STIMULATING INDUSTRIAL INNOVATION FOR SUSTAINABILITY:
AN INTERNATIONAL SURVEY FOCUSED ON TECHNOLOGY
DENMARK
Carsten Frølund Jensen, M.Sc (Lisberg Management Consulting, Denmark)
TABLE OF CONTENTS
1. INSTITUTIONAL CONTEXT/BACKGROUND ....................................................................1
1.1. Overview of the Danish Economy .............................................................................1
1.2. Overview of the National Innovation System related to sustainable innovation .......6
1.3. Policy issues in Denmark on sustainability and technological innovation ..............12
1.4. Interaction of Government, Industry and stakeholder groups..................................15
2. CLASSIFICATION OF POLICY INSTRUMENTS...............................................................16
2.1. Instruments stimulating sustainability......................................................................16
2.2. Modalities ................................................................................................................23
2.3. Organization.............................................................................................................31
2.4. Methods to assess effectiveness ...............................................................................31
3. SPECIFIC EXAMPLES OF PROGRAM DESIGN CHARACTERISTICS...........................32
3.1. The Program For Promoting And Developing Cleaner Products (Former Program
For Cleaner Technology) ......................................................................................32
3.2. Program For Subsidies For Energy Efficiency In Enterprises .................................36
3.3. Subsidy-scheme for coverage of expenditures to CO2 taxes in energy intensive
industries and processes (agreements on energy efficiency).................................38
4. APPENDIX..............................................................................................................................41
4.1. Main documents and literature.................................................................................41
4.2. Informative web-sides on public initiatives and instrument for stimulating
sustainable innovation ...........................................................................................42
4.3. Central Points of Contact .........................................................................................42
1. INSTITUTIONAL CONTEXT/BACKGROUND
1.1. OVERVIEW OF THE DANISH ECONOMY
The economic recession in Denmark in the late 1980s and the beginning of the 90s led to
relatively low growth rates, high unemployment rates, budgetary deficits and inflation.
It was followed by a remarkable economic upturn, which has characterized the Danish
economy since 1994. Denmark has experienced higher than OECD-average GDP growth,
relatively low and stable inflation and an ongoing reduction of the unemployment rate
reaching a low of 5,5% in the first quarter 2000. Moreover, public budgets have turned into
surplus and the current account has been in surplus or near balance over the last years.
Denmark is a small open economy with high export/import ratios in relation to GDP. The
public part of the Danish economy is relatively large both in terms of public expenditures
(54,8 % of GDP in 1999) and high tax burden (50,8 % of GDP in 1999).
Moreover, the Danish economy is characterized by relatively few large enterprises compared
to the OECD average and a relatively large number of SMEs. The SMEs have traditionally
been weak in innovation, as research, product development and marketing represent large
costs and risks for such enterprises. Thus, there has been a need for public schemes to
stimulate innovation aiming at cost reductions, risk sharing arrangements and creation of
intellectual ownership to first movers (patents) or reduction of first mover disadvantages.
The Danish Government’s business strategy has since the mid 1990s been focused on the
following ”resources-areas” (strongholds), cf. box 1. The aim has been to maintain and
develop the competitive framework/key success factors for competitiveness.
Box 1. Resources areas
•
•
•
•
•
•
•
•
Medico/health
Food/agriculture
Biotechnology
Environment and energy
Construction and building
Manufacturing (components, household installations and furniture)
Transportation
Business services and information technology
The composition of Danish export on the resource areas is presented below (figure 1 and 2).
The position of the different resource areas in the home market is illustrated by figure 3 and 4.
Besides identifying environment and energy as a specific resource area, sustainable
innovation has been an issue in the government-industry roundtable discussions on
development and innovation in the resource areas.
In this connection it should be stressed that Denmark has no production or enterprises in
traditional innovation strongholds such as defense industry or car production.
DENMARK-1
Source: OECD, ITCS 1997
Total business
Knowledge services
Methal industries/production
Other businesses
Medical/health
Energy/environment
Transportation
IT/communication
Building
Furniture/clothes
Food
4,5
4,1
4
3
2,5
2
1,8
DENMARK-2
Denm arks average m arket shares %
3,5
2,9
2,3
Figure 1. Average Danish market shares of OECD-market for resource areas 1988-96 (%).
1,5
1,5
1,6
1,6
1
0,9
1
0,9
0,5
0,4
0
Source: OECD, ITCS 1997
K nowl edge s er vi ces
M etal i ndus tr i es / pr oducti on
Other bus i nes s es
40
30
20
10
DENMARK-3
D enmar k s aver ag e ex po r t s har es
6,9
7,2
M edi cal / heal th
1 3,3
1 1 ,4
1 0,5
6,8
33,8
E ner gy/ envi r onment
T r ans por tati on
I T / communi cati on
B ui l di ng
F ur ni tur e/ cl othes
F ood
Figure 2. Average Danish export market share of total Danish export from the resource areas 1988-96 (%).
4,6
5,1
0,5
0
70
59,3
49,4
IT/Communication
46
Source: OECD, STAN, 1998
50
DENMARK-4
Market shares %
60
40
33
Other businesses
Total businesses
32,3
Medical/health
Engergy/environment
Transportation
49,6
80
68,4
Building
Furniture/clothes
Food
Figure 3. Average market share on the home market for resource areas 1998-96 (%)
30
26,2
21,1
20
10
0
Source: OECD, STAN, 1998
Total businesses
Other businesses
Medical/health
Engergy/environment
Transportation
IT/Communication
Building
Furniture/clothes
Food
2
1,5
1
0
-3
-3,1
-4
-3,7
Average annual growth %
-2
-1,6
DENMARK-5
-1
-1,2
-2,2
-2,1
Figure 4. Average growth in market shares on the home market for resource areas 1988-96 (%).
-5
-5,3
-6
-6,2
-7
1.2. OVERVIEW OF THE NATIONAL INNOVATION SYSTEM RELATED TO
SUSTAINABLE INNOVATION
Figure 5 presents an overview of government players related to sustainable development and
innovation in Denmark. There is no specific policy coordination at top-political level on
sustainable innovation issues, but coordination forums with central ministers are established
in connection with comprehensive initiatives (green taxation schemes, Energy21-plan, Green
Business Strategy, etc.).
The present Government Business Strategy including the “green business strategy” aspect
has been prepared in cross-ministerial group. Moreover, the “green business strategy” is
implemented in a cross ministerial forum chaired by the Ministry for Trade and Industry and
with participation of other central ministries e.g. the Ministry for Environment and Energy.
The main government bodies taking part in the formulation and administration of legislation,
standards, grant schemes and green taxation schemes for promotion of sustainability and
sustainable innovation are:
•
Ministry for Environment and Energy, including:
Environmental Protection Agency (environmental protection, regulation, subsidy
schemes, labeling, environmental research program, coordination and support to
Central and Eastern European countries and Development countries in the Third
World).
Energy Agency (green taxes, subsidies schemes, regulation, voluntary agreement,
tradable emission rights, research programs).
•
Ministry for Trade and Industry (industrial issues, innovation, technology policy:
Industrial Promotion Agency (Innovation centers/Incubation Centers, Science Parks.
Technological Service Centers and Technological Information Centers, development
contracts/enterprises)
•
Ministry for Research (research programs, Research Agency, Research Councils,
Universities and Technological Research Institutions).
•
Ministry for Food and Agriculture (Action plan for environmental friendly and ecological
Agriculture, Agriculture Research Center, research on food production technology).
•
Ministry of Finance, Ministry for Taxation and Ministry for Economic Affairs (green
taxation schemes and evaluation, allocation to subsidy schemes and market orientation of
sustainability policy).
DENMARK-6
Development contracts/
enterprises (venture
capital)
Advisory
bodies
Ministry for
Finance
Ministry for
Economic
Affairs
Innovation
/incurbation
centres (6)
Industrial
promotion
Agency
Ministry for Trade
and Industry
Technological
Sevice
centres
Forestry and
nature agency
Ministry for
Taxation
DENMARK-7
Technological
information
centres (TIC)
Enviromental
Agency
Ministry for
Environment
and Energy
Parliament
Advisory
bodies
Figure 5. Overview of major public sector actors stimulating sustainable innovation
Danish tecnological
University
Universities and
Rearch institutions
Energy
Agency
Enviromental
research prg.
