When Danish companies strive to take advantage of the growth potential within the field of renewable energy, they stumble across a wall of politically uncoordinated laws and regulations that make it expensive and inconvenient for the companies to realise their ambitions.

2011.09.02 | Tine Bagger

New research shows that companies’ transition to a more green production is paved with politically uncoordinated regulations, which means that it can be difficult and confusing for companies to make the investments required in order to take advantage of their green potential.

- The system is too bureaucratic and expensive for the companies to take part in, says Ellen Margrethe Basse, Professor of Environmental Law at Business and Social Sciences, Aarhus University and continues:

- There are many different laws that influence the switch to renewable energy. These laws have been put together like a patchwork quilt and are a result of EU requirements, old national legal traditions and alternating political agreements that relate to specific prioritisations of different technologies the following 2-3 years, which makes the system very hard to comprehend.

Ellen Margrethe Basse underlines that the government’s proposal for the future energy agreement mentions the need to modernise tax rules and the electricity supply legislation in order to improve the interaction between the two.

- However, it is only part of the legislation. If the future energy system is to contribute to growth, a bigger and more coherent reform is required, says Ellen Margrethe Basse.

What is the reason?

The reason as to why the legislation is so abstruse is partly because the basic structure of Danish energy and environmental laws adopted 40 years ago has been maintained.

At the time, the EU had no influence in the area. Today, the situation is completely different – both as regards EU’s comprehensive regulation as well as an energy system that looks entirely different than it did 40 years ago. This means that as the EU gradually has implemented new environmental and energy regulations, there has been an attempt to fit the necessary changes into the many original laws. The result is a lack of coherence between the various laws.

If a district heating company, for instance, wants to utilise sun, geothermal energy or wind, it would not be possible, unless production is increased, because the state restricts the switch to tax-free fuels. The reason for this is, among other things, that the state’s overall proceeds are based on green taxes, which make up a significant part of the tax base and can therefore not be sacrificed.

- Today, 9% of the state’s tax base comes from green taxes. This means that the government has made it clear that there is a limit as to how fast the switch to renewable energy can be afforded, Ellen Margrethe Basse points out.

What can companies do?

According to Professor Ellen Margrethe Basse, it is difficult for the individual company to do anything about the situation.

- This is a matter that the trade associations have to deal with, as they can offer guidance on the regulations and exert political pressure. But with the existing regulations and legal principles limiting coordination across the legislation, more fundamental reforms are needed, Ellen Margrethe Basse states.

FACTS

Legislative barriers:

- A new research carried out by the Danish Energy Agency, among others, shows that Danish companies’ export of energy technology has fallen by 16,9% from 2009 to 2010. During the same period of time, the EU15 countries have increased their export of energy technology by 12% and their import by 13,2%. Danish companies have either lost market shares, or Danish production of energy technology has been moved to other markets – in spite of the government’s desire to increase these shares in the future.

- The existing energy legislation has not been prepared in order to promote renewable energy – but to exploit conventional energy resources, i.e. petroleum, natural gas and coal. As previously mentioned, the need to provide capital for public expenses is of central importance to how much they wish to change.

There are a lot of legislative barriers connected with switching to renewable energy. The same applies to local authorities’ opportunities for strategic participation in a switch by, for instance, entering into a partnership with the private sector. Examples of the latter could be:

• Rules governing municipal government, municipal business laws and the electricity supply law impose clear restrictions.
• Demands regarding supply.
• The municipal borrowing facilities are restrictive.

The local authorities’ opportunity to enter into an energy partnership with companies is first and foremost dependent on the legislative frameworks.

Further information:



Professor Ellen Margrethe Basse

Aarhus University, Business and Social Sciences
Department of Law

Email: ellenmb@asb.dk
Tel.: (+45) 89 48 68 69
Mobile: (+45) 23 26 18 29
Web: www.basse.dk