Klima- og energiminister Lykke Friis’ tale på Yale

                     --- Det talte ord gælder ---

Thank you!

“I had a farm in Africa”

Well, I guess you all remember the famous opening words of the Karen Blixen novel, Out of Africa.
With similar pride I can say: “I had an office at Yale”

As pro-vice chancellor at the University of Copenhagen, I had the great pleasure of working intensively with Yale – we launched summer schools together, developed plans on how universities can limit their carbon footprints and hosted a major academic conference in Copenhagen in the run up to COP15, where you, Patchi, also spoke.

So, it’s great to be back – although it’s a bit of a drawback that I lost the office here in New Haven, - and my friend Handsome Don – when I joined the Danish government. But I guess you can’t have it all.

When I originally became Pro-Vice Chancellor, a colleague of mine reminded me of Dr. Kissinger’s bon-mot: “University politics make me long for the simplicity of the Middle East”.

Well, maybe American university politics is harsher than in Denmark - because I must say that I, quickly after having entered office, longed for the simplicity; not only of the University, but also of my old academic field, the European Union. 

Maybe I can best explain that with an anecdote. Two weeks after I joined the government, I was standing in the plenary of COP15 in my hometown Copenhagen –
with Denmark, as the President of the climate negotiations, having the responsibility of striking a global deal on climate change.

Suddenly, my Indian colleague comes up to me – “you wouldn’t have a meeting room we could borrow”?
Well, as you all know we Danes are polite people.
“So sure, come along”. And then he went to find the participants for the break-out-meeting.

And two minutes after, the new world order literally walked past me - Number 1 from China, India, South Africa and Brazil. It was in that tiny room that the so-called BASIC countries agreed to the nuts and bolts of what later became the Copenhagen Accord.Where was Europe? Well, we were arguing among ourselves,
somewhere in the so-called Bella Center, which was anything but Bella.

And the US? Well, they were not invited either. And President Obama literally had to gatecrash the room -”Can I join?”

The lesson of this anecdote is clear and reaches far beyond climate policy: The power equation of world politics has shifted – Today, solutions to global problems, not least due to the economic development,
can no longer be found in a transatlantic context only.
The new challenges of our now multipolar reality require multilateral solutions.

And what is more: countries that do not have access to energy, run the risk of losing out, since energy is one of the megatrends that determine a country’s wealth and hence global influence.

Or to quote President Obama in his recent Georgetown-speech: “the countries that lead the 21st century clean energy economy, will be the countries that lead the 21st century global economy”.

Indeed, where the leaders of the world used to mark their geographical conquests with small flags on each side of the iron curtain, they are now marking their access to the world’s remaining oil fields and gas pipes.

In reality that means that today, we’re facing a new kind of bipolarity– not between the US and the Soviet Union– but between those that control the access to energy – and those who don't.

But why it is that energy has become so crucial? I’ll here point to four explanations.

The first one is connected to the increasing amount of energy consumers worldwide. By 2050, the world’s population is projected to increase to 9 billion.

And with a growing global middle class, more people will demand cars, fridges, city breaks, iPads and all the other commodities of a modern life.

Just think about China. According to McKinsey, urban China could build up to two-and-a-half Chicagos every year to 2025! Already by 2035, the world’s energy demand will have increased by 36 % compared to 2008. And this is a conservative estimate by the IEA.

While the number of consumers on earth is going up, the world’s reserves of fossil fuels are going down. And that’s the second argument.

This is not the time or place to loose ourselves in the details of the peak oil theory. Here it’s simply sufficient to say that nations are already now engaged in an energy race, where we all try to get our hands on the remaining fossil fuels.

Just take the US, today you consume 25% of the world’s oil production, but you only control 2% of the world’s known reserves.

The same goes for my own continent: In 2030, Europe is expected to import:
66% of our coal
80% of our gas
and 90% of our oil

The consequence of this is beyond any doubt: we will be facing immense increases in the price of fossil fuels.

Some might intervene by saying that we have easy access to (shale) gas - at least for a while - and surely there is plenty of coal out there - but the environmental downsides of both these sources are considerable – take coal: the technology to turn it into a clean source of energy at a reasonable price is not exactly round the corner. 

So what it all boils down to is the very fact that fossil fuels will become a scare resource that will empower the world’s big oil countries.

This was a point that Dr. Henry Kissinger already made many years ago, when he stated that the world had experienced the biggest transfer of finances from one region to the other: From the Western world to the Middle East.

And that is obviously my third point: through our energy policy we are often empowering regimes that do not share our democratic values. Libya is here only one illuminating example!

Finally, going back to President Obama’s point, energy is vital in the 21st century, because due to the previous three arguments the demand for new green energy will be immense.

Almost all countries worldwide want to limit their energy consumption and overreliance on fossil fuels.

Hence, green tech is one of the world’s fastest growing markets. 

And those who manage to crack the green code will create new jobs: The European Commission estimates that the total employment in the EU could potentially increase by 1.5 million jobs by 2020.