Research
Councils
Resarch
Councils
Food technology
reseach prg.
Agriculture
research
centre
Ministry for
Food and
Agriculture
Danish
Research
Agency
Ministry for
Research
Traditionally, the players have had different approaches to the issue of stimulation innovation
and to a certain extent these differences still exist, cf. box 2.
Box 2. Traditional positions of major players general approach to sustain able innovation
Ministry for Environment and Energy
• Primarily sustainability perspective (correction of market imperfections).
• Long term and life-cycle perspectives.
• Minimum regulations and norms are required.
• Willingness to supplement with market driven measures (taxation, tradable
emission rights).
Industries, Ministry for Trade and Industry, Ministry for Food and Agriculture
• Primarily product innovation perspective (development and market
introduction of products/processes) and secondarily sustainability.
• Market orientation of measures (voluntary agreements, knowledge
diffusion), non-interventionism.
• Competitiveness and costs.
• Short term-perspective.
Ministry of Finance, Ministry for Economic Affairs and Ministry for Taxation
• Fiscal interests.
• Market orientation of measures.
• Efficiency of subsidies/grants schemes (rationalisation of programmes, deadweight loss and evaluation).
In addition to the governmental players, industry associations and unions have all focused
increasingly on the issue of sustainability.
The level of R&D funding in Denmark has been relatively modest during the 1980s and
1990s, amounting to around 2,0 % of GDP in 1999.
Public sector subsidies amount to 0,7 % of GDP in 1999, including
• subsidies for universities,
• publicly supported R&D programs,
• public-private cooperation between universities, research institutes and SMEs
(knowledge diffusion/venture capital e.g. research centers/parks, business incubation and
innovation centers, etc.).
The private enterprise based R&D funding amounted to only 1,3 % of GDP in 1999 reflecting
the predominance of SMEs in Denmark.
Compared to the OECD-average, a relatively low part of the Danish R&D funding was
directed to manufacturing, whereas the R&D level is larger than OECD-average in the
energy/environment, agriculture and building/construction.
Denmark is especially in front in energy and environment resource area in terms of R&D
expenditures and patents (see figure 6-9), which illustrates growth in R&D expenditures and
patents compared to the OECD average). The main part of the energy and environment
resource area is related to energy (natural gas, windmills, etc.).
DENMARK-8
30
28
25
20
15
14,5
15
15
15
11
12
10
9
8
8
DENMARK-9
6
6,5
7,5
Growth in danish R&D expenses
Average OECD
Source: Benchmarking of Danish resource areas, 2000
Total Business
Knowledge service
Trade
Metal industry/production
Medical/health
Energy/environment
Transportation
IT/communications
Building
Furniture/clothes
Food
4
5
5
5
2
1,9
2
0
-0,5
-5
-5
-8
-10
Figure 6. Average growth in R&D expenditures in Denmark compared to OECD average in resource areas 1998-96 (%).
Source: Fraunhofer, 1999.
1,5
1,6
Total businesses
Methal industries/production
Other Business
Medical/health
Energy/environment
Transportation
IT-communication
Building
Furniture/clothes
Food
1,3
1,4
1,4
1
0,8
0,6
0,5
0,3
0,4
0,4
0,4
0,3
DENMARK-10
Denmarks average patent market shares %
1,2
0,7
Figure 7. Average Danish share of total number of OECD patents in resource areas 1988-96 (%)
0,2
0,2
0
35
30
30
Source: Benchmarking of Danish resource areas, 2000
Average OECD %
Total businesses
Methal industries/production
Other Business
Medical/health
Energy/environment
Transportation
IT-communication
Building
Furniture/clothes
Food
20
15
10
8
6
5
5
3,5
4
4
4
1
1
0
0,5
0
-1
-5
-5
-3
-4
-10
-10
Growth in number of patents in Denmark %
DENMARK-11
25
12
12
Figure 8. Average growth in number of patent in Denmark and in OECD in resource areas, 1998-1996 (%)
-15
1.3. POLICY ISSUES IN DENMARK ON SUSTAINABILITY AND
TECHNOLOGICAL INNOVATION
Denmark has had a high focus on environmental policy since the late 1970s, which at least
until the early 1990s was characterized by a more or less one-sided environmental focus
mainly on regulation, restrictions and reduction in the use of energy-sources supported by the
green movement and few political parties.
In the 1970s and to a large extent during the 1980s, economic growth as such was seen as an
impediment for sustainable development and a barrier for improvement of environmental
standards (e.g. discussion on “limits for growth” and “zero growth societies”).
Gradually since the early 90s and to an increasingly larger extent in the late 90s the policy
goals for Danish policy on sustainability and sustainable innovation have been directed
toward the goals listed in box 3.
Box 3. Policy goals for Danish policy on sustainability during the late 90s
•
Re-coupling of economic growth and sustainability (both short term economic
growth and long term economic growth must be reconciled with sustainability).
•
Active integration of sustainability in sector policies (e.g. energy, industry and
agriculture).
•
Keep the position as an international forerunner in environmental policies and use
sustainable innovation actively as a competitive measure in the global
competition using the strengths of the environmental resource area (e.g. process and
product oriented technologies) as an eco-competitive and eco-efficiency stronghold.
•
Influence and visibly position in international policy development and on
standards on sustainable development (e.g. EU, WTO) and responding to the
challenge of climate changes, facing some difficulties to restrict emissions of CO2
according to national ambitions and the Kyoto agreements.
•
Increased use of market oriented and voluntary measures where possible and
sufficient and emphasis on reduction of indirect costs (administration) attached to
instruments.
Moreover, it is only during the last two years that the Government has discussed and
formulated an innovation policy and specifically focused on innovation as an issue.
In relation to the development of policy goals during especially the 1990s the Danish
ministries, industrial associations and researchers have had discussion on the concept and
definition of sustainability inspired by international developments (the 1987 Bruntland report)
and organizations, especially the UN and OECD.
This has lead to identification of two main approaches:
• Environmental and resources approach focusing on the use of natural resources and
pollution.
• Economic, social and distribution approach focusing levels and distributions of incomes,
poverty, unemployment and health in and between countries and demographic trends.
During the late 90s, the environmental and resources approach in the Danish context has
gradually changed.
DENMARK-12
During the early 1990s, the discussion was predominately dominated by a more strict
environmental and resources sustainability approach demanding that the sum of natural
capital (water, raw materials, air etc.) has to be steady or increasing. This was based on the
assumption that natural capital cannot be substituted for other forms of capital e.g. human
capital (knowledge and education) and human produced capital (technology, machinery etc.).
In the late 90s, a weaker environmental and resources sustainability approach has emerged
focusing on the possibilities for a net use of natural capital by the present generation to be
substituted by a net saving of other forms of capital. However, still based on a certain critical
mass of natural resources. The weaker approach focuses on re-coupling of growth and
environmental sustainability and has lead to the concept and calculations of “the Danish real
net national saving” by the National Economic Council. The calculations are based on the
formula: GDP minus use of real capital and reduced by the use of oil/natural gas in the North
Sea, emission of greenhouse gazes, NOx, SO2 and VOC.
The most recent and potentially most far reaching policy development which represents an
integration of economic growth, innovation and sustainability is the Danish Government
Strategy for Business Development presented in march 2000. A high priority aspect in this
strategy is a “Green Business Strategy” with focus on environment, innovation and
competencies”.
The strategy setting up the goal to be reached in year 2005 is the result of a dialogue during
1999 with more than 300 CEOs from private enterprises, representatives from interest
organizations and directors from research institutes. The background has been a specific
desire of the Government to integrate growth, innovation and sustainability to a package of
international excellence.
The goals of the Governments “Green Business Strategy” are:
•
Under the headline of “Environment, innovation and competencies” to
further the green competitiveness of Danish enterprises and develop the
market for green products.
•
Denmark must in 2005 be among the OECD countries with most
enterprises with environment certification. Denmark is number two in
relation to inhabitants in OECD in 1999.
•
Dissemination of green and ecological labelling. Denmark must maintain
its position as one of the countries where environment and ecological
certified products and goods have the largest turnover.
