MMclimatemasternew

Special Edition, November 2008

Mondaymorning

Denmark: Key Developer of Climate Solutions “The Danish experiences show what it takes to create the changes in behavior that can be decisive in the battle against climate changes …”

Mandag Morgen, Valkendorfsgade 13, P. O. 1127, DK-1009 Copenhagen K, Tlf. +45 3393 9323, Fax +45 3314 1394, mm@mm.dk, www.mm.dk

Being responsible is our foundation

Thinking ahead makes it possible

Innovation is the essence

Grundfos is a company that changes as the world changes, but our fundamental values of Be responsible – Think ahead – Innovate remain constant. They are the cornerstones on which all our actions are based.

They inspire us to provide our customers, employees, and partners with unparalleled excellence, and have made us into one of the world’s leading manufacturers of pumps and pump solutions. Learn more about our values and solutions by calling us at +45 8750 1400 or visiting www.grundfos.com.

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FOREWORD Denmark has gone from being 99% dependent on sources of foreign oil to becoming completely energy self sufficient. Thirty years of focused energy policy, implemented after the 1973 oil crisis, have catapulted Denmark ahead of most other nations in the use of renewable energy technology and sustainable climate solutions. In this sense, “Green” pervades the present Danish climate debate.

Decades ago, Denmark recognised the need to protect the environment and to promote and safeguard sustainable development. Today, this recognition means that the country has a useful lead in tackling issues like sustainable generation of energy, energy efficiency, district heating, waste water treatment and waste management. Green technology is one of Denmark’s biggest exports and our strong competencies attract a number of international Renewable Energy companies to Denmark. Denmark has wellestablished programmes of research, and numerous companies with expertise and production capability in the field of sustainable technologies.

The Danish energy-story is exciting to tell for several reasons. First of all, Denmark gets to share its invaluable knowhow and thus create an opportunity for growth. Energy can have the same significance for the development of the Danish society in the 21st century, as foods had for the 20th century industrial society. Last, but certainly not least, the Danish experiences show what it takes to create the changes in behavior that can be decisive in the battle against climate changes – a challenge, which has the outmost attention all over the world.

This publication originates from a co-operation between the Scandinavian think-tank Monday Morning and Invest in Denmark, the official Danish investment promotion agency, part of the Danish Ministry of Foreign Affairs. The publication aims to portray the wide range of opportunities and world-class competencies within the field of renewable energy and climate solutions that Denmark offers – and, furthermore, tell the story of why Denmark has become one of the frontrunners in the market of Climate Solutions – and of course what we need to focus on to stay ahead.

This publication has focus on wind, water, IT, foods, building and transport – Danish industries that have strong focus on making their business sustainable – both economically and environmentally.

We hope you enjoy your read!

Ole Frijs-Madsen Director, Invest in Denmark

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Erik Rasmussen Editor-in-Chief, Monday Morning

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CONTENTS A nation coping with climate change The world is crying out for Danish water skills Danish agriculture’s golden opportunity Green building begins at home The transport sector’s green laboratory Tackling climate change digitally The call for new business models

PAGE PAGE PAGE PAGE PAGE PAGE PAGE

15 10 14 20 27 32 35

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Denmark is one of the world’s most energy efficient countries – Focused strategy has created economic growth without a corresponding growth in energy consumption – Whole-hearted political endeavour, combined with a unique culture of innovation make up the backbone of the Danish energy adventure.

A nation coping with climate change

while the danish economy has grown by 75% over the last 25 years, energy consumption has remained constant. Since the oil crisis in the Seventies, only a very few countries have managed to erect so many wind turbines, create such an effective local heating plant network, increase industrial energy productivity and save so much household energy as Denmark. See figure 1.

Only a very few Danes are aware that they live in a country that has set world records in energy efficiency. Denmark has been able to decouple energy consumption from economic growth.

Private car use and road and sea transport have never been greater, and the Danes increased desire for mobility weighs heavily in the national CO2 accounts. Yet the truth about the Danish energy adventure is that today only a very few nations can measure up to Denmark when it comes to saving energy.

Even the Republican presidential candidate, Senator John McCain, feels obliged to visit Vestas’ factory in Colorado and sign a turbine wing, while China imports Danish pumps and looks on enviously at Denmark’s efficient local heating plants. Denmark’s cleantech exports are reaching new heights, leaving other Danish exports behind.

The reorganisation of Danish energy policy builds on a number of crucial strategic decisions, taken against a background of increasing global energy prices and geostrategic uncertainty about future energy supplies. Taken as a result of pressure from visionary civil servants and grassroots organisations from the middle of the Seventies onwards, they make up the foundations of a success story now resonating in more and more countries around the world.

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• NEW ENERGY BLEND. Denmark has gradually replaced coal and oil with natural gas and much more wind power. This has reduced CO2 emissions. Not using nuclear power has increased the need for alternative sources of energy.

• INCREASED FOCUS ON ENERGY. Duties and subsidies have stimulated energy savings and the application of more energy friendly technology in the industrial and private sectors.

MM | High productivity Energy consumption, GNP and energy intensity

Index: 1980=100 150 GNP, fixed prices Gross energy consumption, corrected

100

50 1980

Energy intensity, energy/GNP

2006

Figur 1: Since 1980, the Danish economy has increased by approx 75 per cent, while the domestic consumption of energy largely has been constant. Maersk international shipping and international air transport are not included in the account, since they are not included in the Kyoto Protocol.

Source: The Danish Ministry of Climate and Energy.

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MM | Denmark as European champion Energy intensity in selected countries 800

Ton/million euro

0

Denmark Ireland Austria Germany France Italy The Netherlands UK Sweden Belgium EU-27average Spain Greece Portugal Finland Slovenia Hungary Poland Czech Republic Slovakia

400

Figur 2: The energy efficiency in Denmark is the best in Europe. No other European country has as low an energy consumption compared to GNP. Source: The Danish Ministry of Climate and Energy.

• INFRASTRUCTURE. The deliberate development of an efficient collective heating plant and district heating distribution network combined with a ban on electric heating has reduced wastage.

• COMMERCIAL STRUCTURE. The change to a more service based economy has reduced domestic energy consumption.

• DEVELOPMENTAL INCENTIVES. Active public support for innovative companies developing cleaner technologies.

Flexible change The story of the nation that has made ‘Modern Energy’ its brand and its new source of income started with a jolt in October 1973.

Rapidly increasing oil prices and the Yom Kippur War had created severe concerns about Danish energy supplies, where 90% of the country’s energy needs had to be met by oil.

Anker Jørgensen’s Social Democratic government panicked, introduced car free Sundays in November and asked shops to switch off lights outside of opening hours to save on ever more expensive energy. This was just the beginning. Despite a fall in oil prices over the next few years, Denmark and a generation of politicians never got over the shock of the first international energy crisis.

Jens Kampmann, who back in 1971 was Denmark’s first environment minister and the minister responsible for taxes and excise in the Social Democratic government of 1977-78, is convinced that it was the wake up call provided by the energy crisis that paved the way for a new approach.

“Denmark began thinking in energy and environmental lines at the beginning of the Seventies – long before the majority of other countries. It was realised early on that economic means where necessary to ensure a decoupling of energy consumption.

This has resulted in major win-win scenario for Denmark,” says Kampmann. Today, Denmark is number one in Europe. See figure 2.

Mette Wier, Executive Director of the Danish Institute of Governmental Research and with years of environmental economics research experience, believes that underpinning the decoupling of energy consumption and growth is the fact that Denmark is a remarkably flexible society, highly skilled in adjusting to global change. “The two major energy crises did not just change energy consumption. They also spread through an entire society's production and consumption, making the country much more focused on energy use. Danish energy policy has always been heavily influenced by the global situation, and not least by developments in the Middle East. Changes have forced the Danish model over into a far more energy aware direction,” she explains.

Local energy heroes Without concerted popular pressure in the land of the cooperative and 1,000 town halls to find solutions to the global challenges created by the energy crises of the Seventies, it is unlikely that renewal would have taken off. The Tvind School erected Denmark’s first wind turbine in Ulfborg on Denmark’s west coast. Popular movements featured prominently in the energy debate, gaining moral and intellectual support from the Club of Rome, which had begun to talk about “limits to growth.” The country’s most visionary business leaders were beginning to realise the value of renewal long before this became one the world’s biggest growth sectors in the 21st century.

“The heroes of the Danish energy story are the entrepreneurs of the wind turbine sector, those responsible for the partnerships between the public and private sector, the insulation advocates within the building industry and – not least – the architects of the finance ministry's subsidy and duty package. It has created a number of unique clusters in the Danish energy world,” means Lars Goldschmidt, Executive Director of the Danish Association of Consulting Engineers, and who for a number of years has closely followed developments in the energy sector from positions at the Danish Energy Agency and Maersk Oil and Gas.

“The market cannot cope alone, and it’s important that there are a range of incentives and regulations from the state.”

Jens Kampmann, former Minister of Energy Generations of politicians – from Erling Jensen and Jens Kampmann through Jens Bilgrav-Nielsen and Svend Auken to Denmark’s first climate minister, Connie Hedegaard – have helped implement the many regulations, duties, subsidies, incentives and energy efficiency campaigns that have gradually changed Denmark from an energy glutton into an energy econo-

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miser.

“As a result of intense political demands, we have developed a collective heating distribution network and the world’s most efficient heating plants. A major part of Denmark’s success today is a consequence of political decisions taken many years ago,” states Jens Kampmann. “The market cannot cope alone, and it’s important that there are a range of incentives and regulations from the state that can help innovation along the way.”

1976 turned out to be a key year. A new electricity distribution act was passed, the Danish Energy Agency was established, and the country’s first unified energy plan was set out. Reduced oil dependency and energy consumption were now very much top of the agenda, and Danish homeowners busily began insulating cavities and doors and putting up Hessian on the walls. The government again considered nuclear power, but grassroots organisations fought the plans via petitions and anti-nuclear demonstrations and by persuading researchers to develop an alternative energy plan.

In 1997 parliament approved an increase in duties on electricity, and oil. More duty increases followed, designed to motivate Danes to save energy – and secure extra funds for the hard-pressed state economy.

The price shock during the second energy crisis in 1978-79 provoked yet another major shift. In 1979, parliament passed acts relating to heating and natural gas distribution, and Denmark set up its first energy ministry.

“From 1979 to 1985 major progress was made towards decoupling Denmark’s energy consumption,” says Peter Bach, Senior Consultant at the Danish Energy Agency. “During this time Denmark reduced its energy consumption by 25-30%, and this is definitely a world record of which we can be very proud.

Insulation and home improvements were responsible for the first advance. Later expansion of natural gas and district heating and not least conversion to local heating plants had a major impact.

The Danish heating model Today, the Danish energy adventure is especially associated with wind turbines. And they are also central to the acceleration that took place during the Nineties. Yet, as many of the experts contacted by Monday Morning point out, seen as a whole it is collective heating distribution that more than anything has reduced Danish energy consumption.

“District heating has been much more important for decoupling than wind power.” Local heating plant expansion increased rapidly after 1980, and today two thirds of industrial energy comes from highly-efficient collective heating systems. On this front, Denmark is way ahead of most other countries. For example, Germany has not been particularly good at building up district heating,” says Professor Mikael Skou Andersen of the University of Aarhus and recently appointed to an international expert committee set up to advise the Chinese government about developing more sustainable energy provision.

Climate minister Connie Hedegaard relates that even today, fascinated foreign ministerial delegations visit Copenhagen heating plants to see how refuse is transformed into heat.

