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Facts about Danish energy independence
1. The U.S. uses a bit more than 300 barrels of oil to produce one million Euros of gdp, Denmark uses just a bit over 100 barrels.
2. Pig blubber is an important medium for heating.
3. Energy consumption has held roughly steady for 30 years, even though gdp has doubled.
4. Non-profit cooperatives are common in the Danish energy sector.
5. Buying a new car involves a registration fee of 105% of the car's value.
6. Electricity costs 43% more per megawatt hour than in the United States.
Those facts are from The Wall Street Journal, April 16, 2007, "How Denmark Paved Way to Energy Independence."
Posted by Tyler Cowen on May 21, 2007 at 03:10 AM in Data Source | Permalink
Comments
Sorry if I should know this, but is energy used in international shipping accounted for in those statistics? If I ship product or people from NY to LA, I'm going to use a lot of energy in the name of American energy usage. But, in Denmark, anything going more than a couple hundred miles is going to be international, so the same activities (people flying to other locales, shipping products, etc.) are going to result in energy usage that is outside the country. I would assume that this would have a large effect on the statistic in a country that small, though not necessarily enough to account for the differences.
Posted by: kebko at May 21, 2007 3:21:23 AM
Given the low price of energy over the last thirty years, it seems that Americans are the smart ones and the Danes have been artificially handicapping their own economy.
Posted by: secret asian man at May 21, 2007 3:27:32 AM
Whats the big deal exactly?
2/3 of Denmarks energy consumption is fossil fuels (oil, coal, gas).
Denmark is the second largest oil exporter in the European Union.
According to the European union:
"Denmark demonstrates the lowest energy intensity among EU Member States, although due to the high presence of fossil fuels in the energy mix, CO2 per capita production and intensity are significantly higher than the EU average."
2004 CO2 per capita was 18% higher than EU average.
Denmark has little energy intensive industry. The EU average is 28% of energy use, Danish industry stands for 18%. Corrected for this Denmark uses MORE engery per capita than the rest of Europe.
Ps.
I don't accept the idea that the small net costs of global warming warrants cutting CO2 production. But whats the deal with gushing about Danish "energy independence"? They have some oil and gas, a small population, and good acces to windy coasts.
Posted by: Tino at May 21, 2007 3:35:41 AM
"CO2 production"
Sorry I meant emissions.
Posted by: Tino at May 21, 2007 3:36:53 AM
The 105 % registration fee is incorrect or at least a little simplistic.
The 105 % fee is only of the first 74.000 kroners ($13.500), above that the fee increases to 180 % of the cars value, which means that almost nobody can afford to buy new cars in Denmark.
The registration fee is not the only tax on cars however. After having paid that, you also need to pay a VAT (called "MOMS") of 25 percent. On the after-tax/fee value that is.
A new law that was made this year has increased the registration fee for cars with low fuel efficiency, so that you have to pay a fee of 1000 kroner pr. kilometer/litre the car drives less than 16 kilometers/litre.
Posted by: USfromDK at May 21, 2007 3:50:21 AM
The registration fee for cars is on top of all the other taxes and fees, add to that a 25% sales tax. All in all roughly 200% fees.
Posted by: Peter at May 21, 2007 3:51:10 AM
One thing I forgot to mention: Incidentally, the bracket is decreasing in age. For a used car that is 2-3 years old for example, the 105 % is of the first 39.600 kroners, not 74.000 kroners, above that it is 180 % ect. Most people thus have to pay both the 105 % fee and the 180 % fee, even if they buy relatively old cars.
Posted by: USfromDK at May 21, 2007 4:01:38 AM
What's the black/grey market in cars like, in Denmark? In forged registration certificates?
Posted by: Sudha Shenoy at May 21, 2007 4:34:30 AM
@Sudha:
Forged registration certificates: Very small market. The punishment is severe and there's a big risk you end up getting caught. There's a grey market in the market for used cars, but how big it is I don't know (I don't think anybody does for sure).