•
The Government must further the resource effectiveness in all businesses.
Source: Danish Government Business Strategy. DK21, March 2000
The minister for Trade and Industry has in cooperation with the minister for Energy and
Environment formed a cross-ministerial workgroup with participation of industrial
associations as well, which has to put forward proposals for implementation of the “Green
Business Strategy” during the second half on 2000.
DENMARK-13
The topics are the following:
•
Dissemination of sustainable technologies - How is Denmark becoming better to
identify which technologies contain both an environmental and a business
potential? How does Denmark strengthen the ability to develop and market
environmental friendly technologies?
•
Establishment of competencies on environmental management - How do
Denmark improve the general conditions for better environmental management
in enterprises in a better and more market oriented way?
•
Development of a “green market” - How does Denmark increase the public and
private demand for environmental product best and fastest?
Source: Danish Government Business Strategy. DK21, March 2000
It should be noted that representatives from different ministries pointed to the fact that the
initiative is a compromise between industrial and environmental aspects. From the industrial
associations side some skepticism is expressed whether the “Green Business Strategy” is
merely a window-dressing effort. The risk is to focus only on a limited segment of Danish
enterprises that have the ambitions to market themselves with a “green profile” as a
competitive advantage and which are already forerunner on environmental management. This
might leave aside the major part of Danish enterprises that still focus more on the costreductions potentials than a green profile and the enterprises that represent the largest
potential for environmental improvements.
A reorientation in the instruments used for stimulating sustainable innovation has taken
place in Denmark, which has been an integrated part of the gradual intention and believe in
the possibilities to balance environmental protection and economical growth and to promote
environmental protection through technological innovation
During the late 1980s and the 1990s there has been an reorientation in the Danish policy from
a one instrument approach in 1970s and 1980s based on regulatory measures (detailed
regulation and control). This has been a move toward:
• A multiple instrument approach (economic incentives e.g. subsidies and taxation,
knowledge diffusion, institutional building, capital market development) with increased
weight on market oriented instruments.
• Green taxation, tradable emission rights and institutional building especially since
mid/late 1990s.
• Strong focus on definition of a innovation policy, especially in the end 1990s with the
aim of increasing innovation in sustainable products and processes in industry.
• Dialogue between public and private actors in defined resource areas and dialogue during
the policy formulation process (e.g. white paper, pre-policy studies and working groups)
• Strong focus on ecology in food and consumer protection (e.g. position on GMOs).
• Environmental/sustainability impact studies (e.g. the Danish Finance Bills have since
1998 been supplemented by a early environmental impacts publication, the creation of
macro-economic models by the economic ministries, the Danish Economic Council and
research institutes incorporating sustainability and environmental impacts).
DENMARK-14
1.4. INTERACTION OF GOVERNMENT, INDUSTRY AND STAKEHOLDER
GROUPS
Denmark has had a high focus on environmental policy since the late 1970s, which was until
the early 1990s promoted primarily by the green movement and few left wing political
parities.
At least since the early 1990 the policy on sustainability and innovation in connection to
sustainability has been formulated and enacted by:
• Active position on the question of sustainability and a general “greening” of all major
political parties in Denmark, where the differences among parties are more on the actual
combination of instruments and the time-span for realization of the aim than on the goal.
Sustainability is a very salient and important issue for Danish voters.
• Dialogues and cooperation procedures, traditions and practices followed generally in
policy formulation in Denmark stressing compromise and “negotiated agreement” e.g.
• Specific new initiatives, laws, regulation and schemes are discussed with major
interest groups and often have a strong support among the interest groups.
• Industrials representatives (e.g. industry associations) invests relatively large
resources in the sustainability issues as an service and aid for the members and
industrial representatives participate actively in the preparation of schemes, laws and
regulations.
• Multiple actor discussions on future direction of sustainable innovation e.g. white
papers and round tables on green industrial policy and green taxation schemes.
• The establishment of national advisory councils with broad interest representation in
connection to all major initiatives and instruments (subsidy-schemes etc.) influencing the
direction and priorities.
DENMARK-15
2. CLASSIFICATION OF POLICY INSTRUMENTS
2.1. INSTRUMENTS STIMULATING SUSTAINABILITY
The present main policy instruments in Denmark for stimulating sustainability are:
1. Regulation and regulatory measures
• Detailed rules/norms/standards and control (especially on very harmful products and
ingredients e.g. law on chemicals and chemical products).
• Framework rules to be supplemented by secondary regulation/ guidelines.
2. Public grants and subsidy programmes
• Clean products.
• Energy-efficiency.
• Renewable energy sources etc.
3. Energy auditing and green labeling
• National and Nordic label.
• EU-label (EMAS).
4. Certification of products/production processes
• ISO14001-certification.
• Specialised third-party certification body (Environmental Labeling Board/Secretariat).
5. Fiscal measures
• Green taxes (earmarked revenues partially used for subsidies for industry).
• Tax deductions (tax expenditures. e.g. exemptions for windmills, flight traffic).
6. Voluntary agreement
• Agreements on energy efficiency.
7. Tender-system for emission quotas/tradable emission rights
• Tradable emission quotas as part of the reform of the electricity production sector
(SO2 and NO2 from power stations).
8. Public-private partnership focussed on institutional building for (sustainable)
innovation in industry
• Innovation and incubation centres/science parks.
• Development contracts and enterprises (venture capital).
• Public incentives/support/institutional building for knowledge distribution
(technological information, counselling and technological centres/certified service
centres).
9. Patents and property rights
10. Public procurement and buying green policy in public institutions.
11. Environmental evaluation of Finance Bill
• Yearly environmental assessment of the environmental effects of the Finance Bill
The traditional and dominant role of the Danish Government is to be facilitator and
cooperator in stimulation sustainable development but the Government policy also has some
interventionist aspects.
DENMARK-16
The instruments are often combined in action plans for specific sustainability issues e.g.
• Water Environment Plan I and II.
• Pesticides Action Plan.
• Program for Drinking Water Protection.
• Action Plan for City Ecology, Buildings and Houses.
• Action Plan I and II for Ecological development in Agriculture.
There is an increased tendency during the last 5 years to use green taxes and energy taxation
(see figure 9 and 10), labeling and voluntary agreements as a supplement to regulations and
regulatory measures. This tendency is expected to last in the nearest future, even though
further green taxation might be hampered by industry complaints about competitiveness and
the need for international (EU/OECD) use of such measures.
Different financial support programs subsidizing sustainable innovation are still very
important measures in the Danish context (see figures 11-12). The total state expenditure
(subsidies and investments) on environmental purposes was on the level of 1,2-1,3 billion
Euro in 1999-2000. The largest and only increasing expenditure category with environmental
purposes is international environmental assistance. This reflects the cross-border aspects of
environmental issues and the Danish international competitiveness goal. The second largest
category is research and education (figure 11). On energy purposes CO-2 subsidies has
increased since the green tax reform in 1993 to be the largest single expenditure category in
2000, whereas electricity production subsidies has been the largest expenditure item over the
period 1992-2000 (figure 12).
There has been a gradual increase in subsidies with environmental and energy purposes over
the past 8-10 years, event though the energy subsidies has been reduced in 1999 especially
because of reductions in the electricity production grant. Earmarked subsidies related to CO2
taxes have on the other hand remained a very important instrument. The use of negotiated,
voluntary measures (e.g. on energy efficiency agreements) and labeling is expected to
increase even more in the future, substituting - if possible and reasonable - tighter regulatory
measures. However the number of laws, regulations, guidelines and treaties still increases (see
figure 13). It should be noted that the number of laws has stagnated, whereas the follow up
regulations have increased in numbers.
DENMARK-17
1992
1994
Personal taxes
1993
1995
1996
Green taxes
1997
1998
1999
DENMARK-18
Source: Environmental Assessment of the proposal for Finance Bill 2000, Ministry of Finance
24,0
24,5
25,0
25,5
26,0
26,5
27,0
27,5
28,0
Figure 9. Personal and green tax burden in Denmark as percentage of GDP. 1991-2000
2000
1
Energy taxes
2
4
Environmental taxes
3
5
7
Transportation taxes
6
8
DENMARK-19
Source: Environmental Assessment of the proposal for Finance Bill 2000, Ministry of Finance
0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,00
8,00
9,00
10,00
9
Figure 10. Revenue from energy taxes, transportation and green taxes 1992-2000. Billion Euro (2000-price level)
1
3
4
Env ironmental adm.
