The economics of energy conservation [The Danish Paradox] – Jeff Rubin (Globe and Mail – May 5, 2012)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Three years ago, Jeff Rubin left Bay Street to publish a book that warned that the world was on the brink of a period of deglobalization because of the rising cost of energy. Now, as he argues in his forthcoming book, The End of Growth, sustained high oil prices mean that advanced economies are gearing down into a new era of slow – or no – economic growth.
While most economists believe that zero growth means big trouble, Mr. Rubin says it does not have to be a disaster – because consumers in the developed world can learn to live with less, even in energy-hungry Canada. The former CIBC World Markets chief economist cites research to show that some of the happiest people on Earth live in slow-growth economies. Lofty oil prices will do more than any regulations to curb greenhouse gas emissions and slow urban sprawl. The transition to slower growth spells tough, near-term changes in the economy – but in the long run, the environment and its citizens might be better for it

Just what does this new world look like, and what will it take to adjust? Some surprising answers lie an ocean away, in Denmark.
The first thing I noticed on a flight into Copenhagen a few summers ago was a ring of wind turbines surrounding the city. Not far from the city’s harbor, the sweeping arc of offshore windmills is a hard sight to miss. I found out later that this is exactly what the Danes have in mind. The gleaming white windmills, which rise more than 100 meters above the deep blue waters of the Øresund strait, are intended to be an unmistakable symbol of Denmark’s commitment to renewable energy.
The rest of Denmark’s bona fides when it comes to green living are also tough to ignore. In the last two decades, Denmark has cut its carbon dioxide emissions by 13 per cent. That makes for a remarkable contrast with North American emissions, which have increased by 30 per cent since 1990, the baseline year for the Kyoto accord. The credit for reversing greenhouse gas emissions is often given to eco-friendly initiatives like the wind turbines I saw dotting the Copenhagen seascape. It’s a success story the Danes are literally selling to the rest of the world. Denmark, which in 1991 became the first country to set up an offshore wind farm, now garners 11 per cent of its exports from sales of energy technology. At home, wind power accounts for an impressive 20 per cent of domestic electricity generation.
Denmark clearly has plenty of good reasons to be proud of its environmental track record. From the moment I glimpsed the wind turbines from my plane seat, though, I couldn’t get away from a niggling curiosity about how the country generates the rest of its power. At the conference I was attending, a speaker from a local power company presented on Denmark’s world-leading green technology. I tracked him down after my own talk, figuring he was just the person to ask. He hemmed and hawed, but when I pressed him, he reluctantly told me how his country generates the other 80 per cent of its power.

I was floored. The first thought that crossed my mind was, “Something is rotten in the state of Denmark!” For a country striving to be completely independent of fossil fuels, Denmark couldn’t have picked a worse way to generate electricity. Coal is 20 per cent dirtier than oil and twice as dirty as natural gas. With big dollars at stake selling green energy technology around the world, I can understand why Denmark wants to showcase its offshore wind farms instead of its coal-fired power plants. But the cold hard truth is that it is smokestacks, not wind turbines, that allow most Danes to turn on the lights.
Coal’s share of power generation, I found out, is the same in Denmark as it is in China. Where China’s carbon footprint now dwarfs every other country in the world, though, Denmark’s is actually shrinking. How can this be?

To answer this energy riddle, you need to look past how power is generated in Denmark and into the prices Danish citizens pay for electricity. Households in Copenhagen pay roughly 30 cents per kilowatt-hour for power. That’s two to three times the average price in North America. In Denmark, government-regulated power prices are laden with carbon taxes, which means electricity isn’t cheap, whether it’s wind powered or coal fired. Not surprisingly, Danes use a fraction of the power that North Americans consume.
All those world-famous windmills, it turns out, aren’t behind Denmark’s falling emissions. The real reason for its smaller carbon footprint is its high electricity prices, which put a huge damper on power demand.

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