, to drive the green transition. Q: The plan will also set aside every year between 2021 and 2024 DKK 400 million (€54 million) to boost energy savings in business. Will this ensure that Denmark remains a world leader in this field?
A: Energy efficiency measures have been a core element of Denmark’s energy policy since the 1970s and today they represent one of our international positions of strength in the energy sector. The world looks to Denmark to find solutions to generate growth without increasing energy consumption. In the energy proposal, Denmark lays the groundwork for continuing its world leadership in the field of energy efficiency. The starting point for future efforts is to carry out energy efficiency initiatives where they provide maximum benefit for Danish consumers and society. In addition, the costs of energy efficiency initiatives must be balanced against the costs of expanding renewable energy. The government is therefore proposing to eliminate existing subsidy schemes for renewables and replace them with market-based incentives that will encourage less energy to be used in industrial processes. In this way, the money spent will have the greatest possible impact. The government will also support Danish businesses in the field of energy-efficient solutions by at least doubling exports of energy technology by 2030.

The government intends to reduce taxes to make electricity more competitive compared to other energy sources. The Danish government wants to reduce, not increase, business costs

Q: What role do you think taxes and subsidies should play to support long-term climate and energy goals?
A: Some experts believe that we should impose a higher carbon dioxide (CO2) tax on emissions as a way of reducing them, but in reality such a move could have the opposite effect and actually increase emissions. We have to take into account the fact the Danish energy grid, and thereby energy production and consumption, is connected to our neighbours. Taxing electricity production would lead to a large increase in electricity imports without necessarily reducing our total CO2 emissions. It would also lead to production moving abroad, where emission intensities are higher. Further, Danish energy taxes, especially taxes on electricity consumption by liberal professions, are very high compared to other countries. These high taxes impede green solutions and better use of surplus heat. This also means that Danish households pay high energy bills compared to other countries. For a long time, fossil fuels made up the major part of the energy mix for electricity generation. High electricity taxes thereby contributed to both saving energy and reducing CO2 emissions, but renewables now cover more than 50% of electricity consumption and their costs are decreasing rapidly, meaning that the case for taxing electricity use is dwindling. The government therefore intends to reduce taxes to make electricity more competitive compared to other energy sources and to reduce the electricity tax for liberal professions to the EU’s minimum level, putting these workers on an equal footing with other VAT-registered businesses. The Danish government wants to reduce, not increase, business costs. The reduced tax on electricity for heating purposes will also promote surplus heat as electrical heat pumps are often used to increase the water temperature to the level needed in district heating systems. The government will likewise examine the need to change the rules to avoid the double taxation of businesses for electricity initially stored in batteries, for example, and later sold to the grid. Q: The head of left-wing party Enhedslisten, Pernille Skipper, has been quoted as describing the strategy as “embarrassingly unambitious”and focused on giving tax breaks to large energy consumers. What is your reaction?
A: Significant investments are required to create a low-emission society that is independent of fossil fuels by 2050. The proposal is a strong foundation for charting a new course in Danish energy policy based on market developments. It will enable us to maintain our strong green ambitions with fewer costs. For the first time, consumers and businesses will enjoy an unprecedented combination of more green energy and lower electricity bills. The government is taking the lead and proving it is possible to maintain high green ambitions while making life in Denmark less expensive, strengthening growth and boosting exports. We can only remain a pioneer country by proving the feasibility of a cost-efficient energy policy that unifies climate efforts with growth, competitiveness and employment. Q: Policies on electric vehicles in Denmark have had a negative effect on sales. Do you have plans to change this?
A: The Danish government intends to present a strategy for sectors that are not covered by the EU Emissions Trading Scheme, namely transport, agriculture and buildings, in the autumn. In this strategy we will address emissions from the transport sector.

WRITER: Philippa Nuttall Jones PHOTO: Jeppe B. Nielsen