Fores t- and nature adminis tration
Sc ienc e and educ ation
2
5
6
7
9
Env ironmental protec tion
Env ironmental produc tion
International env ironmental as s is tanc e
8
DENMARK-20
Source: Environmental Assessment of the proposal for Finance Bill 2000, Ministry of Finance
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1
Figure 11. State expenditures for environmental purposes 1992-2000. Billion Euro (2000-price level)
1
2
3
5
6
7
Renew able Energy and energy savings
Energy science and -extraction
Electricity production subsidy
CO2 - subsidy
Energy administration
4
8
9
DENMARK-21
Source: Environmental Assessment of the proposal for Finance Bill 2000, Ministry of Finance
0,00
0,05
0,10
0,15
0,20
0,25
0,30
0,35
0,40
0,45
0,50
Figure 12. State expenditures on energy related purposes 1992-2000. Billion Euro (2000-price level)
Law s
1978
Regulations
1983
1988
Guidelines
1993
DENMARK-22
1998
Treaties
Source: Environmental Assessment of the proposal for Finance Bill 2000, Ministry of Finance
0
50
100
150
200
250
300
350
400
450
500
Figure 13. Number of environmental laws, regulations, guidelines and treaties. 1978-1998
Table 1 gives an overview of the main instruments used by the Danish Government to
stimulate sustainable innovation (responsible authorities, description, appropriations/revenue,
type of instrument/support). The list does not tempt to be exhaustive but includes major
instruments and different types of instruments used for stimulating sustainable innovation.
2.2. MODALITIES
Generally, the subsidy programs are organized around an application model where the
responsible administration makes public calls for application that companies, consultants
and/or research institutes respond to.
Traditionally, the specification of issues to be addressed and the project work to be made has
been quite broad and open with a rather limited amount of internal competition among
projects.
During the 90s, the use of priority plans, administrative guidelines, specific application
models (e.g. Logical Framework Approach) has spread to the majority of programs leading to
more specified proposals and clearer goal formulation, but still leaving room for
methodological innovation.
Moreover, during the late 90s the application model has been supplemented by the use of the
tender model, where the public administration (e.g. Environmental Protection Agency) in
more detail specifies the issues to be addressed and the work to be done. Companies,
consultants and/or research institutes then make competitive bids. Often the application and
tender model are used in combination in some programs.
Also, most of the programs using the application model receive more proposals than can be
funded which to some extent creates internal competition on quality.
Finally, the Ministry of Finance and the National Auditors have also in the late 90s set up
norms and guidelines for administration of programs e.g. goal specification, clear selection
criteria, definition of target groups, monitoring, financial administration and evaluation.
DENMARK-23
Technology
fund for new
clean up and
prevention
methods.
Advisory Body
with
representatives
from industry,
research and
ministries.
Appropriation for
the 2000-2004 35
million Euro
Appropriation
/revenue
Application model.
DENMARK-24
Present allocation: 2
mill. Euro a year
over 4 years (2000The fund gives grants to development project, research, demonstration 2004).
of new technologies etc.
Environmental
The main goal for The Technology Fund is to support the
Protection Agency. development of technologies concerning pollution of land.
Combined application and tender model.
Environmental
The program (formerly known as program for clean technology) was
Protection Agency. set up in 1997 based on a government white paper. The focus until
2000 has been on clean technologies (fundamentally new processes),
National Council
where the program was redirected from 2000 towards new products.
on Cleaner
This followed an evaluation, which showed good results but the need
Products (CEO as for a stronger emphasis on market/enterprises and not consultant
chairman and
driven project and the focus from internal processes to the products.
representatives for
industrial
Subsidies are given to:
associations,
• Development projects (demonstration) on waste reduction and
county and
recycling (new methods).
municipality
• Green labeling (coverage of costs).
association,
• Life-cycle analysis and method development (development,
experts and crossproduction, market introduction, sale, use and waste treatment/
ministerial
reuse of clean products).
representatives).
Target group: Especially manufacturing industries and SMEs.
Program
promoting and
developing
clean products.
Description (objectives, themes, administrative procedure and
assessment of effectiveness
Responsible,
coordinator(s)
Instrument
Table 1. Overview of the main policy instruments used by the Danish government to stimulate sustainable innovation
Focus on:
1. Redesign of
products and
processes.
Grant/subsidy for
technologic
development.
Focus on:
1. Improvements of
products an
processes.
2. Redesign of
products and
processes.
3. Function and
system redesign.
4. Market
introduction (only
to some extent).
Grant/subsidy for
product and
technological
development.
Type of
instrument/support
Environmental
Protection Agency
and Housing
Agency in
cooperation.
Steering group
Ministry for
Housing and
Urban Affairs and
Ministry for
Environment and
Energy.
Action plan for
ecological
reorientation in
buildings.
Green jobs fund. Energy Agency.
Green
Environmental
procurement
Protection Agency.
policy for public
institutions.
Responsible,
coordinator(s)
Instrument
DENMARK-25
The goal is: 1) To create a market for green products by demand
steering and 2) To contribute to reduction on the environmental
burden by regulation on public sector procurement demands to
suppliers. The market for public procurement in estimated to 13,5
Billion Euro a year. The schemes is bases on information materials,
labeling demands, guides on the net, green accounts, cooperation
contract in procurement between institutions etc.
Target group: 1) Administrative circular to state institutions and 2)
Voluntary agreement with county and municipal associations.
Evaluation shows increased greening of public procurement,
especially at local level but to some extent also among state
institutions. The level on green procurement aimed at is not reached.
The results point to a need for simplification of the procedural
manuals and focus on the fact that some enterprises without
certification from a LCA-point of view might be much less harmful
for environment that certified enterprises.
The fund was formed as a specific scheme to reach an agreement on
the Finance Bill for 1998. The aim is to give financial support for the
creation of new jobs concerning environmental protection (projects
concerning urban ecology, traffic, renewable energy, energy savings,
recycling etc.).
Application model.
The Action Plan has to be evaluated in 2000.
Gives subsidies to development, demonstration and pilot project e.g.
concerning building materials and wastewater treatment and reuse.
Action plan for ecological reorientation in building since 1997 with
the aim of promoting ecological city-rehabilitation.
Description (objectives, themes, administrative procedure and
assessment of effectiveness
4 mill. Euro in each
of the years 1998 2001.
10 mill. Euro
covering 2000 2003.
Appropriation
/revenue
Subsidies for job
creation.
Indirect focus on:
1. Improvements of
products an
processes.
2. Redesign of
Indirect focus on:
1. Improvements of
products an
processes.
2. Redesign of
products and
processes.
3. Function and
system redesign.
Regulation,
information and
guidelines on
procurement.
Focus on:
1. Improvements of
products an
processes.
2. Redesign of
products and
processes.
Grant/subsidy for
materials and
processes.
Type of
instrument/support
Energy Agency.
Steering/program
group chaired by
the Energy
Agency.
Program for
support for
energy
efficiency in
enterprises.
Support for
coverage of
expenditures to
CO2 taxes in
energy
intensive
industries and
processes
(agreements on
energy
efficiency).
Energy research Energy Agency.
program.
Responsible,
coordinator(s)
Instrument
Appropriation
/revenue
DENMARK-26
Priority areas expected to be covered in 2000: oil and natural gas,
electricity and heat, production, wind energy, energy use in
buildings, solar energy, industrial processes etc.
The aim of the program is to support R&D in new and future energy
technologies that lead to new energy sources, better and cleaner
energy use, energy savings.
Target group: enterprises with energy intensive process according to
the specified short list and/or enterprises where the expenditures to
CO2 taxes are higher than 3 % of the value-added and at least 10 % of
sales.
The goal of the program is the to promoting energy efficiency in
energy intensive enterprises and securing energy intensive enterprises
are not burdened by CO2 taxes to an extent that reduces their
competitiveness. The program is based on the idea of earmarked
redirection of green tax revenue to the enterprises with high taxincident/costs that are not transferable to consumers. The signing of an
energy efficiency agreement is a precondition for the subsidy.