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MM | The efficiency of the industry The gross energy intensity in production, per cent 150

Index: 1990=100

Transportation Industry

Agriculture

100 Public benefits

Other industries

50 1990

2006

Figur 3: The service industry and the public benefits are the most important contributors to the Danish achievement of lowering energy consumption while continuing economic growth.

Note: “Industry” covers industry, energy, water supply and construction. “Other industries” covers trade, hotel and restauration and financial services. International refueling of ships and aeroplanes operated by Denmark are included in “Transportation”, which also covers postal services.

Source: Statistics Denmark, 2008.

“Denmark is doing relatively well, with a good basic structure in place. We have a lot of district heating and decentralised heating plants, we are very energy efficient, and we have relatively little transport wastage in relation to other countries,” she says.

Hedegaard acknowledges that Denmark still burns too much fossil fuel. See figure 3. Yet points to the fact that wind power now provides 17.5% of total Danish energy needs. The target is 30% sustainable energy by 2020. “We are a wind nation and world leaders in installed wind power,” says Connie Hedegaard.

The interplay between innovative companies and still more demanding energy legislation has helped ensure that Denmark’s energy consumption has not exploded in step with economic growth.

Incentives to encourage change have been regular and consistent, including subsidies to encourage the use of sustainable energy and energy savings in buildings in 1981; energy labelling legislation in 1982, and the definitive decision to drop nuclear power in 1985. “Denmark has done a number of things to keep down energy consumption that other countries can learn from.

I’m referring not least to our collective heating system, and the fact that the Danes learnt to save energy and better insulate their houses during the Seventies,” says Greenpeace climate and energy staff member Tarjei Haaland, who in 1974 was a co-founder of Denmark’s biggest anti-nuclear movement, and as such contributed to stopping nuclear power.

From heated discussions about the Brundtland report of the late Eighties to the adoption of the then visionary Energy Plan 2000 in 1990, Danish politicians have constantly pressured the business community. Having increased annually up to 1993, corporate

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energy consumption per produced economic unit has since fallen by an average of 2.5% a year. Household energy consumption is lower today than in 1973.

Energy Plan 2000 set targets to reduce energy consumption in relation to 1988 levels by 15% and to reduce CO2 emissions by 20% by 2005. It has not been possible to meet these ambitious targets, in spite of a major increase in subsidies for sustainable energy and a dramatic increase in energy duties in the Nineties.

“During the Nineties, under Svend Auken, the Danish Ministry for the Environment and Energy was incredibly influential, and the environment was invested with great value,” recalls Mette Wier from the Danish Institute of Governmental Research. “There where no limits to what could be done. However, nobody remembered to ensure– and there was no great desire to work out – whether there was a real return on investment. The environmental movement almost enjoyed too much success, and it has taken a number of years for it to recover. Today, the issue of the environment has been resurrected within the wider climate debate, where it now represents business worth billions.”

MM | ‘Naval Battle’ unresolved There are a number of ways of looking at the Danish energy decoupling process. Between 1982–1986 and 1995–2001, energy consumption fell while the economy expanded. Yet these figures are controversial. Not least the question of whether to include shipping and air transport in the national CO2 accounts. A. P. Møller-Maersk’s global fleet emits almost as much CO2 as the entire country. No other nation in the world has such a relatively large marine element in its national accounts.

Specialist consultant Peter Rørmose Jensen at Statistic Denmark believes that, “shipping and air transport should not be omitted from economic development statistics. If the figures for shipping and air transport are included in the CO2 statement then no decoupling can be said to have taken place.

Tarjei Haaland of Greenpeace believes that Anders Fogh Rasmussen and Connie Hedegaard are travelling around “boasting”. Suggesting that Denmark has been able to decouple energy consumption in relation to economic growth is a clear distortion. Foreign shipping and air transport contributes to our GDP, yet is not included in our energy consumption figures. The numbers should be adjusted to show a more truthful picture.”

Connie Hedegaard maintains however that a major decoupling has taken place in domestic production and, pointing to the Kyoto Protocol, adds that no country includes its foreign shipping and air transport in its CO2 statistics. “Maersk ships transporting freight from Shanghai to San Francisco should not be included in the Danish CO2 statement,” she states. Statistic Denmark is yet to include the transportation of foreign goods carried out by Danish companies abroad. However, they can confirm that Maersk ships refuelling in Danish harbours or SAS aircraft refuelling at Copenhagen Airport are included in the Danish CO2 statement. It is difficult to unravel all the threads and determine responsibility in a globalised world.

Negotiations are currently taking place within the International Maritime Organisation to reduce CO2 emissions from shipping.

Connie Hedegaard is among those hoping for a global agreement that treats everyone equally.

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Global sales of Danish success Climate Minister Connie Hedegaard is clearly proud of how long Denmark has come on its journey of renewal. “Since 1981 we have had 70% growth in GDP while keeping energy consumption more or less stable within the same period,” she says. Along with the Danish Prime Minister, Anders Fogh Rasmussen, she now travels the world with figures from the Danish Energy Agency showing how successful decoupling has been.

If there were an energy efficiency world championship, Denmark would be a serious contender for gold. “Denmark has had the advantage of not having much heavy, energy consuming industry to begin with, and support has been available to carry out energy savings in a number of areas,” assesses Lars Goldscmidt.

Even Tarjei Haaland of Greenpeace accepts that Denmark has been a pioneer in this area. “Denmark is a small country with very low energy consumption. For example, Norway’s energy consumption is four times greater and Sweden uses two and half times more energy than Denmark,” he says.

Associate Professor Anders Christian Hansen of Roskilde University, who is writing a book about the Danish energy story, believes that Denmark can teach the rest of the world a thing or two. “The rest of the world can learn about our experiences with decentralised power plants and wind turbines, as well as gain inspiration from our way of applying environmental taxes,” he says.

For instance, Denmark is one of the countries where environmental taxes contribute most to GDP. See figure 4. In 2006, the state collected DKK 78 billion or 4.7% of GDP in environmental and energy duties. This naturally affects corporate and private behaviour.

“If you do not include sea transport, Denmark has experienced a major increase in energy productivity in relation to other countries. Industrial energy consumption has fallen since 1993, and household gross energy consumption is lower today than in 1973.

New deal Yet according to the Danish Energy Agency and Statistics Denmark, gross energy consumption – and CO2 emissions – have begun increasing again over the last few years. The current Danish Liberal-Conservative government has been criticised for not doing enough to reduce energy consumption. “This government put a stop to many good energy and environment initiatives in the Nineties, and this has led to years of energy policy idling,” says Tarjei Haaland of Greenpeace. “Gross energy consumption has been increasing in the last few years, CO2 emissions are beginning to grow again, coal consumption is going up, and wind power has been put on hold – no new turbines have been erected in Denmark since 2004,” says Haaland, and points to among other factors the adjusted figure for CO2 emissions, which increased by almost 3% from 2004 to 2006.

Anders Christian Hansen from Roskilde University agrees: “The last couple of years have seen a decline in energy productivity, CO2 emission reduction and conversion to sustainable energy.

Not applying duties that would have otherwise made it more costly to pollute and the abandonment of the climate targets in 2002

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MM | Incentives of conduct Environmental taxes distributed in main groups Billion Danish kroner

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 0 Pollution taxes Energy taxes

20

40

60

80

Transportation taxes Resource taxes

Figur 4: There has been a general increase in Environmental taxes in the past ten years.

Source: Statistics Denmark, 2008.

have had an impact. Yet a new consensus in parliament regarding the latest energy bill would appear to have stopped the decline. And this broad consensus is encouraging for new agreements regarding what should happen after 2011,” he adds.

However, it was not just the government that lowered its ambition levels at the beginning of the new century. It could also be seen in a broader shift in thinking, where it became modern to say, ‘Cool it’, and where voters stopped showing the same enthusiasm for environmental issues as before.

During the economic boom of the last ten years, where we have experienced historically low rates of interest, Danes have borrowed money to build new kitchens, buy new cars and spend money on things that give status. Yet they have invested remarkably little in energy savings and house insulation. It would appear to demand a combination of regulation, motivation and information to get people to save energy,” says Peter Bach from the Danish Energy Agency.

SPECIAL EDITION November 2008

Yet recent dramatic increases in oil prices and a new, more pragmatic awareness of climate issues – in Denmark and in the rest of the world – have once more changed the basis for energy policy. A paradigm shift is taking place. A majority of ordinary Danes and politicians wish to bring climate and energy policy up to speed, in order to save more energy and ensure an increase in the use of sustainable energy.

Connie Hedegaard still regrets that the Liberal-Conservative government postponed a number of wind farms during its first years in power. “We lost valuable time, and we would not have postponed the farms today. Yet this has changed now,” she says and points to the decision to erect numerous wind farms on land and sea since the latest energy act was passed in February.

Instead of looking back at previous disagreements, the climate minister thinks that we should look forward, and agree to exploit the first mover advantage that Denmark has built up in many areas. Ever higher oil prices over the next few years combined with a global climate consensus should lead to major growth in the worldwide market for energy saving technology. And Denmark has great potential in this market, emphasises Connie Hedegaard: “Now it’s about maintaining our advantage. Danish cleantech exports grew four times faster than all other sectors in 2007.

Exports have tripled within the last ten years, and sources within the industry believe that a turnover of DKK 200 billion is realistic MM by 2020.

Bjarke Møller | bjm@mm.dk

Sources • Danmarks Statistik, Statistiske Efterretninger 2008:2, Miljøøkonomisk regnskab for Danmark 2006.

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Danish water competencies are the best in the world – Early political prioritisation of drinking water and wastewater created a major first mover advantage in the rapidly growing market for water solutions – Yet global competitors are fast closing in – The Danish water sector must supplement product innovation by developing new business models.

The world is crying out for Danish water skills

it’s an accepted national truism that Danes, according to their own self-perception, are the best in the world at almost everything. Yet this may very well be the case when it comes to the supply, treatment and knowledge about water. Danish researchers and consultants set the agenda in international forums such as the Global Water Partnership and the EU Water Initiative for Africa and Newly Industrialised Countries, as well as projects in the UN and UNESCO and elsewhere. Danish water competencies are well respected internationally – not least due to legislation that early on created the framework and incentives for water related technological advances.

“We hold a strong position within a range of key areas. And there is no doubt that we see a major growth potential in the future, where focus on and investments in water can only increase,” says Ole Mark, a business manager for the DHI Group. “Yet the fact that our technology and software is in many ways among the very best available today does not mean that this will be the case in ten years time. Europe and North America will face competition in Asia especially,” says Ole Mark.

The massive challenge of securing sufficient water for a growing global population will increase global competition.

The global water market is already over USD 500 billion a year, and is expected to grow to a minimum of USD 688 billion dollars by 2010. And rapidly growing investments create increased opportunities for Danish businesses. Danish companies and technological institutions can contribute across a wide range of areas.

• CONSULTANCY, planning and facilities. Denmark leads on the manufacturing front. Leading Danish companies Grundfos and Danfoss each have major sales in the pump and valve sectors. Danish engineering companies such as Rambøll, Cowi, Krüger and Carl Bro all have superior, internationally recognised competencies within pumping station, supply system and wastewater consulting and project management.

Furthermore, cooperation exists between institutions like the DHI Group, the technical and scientific universities and leading companies regarding the development and application of the newest technologies.

