Pricing, partnerships key to green growth (29)
The following is a presentation made during the Global Green Growth Summit held in Seoul May 10-11.
By Christian Friis Bach
When I was a teenager, and that is of course a few years back (apparently a joke), my father erected in Denmark one of the new windmills with a capacity of 55 kilowatts. When you compare to the 40 windmills that the company is running each of which is more than a hundred times that.
And I say that to point out that we have had a technological revolution in terms of renewable energy in the 20 or 30 years.
And how did t come about in Denmark? What happened? How did you get these windmills developed? We did so through a lot of research, a lot of support through partnerships between civil society, companies, universities and government institutions.
But, and foremost, it was about prices, a unique price structure. I remember my father doing the calculations to determine if it makes sense to do the windmills and all of it had to do with prices.
Taxes and subsidies
It was a unique combination of taxes on fossil fuels and energies and subsidies to the renewable electricity coming from the windmills and that created a market and investors came in to fill the market. And I say that to emphasize how important prices are.
And we have a big challenge right now in the world because if we want to achieve sustainable energy and we want to increase the share of the renewable, we also want to increase energy efficiency and we need a quite unique set of prices because in order to increase energy access to everybody, we need low prices which even the poor should be able to afford.
If we want energy efficiency to go up, we need higher prices because then companies will save and find new and innovative solutions to save energy and if we want renewable to go up, we need the prices to be right. We need a right combination.
You need cheap prices to allow for access and high prices to allow for efficiency and right prices to allow for renewable to really come into our production system. That is absolutely critical to promote the market.
Now, in Denmark today, we just approved our new energy plan which is to cut consumption and total emissions of greenhouse gases by 40 percent compared to 1990 levels in 2020. I think it is one of the most ambitious targets in the world and go on from there to phase all fossil fuels in our heating systems by 2035 and aiming at becoming carbon neutral in 2050.
And the surprising thing is that companies in Denmark heavily supported the program and this is because companies know exactly what is going to happen.
We have bipartisan agreement in parliament and all major parties are part of it. There is a clear plan for the next 20 to 30 years and companies know exactly what is going to happen so they can plan accordingly and invest accordingly and I think this is critical for green growth, to travel along the green growth pathway.
That is part of prices and planning, long-term planning and that is what the industry needs to invest and create green growth. It is becoming an important part of the Danish industry.
If you take into consideration the large proportion of green export companies in Denmark, you realize the impact that our plan has had thus far.
(The Crown Prince of Denmark Frederik led the largest-ever business delegation to an Asian country of 76 companies to Seoul during the Global Green Growth Summit last week.)
And why do you we come to South Korea? South Korea is a big and important market but still I believe that many of them come here because South Korea decided to have green growth strategy and a long-term green growth planning.
And that is why Danish companies who are producing the energy-efficient water pumps, the windmills, those who are producing the insulation materials, companies who have the green growth technologies are coming to South Korea.
I say this along the line of how important it is to have green growth planning and technologies for South Korea and especially for a small country like us. For us, it was prices and planning.
Green Growth Forum
On the macro side, Denmark is continuing to seek opportunities to share our experiences with other countries which is absolutely critical and the Green Growth Forum, which will take place in Copenhagen through strong partnerships.
I can say from the experience I have with the South Korean government and organizations like the Global Green Growth Institute, sharing practical experiences with companies, universities and governments which come together do specific planning and the sharing of ideas.
This is the central part of green growth: partnerships, planning and pricing.
Cambodia’s green growth plan well under way
GGGI signed a memorandum of understanding with the government of Cambodia with the intention of developing a National Green Growth Master Plan (NGGMP) to help the country achieve continued rapid economic development while preserving its environmental integrity.
Cambodia has experienced significant economic expansion in recent years; however, this growth has been imbalanced and has largely occurred in industrial sectors such as construction, textiles, agriculture and tourism.
This has placed a significant burden on the country’s natural environment and a heavy strain on its natural resources. Furthermore, the benefits of this growth have gone proportionately to Cambodia's urban population while most of the people continue to live in rural areas, often at subsistence levels.
In order to address these disparities and alleviate the strain placed on the environment and natural resources, the Cambodian government has committed to pursue a more sustainable model of growth. To that end, the government worked with the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) to draw up a National Green Growth Roadmap, which serves as a broad foundational structure to integrate existing ideas and initiatives for green growth into the country’s economic development strategy.
Drawing upon the fundamentals of the roadmap, GGGI is assisting the Cambodian Green Growth Secretariat and the Ministry of Environment in establishing a National Committee on Green Growth (NCGG) to help oversee and implement the NGGMP. In developing this, GGGI is partnering with the Korea Institute for International Economic Policy (KIEP), the Korea Legislative Research Institute (KLRI), UNESCAP, Kwangwoon and Jeju Halla universities in South Korea, and EN3, an environmental engineering company.
The NGGMP is focused on five major areas: economic analysis, institutional analysis, sustainable forestry, waste management, and green job creation.
GGGI's fundamental objective is to help Cambodia meet its goals in developing the national economy, spurring job creation and identifying new opportunities for economic growth. As such, its country program for Cambodia includes both a top-down and bottom-up approach.
The top-down dimension entails performing economic and institutional analyses, including economic analysis of the aforementioned NGGMP, which is to be integrated with Cambodia’s broader economic strategy, and the establishment of the NCGG, which is tasked with shepherding and supervising the implementation of the master plan.
The top-down aspect also encompasses the establishing of a legal framework in order to institutionalize green growth strategies, tailoring specific policies designed to help Cambodia achieve its millennium development goals and the government’s own Updated National Strategic Development Plan; thus raising awareness of green growth amongst the population in general.
The bottom-up efforts are more local and sector-oriented although still, of course, within the scope of the broader GGMP.
Like old fashioned windmills, today's wind machines (also called wind turbines) use blades to collect the wind's kinetic energy. The wind flows over the blades creating lift, like the effect on airplane wings, which causes them to turn. The blades are connected to a drive shaft that turns an electric generator to produce electricity.
With the new wind machines, there is still the problem of what to do when the wind isn't blowing. At those times, other types of power plants must be used to make electricity.
In 2011, wind turbines in the United States accounted for about 3 percent of total U.S. electricity generation. Although this is a small fraction of the Nation’s total electricity production, it was equal to the annual electricity use of about 10 million households.
The amount of electricity generated from wind has grown significantly in recent years. Generation from wind in the United States increased from about 6 billion kilowatthours in 2000 to about 120 billion kilowatthours in 2011.
New technologies have decreased the cost of producing electricity from wind, and growth in wind power has been encouraged by tax breaks for renewable energy and green pricing programs.
Christian Friis Bach was appointed Danish Minister for Development and Cooperation in 2011. He is an agronomist and holds a Ph.D. in international economics from the University of Copenhagen. Bach has more than 20 years of experience in development work. He has also worked for the World Bank, UNEP and DansChurchAid.