Predominantly use of application model used.
90 mill. Euro from
1998-2003.
The program has
been running for
some years.
110 mill. Euro in
2000-2004.
The goal of the program is to reduce energy consumption in enterprise The program has an
by giving grant for measures promoting better energy efficiency and
allocation 250 mill.
energy savings, thereby reducing emissions of CO2 and SO2.
Euro from 19992003.
The program aims at promotion of changes to more energy efficient
technologies and productions methods and processes. The programs
includes the following measures: Energy audits, energy counseling,
pilot project, information-, development -, and demonstration projects,
standard solutions and grant for larger construction works. The target
group is private enterprises.
Description (objectives, themes, administrative procedure and
assessment of effectiveness
Focus:
1. Redesign of
products and
processes.
Focus:
1. Improvements of
products an
processes.
2. Redesign of
products and
processes.
3. Function and
system redesign.
Grant/subsidy
for research..
products and
processes.
Subsidy, information,
auditing on energy
efficient production
methods and
processes. Focus:
1. Improvements of
products an
processes.
2. Redesign of
products and
processes.
3. Function and
system redesign.
Earmarked subsidy in
combination with
energy efficiency
agreements.
Type of
instrument/support
DENMARK-27
A comprehensive evaluation of the green tax complex has been
carried out by a cross-ministerial group (chaired by the Ministry of
Finance) and independent research institutes (e.g. AKF, DTU, Risø).
Results are generally positive in terms of positive effects on emissions
reductions, behavior in industry and pressures for technological
development. Industry support taxes as an efficient mechanism but
demand international agreements. Administrative costs have been high
for enterprises.
The major green tax reform stated in 1994 based on a White Paper
prepared under the responsibility of the Ministry of Finance (fiscal
priorities higher than behavioral effects as the scheme is part of the
financing of personal tax reductions. The green tax complex covers a
number of taxes and taxation objects (energy sources, emissions, use
of energy in processes, waste) and have been adjusted over the years.
Ministry for Food
and Agriculture.
Green taxes
(including
energy and
transport taxes).
Administration by a application model.
Description (objectives, themes, administrative procedure and
assessment of effectiveness
State support scheme for to production of electricity by the use of:
renewable energy,
- bio materials,
- natural gas.
by decentralized power and heat stations, natural gas based industrial
power production etc.
The scheme is based on per unit produced grants. From 2000 and
onwards the grant for renewable energy and bio material sources is
stopped, but the support for natural gas, industrial electricity
production and waste based production is continued.
Responsible,
coordinator(s)
Electricity
Administrated by
production
the Energy Agency
support scheme. in close
cooperation with
Environmental
Protection Agency,
Ministry of
Finance, Ministry
for Taxation and
Ministry for
Economics.
Instrument
Expected to give 10
Billion Euro in
revenue in 2000.
720 mill. Euro from
1998-2003
Scaling down of
grant in 2000.
Appropriation
/revenue
Function and
system redesign.
Indirect focus on:
1. Improvements of
products
and processes
2. Redesign of
products and
processes.
3. Function and
system redesign.
Grant/subsidy for
specific electricity
production methods.
Focus:
1. Improvements of
products
and processes
2. Redesign of
products and
processes.
3. Function and
system redesign.
Taxation/fiscal
measures.
2.
Type of
instrument/support
Ministry for Food
and Agriculture.
Support for the
use of
ecological
production
methods in
agriculture and
fishery.
Ministry for Food
and Agriculture.
Ministry for Food
and Agriculture.
Ministry for Trade
and
Industry/Agency
for business
promotion.
Agency for
business
Food and
fishery research
program.
Environmental
friendly
agriculture.
Product
development in
forestry.
Strengthening
innovation in
Steering group
with
Environmental
Protection Agency
Responsible,
coordinator(s)
Instrument
-
DENMARK-28
Technological information centers (TIC) - 50 % central
government/ 50 % local government financed.
Support for product development, market introduction and promotion
of new sustainable products in forestry. Grant/subsidy for product
development and marketing of new products.
Support for demonstration project and pilot project focusing on new
environmental friendly production methods in agriculture.
Support for research underpinning sustainable, effective and quality
oriented agriculture and fishery and processing industry.
The goal is to support the development and use of new ecological
production methods. The scheme is bases on demonstration projects
and per. acre support.
Description (objectives, themes, administrative procedure and
assessment of effectiveness
Focus:
1. Redesign of
products and
processes.
Grant/subsidy for new
production methods.
Type of
instrument/support
Grant for research in
sustainable processing.
Focus:
1. Redesign of
products and
processes.
35 mill. Euro from
Grant/subsidy for new
2000-2003.
production methods.
1. Improvements
of products and
processes.
2. Redesign of
products and
processes.
Function and
system redesign.
3 Mill. Euro in 2000. Grant/subsidy.
Focus:
1. Improvements of
products
and processes
2. Redesign of
products and
processes.
3. Function and
system redesign.
160 mill. Euro in
Institutional building,
government finance. knowledge diffusion,
70 Mill. Euro from
2000-2003.
150 mill. Euro from
2000-2003.
Appropriation
/revenue
DENMARK-29
Certified service centers providing (GTS) knowledge diffusion
and information.
- Innovation/incubation centers and science parks (6 centers and
parks) for development, pre-financing, market introduction,
pooling of competencies, sharing of rent and facilities. Focus on
new products and processes e.g. energy efficiency and
environmental improving technologies and processes.
- Development contracts and enterprises providing venture capital.
Description (objectives, themes, administrative procedure and
assessment of effectiveness
60 Mill. Euro from
2000- 2003.
Appropriation
/revenue
Type of
instrument/support
project support in the
early development and
marketing phases.
Capital provision.
Focus on:
40 Mill. Euro from
1. Improvements of
2000-2003.
products
and processes
2. Redesign of
products and
processes.
3. Function and
system redesign.
Development of Agency for
The aim is to strengthen the competencies and technological
35 Mill. Euro from
Institutional building
competencies
business
developments in industrial production (e.g. standardization, Center for 2000-2003.
for knowledge,
and technology promotion in
industrial Production).
competencies and
cooperation with
technological
Environmental
development.
Protection Agency.
Focus on:
1. Improvements of
products
and processes.
2. Redesign of
products and
processes.
3. Function and
system redesign.
Environmental
Ministry for
The aim is to increase the level of environmental management in
3 Mill. Euro in 2000. Information.
management
Transportation.
enterprises and increase the number of enterprises focusing and
Focus:
and auditing in
mastering environmental management. The main measures are
1. Improvements of
enterprises
Advisory Council. information, counseling and education.
products
and processes
2. Redesign of
products and
Responsible,
coordinator(s)
industry/institut- promotion.
ional set up.
Instrument
Program on
environmental
friendly
transport
technology.
Instrument
Responsible,
coordinator(s)
DENMARK-30
Support for pilot and demonstration projects and R&D activities in
transport sector technology.
Description (objectives, themes, administrative procedure and
assessment of effectiveness
5-6 Mill. Euro from
2000-2002.
Appropriation
/revenue
3.
processes.
Function and
system redesign.
Grant/subsidy for
technology
development. Focus:
1. Improvements of
products
and processes
2. Redesign of
products and
processes.
Type of
instrument/support
2.3. ORGANIZATION
Programs and schemes are typically organized with:
• An advisory Council (e.g. representatives from relevant ministries, the county and
municipality organization, industrial organizations, consumer organizations, CEO from
enterprises, researchers etc.) proposing general priorities and yearly action plans or in
some circumstances taking decisions of allocation of subsidies on projects.
• A responsible, administrative body taking decisions of allocation of subsidies on projects
and individual project steering groups or responsible persons.
In some programs - and to a lager extent over the last years - project holders (companies,
consultants and research institutes) are expected to publicize their work and disseminate the
results of their projects. On the program level, the responsible administrative body are usually
obliged to take steps to spread the knowledge by the use of web-sites, conferences, seminars
and publications.
The monitoring measures are generally specified in program and project administration
manuals and written into the contracts. Given the increased attention on administration of
subsidies by the Ministry of Finance and the National Auditors the general level of
administrative steering, follow-up and monitoring has been increased according to evaluation
reports.
