Environmental Engineering Reference
In-Depth Information
of wind power to Denmark's electricity grid had only reached 8.7% by 1999
and there were no other substantial renewable technologies contributing to
electricity generation.
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Lamentably, in the same year, the government made what would turn
out to be a forced, ill-fated policy decision that was largely precipitated by a
European Union (EU) led initiative to establish a common green certiicate
market throughout the European Union. In 1999, the Danish government
announced an intention to replace the wildly successful FIT system with a
carbon trading system. According to the proposed scheme, a national CO
2
emissions quota for 2000 would be set at 23 million tons and electricity util-
ities would then be assigned individual CO
2
emission quotas to contribute
to achieving the national target. he national CO
2
quota would be gradually
lowered to 20 million tons in 2003. Utilities that exceeded assigned emis-
sion quotas would be ined €5.4 per ton of CO
2
. Conversely, utilities that did
not fully utilize their quotas could bank the credits for subsequent years or
resell them on the open carbon market.
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here were two seemingly sound justiications for initiating such a change.
First, a system was needed to encourage further reduction of CO
2
emissions
in order to meet Denmark's Kyoto Protocol commitment to reduce emissions
of greenhouse gases by 21% of 1990 levels over the 2008-2012 commitment
period. his necessitated a policy to encourage utilities to reduce coal-ired
electricity generation. Ironically, the wind power FIT was adversely afect-
ing this quest because utilities were continuing to utilize coal-ired plants in
part to ofset the premium cost of wind power. Second, the EU-wide green
certiicate initiative presented inancial opportunities for nations with high
capacities in renewable energy, and therefore integrating with EU policy in
an expedient fashion was desirable. However, as will be detailed in the next
paragraph, it was also obvious from the inancial structuring of the new policy
that the government felt a need to gradually pare back subsidization of wind
power. In 1998 alone, over €77 million was purportedly paid to wind power
generators in the form of production incentives.
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he proposed shift to a carbon trading scheme was initially supported
by the Danish wind power lobby thanks to some favorable front-end ben-
eits and prospects of a much larger market for wind power throughout
the European Union. However, the attractiveness of the program came
with risks. Initially, the subsidization of wind power in Denmark would not
be drastically afected; over time the subsidies would be decreased, to be
replaced by green certiicates that would vary in value depending on prog-
ress within the European Union in achieving aggregate emission reduction
targets. According to this new policy, for projects initiated before 1999,
wind power producers would receive a FIT of €0.044/kWh and a production
