Drill Denmark Drill

Denmark's oil production and shifting environmental strategies threaten to cost the country its status as a green leader ahead of the COP21 United Nations climate conference in Paris

In December, world leaders will meet at the COP21 conference in Paris to draw up plans to combat global warming. Reducing carbon emissions is central to this ambition and in 2012 Denmark took the widely-celebrated step of pledging to reduce CO2 emissions by 40 percent by 2020, and become completely independent of fossil fuels by 2050.

But while Denmark is globally praised for its commitment to renewable energy, it’s simultaneously a committed oil producer. So much oil is produced in Denmark’s North Sea oil fields that the country is completely self-sufficient in the commodity. Last year, the oil industry generated 25 billion kroner in tax revenue.

Despite Denmark’s status as a ‘green pioneer’, there are no plans to cease production in the near future. Instead the government has been taking active steps to amp up the profits from its oil fields.

In 2013 the former Social Democrat (Socialdemokraterne) lead government harmonized tax rules for North Sea oil to generate an additional 28.5 billion kroner of revenue to invest in Denmark’s rail infrastructure. In February, the government also earmarked one billion kroner to improve the efficiency of North Sea oil production.

“We are trying to get as much out of the North Sea as possible,” former climate and energy minister Rasmus Helveg Petersen told Politiken newspaper.

Scientists want reductions
Petersen’s ambition to keep Danish oil production churning at full capacity is at stark odds with one of the most efficient ways to keep temperatures from rising – keeping most known reserves of oil, gas and coal in the ground.

According to research by the UCL Institute for Sustainable Resources, a third of oil reserves, half of gas reserves and over 80 percent of coal reserves must remain untouched. That’s the drastic approach needed if the world is to stick to the carbon budget (see factbox) and avoid exceeding a two-degree increase in global temperatures.

“We wanted to demonstrate the contradiction between the declared political goal of remaining under two degrees of warming and the real world, where all politicians want to develop their own reserves and new resources,” Christophe McGlade, one of the researchers behind the UCL report, told Politiken.

The research identified which oil-producing regions could continue production, and which must slow down. Cheap oil from the Middle East can keep flowing, but a fifth of North Sea oil must remain in the ground. Oil production in the Arctic is entirely out of the question.

Combing for more oil
The report’s recommendations seem to have been completely ignored by the government. Not only does it plan to drain the North Sea oil reserves, but the government has also demonstrated a willingness to expand Denmark’s fossil fuel production by handing out licenses for natural gas exploitation through fracking.

The Danish state oil and gas company Nordsøfonden has also indicated that it will continue exploring the North Sea fields for more oil.

“The Danish part of the North Sea is a so-called mature area with a well-developed infrastructure, but it still holds exploration potential […] large quantities of oil and gas still remain to be discovered in the Danish areas,” Nordsøfonden states on its website.

Nordsøfonden has also suggested that Danish oil production will continue beyond 2050, after Denmark’s projected transition to a fossil fuel free economy.

“2050 is not an end date for the exploration and production of oil and gas in Denmark,” Nordsøfonden’s CEO Peter Helmer Steen said at the 7th Concession Round in 2014, which considered applications for North Sea licences.

Utilising the remaining reserves won’t be easy, however. According to trade organisation Oil Gas Danmark, the largely explored North Sea shelf has “no more easy pickings”. They furthermore claim that unlocking new fields and getting the most out of existing ones will require strong technological and commercial innovation.

A dose of realism
For now, Denmark needs its oil and natural gas. Danish electricity is already among the most expensive in Europe, and a total transition to renewable energy at this point would drastically increase the cost for consumers.

Professor Susan Svane Stipp, from the University of Copenhagen’s Department of Chemistry, works with the oil industry to develop more environmentally-sound techniques for oil production from the North Sea reservoirs. She argues that relying on North Sea oil is the best energy solution for the next 10 to 20 years, while sustainable energy sources are developed to the point where they are financially viable.