2.4. METHODS TO ASSESS EFFECTIVENESS
The effectiveness of government initiatives are evaluated by the use of different approaches
and at different levels.
At the macro-level, the Ministry of Finance conducts an yearly assessment of the
environmental impact of the proposal for the Finance Bill for the next year as well as
benchmarking of the international level of the Danish policies on sustainable innovation.
All programs and major schemes (e.g. green taxes, green public procurement) are ex-ante
evaluated with the aim of redesigning future policy if necessary. The evaluations usually
include external specialists or the Ministry of Finance. Moreover, most programs are
evaluated mid-term. The requirements for evaluations are often specified in the provisions for
the programs. Evaluation reports often have to be publicized and sent to Parliament
(Folketinget).
Since the mid 90s, the focus on assessment of effectiveness and efficiency has been high and
increasingly accepted an important tool. This has led to a structuring, formalization and
methodological development in designing and conduction evaluations with basic standard
procedure also defined from the Ministry of Finance (clear goal description, identification of
indicators, documentation, financial allocations, types and number of projects, effect
measurements).
At the single project level the project holders are expected to submit inception, mid-term and
final reports on the project realization in relation to plans and the realized results in relation to
expected results. The administrative bodies responsible for large programs (e.g.
Environmental Protection Agency and Energy Agency) have established databases with
descriptions and effect assessment for projects.
Evaluations and assessments are often discussed in the advisory Councils for the programs
and thus distributed to different stakeholders.
DENMARK-31
3. SPECIFIC EXAMPLES OF PROGRAM DESIGN CHARACTERISTICS
Three programs are selected for more detailed description:
• The program for cleaner products (former program for cleaner technology).
• The program for energy efficiency (e.g. earmarked revenue used for industry subsidies).
• Subsidy-scheme for coverage of expenditures to CO2 taxes in energy intensive industries
and processes (agreements on energy efficiency).
3.1. THE PROGRAM FOR PROMOTING AND DEVELOPING CLEANER
PRODUCTS (FORMER PROGRAM FOR CLEANER TECHNOLOGY)
Background
The program for promoting and developing cleaner technology was set-up in 1997 based on a
comprehensive White Paper from the Environmental Protection Agency.
The White Paper identified a need for strengthening of the product oriented environmental
efforts in industry. Moreover, it stressed the need for supplementing the traditional
environmental protection measures with a product life cycle approach aiming at development,
production and marketing of sustainable products.
The program focused foremost on technologies for sustainable production processes in
industries giving support to a number of demonstration project and studies focusing on new
productions processes.
In 1999 the program was renamed to the program for clean product hereby indication a shift
of priorities from the internal enterprise process view to a broader life cycle view focusing of
the environment effect also attached to the use of the products.
This revision followed an evaluation of the program during 1997-92 and provisional results of
the forthcoming evaluation of the period 1993-97 showing e.g.:
• Too narrow focus of “inside the enterprise” technology.
• Need for focus on knowledge diffusion.
• Need for LCA-approach to projects.
Objectives and themes
Generally, the overall objective of the program is to create and influence the framework
conditions, which stimulates the market actors to supply and demand cleaner products.
The program aims at increasing the development and sale of environmental friendly products.
Environmental friendly products are understood to be good/services where the environmental
burden in the products total life cycle - from input and manufacturing to use and waste
treatment - is reduced.
The overall strategy to achieve this objective is:
• To give subsidies to improve the possibilities and motivation of enterprises to develop
less environmental burdening products (supply-side).
• To stimulate a qualified demand for cleaner products (demand side).
• To develop and communicate knowledge and methods that can be used by enterprises,
public institutions and consumers to assess the environmental burden of products and to
market the products.
DENMARK-32
The program for cleaner products is divided into three overall elements:
•
•
•
The development scheme (80% of the budget allocation).
Standardized subsidies for establishment of environmental competencies in enterprises
(18% of the budget allocation).
Standardized subsidies for support the achievement of green labels
(1-2% of the budget allocation).
Moreover, efforts to develop methods and new knowledge and to communicate results from
the program are financed by the program.
The allocation for the program for 2000-2004 is 35 million Euro.
A) The development scheme
The development schemes has four general themes representing the product life cycle:
• Knowledge building.
• Product development.
• Market development.
• Waste treatment and reuse.
The target group is actors involved in the life cycle of the products: Producers,
suppliers/purchasers, consumers and waste treatment.
According to the program priority plan for 2000 the action areas for 2000 are:
1. Subsidies to specific product areas often identified after discussion in“product
panels” (representative from industry, experts, consumers, etc.):
• Electronics (e.g., green electronics, increased lifetime, design and construction).
• Textiles (e.g., design, product, marketing and information strategy).
• Transport (e.g., environmental optimized transport services, tools for assessment, cargo
transport, transport systems).
• Building and construction.
2.
•
•
•
•
Subsidies for the development of cleaner products:
General framework for chemicals and chemical materials.
Cleaner production processes.
Development of cleaner products in agriculture.
Further development of cleaner production processes and waste-treatment technologies in
manufacturing industries.
3. General methods and tools:
• Life cycle assessments: methods, data and instruments (LCA, UMIP).
• Environmental management (EMAS, second-generation environmental management
systems).
4.
•
•
•
•
•
•
•
Consumption, sale and market conditions:
Green public procurement.
Use of green labeled products.
Service sector and trade.
Environmental goods declarations.
Product standards.
Product responsibility.
Economic or information barriers and measures.
DENMARK-33
5.
•
•
•
•
Waste treatment and reuse systems:
Means and measures.
Waste amount and data.
Waste prevention.
Reuse of specific fractions.
B) Environmental competencies
This action area was started in 1999. The environmental competencies action areas aims at
improving the competencies in enterprises, organizations and public institutions to work
systematically with establishment of environmental competencies (e.g. identification,
planning, policies and action plans for environment improvements). This can imply 1)
employment of new employees with special environment competencies and 2) building of
competencies for present employees. Often this is done in cooperation with knowledge
centers.
The standard offers have been subsidies for:
• Introduction of environmental management in enterprises, public institutions and
organizations.
• Building of competencies in public purchasers functions.
• Environment in sales and purchase functions.
The interest and applications numbers have been large but have mainly focused on
environmental management.
New priorities for 2000 are:
• Support for certification with EMAS and ISO 14001.
• Competence development project in selected branches and products.
• Competence development project for especially SME to achieve environmental labeling
and LCA.
C) Environmental labeling
Aiming at supporting SMEs efforts to be the first to get the EU-label (EMAS) or the Nordic
green label. Support is given to the extra-costs involved in applying for labeling of their
products.
The experience from 1999 shows a rather limited success for the action area. For some
producers the Nordic label was not attractive, as their export went outside the Nordic
countries. For other small producers the labeling was attractive but not part of the scheme, as
labeled products were already on the market.
Organization of program, project selection and management
The Council for Cleaner product has the overall responsibility for the administration and
implementation of the program in cooperation the Agency for Environmental Protection.
The National Council for Cleaner Products is composed of 20 member including
representatives from a number of interest-organizations, public institutions as well as selected
CEOs.
The National Council for Cleaner Products:
• Makes a yearly priority-plan for the program with action areas, goals, target groups and
success criteria.
• Gives advise to the Ministry for Environment and Energy on cleaner products.
• Decides on support for specific project (from a special but relatively small reserve fond).
• Discusses results, evaluation and effect assessments of the program.
DENMARK-34
The Agency for Environment Protection is responsible for:
• Calls for applications and call for tenders.
• Assessment of applications and tenders.
• Administration and monitoring of the projects.
• (External) evaluations.
The program administration is run according to the general guidelines from the Ministry of
Finance and the National Auditors and specific guidelines adopted by the Council and the
Minister for Environment and Energy.
Subsidies under the development scheme can go to projects focusing on analysis, development
and knowledge diffusion and communication. It is a precondition for support that the project
creates “news-value”.
The general rule is 100% subsidy for publicly useful projects not including the technological
development of enterprise specific products, processes and methods. The subsidy % for
enterprises technical development project varies, the closer the project result is to commercial
use the lower is the subsidy. A maximum of 50% for industrial research project is set and a
maximum of 25% is set for other project on the pre-competitive stage.
