Oil still fuels the green state of Denmark

Denmark oozes green.

Its capital, Copenhagen, won the moral right to host next month's climate change summit in good part because Denmark seems to have found the winning balance between growth and carbon reduction. Wind power is coming on strong. Its citizens are willing to pay sky-high electricity prices to encourage conservation. Its hot-water-based district heating system is considered a marvel of energy efficiency.

Denmark's green efforts have won praise from United Nations Secretary-General Ban Ki-moon and the World Bank.

But this small, wealthy Nordic country - population 5.4-million - may not be as green as advertised. The fine print in Denmark's Energy Agency data paints a paler picture.

While Denmark has made considerable progress in moving toward clean energy, it is still tethered to the grubby old carbon world.

In reality, the Danish economy is more dependent on fossil fuels and the wealth they create than at any time in the country's history. The fuels come from the North Sea, whose reserves gave Denmark its first oil production in 1972.

In 1990 Denmark's oil production was 7-million cubic metres (one cubic metre equals 6.3 barrels). Production peaked at 22.6-million cubic metres in 2004. In 2007, the figure was a still-hefty 18.1-million. Natural gas production has doubled since 1990.

Most of the oil and gas is exported. "Denmark's economic success story is dependent on other nations increasing their carbon-dioxide footprint," said Aldyen Donnelly, president of Vancouver's WDA Consulting, a greenhouse-gas emissions management consultancy.

Of course, Denmark also exports green technology, such as wind turbines made by Vestas, the world's biggest wind-energy company. But clean-tech exports, combined with exports of electricity, are still well below the combined value of its exports fossil fuel and fossil-fuel technology, such as oil-drilling equipment. In 2008, for every dollar of exports in the clean-tech and electricity category, $6 worth of exports in the fossil-fuel category left Denmark. On the export front at least, Denmark is still very much an oil economy.

Another myth is that Demark's electricity production is ultra-clean.

There is no doubt that the Danes are world leaders in the development of wind energy. Wind power generated 18.3 per cent of Denmark's electricity last year, up from 11.6 per cent in 1990. (Solar power has a near zero share of the market.) "They broke every barrier in the wind market," said Jonathan Coony, an energy technology specialist at the World Bank. "They were pioneers in that area. No one thought they could go beyond 5 per cent. But they went to 10, then 15 and kept on going."

But coal, the dirtiest of the fossil fuels, is still the most popular electricity-generating fuel. Last year it supplied 48 per cent of Denmark's electricity, a ratio that has varied little this decade. Since coal plants are used as backups for wind generators when the wind doesn't blow, the plants are unlikely to be phased out.

Oil and natural gas, meanwhile, are still doing yeoman's work in the Danish electricity market. In 2008 the two fuels accounted for 22 per cent of total electricity generation. Coal, oil and gas together account for a not-so green 70 per cent of total electricity generation.

Other than wind power, Denmark's big environmental success story is district heating, hailed as a model of energy efficiency. District heating takes the surplus heat thrown off by coal and gas plants and uses it to create hot water that travels through pipes to heat homes. Today, some 2.5 million Danish homes are connected to the vast underground heating grid.

The Danish government says the system reduces fuel consumption by 30 per cent compared with the amount that would have been consumed in home furnaces. Ms. Donnelly says district heating can reduce the greenhouse-gas emissions from home heating by as much as half. But she notes the system was built well before the 1997 Kyoto climate change accord, and had nothing to do with Denmark's green halo. Developed in the 1930s and greatly expanded in the 1980s, district heating was the national effort to reduce energy costs after the twin oil shocks of the 1970s.

District heating is a consumer bargain. What is not a bargain is Denmark's electricity price. At the end of last year, according to Energy Regulatory Authority, the consumer price had reached the equivalent of 46 cents a kilowatt hour. That's more than three times the typical Canadian and American price. Only 30 per cent of the charge represents the actual energy cost. The rest comes from taxes, transmission costs and other fees.

The prices have worked in the sense that they have kept a lid on electricity consumption in recent years. But they seem to have failed to create an alternative energy revolution; fossil fuels still dominate electricity production.

Still, international organizations like the World Bank and the UN praise Denmark's green efforts and hold it out as an example to be followed as the world lurches towards a difficult carbon-reduction summit in Copenhagen. But Denmark, in spite of its best efforts, shows how hard it is to make significant progress on the carbon-reduction file. Said one energy executive: "It's not all sunshine and rainbows in the Danish energy market."