Important to this discussion is also of course the fact that the gas price in Denmark for the moment is appr. $7.2/gallon.
Posted by: USfromDK at May 21, 2007 5:06:22 AM
Population Density (/km2): Denmark = 126, US = 31
Denmark uses 1/3 the fuel per dollar produced, but their population is 4x as dense. It's not hard to imagine that this explains virtually all the difference, given that most of what reduces consumption in Denmark only works when people live and work close together.
Posted by: Josh at May 21, 2007 5:53:35 AM
Why is energy independence an issue? AFAIK Denmark isn't independent when it comes to cars, computers, orange juice, cell phones and a lot of other kinds of goods.
"How Denmark Paved Way to Energy Independence." Energy mercantilism? There are more pigs than humans living in Denmark. When will they write "How Denmark Paved Way to Bacon Independence." ?
A lot of the electricity in Denmark comes from burning coal. I'm not sure which country the coal comes from.
4) 105% - I wish. More like 200% as Peter writes. The high registration tax on cars means that a lot of people drive old cars that are less secure, polluting more and less comfortable.
The high car taxes started in the 1980's because politicians wanted to tax importing of foreign products. No cars were (or are today) produced in Denmark and therefore were an easy target.
Posted by: Lau at May 21, 2007 6:36:21 AM
Curious fact about MOMS: Here in Norway, it was also called that, but they changed the name to MVA. The reason?
MOMS = Midlertidig OMSetningsavgift = "temporary VAT"
MVA = Merverdiavgift = "VAT"
Posted by: Harald Korneliussen at May 21, 2007 7:38:35 AM
Lau: energy independence is an expensive luxury, that's for sure. However, if the alternative is buying natural gas from Russia, it might be a sensible strategic choice for Denmark. Once Russia starts throwing their power around, it might be too late. Of course, they could buy gas from us in Norway, but in such a situation that wouldn't be cheap.
Posted by: Harald Korneliussen at May 21, 2007 7:44:28 AM
I'm much more worried about the discovery that the US depends on China for 80-100% of some food ingredients than that we depend on Canada, Mexico, Nigeria, Saudi Arabia, and about 10 other countries for 50% of our oil. Especially since oil is always carefully tested to control impurity levels.
Posted by: DK at May 21, 2007 8:37:16 AM
Harald, in Danish the 'M' in 'MOMS' does in fact stand for 'Mer' (more) rather and 'Midlertidig' (temporary): http://da.wikipedia.org/wiki/MOMS
Posted by: Steffen at May 21, 2007 8:48:19 AM
Doe the use of pig fat for energy give a pleasnt bacony smell to the countryside?
Posted by: Matt at May 21, 2007 9:04:13 AM
The Scandinavian countries all have very high turn over tax on auto sales. As a consequence they produce very durable autos like the Volvo and SAAB so that even though the upfront cost of buying a Volvo or SAAB is higher then an American auto the total operating cost over the life of the car is lower. Of course, Ford claims they are working on addressing that difference.
How does the high turnover tax on auto sales work out in Denmark
where they do not build cars?
Do more durable cars dominate the auto stock? What other secondary impact show up?
I have no idea what the answer is, but it would be interesting to hear some informed comments.
Posted by: spencer at May 21, 2007 9:39:11 AM
I wonder what the Dainish GDP would have been without the taxes and regulations. 1/3rd the fuel consumption is great for bragging rights, but we should know what they gave up to reach that.
Posted by: Charlie Quidnunc at May 21, 2007 9:56:41 AM
Some of these remarks seem a bit off. Denmark is far and away the tops
in the world in wind energy production, with 20% of their electricity currently
coming from that very clean source, and a plan in place to increase that to
50%. Maybe most of the rest is from coal, but they seem to be rapidly moving
credibly to sharply reduce that, in sharp contrast to the US.
Posted by: Barkley Rosser at May 21, 2007 10:56:07 AM
Re: Josh's remark about population density explaining the difference.
From a piece in the Boston Globe, http://www.iht.com/articles/2007/04/11/opinion/edfoy.php:
New York City, for example, is the most energy efficient place in America.