• RECYCLING, PURIFICATION AND ‘NEW WATER’. The international market is growing very rapidly, and Denmark is home to many interesting players. For example, the Danish inventor Mikkel Vestergaard Frandsen has built up an international company based on the Life Straw – a ‘drinking’ straw with a filter that purifies even very dirty and polluted water, making it drinking water quality. Costing the same as a cafè latte and working for about a year, Life Straw won Saatchi & Saatchi’s Award for World Changing Ideas in New York earlier this year, and has been named as one of Forbes Magazine’s ‘10 Things That Will Change The Way We Live.’ A company such as Grundfos has the opportunity of playing a more influential role in the new EU member countries, where EU regulations among other demands will require major new investment in water supply systems. Here, Grundfos’ BioBooster – a compact, transportable water purifier that can recycle

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MM | The foundation of life is threatened

MM | Affecting billions Number of people who suffer from limited or no access to drinking water 8

Billion people

High

6 Medium

4 Low

2

0

1995

2050 Population prognosis

No access Limited access

• 1.1 billion people do not have clean drinking water.

• 2.6 billion people do not have even primitive plumbing.

• 2 million people die each year due to a lack of clean water.

• 3,900 children die each day of water-borne illnesses.

Global population growth combined with high economic growth, insufficient infrastructure, waste of resources, pollution and climate change have put global water supplies under enormous pressure. There is a real risk that crucial rivers and groundwater reservoirs across the world will dry out, bringing unimaginable hardships to the world’s poor, in particular, in the form of thirst, hunger and hygiene related illnesses.

The UN and a number of international organisations have raised the alarm. Political action and global investments are increasing sharply.

Investments are being made into water-saving technology, new supply systems, and in developing new ways of producing clean drinking water.

Apart from drinking water, an efficient water supply is necessary for all food and industrial production and manufacturing. Current high food prices worldwide are also to a large extent due to a lack of clean water. The water supply situation is critical in California, China, India, South-east Asia, the Middle East, North Africa, and especially in Sub-Saharan Africa and Bangladesh.

If we are to solve future challenges, our investments in this area will have to make up a great deal of lost ground. In China and India alone, the World Water Council estimates that annual investments of USD 180 billion are required – doubling the current level. In Africa and the Middle East the gap between actual and required investment is even wider. In EU member states too, the shortfall in investment is colossal. The European Commission has calculated that if the EU is to meet its own environmental requirements, it will cost member states more than EUR 95 billion.

• 135 million people risk dying due to lack of water by 2020, if we fail to find a solution to the problem.

Sources: Energy Information Administration (EIA), Renewable Energy Policy Network for the 21st Century (REN21).

water for industrial and private use – would for example be ideal. Numerous other companies are working on ‘reverse osmosis’ as a means of turning contaminated water into drinking water. All decentralised and flexible solutions, which can be extraordinarily attractive.

• THE POTENTIAL IN SALTWATER. Global water shortages would cease to exist if saltwater could be converted to drinking water, irrigation purposes and industrial usage. Up until now this has been too inefficient and expensive. Yet Danfoss has now developed a high-pressure saltwater pump that is 30-40% more energy efficient than the centrifugal pumps used thus far. An enormous market exists for new technologies that increase efficiency and reduce overheads in connection with the process of desalination.

• IT. One of the major problems globally is that many countries do not have any real overview of water resources, water treatment capacity, or flood control systems. Managing drinking water and wastewater treatment plants is a very complicated process that demands close cooperation between the authorities, manufacturers and researchers. Structures to support this are often not in place, and this is one of the reasons why

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the DHI Group is a world leader. DHI develops and manufactures software that helps coordinate, manage and optimise the use of water resources. From Copenhagen to Prague, Bangkok to Beijing, DHI can provide clients with among other services virtual imagery of actual water levels and help with intelligent planning of often fast growing urban environments. In principal, every single city in the world with a population of over 50,000 is a potential client.

National standards a deciding factor Grundfos’ business model built on water transportation. This is not a task that will be any smaller in the future. Grundfos CEO and Group President Carsten Berg sees major potential in the increasingly green market of the future.

“First and foremost, it is vital for our own future and that of the planet that we find solutions to the problems created by climate change, increasing population growth and resource waste. That there are major opportunities for companies with the will and the means is evident for this reason alone,” says Carsten Berg.

He points to the importance of the long Danish tradition for applying threshold values and plans of action to the water sector as important factors. Both in terms of incentivising development as well as recognising business potential.

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MM | ‘An unavoidable catastrophe’ More than four decades of work on international water projects, development and failed policies have left their mark on Harald D. Frederiksen. Over the years, the American researcher and water consultant sat on innumerable commissions and witnessed how nation states, the UN and the World Bank all neglected a problem that gradually turned into a catastrophe.

“Water is the cornerstone of any civilisation. At present, we are unfortunately more than 40 years too late to solve the fundamental supply problems that our lifestyle and global population growth have caused. Existing global targets are insufficient and implementation lags even further behind. For billions of people in the developing countries – and a great many in the West too – it is already too late, unless some miracle technology unknown to me is developed,” says Harald D. Frederiksen. He led the World Bank Water Resources Unit from 1984-1995, and is currently employed as a water consultant to governments in South America, the Middle East and Asia.

He points to increasing growth in the world population and related requirements as the primary cause of this imminent crisis. Massive waste as result of increased urbanisation is the immediate consequ-

“Many Danish companies in the water sector have achieved a position of strength by being first with practical or theoretical solutions to problems that Denmark set out to resolve earlier than others. The trend has to continue if Danish companies are to protect or build on their leading position in the future. Certainly, politicians must create a framework that rewards energy and resource saving technology not just in relation to research and development, but also in relation to its application especially. A domestic market is extremely beneficial for start-ups in this sector, and it is much easier to reach international clients if you can point to good results from home,” says Carsten Berg.

“Developments that we have made have all been as result of legislative measures: water environment plans, wastewater treatment regulations, etc.”

Jes Clauson-Kaas, Cowi Jes Clauson-Kaas, Senior Project Manager at Cowi, also sees the framework conditions as the reason why Danish water technology is so advanced.

“When you come down to it, developments that we have made have all been as result of legislative measures: water environment plans, wastewater treatment regulations, etc. Councils have had to implement this legislation, companies have had to introduce new technology, universities and research institutes have gained

ence. Furthermore, geopolitical gambling with water as currency in many cases threatens to cause drought catastrophes, societal breakdown and increased migration. A catalogue of misery that is certain to be the cause of tomorrow’s regional wars.

“Whether we are looking at US and Mexico, Israel and Jordan, India and Bangladesh, or Egypt and all its neighbours, there is a tendency for the stronger countries to hold on to the control of water supplies.

Thus leaving the civilian population of the weaker countries facing terrible consequences, now and in the future.

From Harald D Frederiksen’s point of view, the only positive indications are at long last, there now seems to be worldwide awareness of the real scale of this problem. And that humankind’s capacity for innovation in the face of crisis has been inspirational in the past.

“At present, I find it difficult to see how we can avoid a catastrophe in which millions and millions of people will die.” My only hope is that innovation and a massive political effort can alleviate the situation,” says Harald D. Frederiksen.

new measurements and data. There are many industries that historically have seen such measures as wholly anti-competitive in relation to what has been permissible abroad. Today, recognition is growing that major advantages can be gained in the long run. It’s an important factor driving development,” says Jes Clauson-Kaas.

Pioneer spirit and venture capital Even with a good foundation, Danish companies face more and more competition. The global green paradigm shift has not gone unnoticed by the likes of such multinational giants as General Electric, Honeywell, Siemens and Mitsui – all of which have far greater resources than any Danish research and development business.

The best chance for Danish companies lies in developing new business models. According to Hans Enggrob of Enggrob Consulting and attached to the DHI Group as venture capital consultant, they constitute the critical innovation leap that the water industry lacks.

“Venture capital companies have enormous interest and masses of financial resources. Yet there is general shortage of good business ideas in this area. It often appears as if cleantech companies are too narrowly focused on the scientific side when compared with, say, IT and biotech companies. It would give us a major advantage if we were to be among the first to change this image. There exists massive potential for developing new business models given the specialist Danish competencies in so many aspects of water technology. This will make it much, much easier to attract venture capital,” he says.

He underlines that in recent years Denmark has done well on the innovation front – now this just needs to be linked to the existing culture of entrepreneurship.

“An entrepreneur environment already exists. Yet we are a small

SPECIAL EDITION November 2008

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country with limited investment resources – we’ve often been good at starting things up, only to have difficulty following them up as successfully as we would like. To a great extent this is natural barrier, and one that we may just as well view as an incentive to consider alternative business models and partnerships with bigger players,” says Hans Enggrob.

Jim Mahoney, Regional Director for China at the American owned environmental venture capital group Cleantech, is sympathetic to this line of thinking.

“Denmark has a wide range of superior competencies within water technology. The more you can create tailor-made, flexible solutions that meet the challenges we face in for example China – in the form of cross-disciplinary cooperation between sectors, new business models, etc. – the stronger your position will be.

Applying to all major developing countries is the fact that capital rich partners with networks and resources play a key role when it comes to long-term investment in infrastructure. The reality is that venture capital is flowing into China and India to a degree that we have never before witnessed. This fact, combined with a willingness to invest from the state, creates a fantastic business foundation – if we can formulate a unique vision,” says Jim Mahoney.

MM

Glen Mikkelsen | gm@mm.dk

Sources • www.waterindustry.org.

• www.worldwatercouncil.org • JEMU: Growth of Global Environmental Markets 2000-2010, 2002?

• Jan Eliasson & Susan Blumenthal: Dying for a Drink of Clean Water, Washington Post, September 2005.

• UNESCAP: Statistical Yearbook for Asia and the Pacific 2007.

• The Danish Ministry of the Environment: Miljø, teknologi og innovation – bidrag til en grøn markedsøkonomi, 2004.

• DHI: The World of Water and Environment 1950-2050.

SPECIAL EDITION November 2008

MM | Self-sufficient Eco-Village The world’s first 100 % sustainable city, Dongtan-Eco Village, currently under construction on Dongtan island off Shanghai, is attracting massive attention. The city will be self-sufficient in energy. All buildings will be passive, the collective transport system will be CO2 neutral and all waste will be recycled.

“Where water is concerned, the project is groundbreaking,” says Peter Head from British architects Arup, the company managing the project. “Dongtan will be self-sufficient in water. Water that the population and companies here would normally dump into the river, will instead be collected, treated and reused within the city. In addition, there will be an approximately 3 km wide buffer zone between the boundaries of the city and the vulnerable wetlands, where farming will provide all of the city’s food. Farming itself will be water-intensive, but requirements will be covered by rainfall and the city’s own purified and recycled water. The system is a milestone in the development of a sustainable rural-city-water distribution cycle, where the city puts back what it uses,” states Peter Head.

The first phase of the Dongtan Eco-Village is planned to be completed in time for the Shanghai World Expo in 2010, by which time it will have approximately 5,000 inhabitants. The project will be completed in 2050, when half a million people will live in an area the size of Manhattan.

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The climate can be Danish agriculture's greatest competitive advantage – Years spent focusing on minimising resource use and rationalisation have resulted in valuable solutions that both improve production and protect the environment – Major export opportunities within knowledge, technology and integrated solutions – A new, green revolution is necessary if potential is to be fully realised.

Danish agriculture’s golden opportunity danish agriculture was in crisis in the Seventies. Increasing energy prices and ever more demanding environmental legislation were forced farmer’s costs sky high. The associated food industry was also under pressure, due to the increasing cost of raw materials among other factors. Stagnation beckoned, with enormous production costs ensuring that both sectors would be uncompetitive in European and global markets.

Yet 30 years later, these predictions have turned out to be wrong.

Legislation has created an ongoing focus on cost savings and rationalisation, which today is paying dividends internationally.

Not only has Danish agriculture succeeded in building up a good reputation for quality and remaining globally competitive, the sector also possesses unique knowledge about a range of solutions that make it possible to increase global food production, while simultaneously reducing the impact on the environment.

A to a great extent politically dictated pressure to innovate has created one of the world’s most energy efficient agriculture and food sectors.

