NAP II in Denmark The challenges

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1 NAP II in Denmark The challenges 28 August 2006 Ture Hammar Energistyrelsen

2 Overview The Danish commitment to control GHGs Development in emissions since 1988 Contents of NAP I & II in Denmark Major challenges

3 The Danish commitment to control GHGs Toronto meeting 1988 after Brundtland report on a sustainable development Energy strategy Energy Rio meeting 1992 Climate Convention Energy Kyoto protocol 1997 National communications & climate strategies Burden sharing inside enlarged EU high ambitions Elaborations on many instruments subsidies, taxes, regulation, VAs, certificates, ETS etc. over 2 decades

4 Development of Energy consumption, CO2 emissions & GDP in Denmark GDP fixed prices 110 CO2- emissions Gross energy consumption 80 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04

5 Danish efforts on supply side Large scale CHP in 1970s and 1980s Medium & small scale CHP 1990s New types of generation in this Millennium Denmark today, 60% of generation is CHP more than 20% is wind power i.e. more than 80% of production integrated CHP savings average 20% Maximum utilisation of waste, biomass and difficult fuels

6 Centralized production in the mid 80 s Decentralized production of today

7 100% CHP Shares in Electricity and District Heating Production 80% 60% 40% 20% 0% 1980 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 District Heating Electricity

8 PJ 200 Electricity Production by Type of Producer '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 Small-scale CHP Units Autoproducers Large-scale CHP Units Windmills and Hydro Power Units Large-scale Units, Power Only

9 District Heating Production by Type of Producer PJ '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 Large-scale CHP Units Small-scale CHP units District Heating Units Autoproducers, CHP Autoproducers, Heat only

10 Danish efforts on demand side Wide range of measures since 1970s: - high taxes, many subsidies, fierce regulation Denmark leading EE country low energy bill Demand & supply not always in harmony Lesson that all measures must be deployed Orchestration in an integrated approach Danish results in buildings, appliances, etc. Energy efficiency efforts continuous exercise Energy efficiency action plan in Denmark Consumption reduction target minus 1,7%

11 Denmark 2005 Energy conservation potential End-use Final energy use 2003 Socio-economic potential up to 2015 PJ/year % PJ/year Space heat 217,6 24 % 51,3 Industry 66,5 25 % 16,5 Lighting 24,0 24 % 5,7 Cool/freeze 15,1 28 % 4,3 El motors 12,4 15 % 1,9 Ventilation 11,9 40 % 4,8 Pumps 8,4 35 % 2,9 Other 71,3 24 % 17,2 Total 427,2 24 % 104,5

12 Impact of labelling in Denmark compared to EU Market share of A-labelled cooling appliances in the EU and DK % DK A-share EU A-share Year

13 The Danish commitment to control GHGs Today s situation: Denmark took early action in all national and downstream efforts However, Denmark committed herself to 21% reduction in first period 2008/12 On top of this the 1990 baseline problem, equal to plus 8% reduction, i.e. 29% reduction in total Discussions on how to use flexible mechanisms and ETS

14 EU national GHG commitments in the Kyoto Protocol

15 Development in Danish GHG emissions (Mt CO2 equivalent)

16 CO2 emissions inside sectors '92 '94 '96 '98 '00 '02 '04 Energisektor Transport Produktionserhverv Husholdeninger Handels- og serviceerhverv

17 Prices om emissions correspond to energy market ETS market rely on fuels switch from coal to natural gas or oil Uncertain market for EUAs postpones investment in new technology & capacity New situation after high energy prices?

18 Prices of electricity and EUAs

19 Oil prices (Brent) USD/barrel Serie

20 Market conditions prices now beyond 70 øre/kwh Nordpool spot market

21 Main contents of Danish NAP I National quota system already in Climate strategy 2003 Huge reliance on trade with Scandinavia and use of CHP & wind power Free allowances for industry & heat market rely on historical consumption For electricity, quotas are based on benchmarks and demanding requirements 5% of emissions reserved for auctioning

22 Major challenges in NAP II Danish ambitions high 21 % Baseline set too low, need for more reductions (5 Mt) Non-ETS efforts exhausted Main target now is electricity, and here Denmark is integrated in regional power pool (16 Mt reduction) CHP & wind should be safeguarded Use of flexible mechanisms JI, CDM and purchase of EUAs (4,5 Mt resp. 3,7 Mt) Post 2012?

23 Themes in NAP II Total amount of emission allowances Allocation mechanisms (benchmarks, grandfathering, auctioning) Use of JI/CDM credits in ETS Inclusion of transport, aviation and industry gases Broad or medium definition of combustion Small companies Allowances for new entrants and

24 Time schedule NAP II June 2005: Implementation of Linking Directive Autumn-Winter 2005: Evaluation of NAP1, drafting NAP2 and rules for JI/CDM credits Spring 2006: Public hearing of NAP2 and political discussions Summer 2006: NAP2 to EU Commission - Delayed Autumn 2006: Public hearing of Law on Emission Trading January 2007: Deadline for allocating emission allowances for 2008

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