How does Denmark compare with NYC?
Posted by: Eric Galloway at May 21, 2007 11:06:48 AM
I don't know about the grey market for car registrations in DK, but there certainly is a (legal) scam on selling used cars out of the country and getting the taxes in return. If you buy a used car for e.g. 10.000 kroners and sell it to Sweden or Poland, the government will return you some (maybe the full) amount of taxes paid for the car - even though the taxes were not paid by you. I know a guy who lives rather well on selling two cars a month to Poland. Sweet deal for him, rather stupid for the rest of us.
Posted by: Lawrence Whiteberg at May 21, 2007 11:07:12 AM
Matt- "Does the use of pig fat for energy give a pleasnt bacony smell to the countryside?"
McDonalds would love that ...
Posted by: Jon at May 21, 2007 11:11:46 AM
I just bought some bread a few minutes ago. Does my food rely on that bakery then? Not really. If they raise prices or go bust, I'll get food from somewhere else. If something changes, people adapt.
I don't grow food myself. I am depend on others to sell it. Yet I'm not really worried about being able to eat. There's a global market for food and energy. Buy what you want at the best price. If everybody tried to produce everything themselves they would be very poor.
@Harald: Denmark (producers and consumers in Denmark) is already a net exporter of energy and oil and produces natural gas too. But I don't think it matters much.
@spencer: The only country that has a tax less than 100% on cars is the only one that produces cars: Sweden. AFAIK in Sweden the tax on cars is just the normal VAT (25%). If Denmark produced cars they would most likely not be taxed at ~200%.
From my personal observations In Denmark: On average people buy cheaper cars and keep them longer. Some buy used cars imported from Germany or other countries. Yes you still have to pay the high taxes when you import a used car.
In other countries than Denmark cars often have far more features as standard. Some features are not even available as options in Denmark. Just like the rest of the car, you pay 3 times for the features.
Some security features, such as ABS and ESP gets you a small tax rebate. I think all new cars sold in Denmark have had ABS for years. But that doesn't help the people that drive cars from the 1980's.
The cars that people drive in Denmark are older on average than in comparable countries.
The high taxes on new cars are there because they generate a huge revenue for the state. It doesn't have any thing to do with fuel consumption.
@charlie: When measuring GDP in Denmark the public sector is usually a big part of it. You can't really measure the value of production in the public sector so they just say the the value equals the costs. So that makes GDP a relatively useless number.
@Matt: I had never heard that people use pig fat for heating.
Posted by: Lau at May 21, 2007 11:32:28 AM
Spencer,
Yes, I think the Danes drive more durable cars than Americans, but that is something for you and Ford to work out between you. I doubt that the Danes drive more durable cars than people in the rest of Europe. However, they certainly drive older cars especially if you control for income differences. The Danes simply have to do with their old Toyotas and Peugeots. Without the taxes on cars, the streets of Denmark would be packed with new Mercedeses and BMWs produced in Germany. Instead, its public buildings are packed with expensive designer furniture produced at home. Firstly, this is because Social Democratic governments think that they are better at spending people’s money than people are themselves. Secondly, this is because Social Democratic governments used to be concerned about foreign exchange reserves. Concerns about the environment came later than the car taxes, but they are the main reason why few people want to lower taxes on cars today. Because the labour market is very tight, Liberals and Conservatives argue that taxes on labour income, which are also very high, should be lowered first.
Posted by: Nils at May 21, 2007 12:02:25 PM
Barkley, the comment about coal is dead-on -- IIRC, Danish coal use is actually a source of considerable diplomatic friction between Denmark and Sweden, because of acid rain.
However, the Danes do use their coal power very efficiently. For example, heating is centralized in most cities, with the power plant piping heated water to every home in a city. This lets them skip the intermediate step of converting it to electricity and then back to heat at each home. This is one of the benefits of a high population density -- it wouldn't be practical in the US.