• Between 1995 and 2005 the Danish agriculture and food industry managed to reduce CO2 emissions by 16%, while simultaneously increasing the value of production. See figure 1.

• The Danish food industry is among the leading exporters of eco-friendly meat and milk. Denmark is ranked fourth in the EU when it comes to limiting methane emissions from milk production. Where pig farming is concerned, Denmark is surpassed only by the Netherlands.

• Danish agriculture is a major supplier to the sustainable energy sector. Agriculture supplies the majority of the biomass that makes up 70% of all bioenergy production.

• Growing export of machines, environmental technologies and enzymes that contribute to more eco-friendly agriculture. In just two years, this market has grown from DKK 39 billion to DKK 45 billion.

According to the experts that Monday Morning has spoken to this means that Denmark is now well placed to assert itself as a global front-runner within eco-friendly agriculture.

“The climate can provide a new competitive advantage for Danish agriculture and food production. Years of focus on resource use has resulted in our getting used to using as little as possible. This means that we are out in front when it comes to getting the most out of nitrogen as possible. This applies to a wide range of other areas as well, including the use of fertilisers and pesticides, which have traditionally been associated with high duties,” says René Logie Damkjer, director at AgroTech, which is currently in the process of determining Danish agriculture’s contribution to global climate change.

“Today, we are far more conscious of this being a valuable benefit in its own right..”

Søren F. Frederiksen, Danish Crown The Danish Agriculture Council is also preparing to make the most of this major opportunity. According Director Claus SøgaardRichter, the council is working for a further reduction in the sector’s CO2 emissions. The challenge lies especially with methane and nitrous oxide, where Danish agriculture is responsible for almost 15% of total emissions.

“We are focused on the importance of developing and applying new technologies and cultivation methods that will contribute to limiting resource use in food production. We are also looking at how we can improve feed and fertilizer use to ensure the minimum impact on the environment.”

SPECIAL EDITION November 2008

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Mandagmorgen

MM | Food crisis is a climate crisis too The global agriculture and food sector finds itself in caught in a situation that threatens to increase pressure on the environment, and make things worse for a number of the world's poorest countries and populations. This increases the need for new approaches and new solutions that can improve agricultural yields and boost food production globally, while reducing the impact on the environment.

• More mouths to feed: Global population growth demands more food. See figure. According to the UN, the global agricultural and food sector will need to feed 9.1 billion people by 2050, the majority of whom will be living in developing countries. This alone means that global food production will have to increase by 50% in just 40 years. Growing calorie intake per person further increases this need.

• From herbivore to carnivore: Increased welfare, growing urbanisation and ageing populations have led to an explosion in demand for meat and other animal products. In just 40 years, meat consumption in China has increased from 10 to 29 kilos per person.

According to figures from the FAO, this development will lead to a doubling of global production, from 229 million tons in 2000 to 465 million tons in 2050. The same applies to milk production, which has grown from 580 to 1043 million tons. This growth will have enormous consequences for the environment, as the production of animal products using traditional methods of agriculture is associated with very high levels of CO2 emissions.

• The fight for farmland: Growing animal production demands ever more land for grazing and feed production. It takes approx. 5 kilos of corn to produce 1 kilo of pork, and 8 kilos to produce 1 kilo of beef. Today, 33% of all arable land is already used in the production of animal feed. Yet the amount of arable land suitable for feedstuff and grazing is decreasing as cities become ever larger. At the same time, agriculture and the food industry has to compete with the pharmaceutical and energy sectors for the arable land required to produce biofuel and new types of medicines.

• Drought and rain: Climate change has altered the conditions for growth for crops in large parts of the world, and contributed to a reduction in the global production of wheat among others crops.

It is tempting for the agriculture and food sector to meet the demand for increased production. Yet such a strategy could have fatal consequences if regard for the impact on the environment is not allowed to play a central role. According to the UN Climate Panel, agriculture is responsible for 13.5% of all global greenhouse gas emissions. To this must be added the emissions generated by processing and manufacturing in the food industry.

Among the biggest offenders according to the FAO is the global cattle industry, which uses 70% of all arable land and is responsible for 18% of green house gas emissions worldwide. This is more than the entire global transport sector combined.

The production and use of fertilisers also creates problems. Fertiliser use alone results in 2.1 billion tons of nitrous oxide emissions annually, the affect of which on the environment is 269 times greater than CO2. On top of this come dangerous gasses, such as nitrogen oxide and ammonia, which are also major contributors to global warming.

When it comes to water, agriculture and food production account for more than two thirds of overall global consumption. Added to this, global water resources and aquatic environments are being seriously affected by the use of pesticides, antibiotics, phosphates, etc.

MM | Taste for food The past and future consumption of animal provisions Calories per person per day 800 Middle-income countries

600 400

Industrial countries Latin Amerika and The Caribbean

East Asia

Asia Minor and North Africa

South Asia

200 Africa (South of Sahara)

1962 1970 1980 1990 2000 2015 2030 2050

Sources: FAO, ICCP, Statistics Denmark, Landbrugets statistikbank.

Claus Søgaard-Richter points out that as result of the Kyoto protocol, Danish agriculture expects to reduce its greenhouse gas emissions by 5.1 million tons of CO2 per year up to and including 2010. This equates to 35% of the required Danish commitment.

Recycling as an innovation driver There is gap between the ambitious target and the actual reduction measured in the period 1990-2005, with the real decrease being recorded at just 0.32 million tons CO2.

Yet the chances of an increased effort would appear favourable. The Danish agriculture and food sector has a number of solutions at its disposal capable of impacting even the individual consumer. For example, new calculations show that climate conscious consumers in England are best served purchasing Danish produced pork. Even though sea transport is involved, Danish production is so much more eco-friendly that buying

SPECIAL EDITION November 2008

Danish pays in relation to the overall climate account.

International food producers Danish Crown are leading the way. The company’s energy, electricity and water consumption have all been reduced in less than ten years. The most dramatic fall has been in water consumption, which has been reduced by almost 50%, from approx. 640 to approx. 230 litres per slaughtered pig. According to Danish Crown technical director Søren F. Frederiksen, the answer lies in a combination of behaviour change, the application of new energy technologies and a distinct flair for recycling.

“We’ve been focusing on the expenditure aspect of our energy and water consumption for a number of years now. For example, we decided along time ago to recycle the excess heat generated during the production process and use it to heat up the water required for cleaning. That this approach also helps the environment was originally seen as a bonus. Today, we are far more conscious of this being a valuable benefit in its own right.

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MM | Against all logic Production value compared to CO 2 -emissions in the sector of agriculture and provision 110

Index: 1996=100 Production value

100

90 CO2 -emissions

80 1996

2005

Figur 1: The sector of agriculture and provision has succeded in lowering the CO 2 -emissions considerably, while the production value has increased.

Source: Statistics Denmark & The Danish Agriculture Council, 2007.

Reduced water consumption is evident across the entire agriculture and food sector. In just ten years, annual company water consumption has fallen from 516 to 319 million cubic metres.

Thus Danish Crown in many exemplifies the entire sector’s conversion to more eco-friendly methods of production. A heightened focus on resource optimisation and rationalisation, which can be traced all the way back to the individual farmer, has functioned as an innovation driver, resulting in the development of a wide range of new solutions. Common to a number of these solutions is that they provide both the opportunity to increase production as well as the means to reduce agricultural impact on the environment and climate.

• CROP OPTIMISATION. Climate changes impact the way crops grow, making them vulnerable in the face of sudden drought or rainfall. See box. According to the UN Climate Panel, the lack of crops capable of adapting to changing climate conditions is one of the greatest threats facing global food provision. Denmark is in a strong position when it comes to crop development and optimising crop performance. Leading companies include DLF Trifolium: while working on developing new types of feed grass, the company has managed to drastically reduce the need for watering, fertilizer and pesticides. Denmark’s position will be strengthened even further by a new centre for the development of proactive plants. The centre, established within the Faculty of Life Sciences at the University of Copenhagen, has recently received a DKK 25 million grant to develop plants that provide a greater yield per area.

• FEED AND ENZYMES. Methane emissions constitute a major threat to the environment, in as much as their effect on global warming is 23 times greater than CO2 emissions.

According to the FAO, agriculture is responsible for 37% of the methane emissions generated by humankind. Cattle and pigs are among the worst offenders. Denmark has a number of intelligent solutions at its disposal that can drastically reduce methane emissions. The DLG Group, a major Danish feedstuff company, has taken a leading role in the development of methods that make it possible to reduce emissions from manure by introducing enzymes that help livestock breakdown phosphates. Denmark’s powerful position is reinforced by a strong ingredients industry, including companies such as Novozymes and Danisco, which supply enzymes for biofuels and a wide range of other agricultural production processes. According to Novozymes, enzymes can help reduce agricultural CO2 emissions by a total of 200,000 million tons.

• PACKAGING RECYCLING. Rubbish mountains continue to grow in line with global consumption of processed foods.

Concerted long-term efforts to recycle rubbish and other materials means that many Danish companies are now among the best in the world. One of these is Færch Plast, specialists within the development of recycled plastic and intelligent packaging, which increases the shelf life of food products while reducing resource waste. Working with among others the University of Aalborg, Færch Plastic has developed a range of environment and lifecycle appraisals that show where in the production process most energy is used. This knowledge has been the driving element behind the development of a range of different types of recycled plastic that today is exported around the world.

• AGRICULTURE AS AN ENERGY SUPPLIER. Danish agriculture is especially well placed to contribute to realising the EU goal of ensuring that 20% of overall energy consumption is

MM | The new carnivores The past and future meat production in industrial and developing countries 300 Developing countries

200 Industrial countries

100

0

62

19

70

19

19

80

19

90

00

20

15

20

20

30

50

20

Figur 2: Growing wealth and population is the main reason for the increase in meat production in developing countries during the next few years. Especially China and India will drive the growing demand.

Source: FAO, 2006.

SPECIAL EDITION November 2008

MAKING MODERN LIVING POSSIBLE

Imagine a future so bright Debatten om global opvarmning og energibesparelser handler om at sikre et rent miljø i fremtiden. Men så længe behøver vi ikke vente.

Fuld udnyttelse af de teknologier, som vi kender, kan gøre en forskel allerede i dag.

Hvis vi vil.

Danfoss A/S • 6430 Nordborg • 7488 2222 • www.danfoss.com

Du kan også være med til at gøre en forskel.

Kig ind forbi jobs.danfoss.dk og se hvordan.

2288

I snart 75 år har det været Danfoss’ mission at medvirke til et komfortabelt liv for mennesker ved hjælp af moderne teknologi, som udnytter vores energikilder mest effektivt.

18

MM | Big opportunities in biomass Many factors indicate that the next chapter in agriculture’s energy adventure will be the production of bioethanol. As a result of investments by global actors such as Shell, Ford, BP and the Carlyle Group, it is estimated that the global market for biofuels will exceed USD 100 billion by 2010. According to the Danish Agricultural Council, the Danish food industry has a good chance of playing a part in this enormous growth.

The global food crisis has created problems for the so-called first generation of biofuels. Attention is now focused on second-generation production, which includes recycling agricultural waste.

Denmark’s position is strengthened by the Danish energy group DONG Energy’s investments in the area, which focus on processing the biomass needed for production.

covered by sustainable energy by 2020. Denmark was the first country in the world to introduce a ban on straw and stubble burning in open fields. Today, Denmark is in the forefront when it comes to the use of straw in energy generation. A total of 1.5 million tons of straw is converted to Danish energy annually. The same applies to biogas, where for many years Denmark has led the way in the development of biogas stations, which among other things convert manure into sustainable energy and eco-friendly fertilizer. Efforts on the biogas front are made possible by likes of companies such as Samson Agro, which has developed an advanced slurry treatment technology. According to figures from the Aarhus School of Business, the global market for biogas and slurry management solutions alone has a value of DKK 750 billion.