“We can’t turn off the tap tomorrow, but if we can find a way to squeeze a little more oil from the North Sea fields, then we avoid drilling in the Arctic where a spill could be disastrous. We would avoid using resources on new infrastructure. If we produce a little more from existing reservoirs in a responsible way, we would give ourselves another decade or two to get alternative, sustainable energy production going,” she says.

Increased investment in renewable energy would only help this transition, but the current Liberal Party (Venstre) government has other plans. Since their June election win, they have massively increased the cost of electric cars, as well as cut the 2016 research budget from 20.6 billion kroner to 19.2 billion kroner. They also proposed 300 million kroner in cuts from the climate budget.

While those cuts were ultimately dropped in the final budget, the government’s self-described “green realism”, has nevertheless shaken Denmark’s reputation as a green leader. Siemens’ wind turbine production is headquartered in Denmark and employs over 10,000 people. But in an interview with Politiken, CEO of offshore wind at Siemens Wind Power, Michael Hannibal, warned the government that it needs to continue sending the right signals to investors if it wants to keep those jobs in the country.

“My challenge to politicians is to continue the ambitious green policies that have maintained a steady increase in wind energy both at sea and on land,” Hannibal said.

Lacking climate Leadership
Hannibal isn’t the only one concerned about the potential impact of weaker climate ambitions. Mads Nipper, CEO of multinational pump manufacturer Grundfos, and Troels Ranis, energy director at lobby group Dansk Industri, have both expressed concerns over recent developments.

The government’s hesitation to pursue ambitious climate targets is understandable, given that they are enormously costly and would have a negligible impact on limiting global climate change from a national standpoint. But the hope is that Denmark’s ambitious targets could demonstrate much-needed leadership, especially ahead of the important COP21 climate conference in Paris.

But as long as the world keeps extracting and burning fossil fuel, no amount of solar panels and windmills can prevent serious climate change from happening.

“There’s the argument that as long as we need oil and gas, it’s better that we produce it ourselves than somebody else,” says Tarjei Haaland, climate and energy expert with Greenpeace Nordic. “But if every country says that, then the world will go to hell.”

He argues that with a deadline to create a global climate deal and avert dangerous increases in temperatures, it’s time for countries like Denmark to step up to the plate.

“We’re always talking about reducing CO2 emissions, but we don’t talk about who is going to be the one to keep their reserves in the ground,” he says. “The Danish government often talks about itself as a green pioneer, but then we should be a pioneer by letting our reserves stay in the ground and let poorer countries produce their share of fossil fuels.” M

FACTBOX: The carbon budget and bubble
We must avoid dangerous climate change – this is the objective of the United Nations Framework Convention on Climate Change (UNFCCC), which has organized the annual COP climate conferences since 1995.

But what is dangerous? Over the past 20 years a consensus has emerged that global temperatures cannot rise more than two degrees of pre-industrial levels. To do so means stabilising CO2 levels in the atmosphere below 450 parts per million (ppm), which is steadily approaching. In March 2015, CO2 concentration broke the 400 ppm mark, a 24 percent rise since records began in 1958. If we are to stay below two degrees of warming, we cannot burn all our known reserves of fossil fuels. If we are to stay within our ‘carbon budget’, 82 percent of coal, 49 percent of gas and 33 percent of known oil reserves will have to stay in the ground, according to a 2015 analysis from University College London.

Keeping fossil fuel reserves in the ground could have a major impact on the economy. Energy companies are valued based on the assumption that they can extract their proven reserves. If they are forced to keep some of their reserves in the ground, their valuation will drop and wipe out large amounts of wealth from the economy. According to Citigroup, if the two-degree limit is enforced, the so-called ‘carbon bubble’ risks $100 trillion of ‘stranded assets’. M


By Lena Rutkowski

Politics & Society Editor. Lena is a journalist and translator from Australia. lena.rutkowski@gmail.com @Lenarutski

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