And there’s money in it, too: According to McKinsey, clean tech centers of growth are developing a global market potential of approximately 2,5 trillion dollars in 2020.

So, ladies and gentlemen, to me the case is crystal clear. Together the four arguments make a compelling case for action.

Indeed, I will go as far as saying that in energy policy, we stand at the crossroads, where all conventional sources of energy have failed the tests of security or accessibility.

Just think about Deepwater Horizon and recently also the tragedy in Japan, not to mention the horrible accidents in coalmines that we witness from to time.

Hence, status quo is not an option – and please note that here it doesn’t really matter if you believe in climate change or not! Personally I do, but you do not really need the argument to make a convincing case for a paradigm shift in our energy policy.

However, it is one thing to make the analysis; quite another to design a clear roadmap to fossil fuel independence.

To be sure, we are here confronted by an unusually complex task. But these complexities and impediments are not an acceptable excuse for inaction. And the core lesson from my home country, Denmark, is actually that it can be done.

In Denmark, the paradigm shift in energy policy already began, when the oil crisis struck us in the 70-ties. Back then we chose to prioritise energy savings and renewable energy. And we didn’t stop, when oil started to flow again in the 80-ties.

And even just as importantly: throughout the years, we have shown that investing in renewables goes hand in hand with economic growth.

As a matter of fact, since 1980, the Danish economy has grown by almost 80%, while our energy consumption has remained more or less constant, and CO2-emissions have been reduced.

The share of oil in the total Danish energy consumption has fallen dramatically over the years.

At the same time, renewable energy is now covering almost 1/5 of our consumption of energy.

And what is more: today, almost 12% of our exports come from clean tech – and it is now part of the Danish brand on the global scene, making us the number one exporter of green tech within the EU.

As a matter of fact, last year we were made fun of in the Simpsons. Normally that’s an honour restricted to Bono or American Presidents.

But in this particular episode from last spring, Homer – under the clever supervision of his daughter Lisa – buys a wind turbine from the Danish wind industry.
And quite correctly, wind is introduced as “the energy that powers Denmark”, since it already makes up 20% of our electricity system. 

Now we are planning to take energy policy to the next level. You might call it our second transformation.

We will show that economic growth can be achieved while phasing out fossil fuels. And with less energy than today!

That’s why the Danish government set up a national commission in 2008 to help us become completely independent of fossil fuels.

The core conclusion was that independence is not a pipe dream; It can be done – and exactly because the prices on fossil fuels are bound to go up, it can be done at  limited extra cost.

Indeed, you can say that the slightly higher bill for green energy is an insurance premium that we pay for not having to participate in the global energy race – and hence deposit our room for manoeuvre with a limited number of energy producing countries!

Just to make sure. The conclusion that the green road won’t be much more expensive than the conventional – or black one, if you like – is not just a Danish sidekick.
Just last month, the European Commission reached the same conclusion.

Yes, the transition to a low carbon Europe will require great investments. But the European Commission assesses that cost savings by increased energy efficiency and switching to domestically produced low carbon sources will balance out the investments. Quite thought-provoking, the International Energy Agency has also just estimated that the EU has spent 70 billion USD more on imports from 2009 to 2010.

When I presented our new strategic energy plan in Copenhagen a couple of weeks ago, I took the liberty of labelling it as our modern version of a declaration of independence – we declare that we must become independent of coal, oil and gas by 2050.

I just participated together with Secretary of Energy Dr. Steven Chu in the second Clean Energy Ministerial in Abu Dhabi and here it struck me that the strategy is probably the first of its kind. Not just in Denmark, but in the world!

To be sure, we do not have a GPS system in Denmark that will show us the concrete travel route all the way to 2050. Just take low carbon transport. We simply do not know, where the major breakthroughs will materialise – and unfortunately, we are not a car producing nation; at least not last time I checked. So what we do is that we develop a very detailed travel plan until 2020, at the same time as we clearly calculate the cost of the journey.  
 
Allow me to highlight the most important initiatives on the road to 2020:

The first one is wind energy.
As I touched upon earlier, wind turbines are already the cornerstone of Danish energy policy. But in the new strategy, we will step up on wind power – especially with regards to off shore wind farms.

Secondly; biomass: we will also initiate a large- scale shift from coal to biomass in our combined heat and power plants – turning our heating system green.
All in all, we will get rid of close to 40 % of our coal before 2020, compared to 2009.

Thirdly, energy efficiency: we will take measures to increase energy efficiency even further. After all, the cheapest energy is the energy we do not use.
We aim to achieve a 6 % drop in energy consumption between now and 2020.

Since Denmark is already according to the OECD one of the three most energy efficient countries this is very ambitious, indeed.

Ladies and Gentlemen, these were the three main pillars of action. But the core challenge is actually to do everything at once - to transform these three initiatives into a holistic energy system.

After all, we all know that the wind is not always blowing.

On a calm day, electricity produced by wind power will be low. On a stormy day, production will be high.
Needless to say, modern societies cannot base their energy supply on weather forecasts. We need to ensure the highest degree of energy security – no matter the source.

Let me add, by the way, that the Danish energy strategy does not include nuclear power.

