These two case studies, on Denmark and
Norway, extend a previous report, which considered the supply revolutions in Germany,
France, Japan and the UK.
(1) Consumers
The case studies suggest that consumers will
participate in the energy transition if it is subsidised, as was the case in Norway, and they may
even pay for the transition if they are convinced
of the environmental benefits, as in Denmark.
However, both the Norwegian electric vehicle
(EV) subsidies and the Danish energy taxation
system that finances the deployment of offshore
wind suffer from design problems that Chinese
policymakers can learn from. Specifically:
• China may wish to align carbon costs by
implementing a universal carbon price and
support R&D in green technologies to reduce
the cost of transition. Both the Danish energy
taxation system and the Norwegian EV subsidies failed to align carbon costs with mitigation opportunities; this is likely to have
increased the total cost of the Scandinavian
transitions, as the most expensive mitigation
options were encouraged by policy. Norwegian EV subsidies have been an expensive
way to reduce carbon, and cheaper reductions
could likely have been made in other sectors
of the economy or by investing in R&D to
reduce EV costs. Likewise, Danish taxes were
unequally distributed across energy carriers
and sectors. As a result, industry has had
insufficient incentives to reduce energy consumption and emissions. This is unfortunate
because similar decarbonisation levels could
have been achieved at a lower cost if policies
had been technology-neutral and all sectors
and carriers had been treated equally.
• China may wish to further evaluate the distributional consequences of planned energy
policies. Both the Danish and Norwegian
energy transitions have had unforeseen distributional effects. Norwegian EV subsidies
have favoured city dwellers who experienced
greater benefit from in-kind subsidies, such as
free parking and the use of bus lanes during
traffic congestion, than rural citizens. This is
good from an environmental efficiency perspective as air pollution is more problematic
in cities. However, the system favours richer
citizens as they tend to live in cities and the
policy might therefore widen inequality.
Likewise, the burdens of Danish energy taxation have been unequal, with residential
consumers and small and medium-sized
enterprises (SMEs) paying for the transition.
This has protected heavy industries but has
put significant pressure on household energy
bills, which hit poorer households disproportionally hard.
(2) Companies
The Danish and Norwegian cases illustrate that
companies can both finance and benefit from the
energy transition. National oil companies
(NOCs) have been a key part of the transition,
both in Norway and in Denmark. In Norway,
Equinor (previously Statoil) and many international oil companies (IOCs) have helped finance
the transition through their petroleum taxes. In
Denmark, DONG Energy has transformed from
being a conventional NOC into a largely green
energy service company that develops Danish
offshore wind resources. To reflect this transition,
DONG, which was short for Danish Oil and
Natural Gas, renamed to Ørsted in October 2017,
after a Danish scientific innovator, given the
company no longer operates in oil and gas. Both
cases illustrate how companies, and in particular
NOCs, can be the key to the transition. However,
the Scandinavian cases highlight that a series of
supporting conditions must be in place if the
transition is to be successful. Specifically, two
lessons can be learned:
• China may wish to develop credible and
long-term strategies for its energy transition,
as it gradually moves towards non-subsidised
systems and as technology costs are reduced.
The Nordic countries are characterised by
Special Report 1: A Study of China’s Energy Supply Revolution
189
Norway, extend a previous report, which considered the supply revolutions in Germany,
France, Japan and the UK.
(1) Consumers
The case studies suggest that consumers will
participate in the energy transition if it is subsidised, as was the case in Norway, and they may
even pay for the transition if they are convinced
of the environmental benefits, as in Denmark.
However, both the Norwegian electric vehicle
(EV) subsidies and the Danish energy taxation
system that finances the deployment of offshore
wind suffer from design problems that Chinese
policymakers can learn from. Specifically:
• China may wish to align carbon costs by
implementing a universal carbon price and
support R&D in green technologies to reduce
the cost of transition. Both the Danish energy
taxation system and the Norwegian EV subsidies failed to align carbon costs with mitigation opportunities; this is likely to have
increased the total cost of the Scandinavian
transitions, as the most expensive mitigation
options were encouraged by policy. Norwegian EV subsidies have been an expensive
way to reduce carbon, and cheaper reductions
could likely have been made in other sectors
of the economy or by investing in R&D to
reduce EV costs. Likewise, Danish taxes were
unequally distributed across energy carriers
and sectors. As a result, industry has had
insufficient incentives to reduce energy consumption and emissions. This is unfortunate
because similar decarbonisation levels could
have been achieved at a lower cost if policies
had been technology-neutral and all sectors
and carriers had been treated equally.
• China may wish to further evaluate the distributional consequences of planned energy
policies. Both the Danish and Norwegian
energy transitions have had unforeseen distributional effects. Norwegian EV subsidies
have favoured city dwellers who experienced
greater benefit from in-kind subsidies, such as
free parking and the use of bus lanes during
traffic congestion, than rural citizens. This is
good from an environmental efficiency perspective as air pollution is more problematic
in cities. However, the system favours richer
citizens as they tend to live in cities and the
policy might therefore widen inequality.
Likewise, the burdens of Danish energy taxation have been unequal, with residential
consumers and small and medium-sized
enterprises (SMEs) paying for the transition.
This has protected heavy industries but has
put significant pressure on household energy
bills, which hit poorer households disproportionally hard.
(2) Companies
The Danish and Norwegian cases illustrate that
companies can both finance and benefit from the
energy transition. National oil companies
(NOCs) have been a key part of the transition,
both in Norway and in Denmark. In Norway,
Equinor (previously Statoil) and many international oil companies (IOCs) have helped finance
the transition through their petroleum taxes. In
Denmark, DONG Energy has transformed from
being a conventional NOC into a largely green
energy service company that develops Danish
offshore wind resources. To reflect this transition,
DONG, which was short for Danish Oil and
Natural Gas, renamed to Ørsted in October 2017,
after a Danish scientific innovator, given the
company no longer operates in oil and gas. Both
cases illustrate how companies, and in particular
NOCs, can be the key to the transition. However,
the Scandinavian cases highlight that a series of
supporting conditions must be in place if the
transition is to be successful. Specifically, two
lessons can be learned:
• China may wish to develop credible and
long-term strategies for its energy transition,
as it gradually moves towards non-subsidised
systems and as technology costs are reduced.
The Nordic countries are characterised by
Special Report 1: A Study of China’s Energy Supply Revolution
189