40-percent goal can be achieved together with socioeconomic gain
The Danish Council on Climate Change has calculated what the cost will be of reaching the objective of a 40 percent reduction in greenhouse gas emissions in 2020 and it has therefore put together two packages of measures, both of which can reduce emissions by a further 2 million CO2e and thereby eliminate the shortfall in 2020.
One package is called the "cost-minimization package”. This package comprises measures that together will guarantee the lowest socioeconomic cost of achieving the 40 percent target. The measures are mainly selected from the so-called “catalogue of climate initiatives”, but the Danish Council on Climate Change has added two new initiatives to encourage the use of heat pumps. Most of the measures in this package relate to agriculture. Overall, the package is estimated to provide an economic gain of around 1.1 billion DKK annually, once all side-effects have been taken into account. Side-effects primarily refer to the realisation of a cleaner aquatic environment due to less nitrogen-leaching and fewer ammonia emissions from agriculture.
Elements of the agricultural sector are under financial pressure at present. Therefore the Danish Council on Climate Change has also calculated what the costs will be if the politicians choose to completely exempt agriculture from contributing with further reductions until 2020. This package is called the "non-agricultural” package. The package includes measures undertaken independent of the agricultural sector which together will ensure the lowest economic cost of reducing emissions by 2 million CO2e. The economic cost of this package is estimated to be almost 150 million DKK. annually.
Calculations regarding the impact on employment show that implementing the measures contained in the "cost minimization package" can provide short term employment for about 1,000 people, a figure which rises to up to 3,000 people in short term employment with the implementation of the "non- agricultural” package. The greater positive effect on employment through the implementation of the "non-agricultural" package is due, among other things, to the fact that relatively large investments are made in this package which in the short term generate increased employment. In both packages the investments have to be financed, which in the medium term leads to lower employment. In the long run, the employment situation will be determined by the development of the workforce and in structural unemployment. Neither of these factors are thought to be affected by the two packages in any significant way.
Although the calculations are subject to considerable uncertainty, they do indicate that it is possible to meet the 40 percent goal without incurring major economic costs. The Danish Council on Climate Change's calculations show that exempting agriculture from contributing to reductions will have expensive socioeconomic repercussions and that there are positive employment effects to be realised from both packages in the short term. If it were preferable to not place too much of a burden on agriculture, measures could still be implemented that would result in emissions reductions in the sector if the financing policy is organised so as to minimise the impacts of these measures on the rural economy. This can be done by promoting initiatives in agriculture through subsidies rather than tax and regulatory requirements, administering this relief where appropriate as temporary measures. Alternatively, other instruments could be used to compensate agriculture wholly or in part for the costs of the reduction requirements.
Achieving the 40 percent target could strengthen the credibility of the political will to achieve the long-term climate goals for 2050. In assessing the cost of achieving this objective, it is important to keep in mind that there must still be a substantial reduction in emissions from the non-ETS sector in the period leading up to 2030. Under the EU's climate policy objective for 2030, It is expected that Denmark will be required to reduce greenhouse gas emissions from non-ETS sector by 36-40 percent in comparison to the levels recorded in 2005. The additional costs which the agricultural or transport sector, for instance, would incur to fulfil their part of reaching the 40 percent target, will in any event be borne during the period 2020-2030.