Danish CO2 quotas for electricity under fire

Power firms hit out at plans for "European first" national emissions trading system

Danish industry has hit out at a government plan to impose annual limits on the amount of carbon dioxide (CO2) that individual power generators can emit. Under a proposal claimed to be the first in Europe, firms would be granted tradable CO2 quotas, and would be taxed on excess emissions if they failed to keep to their allotted limits.

The proposal, which is due to be voted on in the Danish parliament next week, would raise electricity prices for major power consumers by 5-10%, Niels Gram of the Confederation of Danish Industries told ENDS Daily today. According to the group, the plan would also harm Danish power exports while promoting use of electricity produced elsewhere in Europe with less regard for the environment.

Introduced as part of a legal package aimed at liberalising Denmark's electricity market as required under a new EU law (ENDS Daily 5 May), the government's plan is to allocate permits containing ceilings on CO2 emissions to individual electricity producers over a four-year period. Combined heat and power producers would be protected by being given priority access to permits, according to the agency.

A collective ceiling for all firms would be set at 23m tonnes in 2000, falling to 20m tonnes in 2003. A tax of DKr40 (euros 5.40) per tonne would be levied on any producer emitting CO2 above permitted levels – in a move the government says is designed to ensure that ceilings are not exceeded. Unused permits would be stored in a bank administered by the national energy agency, and could be used for credit in subsequent years or sold to other producers.

"Electricity generation currently accounts for almost half of total Danish CO2 emissions, and we are determined to take a lead in reducing this," an agency spokesperson told ENDS Daily. "Massive Danish electricity exports in recent years are in conflict with our commitments to reduce emissions under the Kyoto protocol – commitments we fully accept." In March, for example, 30% of Danish production was exported, while the equivalent of 10% was imported. The draft legislation makes provision for future international trade in quotas, although detailed rules are not specified.

Danish industry argues that the measures are too stringent, and could lead to one of the largest utility companies, Elsam, operating at only 45% of capacity within three years. At the same time, Mr Gram forecast an increase in production from, for example, plants in eastern Germany, which produce more emissions per unit of output. "We accept the desirability of quotas in principle, but we want their introduction postponed until a full international system has been worked out by the parties to the Kyoto protocol," he said.

Follow Up:
Danish energy agency, tel: +45 33 92 67 00; Confederation of Danish Industries, tel: +45 33 77 33 77.

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