A detailed proposal for the CO2 quota system is due to be presented to parliament this autumn as part of a package of reforms to complete liberalisation of the Danish electricity system in time for the EU's February 1999 deadline for its internal energy market.
The suggestion was made in light of the drastic rise in Danish electricity exports in the last two years, especially to Norway and Sweden, where dry weather contributed to low hydro supply. Denmark's electricity generation is largely from coal and as exports rise so do C02 emissions. From around 800 GWh in 1995, electricity exports increased to 15,400 GWh in 1996 and maintained a relatively high level last year. Out of total generated production in Denmark in 1996, the amount of power exported was nearly half that used at home. As a result, CO2 emissions rose by a quarter.
"We cannot expect that other countries are ready to take over the CO2 emissions that become attached to Danish exports," Auken says. "But a Danish CO2 quota does not mean a stop in export. There will instead be much more CO2-free power from, for example, wind turbines."
One possible way of encouraging more generation from renewable sources of energy may be through a system of tradeable emission credits. Companies trading electricity will face limits on the amount of C02 they can emit. Those unable to meet their quotas can buy credits from others who have extra credits, says Ture Falbe Hansen of the ministry.
xThe quota system for CO2 will be loosely based on existing regimes for emissions of sulphur and nitrogen oxides that have been in place for more than a decade in Denmark. The two Danish electricity co-operatives, Elsam and Elkraft -- which co-ordinate power supply in eastern and western Denmark respectively -- are given a limit for the amount of these gasses they are allowed to emit. The task is left up to them to decide how to apply it among their own power generators, giving some plants permission to emit more than others.
With only two main authorities to oversee, Hansen says, the government has not had difficulties running the system. But designing the CO2 quota system is proving more complex because it will have to apply to any newcomers to the electricity market in Denmark. The quota systems for the other gases will also have to be redesigned. "We have not put the flesh on the bones yet," says Hansen.
Determining the quotas will depend on the outcome of current EU negotiations on the Kyoto climate agreements, the ministry says. Denmark is standing by its ambitious commitment to reduce CO2 emissions by 20% by 2005 on 1988 levels, compared with an EU limit of 8% by 2008-2012. Emissions created from electricity that has been exported are not counted in the national target levels, Hansen says. Ignoring exports, CO2 emissions from electricity in Denmark were reduced 4% in 1996, with a further slight reduction last year. "We are going in the right direction, but just not fast enough," he adds.
Norway is also proposing to sharply increase taxes on carbon dioxide emissions -- and for all industrial sectors, including voracious energy guzzlers which have so far been exempt on economic grounds. The proposal is contained in a White Paper on climate change prepared by the government in response to Kyoto.