Sustainable agricultural exports 16% growth in the last 2 years alone means that the food industry now has a total global turnover of USD 6.4 trillion dollars. Gaining a share of this growth through increased production is a desirable goal for the Danish agriculture and food sector.

However, 63% of Denmark is already under cultivation, making it almost impossible to increase the amount of farmland in the country. The conversion of any more land to agricultural use will negatively impact the aquatic environment and the countryside in general. It would also mean more transport and an increase in CO2 emissions. Demand for food, including animal products, will increase most in the developing countries, where production is also expected to grow rapidly in the coming years. See figure 2.

The opportunity for Danish agriculture lies not in increased production, but in increased export of knowledge, technology and solutions that can help expanding agricultural nations such as China and India make their production more sustainable. Environmental legislation is often relatively limited in these countries, which among factors results in massive fertilizer use.

According to the UN Climate Panel, lack of knowledge about how agriculture and food production impacts the environment is one of the greatest barriers to reducing the sector’s CO2 emissions. Correspondingly, there is an urgent need for control and

Mandagmorgen

observation systems that can help monitor production on the basis of important climate concerns.

In this connection Denmark has a highly developed, interlinked system of consultancy, management and control that, according to Claus Søgaard Richter of the Danish Agriculture Council, builds on a tradition of close cooperation between agriculture, food manufacturers and academia.

“Denmark is in the forefront when it comes to the application of research and development, while at the same time we have a unique system of consultancy and cooperatives. This enables us to rapidly introduce new knowledge and technology to the market. Our strength lies in the relationship between the consultancy and the farmer. There’s great potential if we manage to convert this knowledge to concepts that can be exported globally."

The ability to convert knowledge to actual solutions can be seen in among other areas water and slurry management, which can help make agriculture more effective and sustainable in developing countries especially.

“We’ve been used to the idea of making more efficient use of energy for years, so we’ve built up a wide range of knowledge and experience that today is very valuable seen from a climate perspective We automatically select the electric motor with the lowest possible energy consumption, because we're used to thinking about how we can save as many resources as possible. In many areas, where we haven't had a solution, we've taken the lead in developing one. This approach gives us a clear competitive advantage,” says René Logie Damkjer from Agrotech. He also points to the fact that knowledge and consultancy is alrea-

MM | Climate on refrigerated display Arla is among the first food manufacturers in Denmark to have set out specific goals for reducing production greenhouse gas emissions.

Annual global emissions for the company are an estimated 1.5 million tons. The goal is to reduce this figure by 25% by 2020. To achieve this target Arla have developed a climate strategy based on four focus areas: Cattle production, transport, food manufacture and packaging.

The initiative is aimed at meeting the specific demands of consumers. According to a study carried out by the consulting company McKinsey, regard for the environment weighs very heavily among the company’s customers. 55% of respondents want to see a positive contribution from business when it comes to eco-friendly production.

In contrast, ‘only’ 33% of respondents pointed to healthy and safe production as a key requirement.

It can of course be difficult to determine individual products’ ecofriendliness. For this reason, the UK supermarket giant Tesco has recently postponed its ambitious ‘food miles’ project, set up to show transport related CO2 emissions for every product in the company’s range. Such numbers are misleading, given that the majority of CO2 emissions take place during the agricultural and processing phases rather than during transport. There is no easy answer. The Confederation of Danish Food Manufacturers is in the process of developing a number of recommendations for its members that focus on more eco-friendly methods of production. The recommendations are expected to be published this autumn.

SPECIAL EDITION November 2008

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dy being exported via Danish farmers, who are buying up and developing more and more farming and production facilities in Poland and the UK among other countries.

Green revolution 2.0 Many opportunities remain to be exploited. To realise these opportunities food and agribusinesses must be even better at developing integrated solutions and systems.

“In the past, our environmental focus was linked to respect to for the local surroundings. In the future, we must look at wider climate issues and see things from the broader perspective.

For example, it’s no use implementing a new clean air technology if it requires a lot of energy to make it work,” says René Logie Damkjer.

Encouraging Danish farmers to see the behaviour in a wider context requires new initiatives, which to an even greater extent than today reward processes that reduce the overall impact on the climate.

Peter Olesen, Adjunct at KU-Life at the University of Copenhagen and a former director of research at ingredients company Chr. Hansen, believes that development should be pushed even further.

He wants to see a new and sustainable agricultural revolution on the same scale as the last major green revolution in the Fifties.

“Any eventual breakthrough for the Danish agriculture and food sector will turn on the ability to radically rethink production. Increasing amounts of food and more focus on the environment are both needed, and we can't wait for the results of traditional improvements, where it takes 10-15 years to develop new and improved varieties.”

According to Peter Olesen, what’s needed is break with the existing fear of and reluctance to deal with genetic engineering and gene modification, which can be used to quickly produce a range of tailor-made, high-yielding crops.

A strong GMO research environment exists in Denmark, yet negative public opinion has until now prevented an all out effort on this front. However, climate change can very well be the factor that turns this around.

“It is self-evident that if we are to feed a growing global population while still maintaining our strict quality and health standards, then we must be open to methods and technologies that make it possible to dramatically increase production without damaging the environment.”

MM

Ida Strand | is@mm.dk.

Sources • The Danish Agriculture Council: Klima, jordbrug og fødevareproduktion, 2007.

• McKinsey&Company: Addressing consumer concerns about climate change. The McKinsey Quarterly, 2008.

• FAO: The State of Food and Agriculture, 2007.

• FAO: Livestock’s Long Shadow, 2006.

• International Food Policy Research Institute: The World Food Situation, 2007.

• IPCC: www.ipcc-wg2.org

SPECIAL EDITION November 2008

MM | A Nation of Maize Growers Compared to a number of the world's biggest agricultural nations, Denmark has currently little to fear when it comes to global warming.

According to UN Climate Panel member Professor Jørgen E. Olesen, a warmer climate will extend the growing season and allow for the cultivation of new crops, such as maize.

Yet in the longer term, global food shortages will also have a major impact on Denmark.

“While Danish agriculture will be better positioned from a production perspective, things will be much worse in other parts of the world.

Drought will hit agricultural production in Southern Europe, Australia, South American and some parts of the USA. In other areas, crops will be ruined by massive amounts of rainfall. This will lead to a major global food shortage, which will also affect Denmark.”

Jørgen E. Olesen points to the heat wave that struck large parts of Southern Europe in 2003, which led to EUR 5 billion in agricultural production losses in France and Italy among others.

While Denmark is unlikely to experience a similar drought, climate change will have other consequences. The drying out of low-lying areas will mean that production will no longer be possible in some parts of the country. Less rainfall and higher temperatures will increase the need for irrigation, leading to increased leaching of nitrogen and phosphate into the aquatic environment. Higher pesticide usage will also be necessary as a result of more disease and an increased numbers of pests.

This scenario underlines the need to increase production in those parts of the world where cultivation levels expect to remain unchanged or even increased. This will be the case in the Ukraine, Belarus and some parts of Russia among others, where enormous amounts of arable land remain uncultivated. However, increased production must not be allowed to take place at the expense of the environment.

“We need to start thinking very differently about how we limit agricultural pollution. Production needs to be increased, while at the same time we must avoid locating new farmland in those areas we wish to protect out of regard for nature and our drinking water supply.

Although located all over the country today, in the future we should place agricultural production in clusters out of regard for the environment. This will demand a comprehensive, long-term planning effort, involving both the public and private sector equally. This will involve a major investment of time and resources, yet seen in the wider context we do not really have any choice.”

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Mandagmorgen

Huge energy-saving potential in Danish real estate – Golden opportunities in foreign markets for Danish construction and design – Pioneering spirit and the home market are essential for cultivating exports – Legislative changes and incentives can give development a push in the right direction.

Green building begins at home

world population is increasing fast. A combination of economic growth in developing countries and high standards of living in the West is bringing massive pressure to bear on global resources.

Meeting UN, EU and national level energy-saving targets will require massive investment in the domestic housing stock.

Ironically, the technology and materials required for costeffective, eco-friendly buildings that do not require energy for heating are now available. At the same time, there is massive potential for saving energy by renovating the existing housing stock.

“By improving the energy efficiency of existing housing using available technologies, we can reduce energy consumption by up to 45% by 2015. Domestic housing accounts for 40% of total energy consumption in Denmark. However, the fact is, that these costs can be eliminated if we build intelligently”, claims Ole Michael Jensen, Senior Researcher at the Danish Building Research Institute.

The new, low-energy houses are not only more efficient and healthier but, when you make a life cycle calculation, also considerably cheaper than traditional housing. Architects, construction companies and building materials manufacturers are now all actively involved in exploring these developments in what the German chemist Michael Braungart has aptly named “The New Industrial Revolution”. Germany is spearheading development and experimenting increasingly with passive houses, even building housing that produces more energy than it consumes.

The Confederation of Danish Industry has spearheaded the development of energy-saving and energy-efficient solutions for

decades. When Monday Morning asked what the effect of this Danish know-how could have on the country’s prospects of becoming a major exporter of sustainable building, a number of key agencies confirmed that they see Danish potential as “highly significant”. The potential lies not only in Denmark delivering individual components, such as windows, building envelopes, insulation, electrical and heating systems, but also in supplying turnkey house projects and selling consultancy services, etc.

Initially, export potential will be greatest in those markets that are culturally and economically similar, i.e. western countries.

In the longer term, potential for growth lies in gaining access to enormous new markets in Asia, first and foremost China, where environmental pressures and increasing energy consumption will provide the impetus for opting for more sustainable kinds of production and lifestyle.

“Several companies are already well-established. However, there are still huge opportunities for export growth. Companies just have to find the right business model, the right partners and the right investors,” says Jonas Møller, who is special consultant at the Danish Construction Association.

All the pieces are in place Danish architects, town planners and consultant engineers are already among the world’s best in this field. And they will now increasingly become leading specialists in sustainability. Using their architectural expertise in a number of ambitious projects in China, companies such as Arkitema, Henning Larsen and Cobe have already made their presence felt in a market where interest

SPECIAL EDITION November 2008

INSULATING YOUR HOME

MAY BE THE MOST IMPORTANT COMMITMENT YOU CAN MAKE TO THE ENVIRONMENT

It’s a commitment that’s easy to make.

Simply insulating buildings is by far the most effective way to conserve energy and reduce CO2 emissions. And once it’s done, it’s done.

Once installed, Rockwool insulation saves energy by minimizing heat loss.

This in turn conserves non-renewable fossil fuels and reduces CO2 emissions.

In fact, over its lifetime, a typical Rockwool product will save more than 100 times the energy used and CO2 emitted during its production.

Our company Rockwool International A/S headquarters are near Copenhagen in Denmark. We have 35 operating companies throughout Europe, North America and Asia.

The Rockwool Group is not only a supplier of insulation materials but also an organisation that is concerned with the way in which we interact with our local and global environment. We understand that our local actions have a global impact and are committed to a socially, environmentally and economically responsible approach to our business.

For more information download our Environment Report 2008 at www.rockwool.com/environment

55169_Rockwool_FP_210x297.indd 1

13/10/08 18:16:32

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MM | Need for a new building paradigm While traffic congestion and industrial production make headlines, our homes consume vast amounts of energy. Constructing, heating and cooling our homes, and supplying domestic electricity, together account for a massive 30% of the total global energy consumption. In highly developed countries the percentage is even higher.