Posted by: Neel Krishnaswami at May 21, 2007 12:31:59 PM
Does it really help energy independence to discourage people from buying new cars? Older cars tend to be less fuel efficient because they lack the latest technology and also because they run less efficiently with age. I understand the concept is to discourage driving, but it seems, at first glance, that this may not be the best way to do so.
Posted by: Ted Craig at May 21, 2007 1:19:45 PM
Ted Craig, you are right.
And as Nils and I (and others?) have stated in the comments it has nothing to do with energy independence or fuel consumption. The car registration tax was something politicians initially did because of currency policy (that was the argument) and it has been kept in place because it now is a big income for the state. So as usual with politics it doesn't benefit the citizens, but is just a case of politicians messing with peoples lives and spending their money.
The result is relatively expensive, low value for money, old, unsafe cars.
Posted by: Lau at May 21, 2007 2:00:38 PM
Neel Krishnaswami,
Centralized heating might be more efficient than electric heating, thought I doubt it, but it is certainly less efficient that what is done everywhere I've lived in America: piping or trucking fossil fuels to be burned at the endpoint.
Posted by: Douglas Knight at May 21, 2007 2:35:44 PM
"very durable autos like the Volvo and SAAB" Huh? Here in Australia volvos have a fairly good reputation, but SAABs are widely regarded as moneypits of repairs and unreliability. Sort of like a Swedish Jaguar.
Every single person I know with a SAAB says that it was nice to drive, but "oh the engine blew up, and the gearbox needed replacing 3 times, at $5000 each." And mechanics won't even speak about them.
Of course it is possible that this is still good by American standards.
The other possibility, is that in Australia the cars are being used in temperatures 50° hotter than what they were designed for.
Posted by: doctorpat at May 21, 2007 7:41:56 PM
Douglas Knight,
If the circulated hot water is warmed using waste heat from the power plant it could be a good way to get value from a power plant waste product.
Posted by: TJIT at May 21, 2007 10:46:02 PM
"Neel Krishnaswami,
Centralized heating might be more efficient than electric heating, thought I doubt it, but it is certainly less efficient that what is done everywhere I've lived in America: piping or trucking fossil fuels to be burned at the endpoint."
Actually, it almost always works the other way. Plants for converting energy (such as power plants converting internal energy to electricity) are always more efficient the bigger they get. The high capital costs of fuel-saving features, such as heat exchangers or high temperature combustors and turbines, become more economical with higher energy output. For this reason, most large-scale institutions already have centralized heating and cooling systems.
That said, Denmark's system is extremely unpractical for America. Too much has been invested in the current Natural Gas architecture to ever really turn from it, even in high density areas.
I also find it odd that #1 and #6 are mentioned as if they don't have any relation. Assuming Ricardo's free trade model, Denmark will specialize in industries with lower energy usage while the US specializes in industries with higher energy usage. A full accounting of energy consumption would include the energy usage in making and transporting all goods. Under this definition, Denmark's per capita energy usage would increase and America's energy usage would decrease somewhat.
Posted by: Matthew at May 22, 2007 4:43:11 AM
Matthew is right -- the heat comes mostly from waste heat from power generation as well as from incinerators, so it's basically a way of getting more efficiency out of fuel that's already being burned.
A Cowen-ian point is that the efficiency relies substantially on institutional factors: the Danish system runs at high pressure and temperature, and relies on having competent and honest maintenance staff. OTOH, Russia also makes heavy use of district heating, but there you see corruption and poor maintenance turning it into a very inefficient system (due to unfixed leaks and similar).
Posted by: Neel Krishnaswami at May 22, 2007 1:59:29 PM
This heating system used in Denmark is called cogeneration in the US and has long
been advocated by some here. It used to be used in some of the larger cities, and
would be a better way to go in many of them again, given what has happened to natural
gas and other prices, although indeed we are now locked into a bunch of inefficient
infrastructure, as throughout much of the rest of the US economy.
Posted by: Barkley Rosser at May 22, 2007 6:22:58 PM
I'm very surprised to learn that this works. It seems to say contradictory things about the quality of insulation. Maybe the point is that when it comes to turbines, there is some waste heat even perfect insulation wouldn't save?