Subsidies for environment competencies can amount to 50% of the costs for: Environmental
management, product development and green purchasing. The typical subsidies amount to
25.000-30.000 Euro.
For promoting the use of green labeling the subsidy covers the extra-cost for the first
enterprises (only SMEs) to get a label. Guidelines are established defining extra-cost.
Typically, the subsidies amount to 25.000-30.000 Euro.
The program is run by a combination of the application and tender model. Approximately 2/3
of the subsidies are based on applications and 1/3 on calls for tender.
The program has been changes from a model of continuous application to two applicationrounds to ensure a higher degree on internal competition and quality benchmarking of the
project. There are substantially more applications than can be supported.
Assessment of effectiveness is done on the following levels and by the following means:
• At project level the project holder as a condition for the support has to make an selfassessment of the effectiveness and turn in inception, mid-term and final reports in
Danish or sometimes English, produce project news-letters and run seminars
• At program level the Agency for Environmental Protection is responsible for the ongoing
monitoring and effect-assessment in relation to the priorities given from the National
Council for Cleaner Products.
• Mid-term and final evaluations by external (and often international) experts and
consultants are made and submitted to the National Council for Cleaner Products and
Parliament for discussions on new direction and improvements. The evaluation methods
vary but are often a combination on economic models calculating effects and more
qualitative methods (interviews and questionnaires).
Barriers
From the point of view of the Confederation of Danish Industries the program for cleaner
technology was to focused on the environmental processes at enterprise level, which often
lead to marginal effects at higher costs than focusing on the product and product life cycle.
Moreover, the program has suffered from too many consultant led projects with weak spread
of knowledge and marketing of the results. Such projects are often to distant from the market
and the public authorities still have some fear for approaching the market e.g. by using public
procurement/tendering for specified tasks which also has some guaranteed turnover.
DENMARK-35
Potentially, the revised program has continue to focusing on cleaner project even though the
Confederation for Industries see hopes for a higher focus on diffusion of knowledge and
support for projects closer to the market.
The Environment Protection Agency stresses the increased support to diffusion of knowledge
and the product orientation as strong means for getting better results from the program.
3.2. PROGRAM FOR SUBSIDIES FOR ENERGY EFFICIENCY IN ENTERPRISES
Background
The subsidy for energy efficiency is given according to the law on state support of energy
savings in enterprises from 1996.
The introduction of the program is closely related to the introduction of the “Energy package”
in 1995 - introducing energy taxes - on CO2 and SO2 emissions from private enterprises. A
government White Paper on green taxes discussed broadly by relevant ministries, industrial
association etc. and with the Ministry of Finance as chairman includes a number of
recommendations on the how the reduce the tax-burden on enterprises which took initiatives
on energy saving by improving their environmental awareness and behavior.
An appropriation of 0,24 billion Euro from 1995-1999 has been given to the program for
subsidies for energy efficiency in enterprises and the allocation for the period 1999-2003 is
0,25 billion Euro.
Objectives and themes
The subsidy program aims at promoting a more efficient use of energy resources in
enterprises. The goal of the program is to reduce energy consumption in enterprise by giving
subsidies for measures promoting better energy efficiency and energy savings, thereby
reducing emissions of CO2 and SO2.
The program aims at promotion of changes to more energy efficient technologies and
productions methods and processes. The programs includes the following measures: Energy
audits, energy counseling, pilot project, information-, development-, and demonstration
projects, standard solutions and grant for larger construction works. The target group is
private enterprises.
The target group is private enterprises and publicly owned enterprises working on market
terms. The subsidy % depends of the type of project and size (higher subsidy % for SMEs).
Subsidies are given to:
• Reorientation to more energy efficient technologies and productions methods.
• Projects, that can reduce the emission of CO2 and SO2 from private sector energy use.
• Development activities.
It is the intention only to support investments and activities which enterprises would not have
carried out with out the subsidy (“dead weight loss”) and which are at the same time of a high
quality.
DENMARK-36
The eligible projects fall in the following categories:
• Individual projects: Aiming at investments leading to energy savings, effective use of
energy and change to use of cleaner energy sources. Support up to 30 % of the project
costs. Criteria are set to secure no support for high profitability project and low energy
saving project e.g. demanding pay-back time on 2-9 years and CO2 reduction minimum
0,15 kilo/year per invested Danish krone.
• Standard solutions: Aiming at energy saving projects that are pre-described. These are
introduced to make it easier for small enterprises to achieve support. Standard solutions
have been elaborated in around 40 action areas with large potentials for energy savings by
the use of similar technologies a cross industries e.g. lightning, cooling and motor
industries.
• Combined power and heating. Aiming at support for individual projects up to 40 % of
project costs for SMEs.
• Development, pilot and demonstration projects: Aiming broadly: from projects
contributing to product maturing of new principles and methods for energy and
environmental friendly production to demonstration plants and projects on knowledge
diffusion concerning technologies that have not yet been marketed.
• Other projects. Aiming at general information activities, white papers and reports,
industry-related analysis, use of energy counselors. Normally a subsidy maximum of 30%
is provided.
The use of this program has increased for all categories. Standard solutions are the most
widely used instrument, see table 2.
Table 2. Number of subsidies granted for investment under the program for energy
efficiency in enterprises
1996
1997
1998
Individual projects
1.900
2.800
4.000
Standard solutions
600
1.500
2.500
Other
300
400
500
Total
2.800
4.700
7.000
Organization of program, project selection and management
The Energy Agency is responsible for the administration of the program. An application
model is used.
The administration includes:
• Assessment of applications.
• Granting of subsidies.
• Approval of payment requests.
• Control of use of payments.
• Establishment and monitoring of standard solutions, applications guidelines and forms,
administrations procedures and practices.
The Energy Agency makes the project selection.
Generally, a survey among application shows large satisfaction with the administration
(procedures, time etc.), even though the costs for application in the case of individual project
are assessed to be to high, especially for small enterprises which often have had to hire
external assistance for this task.
Assessment of effectiveness is done on the basis of the general guidelines from the Ministry of
Finance and the National Auditors.
The Energy Agency demands inception, midterm and final reports and has formed a project
data base system for analysis of subsidies and calculation of effects on energy savings.
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Calculations show that the CO2- reduction effect per invested Danish krone is much higher
for industries than households.
The program was evaluated in June 1998 by the Danish Technological Institute
“Undersøgelse af effekterne af tilskud til energieffektivisering”), showing that the realized
energy saving were only marginally lower than expected at the time of the application.
Supplementary to positive effects on energy savings advantages spun of from the projects in
terms of security and working conditions. A significantly large number of enterprises gave
information that the subsidy had been a very important precondition for the achievements and
for a continued (with out subsidy) focus on energy management and steering.
Barriers
According to the external evaluation, the main barriers have been the relatively high costs for
individual projects in terms of application and to low degree of prioritization of action areas.
There is a need for prioritization to reach the highest CO2 reduction effects (e.g. industrial
power and heat, technologies for cooling) more differentiated subsidy rates.
The evaluation also points to the need for support both for development of new technologies
as part of demonstration project but also support for market introduction of new energy
efficient products.
The Confederation of Danish Industries finds that the program should focus more on market
introduction. In general the Energy Agency approach have been too distant from market
related questions and the Energy Agency has been to reluctant to engage in the creation of
profitable market opportunities for firms based on providing solution to energy efficiency
question.
3.3. SUBSIDY-SCHEME FOR COVERAGE OF EXPENDITURES TO CO2 TAXES
IN ENERGY INTENSIVE INDUSTRIES AND PROCESSES (AGREEMENTS
ON ENERGY EFFICIENCY)
Background
The subsidy scheme is an integrated part of the introduction of the green tax reform in
Denmark in 1994 and is focused specifically on reducing the tax-burden and restoring the
competitiveness for energy intensive industries and processes. The creation of the subsidyscheme was discussed as basis for the Government White Paper on green taxation.
The issues of competitiveness and potential loss of jobs were put forward by industries
associations (gardeners) and individual firms (e.g. steel) and pressures to be included in the
short list for energy intensive industries and processes were strong
The program has an allocation 250 million Euro from 1999-2003.