This creates an increasing focus on improving energy efficiency. With available technologies, we can build passive housing that produces its own electricity and provides a healthier living environment than conventional buildings – and, in the long term, costs less, due to energy savings and lower maintenance costs.

The challenge lies in implementing new technologies that cost very little, so that they can also be used in the developing countries, where population growth and intensive urban migration herald a need for more intensive building activity. With rising standards of living, private energy consumption also increases.

• Domestic housing accounts for 30% of total global energy consumption. In Denmark, housing accounts for 40% of total national energy consumption.

• During the next two decades in China and India alone, 800 million people will migrate to the major cities. With growth rates at the 2007 level, this will more than quadruple current consumption.

• Worldwide, more than two billion people are expected to migrate to towns and cities by 2050. See graph. According to UNESCO expert Kazuo Iwamura, failure to introduce sustainability requirements for buildings and the related infrastructure would bring about “the greatest global humanitarian catastrophe ever.”

• The EU Energy Performance Building Directive means that Denmark must reduce energy consumption by 25% by 2006, by 25% more by 2011 and again by 50% by 2016.

• If half of all new housing constructed in the US was green housing, energy-savings would be equivalent to removing one million vehicles from US roads.

MM | The world heads for the cities Rural and urban population, billions

5

Billion people Urban areas

4 3

Rural areas

2 1 0 1950

1975

2000

2030

Sources: Global Environment Outlook 2000, www.masstech.org, greenbuilding.ca.

in energy-saving and turnkey solutions is snowballing. At the same time, global key players such as Grundfos, Danfoss, Rockwool and Velux are enjoying success in their market sectors. Meanwhile, the Danish government has passed the world’s toughest energy saving legislation, so that the Danish housing sector is now one of the most energy-efficient in the world.

Ellen K. Hansen is the architect responsible for an experimental building project, “Aktivhuset”, currently being built by Velux and Velfac in Aarhus, Denmark. She believes that Denmark can achieve far more. “Our aim is to show that we can build a house using Danish construction materials and components that produces more energy than it uses, and still be an attractive and pleasant to live in – and which costs the same to build as a traditional construction,” she says.

The secret behind zero energy consumption is the use of exceptionally high insulation standards combined with intelligent hi-tech systems, such as wireless interior lighting control, automatic heat recovery from ventilation and hot water systems, and installing windows and building envelopes that absorb more

heat than they release. Calculations show that, over a 30-year period, the energy produced by the house’s solar panels will offset all the energy that went into building it. This is important as it is a well-known fact that the greatest energy costs in the lifetime of a house occur during its construction and demolition. Quality and comfort levels are therefore very important as attractive houses do not get demolished.

“I hope politicians learn that insulation, important as it is, isn’t the only important factor. We prioritise the building’s lighting, functionality and comfort. Improving ventilation and indoor climate means that this type of housing is quite simply healthier and more pleasant to live in. In fact, just like green office environments, green housing will save society huge amounts of money.

We must foster a holistic approach to building. There are so many areas in which we can make changes for the better, saving money and building better housing in the process,” Ellen K. Hansen says.

There’s a similar philosophy behind the building of passive houses, which, in principle, must produce the same amount of

SPECIAL EDITION November 2008

23

Mandagmorgen

energy as they consume. To date, there is only one passive house in Denmark, but the potential is enormous. The extra 10% in building costs can be expected to be offset within a few years by the house’s low energy consumption.

“This is just the start. Yes, new passive buildings are expensive to build – because there’s extra planning and there are far more subcontractors involved than in normal building projects. Once we have laid the standards down and established best practices, passive buildings will be generally accessible”, says Ellen K. Hansen. The Danish Building Research Institute is currently formulating such standards.

Impetus for growth While converting existing domestic housing to sustainable housing will take some years, there is already a booming market for components and building materials that minimise energy loss.

Rockwool has almost doubled company turnover during the last five years: from DKK 7.9 billion in 2002 to DKK 14.1 billion in 2007. Rockwool has achieved success by developing new thermal insulating products, which reduce thermal transfer and thus the need for power-hungry air conditioning systems. Current trends mean that the odds are in Rockwool’s favour: New stricter EU legislation requires further reductions in energy consumption and CO2 emissions, and the UN Climate Panel has stated that it sees insulation as the cheapest solution. Research undertaken by Force Technology in Lyngby in Denmark has shown that one of Rockwool’s ceiling insulation products saves 162 times more energy than it uses. Production of the Rockwool products in 2007 alone will, during the products’ lifetime, reduce emissions of CO2 by more than 200 million tonnes. The figure corresponds to four to five times Denmark’s annual CO2 emissions.

Eelco van Heel, Group President of Rockwool, recently announced that the company is aiming for growth at a level run-

MM | Sky-high ambitions Opportunities for sustainable building are escalating. Some would argue that yesterday’s most efficient technologies will very soon be obsolete. The irony is that it is an argument that is cited more often than any other as a barrier to the implementation of new techniques.

The fact is, however, that a high-profile pioneer is often what is needed to start a trend. One such example is the Commerzbank headquarters in Germany.

This 290-metre tall, triangular office tower, which was completed in 1997, constitutes a radical departure from the norm. An open atrium through the entire tower forms a spiral of “Sky Gardens”, bathing the building in natural light and providing fresh air from top to bottom. For 70% of the year, the building is both cooled and warmed naturally during daylight hours.

Even taking into account that the building was ahead of its time and did not have the benefit of today’s technologies, this prestige construction project will in time cost less than traditional buildings.

The construction of the building, its ventilation system and the many green areas encourage social activity, creating a healthy working environment for more than 2,600 employees and provides facilities for relaxation and well-being too. The Commerzbank building has provided pivotal inspiration for the growth and adoption of new technical and architectural breakthroughs in Germany.

SPECIAL EDITION November 2008

MM | Favourable framework is key Legislation is highly significant for the development of technological advances and international growth.

• Green housing taxes may help increase private investment in energy-saving. Especially if the introduction of green taxes is combined with reform of current legislation so that, for example, extra ground area is exempt from rateable value.

• Energy inefficient products may be taxed more heavily, while tax relief could be granted to energy efficient products. For example, electricity saving lamps produced in China are currently subject to an extra tax, which is not levied on “old-fashioned” light bulbs.

• Subsidies and extended incentive programmes promote investment in the development of green technologies and products.

These measures may help create a larger domestic market and accelerate the process by which products are matured for export.

• Green renovation of existing domestic housing stock may also accelerate if the correct incentives are introduced. Under current conditions, residents benefit from energy savings, but not private landlords.

ning to DKK billions in Southern Europe, and that the next step will be to capture the Asian markets.

Jonas Møller from the Danish Construction Association confirms that there is a huge foreign interest in Danish materials generally.

“Danish manufacturing is well-known for being energy-conscious. Once we are in contact with a foreign partner, within the industry, we are actually quite good at spreading the word about other Danish manufacturers. This provides interesting commercial perspectives for innovative companies, as suppliers of niche products to the principal Danish exporting companies,” states Jonas Møller.

One such company is Ulsted Vinduer, as yet still a small company which seems to have struck gold. Ulsted Vinduer has patented a new kind of window that retains 60–70% more heat than traditional double-glazed windows. Initial demand has been colossal and the small company has found it difficult to keep up. Success came as a surprise to the owners, who are now hoping to upscale in order to meet international requirements. “Interest has been massive. Besides Denmark, we are currently receiving many enquiries from the UK and Ireland in particular. In the future the target group for our products will chiefly be architects and major developers. We are about to sign a contract to deliver windows to 800 companies in Denmark this year. Our next step will be to participate in larger foreign construction projects that focus on energy-efficiency, wherever in the world these may be,” says Kenneth Klausen, who is the CEO at Ulsted Vinduer.

“We have sole rights to the patent on a unique product that is 100% natural. There is, as far as we can see, no limit to what we can turn over,” says Kenneth Klausen.

Global success demands a strong domestic market All the experts in the industry that Monday Morning contacted confirmed that the new market for sustainable building will provide a springboard for numerous Danish export miracles successes.

Yet competition will be tough. If we are to realise our potential,

24

MM | Pioneers of green architecture While mainstream international debate increasingly concentrates on saving energy and restricting emissions of harmful substances from industry, construction and human activity generally, there is one school of thought that contends that mainstream opinions are not ambitious enough.

One of the pioneer patrons is German chemist Michael Braungart, Professor of Process Engineering at Lüneburg University. In tandem with American architect William McDonough, Braungart has developed the “Cradle to Cradle” design paradigm, which is described as a manifesto for “real sustainability”.

“Of course, the current paradigm shift towards sustainability and passive houses is a step in the right direction. However, we believe that reducing quantities of resources wasted and limiting harmful emissions is not ambitious. We are currently able to design industrial processes so that they neither pollute nor use excess energy, but rather add energy and sustain their surroundings. I am convinced that when our philosophy becomes widespread, it will spark off the next industrial revolution.”

Mandagmorgen

sustainable sector. However, I believe there is potential for more formal kinds of cooperation through which we can become better at pooling resources,” says Bendt Almvig.

Carsten Bjerg, CEO at Grundfos, agrees and adds that export opportunities would be enhanced if financial conditions for the development of sustainable technologies, for example, in the construction industry, were improved: “Incentive schemes to promote research and development and stricter energy and sustainability requirements would undoubtedly give the industry renewed impetus.” It is extremely important for a country like Denmark that the home market is active and dynamic. International customers want to see evidence that it works. Just setting aside our obvious interest in lowering energy consumption and pollution levels, I’m convinced the costs of making Denmark the frontrunner, will be more than offset by export earnings,” Carsten Bjerg adds.

MM Glen Mikkelsen | gm@mm.dk

Braungart’s mission is to create: • Buildings that, like trees, produce more energy than they use and purify their own waste and release it in a purer form.

• Furniture, household appliances and consumer goods that can be recycled in situ or are biodegradable and can provide nutrients as food for animals, plants and the atmosphere.

“We have to build housing in this spirit. We already make seating, cladding, paint and a lot more. Once the design philosophy is established, it will be cheaper than conventional construction and factory production methods, when the lifecycle costs of production, demolition, energy consumption, and environmental and health effects are taken into account. There are far too many human beings on the planet for us to be able to just carry on living the “old” lifestyle. My ideas can be reduced to three words: Upcycling, not recycling. Why not use our intelligence and creativity to produce financial, social and ecological benefits from construction and industry, instead of merely minimising the damage and maintaining harmful emissions just inside permitted limits? It’s possible, it costs less, it’s better and we’re forced to do it,” states Michael Braungart.

Sources • www.masstech.org • www.greenbuilding.ca • Gregory H. Kats: Green Building Costs and Financial Benefits, Massachusetts Institute of Technology, 2004.

• Maj Munch Andersen: Danish Green Technology Foresight – Challenges from Nanotechnology, Biotech and ICT, 2006.

companies and politicians alike will have to think outside the box.

“Maybe it’s a provocation but I do think that Danish companies have to recognise that Denmark is really no more than a tiny dot on the globe,” says Bendt Almvig, a partner in Arkitema and responsible for Arkitema’s activities in China. “Many Danish companies have a good product and are ambitious to enter extremely competitive markets – China being one of them. All they have to do is get going. They have to create a network and they have to learn what conditions apply. Global success can be achieved, but only if you have a global mindset,” says Bendt Almvig.

He points out that several other Danish architectural companies are currently enjoying success in Asia. The good reputation of Danish design and architecture is a virtuous circle, reinforcing and opening doors for Danish production companies.