So as we expand the role of wind power, we must make sure that the supply of energy is not challenged. 
Hence, in the future we will increasingly use biomass, when we face shortage of wind energy.

At the same time, we will develop a European market – a so-called supergrid – where through connections Denmark can export its superfluous wind energy to Germany and import solar energy from Spain or hydropower from Norway, when there’s no wind.
This is also a way to make sure that the price on renewables will eventually come down.

But to be sure, we also have to find stable and cost efficient ways to store electricity. In short, we have to make electricity a smarter energy source than it is today. 

One solution is smart grids that will improve energy management significantly. Smart grids will enhance communication between households and power plants.

As an integrated part of a smarter grid, electric cars, for example, can be used as a decentralized storage facility. Or washing machines can be set to turn on at night time when power is plentiful.

All in all, this will enable us to manage the changing production levels of electricity by wind turbines.

This is our plan in short. But as Winston Churchill once said – “no matter how beautiful a strategy, you should occasionally look upon its results”.
So what are the results – or the energy bottom line of the strategy once it’s implemented?

Well, by 2020 we will increase the share of green energy in our economy by more than 50 percent – to 33 %.

Looking at electricity alone, the total share of renewables will increase from 29 % to 62 % in 2020.
The share of wind in this mix of renewables will move from 20 to 42%. A new world record I believe.

Although we still have to travel quite a journey to live up the goal of our declaration of independence – no coal, gas and oil by 2050 – we actually manage to limit our reliance on fossil fuels by 20% already in 2020.  

But, how will you pay for this, you might ask?
And this is obviously a crunch question.
Because although we know that in the mid- to long term, renewables will not be more expensive than fossil fuels, this is definitely not the case today.
So right at a time, when most countries are still struggling with the aftermath of the financial crisis, money has to be put on the table.

The way we tackle this challenge of financing in Denmark is multi pronged.

First, the most important point of action is actually that we have now developed stable, predictable framework conditions in particular for the green tech industry. This in its own right mobilises capital and entices industry to come up with the huge upfront investment.

And this is not just theory.

Let me just give you one concrete example:

Just after we presented the plan, institutional investors in Denmark, two pension funds, decided to invest heavily in an off shore wind park. With predictable, stable and credible tariffs they were ensured a stable, low risk return for their investment.

Second, we finance the initiatives over the electricity bill by allowing a public service obligation fee on energy tariffs.

And third, yes, and I know this may not go down well here, we also finance our energy plan through levies and taxes. We will for instance now introduce a new levy on heating -  a levy that will help pay to ensure uninterrupted energy supplies, and which will replace the income we currently earn from the fossil fuel levy.

But although it is controversial in the US, what we are doing is exactly the same as the President of Yale, Richard Levin argued when he spoke at my alma mater in 2009.

His point was that we, including the US, already have been experiencing something that looks very much like a carbon tax.

More specifically, President Levin made the interesting comparison, that we through half a decade – due to increasing oil prices – have suffered costs, which were more than six times higher than the costs we were likely to need to curtail global warming in the same period.

The evidence suggests that in countries where such tax differentials have been in place for some time, like Denmark and the Netherlands, the overall fuel efficiency of the vehicle fleet is higher than in other countries, and has improved more quickly over time.

In Denmark, taxes on energy – including on CO2 – make up about 2 percent of GDP.

You could argue that taxes and subsidies are not the obvious tools to use, particularly in a period of modest growth and job creation.

But in Denmark, it is part of the explanation that we are among the leading countries in terms of energy efficiency and hence have to shoulder lower energy bills.

Finding the right balance in terms of taxation is extremely difficult in all countries. And I am not arguing that Denmark has found the perfect model! But broadly speaking, we see energy taxes as a cost effective way of increasing efficiency and stimulating the development of new technologies.

Over the past 10 years, Danish exports of green tech have increased much faster than exports of ordinary goods. Wind power alone makes up 8,5% of Danish export.

This underlines the importance of the green tech sector as an engine for growth and job-creation in Denmark.

But obviously, ladies and gentlemen, none of us can predict the future in great detail.

As the famous Danish philosopher, Soren Kierkegaard once put it: “Life can only be understood backwards, But must be lived forward”

Or to use Steve Jobs’ modern version, a couple of weeks ago at Stanford: “You can’t connect the dots looking forward, You can only connect the dots looking backwards”.

My point today has been the following. We can connect the dots in terms of knowing, that we have to change. But obviously we don’t know the exact energy mix and technologies that will enable to us to break free from fossil fuels.

This reminds me of another innovative businessman;
the car manufacturer Henry Ford.

For years he and Thomas Edison worked on creating an electric car. And Ford believed it would be the most used vehicle in a near future. But Edison persuaded Ford to give up the project.

Maybe that’s why Edison years later said: "Many of life's failures are people who did not realize how close they were to success when they gave up."

I’m sure we’ll make many mistakes in our journey toward a low-carbon society. But the mistakes will make us wiser, and they will bring us forward.

Forward to a greener and safer world.

Thank you.