Plants for converting energy (such as power plants converting internal energy to electricity) are always more efficient the bigger they get.
That's certainly true for electricity generation, but it seems hard to believe it's significant in generating pure heat. The point is not to generate pure heat.
Posted by: Douglas Knight at May 22, 2007 10:56:22 PM
Douglas Knight
A top class coal-fired power plant has c. 40% energy conversion efficiency (a few European and Japanese plants achieve this, not many in the US where coal is cheaper). Transmission loses you another 8-10%. So home heating electrically *unless* you use a heat pump, is about 30% efficient.
A top of range GE Combined Cycle Gas Turbine will get you around 61-62% efficiency (a nuclear power plant about 31% although arguably that is less relevant).
A combined heat and power plant can have 80% efficiency-- 90% is possible. By a law of physics known as Cornot's Law, the efficiency of a power plant is capped out at around 67%(+), but you can *cheat* if you can find a use for the waste heat rather than just dumping it.
Lagging (insulating) pipes is not that difficult, especially if they are underground (temperature is a constant 55 degrees F). So yes there are transmission losses but they are not that huge.
Such systems aren't unknown in North America. Toronto has one which heats much of the downtown office core (and actually cools it as well-- they put the airconditioning loop under Lake Ontario). You'll also find them at a lot of chemical and industrial plants in North America.
The trick the Danes are pursuing is to use biomass to fuel the CHP plants-- as an agricultural country they produce a lot of biomass. Then you are effectively carbon neutral.
I can tell you Danish houses and offices are far better insulated than American ones. Danes don't like waste.
In terms of Danish electricity, they sell a lot of wind power to the Germans and the Norwegians off peak, and conversely buy a lot of Swedish hydro electric power (and nuclear) at peak times.
(+) Cornot's Law is why a nuclear power plant in Maine is a couple of percent more efficient than one in Florida-- the water temperature in Florida is higher.
Posted by: Valuethinker at May 24, 2007 6:28:32 AM
Douglas Knight
Piping gas to the home for heating and cooking *is* efficient, but the Danish system came into existence in the context of the 1970s. They were using oil in central heating systems, and then the oil crisis hit.
By using the coal (or gas) to generate electricity as well, they get a 'double bonus' which a North American city is not.
Your other problem is of course where to get the gas. North American gas production is declining despite record drilling activity. More and more Canadian production is going towards tar sands. When the Mackenzie Delta pipeline is finally built, that gas will go straight into Alberta Tar Sands.
The only solution for North America will be to increase LNG imports from the likes of Qatar, Russia and Iran (respectively the 3 largest reserves in the world). However the terminals have to be built which will require overcoming NIMBYism (they make great terrorist targets-- a hit will lead to a spectacular explosion).
The Canadians are building one in New Brunswick to keep New England's lights on. The Mexicans are building one in Baja for San Diego.
The other problem is that LNG will be expensive-- all that infrastructure costs big money, which isn't invested unless the utilities sign the contracts. *and* the Japanese and Koreans are already there first. The Chinese have just granted their first LNG import license.
Posted by: Valuethinker at May 24, 2007 6:36:54 AM
Douglas Knight
Sorry one more point. The obvious corollary to using gas as a domestic fuel is that one could use coal.
However, for good reason, just about every advanced country bans the use of coal for domestic heating and cooking in urban areas.
The reason being the air pollution problem. China is now coming to grips with this, the air polllution problem is so bad.
In the UK, 3,000 people died in 'The Great Fog of London' in ?1952? A winter of severe temperature inversion and air pollution. Heating with coal (or wood) is illegal in London, now. The fogs you see in London movies were actually coal smoke and SO2 fumes and the cockney nickname 'the big Smoke' actually dates from Victorian times. London doesn't get more fog than any other maritime city.
(it's worse than that in some places: in Aspen Colorado they ban new fireplaces, the smog problem from wood smoke is so bad).
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