“We often cooperate very closely with other Danish partners, who supply elements and know-how. We endeavour to maintain contact with all the companies who express a will to work in the

SPECIAL EDITION November 2008

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Mandagmorgen

The transport sector of the future will be closely linked to the energy sector – Denmark is an ideal test case for the development of new infrastructure, as it has one of the world’s most advanced electricity systems – Massive earnings potential for Denmark in developing the electric and fuel cell driven cars of the future.

The transport sector’s green laboratory “denmark can be at the forefront of the development of the ecofriendly transport of the future. Tomorrow’s cars will still be built in Germany and other major car manufacturing countries. Yet we have certain competencies and companies in Denmark that make us very interesting as a test market.

Aksel Mortensgaard, a program coordinator at the Danish Energy Agency, hits the nail on the head in Monday Morning’s analysis of the opportunities open to Denmark in the transport market of the future. As chairman of the Danish Hydrogen and Fuel Cells Partnership, he sees huge potential in the global transport industry’s conversion to more eco-friendly fuels, and an opportunity for Denmark to play a key role in this process.

“We believe there will be a breakthrough for an electric-powered hybrid solution based on battery technology, and for onboard production of electricity using fuel cells. Both are a perfect match for Denmark’s energy infrastructure and Danish key competencies," says Mortensgaard.

Industry insiders and experts agree that in the future transport and transport infrastructure will be closely integrated with energy infrastructure. All over the world, climate change and a desire for reduced dependence on politically unstable oil states has led to efforts to use fuels and energy resources more efficiently. A new wave of development points towards using the transport sector as a ‘buffer’ for the energy sector. The idea is that the transport sector functions as both an energy producer and a storage facility. The transport sector can take the extra energy made available as a result of overcapacity in the energy sector (e.g. at night or when there is a lot of wind in a wind turbine area) and store it in, say, electric car batteries. Conversely, the transport sector can sell energy from batteries and fuel cells, etc., back to the energy sector for use in peak periods if so required.

Denmark has an advantage in this area due to its advanced and highly decentralised electricity system, where 20% of all electricity generated comes from wind turbines. The Danes are used to dealing with a very complex system, with many actors and highly variable levels of production from wind turbines, which generate electricity “as the wind blows”.

SPECIAL EDITION November 2008

“We have the case,” as Kim Behnke, Director of Research and Environment at Energinet.dk, says: “An infrastructure needs to be built to service the transport sector of the future, and this is where Denmark can function as a test facility.”

Working across the electricity, energy and transport sectors, the Danish business environment is currently finding its feet in relation to how best to deal with a new transport future, as exemplified by the Danish Hydrogen and Fuel Cells Partnership. The Danish Foreign Ministry sees an opportunity to develop a range of lucrative business models. Since last year the ministry’s ‘Invest in Denmark’ unit has been marketing Denmark to international manufacturers as a test nation for eco-friendly forms of transport.

“We have a good chance of attracting investments from electric and hydrogen car manufacturers, as well as others with an interest in developing forms of transport based on sustainable energy. This helps us in relation to increasing Denmark’s use of sustainable energy, and in the longer term also provides an opportunity for Danish companies to establish themselves as subcontractors to the car industry of the future,” says Invest in Denmark Project Manager, Peter Bo Sørensen.

Invest in Denmark played a part in brokering the newly announced partnership between the Danish energy company DONG and the American-Israeli entrepreneur Shai Agassi. They will be working to develop a new infrastructure for electric cars. They will be working with car manufacturers such as Renault and Nissan to develop a new infrastructure for electric cars. The aim is to get 500,000 electrically powered cars onto Danish roads by the year 2020. Previous analyses by Monday Morning suggest that such a partnership offers an enormous opportunity for Danish industry. Industry association Danish Energy estimates that the development of a so-called plug in technology, which can connect electric cars to the national grid, represents an export potential of “many hundreds of millions of kroner.” An analysis carried out on behalf of Monday Morning by the University of Aalborg shows that by converting 20% of the total number of cars on its roads to run on electricity, Denmark could harvest an a national

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MM | Notorious climate crook The transport sector is one of the major problem areas when it comes to efforts by the international community to limit CO2 emissions. The sector is responsible for roughly a fifth of global human created CO2 emissions, and all prognoses suggest that this share is increasing. According to the Norwegian Center for International Climate and Environmental Research Oslo (CICERO), up to 30 to 50% of all CO2 emissions will come from the transport sector by 2050.

This is due to the rapid rise in global trading and increased transportation from growth areas such as China and India. The primary fuel used by land, sea and air transport is oil, which emits large amounts of CO2 when combusted. Road transport is the major offender, making up 75% of the transport sector's total CO2 emissions.

Paradoxically, emissions from the transport sector have yet to be included in global CO2 reduction agreements, such as the Kyoto Protocol. This is likely to change at the UN climate summit to be held in Copenhagen in 2009. A new treaty is expected to rapidly pick up the pace of development of the huge global market for solutions that can reduce CO2 emissions within the transport sector. The biggest potential lies in developing new motive power technologies, infrastructures and intelligent traffic systems for road transport.

OECD reports show that the transport sector is a major contributor to global CO2 emissions: • In 2005, 44% of all freight and 84% of all passenger transport took place by road.

• The transport sector’s share of global CO2 emissions is greatest in the most developed OECD countries where, in 2005, 30% of all global CO2 emissions were generated by the transport sector.

• CO2 emissions from the transport sector grew in Europe by 27% between 1990 and 2005.

• A third of emissions from the transport sector comes from commercial transport, while two thirds come from private transport.

• Benefits to the climate from more effective cars have thus far been wiped out by the rapid global growth of the number of vehicles.

• China is today the world's second largest car market behind the USA, and car sales in China are expected to increase by 65% in 2008. Last year, over 8.5 million cars were sold in China, of which 5.5 million were registered for private use. The total number of cars sold 10 years ago was 1.6 million.

• In Europe, the number of cars per 1,000 inhabitants increased by 25% from 1995 to 2005, where the number reached 460.

MM | Dirty traffic CO2 -emissions of transportation spread out on sectors

OECD (Total share of CO2 -emissions spread out on sectors: 30 per ce 76 7

6

1

8 3

The world (Total share of CO2 -emissions spread out on sectors: 30 per ce 73 5

Road Aviation, domestic Aviation, international

7 2

9

5

Shipping, domestic Shipping, international Other transportation

Sources: European Environment Agency, Center for International Climate and Environmental Research, OECD

economic gain of as much as DKK 2 billion per annum. See Monday Morning, issues 12 and 13, 2008.

Multiple focus areas It will however take a very long time before the entire transport section is electrically powered. Current battery technology means that the price and range of electric cars for many years will limit their use to cities, or for journeys within geographical areas where – as in Denmark – it is possible to establish a complex infrastructure onto an already existing energy system.

Therefore, it will be necessary in the short term to bring other focus areas into play to deal with the transport sector’s growing CO2 problem. Analysis by Monday Morning shows that Denmark is capable of contributing in many of these areas.

• BIOFUEL AND HYBRID TECHNOLOGY. In the short term the car industry is venturing to make the internal combustion engine more efficient and to use alternative fuels and hybrid technology. This brings into play technologies such as 2nd generation biofuel, electric motors and fuel cells. Intense debate in Europe regarding the sustainability of biofuel has led EU countries to focus more and more on developing so called 2nd generation technologies that can produce bioethanol from waste products. Denmark has a good opportu-

nity to make an impact in this area. Companies such as Novozymes and Danisco are global leaders in the field of producing enzymes that can optimize the production of bioethanol, and a national commitment to 2nd generation biofuels to the tune of many hundreds of millions of kroner over the next few years would also help encourage development.

At the same time, Danish companies such as Haldor Topsøe, IRD Fuel Cell Technology and Risø DTU are in the forefront internationally when it comes to developing the fuel cells, which in the future may replace the internal combustion engine. However, hybrid solutions combining internal combustion engines and electric motors will continue to make up the majority of the market for many years to come, with hybrid fuel cell and electric motor combinations gaining ground in the longer term. Battery technology and transport and energy sector integration is important for both hybrid concepts. As such, Denmark’s experience in making sustainable energy a central part of its electricity system could be a major advantage in developing the technical solutions needed if vehicles are to run on “clean” electricity.

• INTELLIGENT TRAFFIC SYSTEMS. Congestion and poor planning in and around urban environments only serve to increase the transport sector’s CO2 problems. Therefore, intelligent traf-

SPECIAL EDITION November 2008

Mandagmorgen

fic systems that can help improve traffic flow and prevent unnecessary idling, braking and acceleration are an effective method for reducing CO2 emissions in the short term. The same applies to better city planning and incentives such as congestion charges, which can limit car traffic while increasing the use of public transport, cycle routes and pathways.

Many countries around the world are in the process of introducing these measures into their urban environments.

“Intelligent traffic systems can reduce CO2 emissions from transport in urban areas by 10 to 15%,” estimates Professor Oli Madsen from the internationally renowned Institute for Transport at the Technical University of Denmark. He believes that within certain niche areas, such as system software and road pricing, Denmark has the opportunity to bring its competencies into play in relation to the growing market for new, intelligent traffic systems.

• SMART LOGISTICS AND SHIPPING SOLUTIONS. A particularly challenging aspect of the transport sector's CO2 problem is ever increasing globalisation. People and goods are being transported between the world’s continents in ever increasing numbers, turning the air and sea transport sectors into growing CO2 offenders. According to the OECD, air transport is today responsible for almost 2% of the world’s total CO2 emissions, while sea transport is responsible for 2.3%.

As one of the world’s leading maritime nations, Denmark has a particular responsibility for the increased emissions generated by shipping. The A. P. Møller-Maersk group’s approx. 1000 ships and oil and gas operations produce a total of almost 50 million tons of CO2 annually. This equates to Denmark’s entire domestic CO2 emissions total. Sea transport remains the most eco-friendly method of freight transport, yet growing globalisation makes the sector a growing contributor to the climate problem. This is why the international community is focusing on developing smart CO2-saving logistics and shipping solutions. A. P. Møller is heavily involved in these developments, and together with IT companies such as IBM, the group has identified a number of solutions that help optimise the logistic process, including optimizing container loading and ship design and developing money-saving routes and manifests that reduce CO2 emissions. Recently, the company launched a so-called Carbon Foot Print Calculator, which helps optimise the entire freight chain from the customer’s factory door all the way to the customer’s customers. It is expected that demand for these types of solutions will grow as international business increasingly becomes more aware of its carbon footprint.

And this also presents Denmark with a great opportunity, not least due to its highly developed shipping industry and expertise within logistics systems.

World leaders in system integration The greatest opportunity for Denmark lies in the wholly necessary restructuring of road transport. Road and rail transport currently account for 75% of the transport sector’s CO2 emissions total.

SPECIAL EDITION November 2008

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The internal combustion engine will continue to dominate for many years to come, yet global car manufacturing giants such as Toyota and General Motors are investing billions in developing hybrid vehicles and alternative motor technologies. At the same time, more and more companies – such as Think from Norway – are developing and launching 100% battery- or fuel cell driven vehicles.

So there is no doubt that the internal combustion engine will gradually be phased out, eventually being replaced by other technologies. The more integration between the transport and energy sectors, the more CO2 will be reduced as a result of more effective use of fuel and energy technologies. Danish competencies within transport and electric power systems integration could be very valuable in this context.

“We are out in front internationally when it comes to our systems integration knowledge. This can be used in the transport sector. And the market will be wide open for us if we’re among the first,” says Professor Jacob Østergaard, head of DTU’s Center for Electric Technology. He believes that Danish competencies within software management, physical grid connection and energy system integration are especially interesting when it comes to developing the transport sector of the future.

And according to Østergaard, it is not only Shai Agassi who has shown an interest in making use of these competencies. “DTU is currently working with Siemens in Germany to develop plug-in technologies for electric cars as well as transport and electricity integration technologies,” explains Jacob Østergaard.