Objectives and themes
The program aims at:
• Promoting energy efficiency in energy intensive enterprises.
• Securing energy intensive enterprises under competition are not burdened by the green
taxes to an extent that significantly reduces their competitiveness.
The program is based on the idea of earmarked redirection of green tax revenue to the
enterprises with high tax-incident/costs that are not transferable to consumers.
The signing of an energy efficiency agreement is a precondition for the subsidy. Through an
agreement between the enterprises and the Energy Agency, the enterprises commit to carry
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out a number of energy saving measures and to introduce energy management. In return, the
Energy Agency grants a subsidy for reduction in the CO2 tax put on the enterprise.
Only enterprises with energy intensive processes (according to the specified short list) and/or
enterprises where the expenditures to CO2 taxes are higher than 3 % of the value-added and at
least 10 % of sales are eligible.
There are two types of agreements, cf. table 3 below:
• Individual agreements with single enterprises.
• Industry agreements covering specific types of enterprises which are similar in relation to
processes, production and energy consumption pattern. The Energy Agency makes
agreements with an industry (association) or group of enterprises (e.g. gardeners).
The agreements cover 3 themes:
• Energy saving measures.
• Specific analysis not done during the energy audit.
• Energy management.
The agreements run for 3 years at the maximum. During the agreement energy audits are
carried out by an independent verifier and reporting to the Energy Agency are made.
Table 3. Number of active energy agreements 1996-1998
1996
1997
1998
30
76
101
Individual agreements
39
90
129
Industries agreements
69
166
230
Total
Organization of program, project selection and management
The Energy Agency is responsible for the administration. This generally consists of:
• Making agreements.
• Approval of reports.
• Control of payments.
• Establishing and monitoring of administration basis (guidelines, applications,
information, analysis of reporting etc.).
Project are approved and selected by the Energy Agency.
The enterprises have to:
• Make energy audits, energy management reports and actions plans.
• Carry out the agreed activities.
• Implement energy management.
• Report regularly to the Energy Agency.
Assessment of effectiveness is done on the basis of the general guidelines for subsidy schemes
from the Ministry of Finance and the National Auditors.
Moreover, the agreements are monitored through energy audits performed by independent
verifiers and reports to the Energy Agency on results and progress.
An evaluation by a team of external experts (AKF, Danish Energy Analysis and Rambøll:
“Evaluering af energiaftalernes effekt”, August 1998). pointed to:
• An estimated CO2 reduction in 2005 of 6 % for the enterprises with an energy agreement,
of which 40 % can is caused directly by the energy effectiveness projects in the
agreements or renewed/adjusted agreements.
• An (conservative) estimated energy efficiency improvement on 0,4 % per year caused by
energy management systems.
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The evaluation concludes that in the future the energy efficiency effects will primarily be
caused by energy management elements in the agreement, which thus have to be given higher
priority in future agreements.
Barriers and hurdles
Even though the agreement takes into account the present level of energy management and
efficiency in single enterprises the number of initiatives and demands in the voluntary
agreements often lead to relative high administrative costs for SMEs.
Moreover, the demands to the specification of the agreements might been seen as relative
rigorous given the fact that these also have to adhere to guidelines for control of subsidies e.g.
declaration from chartered accountant. This has been assessed by SMEs to be quite
burdensome from an economic and administrative point of view. This has given raise to some
reluctance on the part of SMEs to enter into voluntary agreements even though the number of
agreements in general and also agreements including SMEs has increased significantly over
the period 1996-1998.
Moreover, the Danish Confederation for industries associations finds that the audit procedures
might be too cumbersome. Moreover, too specific measures for energy efficiency are
sometimes part of the agreement, which might result in less that optimum solution in a world
of constant changes, whereas the energy management aspects puts more focus on flexible
solutions.
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4. APPENDIX
4.1. MAIN DOCUMENTS AND LITERATURE
1. “Benchmarking of Danish business community - analysis of the Danish resources areas”,
Oxford Research A/S and The Danish Agency for Business Promotion, January 2000
(Danish version only: Benchmarking af danske erhvervsliv - en analyse af de danske
ressourceområder)
2. “The Governments new Strategy for Business Development. dk21”, The Danish t (Danish
version only: Regeringens erhvervsstrategi. dk21)
3. “A strengthening of the product oriented environmental policy - a paper for debating”,
November 1996, The Environmental Protection Agency (Danish version only: En styrket
produktorienteret miljøindsats. Et debatoplæg).
4. Energy 21 - The Danish Governments Action Plan for Energy, The Danish Energy
Agency,1998.
5. “Evaluation of green taxation and business”, 1999, Ministry for Finance (chairman and
secretariat), Ministry for Trade and Industry, Ministry for Food and Agriculture, Ministry
for Environment and Energy, Ministry for Taxation, Ministry for Transportation, Ministry
for Economic Affairs and Ministry of Foreign Affairs.
6. “Review of the product oriented environmental policy, February 1998, The
Environmental Protection Agency (Danish version only: Redegørelse om den
produktorieterede indsats).
7. Priority plan for the program for cleaner product etc. 2000, January 2000, The National
Council for Cleaner Products (Danish version only: Prioriteringsplan for renere produkter
m.v. 2000)
8. Environmental assessment of the Proposal for Finance Bill 2000, The Ministry of Finance,
august 1999 (Danish version only: Miljøvurdering af finanslovsforslaget for 2000)
9. “Program for cleaner products etc.”, December 1998, The Environmental Protection
Agency (Danish version only: Program for renere produkter m.v.)
10. “Financing of innovation”, The Danish Government, January 2000 (Danish version only:
Innovationsfinansiering)
11. “Denmark as forerunner - international benchmarking of Denmark - chapter 10 on Energy
and Environment, November 1999 (Danish version only: Danmark for foregangsland)
12. “Innovation clusters - development through new innovative corporations”, Ministry for
Trade and Industry, April 1998 (Danish version only: Innovationsmiljøer - udvikling
gennem nye innovative virksomheder).
13. Danish Environmental Protection Agency, “Cleaner Technology Action Plan, 1993.1997,
English version November 1993, June.
14. Danish Environmental Protection Agency, “Cleaner Technology Projects in Denmark 1995”
15. Technology and Environment: Towards Integration, OECD, June 1999
DSTI/STP(99)19/FINAL.
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4.2. INFORMATIVE WEB-SIDES ON PUBLIC INITIATIVES AND INSTRUMENT
FOR STIMULATING SUSTAINABLE INNOVATION
www.ens.dk (Danish Energy Agency)
www.mst.dk (Danish Environmental Protection Agency)
www.fm.dk. (Danish Ministry of Finance)
www.em.dk (Danish Industrial Ministry)
www.es.dk (Danish Agency for Industrial Promotion)
4.3. CENTRAL POINTS OF CONTACT
1. Head of Section, Lars Bo Neregaard Pedersen, responsible for the
Program for Cleaner Products, Environmental Protection Agency.
E-mail. lnp@mst.dk. Telephone: DK+32660586
2. Chairman for the National Council for Cleaner Products, Erik Hoffman-Petersen, FLS
Miljø (can be contacted through the Environmental Protection Agency, Lars Bo
Neregaard Pedersen)
3. Head of Department, Anders Nørskov, Ministry of Finance, responsible e.g. for green
taxes, environmental assessment of the Finance Bill etc.
E-mail: ano@fm.dk Phone: DK+33923333
4. Environmental consultant, Uffe Sønderhousen, Confederation of Danish Industries,
representative for industry in committees and Council e.g. National Council for Cleaner
Products.
E-mail: ufs@di.dk Telephone DK+33773377
5. Head of Section, Lisbeth Nielsen, Energy Agency. Responsible for
green taxes and subsidy schemes for energy efficiency in companies. E-mail: Lin@ens.dk
Telephone: DK+ 33926844
6. Head of Department, Birgit Kølby, Ministry for Trade and Industry, coordination on green
business strategy.dk21 and innovation policies.
E-mail: BK@em.dk Telephone: DK+33924567
7. Consultant, Carsten Frølund Jensen, Lisberg Management Consulting, responsible for
country study on Denmark and can give information on supplementary contact persons.
E-mail: cfj@lisberg.com Telephone DK+45868811
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