Within the last few years, the Danes’ ability to develop technologies and solutions across sectors and businesses has become increasingly formalised in partnerships across knowledge institutions and the public and private sector. Many of them have begun to focus on renewing the transport sector.

This applies to, for example, the EcoGrid research partnership, which is attempting to increase the use of wind energy within the Danish electric power system. The collaboration brings research and commercial interests within the energy sector together with Energinet.dk, the state-owned operator of the Danish electricity and gas infrastructure. One of the particular focus areas is closer integration between the energy and transport sector.

“It’s about using our energy more intelligently. Electricity and fuel cell technology in the transport sector matches Denmark’s high degree of wind energy utilisation perfectly. So we have a good basis for experimenting with linking together these sectors more effectively,” says Kim Behnke of Energinet.dk.

The Danish Hydrogen and Fuel Cells Partnership, which brings together producers, knowledge institutions and the authorities associated with fuel cells, published a strategy earlier this year setting out how Denmark could exploit opportunities within the transport sector of the future. Here it emerges that fuel cells, among other technologies, have the potential to achieve considerable market penetration within the transport sector by 2050.

The strategy also shows that in the short term, Denmark has a range of opportunities in markets for technology such as hybrid systems and internal company transport systems. See figure 1.

“The market for trucks alone is enormous. It’s here that the new

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Mandagmorgen

MM | On the road to oil free transportation Danish short- and long-term market options Expected period of commercialization Short-term 2015 Early markets for fuel cell hybrid systems Internal transportation Service and labour vehicles Secondary power supply (APU) Long-term 2025 Fuel cell hybrid systems and hydrogen infrastructure Smaller vehicles, road Public transportation Hydrogen infrastructure

2010

2012

2015

2025

Figur 1: Especially solutions including fuel cells, batteries, and electric motors count as Denmark’s strengths.

Source: Danish Energy Industries Federation.

technology will be adopted most quickly. And we already have Danish projects underway in this area,” says Aksel Mortensgaard of the Danish Energy Agency.

For example, six hydrogen filling stations have recently been opened in West Jutland. They are a part of Denmark's hitherto biggest fuel cell technology project. The project, known as Hydrogen Link West Jutland, is aiming, among other things, to introduce fuel cell driven trucks and hybrid vehicles in a range of different companies throughout the region.

Growth rates in the wind turbine class Neither the partnership nor Invest in Denmark are able to say precisely what the overall potential for Denmark is when it comes to providing solutions for the transport market of the future.

However, everyone agrees that it’s “very big” and that it will in the first instance be realised in areas such as internal transport, hybrid vehicles and the DONG/Shai Agassi electric car project.

A number of Danish companies have already had their first breakthrough in the new markets for electric and fuel cell driven vehicles, including new start-up Lithium Balance, which develops system software that optimises lithium-ion batteries. The company is in close dialogue with both battery and vehicle manufacturers, and has recently won its first large-scale orders. They are for the German electric scooter manufacturer E-max and the American distributor of electric vehicles ZAP (Zero Air Pollution).

“This should help take our turnover into the tens of millions next year,” says Lars Barkler, Lithium Balance’s new director, who was headhunted last year from a position as VP in the electronics company Brüel & Kjær. His main task is to increase growth, and he expects to be busy over the next few years: “We want to achieve a turnover in the hundreds of millions

during the next three years,” says Lars Barkler about the company, which had a turnover of just DKK 500,000 last year.

H2 Logic, a company developing hydrogen and fuel cell technology for the transport industry, has also just started out in the market for future solutions. Among other partnerships, H2 Logic is working in close cooperation with the Norwegian company Think to develop fuel cells for Think’s hydrogen powered vehicles. This initially means delivering systems for seven vehicles, which will function as demonstration models throughout Scandinavia.

The order is among the first of its kind in the world within the established car industry. Combined with the growing demand for fuel cell driven trucks, this type of deal has the people at H2 Logic dreaming about growth rates equal to those in the wind turbine sector.

“I believe that we will see a growing demand for clean energy in the transport sector. And that it is not unrealistic to state that fuel cells will achieve a rate of growth similar to that which we have seen in the wind turbine industry,” says Svend Sigaard, chairman of the H2 Logic executive committee. As Svend Sigaard is a former director at Vestas, his assessment has not been plucked out of thin air.

MM

Bjarke Wiegand | bw@mm.dk References:

Referencer • The European Environment Agency: Climate for transport change, 2008.

• Center for International Climate and Environmental Research Oslo (CICERO): Climate forcing from the transport sectors, 2007.

• OECD: Cutting Transport CO2 Emissions, 2007.

SPECIAL EDITION November 2008

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Bio-Feeders’ product catalogue: Biomass handling systems - from stone traps and string removers to transport systems and shredders - drying and pre-treatment for biomass and waste.

Advanced screw feeders with a capacity up to 100,000 kg/h. against a pressure of 10 bar (145 psi) and large piston feeders feeding against a pressure of 50 bar (725 psi). ‌ from idea to solution.

www.bio-feeders.com Biomass is a large unused source of renewable energy.

Biomass can be converted into liquid bio-fuels.

Biomass can be used in existing power plants, where substitution of fossil fuels is the most cost-effective CO2 reduction.

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Mandagmorgen

Intelligent use of IT is an important weapon in the fight to reduce CO2 emissions – Denmark is spearheading energy-saving combined technologies – Politicians give the go-ahead for green IT exports.

Tackling climate change digitally denmark is poised to become the new green IT trendsetter.

Denmark possesses a unique combination of strengths and competencies in software development and public digital services – Denmark is a world leader within environment and energy technologies and has a unique tradition for partnership across different branches of industry – All ingredients in an innovative cocktail that can bring Danish IT companies to the forefront in the race to combat man-made climate changes.

A thesis supported by Monday Morning’s research into green IT competencies and opportunities in Denmark. Denmark might not be a country that develops hardware and new IT products.

The country does, however, have the ability to combine technologies and find solutions that cross the traditional boundaries between branches and there is a massive potential in being able to identify new perspectives to solve interdisciplinary problems.

“Denmark is a very small country. We are close-knit and different branches work together. We often collaborate with the electricity sector, for example. This means that we are in a position to come up with integrated, innovative solutions,” states Tom Togsverd. He is director of ITEK, the Danish ICT and electronics federation, part of the Danish Confederation of Industry.

Denmark’s Ministry for Science, Technology and Innovation recently published a plan of action for green IT in Denmark. An international workshop, organised by the Ministry in cooperation with OECD, was held recently, and three Danish industry federations are about to launch campaigns and conferences to discuss the importance of thinking green in any IT development and application context.

“We are aiming to set the agenda,” says Jakob Lyngsø, who is director at IT-Branch. He firmly believes that there is money to be made: “Several companies are already making good money from green IT solutions. I’m certain there will be a lot more of them once they are aware of the market’s potential.”

Jakob Lyngsø is not willing to give an exact figure, but quite simply describes the potential as “enormous”. In his view, the UN Climate Change Conference in Copenhagen in 2009 is the perfect arena for demonstrating what Danish companies can do.

MM | What is green IT? There is no single definition of green IT. In ‘Green IT: The New Industry Shock Wave’, the Gartner Group describes it as a discipline in the making. In essence, green IT is all about optimal use of information and communication technologies (ICT), for controlling an organisation’s environmental sustainability, both in relation to business processes and supply chain, and in relation to the company’s products, services and resources during their lifecycles.

“When the delegates get here, they will find that the hotels they are staying in, the taxis they travel in and the restaurants where they dine are all brimming with the kinds of integrated solutions at which Denmark excels,” he predicts.

According to the industry experts that Monday Morning has interviewed, conditions are favourable for Denmark to exploit the advantages of climate leadership where IT is concerned.

Environment and energy technologies are already one of the most promising fields in Danish exports. Turnover is currently DKK 50 billion a year with annual growth at approximately 8%.

Potentially, green IT and the intelligent utilisation of energysaving technologies will accelerate the rate of export growth in this sector. “Denmark has an impressive track record in energy saving.

There is no doubt in my mind that there is a massive export market out there,” says ITEK’s Tom Togsverd. The Energy Branch sector at the Danish Confederation of Industry has estimated that exports of energy technology will be around DKK 200 billion a year by 2020, if growth continues as it has done until now.

Furthermore, green IT solutions are open to everyone. They are in no way restricted to traditional IT companies. “The boundaries are blurring,” says Keld Jersild Olsen, who is CEO at HP and who manages the IT-Branch green IT campaign. “There’s a huge number of companies out there where IT is so important to them that I’d call them IT companies too: for example, all the major banks are developing IT solutions of their own and service their markets digitally,” he says.

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MM | The green dilemma of information technology Information technology is hero and villain in the global struggle to beat climate change.

The development and application of IT produces 1 billion tons of CO2 emissions annually. This corresponds to 2% of total global CO2 emissions, and is more or less the same as the airline industry emissions.

These figures are increasing sharply. IT is spreading like wildfire from sector to sector and into almost all products. Industry is automated, trade routines are digitalised and our homes are brimming with computers, mobile phones, TVs and gaming consoles. More and more equipment is linked up to broadband internet connections and left permanently switched on – flashing and beeping and using energy to remind us that there are new updates.

On the other hand, IT is also a significant weapon in the battle to reduce CO2 emissions. In sectors increasing their use of IT applications, the aim is to further optimise work processes. Furthermore, the IT developers are increasingly aware of the need to improve energy consumption – and this includes consumer electronics. During the past decade, the energy efficiency of mobile phones has improved drastically, and the stand-by energy consumption of TV sets has been reduced by more than 90%.

IT generally plays a pivotal role in what we know about man-made climate change and the methods available to limit them. Much of the information about global warming in the current debate is based on digital models of the effects of harmful emissions and climate change. Without IT applications, we would probably not be in a position to appreciate the scale of climatic problems nor identify how best to tackle them.

As an independent business area, green IT is, for the time being, virgin territory. Global giants Intel, IBM, HP, Microsoft and Google can

see big profits and are competing to establish themselves as frontrunners. At the world’s largest IT exhibition CeBIT in Hanover in Germany this spring, there was a special exhibitor section and conferences reserved for green IT solutions. The leading consultancy and analysis institutes, such as Forrester Research, Gartner and McKinsey, have all produced analyses related to sustainable digitalisation.

However, integrated solutions applying technology to reduce other sectors’ carbon footprint and which are themselves optimised throughout production, distribution, application and disposal, remain few and far between. Demand for such solutions will be massive in the coming years.

MM | Digital scoundrels Contribution to CO 2 -emissions, per cent.

Printers LAN and office lines

6 7 39

Cell phones

PC’s

9

Per cent

Landlines

15

23

Servers

Sources: Gartner Group, Intellect, Nokia, Statistics Denmark.

Denmark leads the field One of the largest markets for green IT involves optimising production and energy consumption relative to one another, so that excess energy production is avoided, and the share of energy from sustainable sources is increased.

“In our view, this is climate technology on a par with wind turbines and solar panels – a sector in which Denmark is already doing very well,” says Tim Mondorf. He is responsible for environmental and energy at computer giant IBM, which is currently making huge investments in these sectors.

One Danish speciality is highly efficient power plants. Another is incorporating sustainable energy into the established electricity grid. The market potential for both is huge.

“The energy sector utilises a massive assortment of IT hardware,” says Lars Aagaard, a director at the Danish Energy Agency. He points out that IT is an indispensable tool for combining data about ideal production conditions with information about consumer consumption. “Nothing really makes sense until you include all the software. Software is what binds it all together and makes your data into something you can put to practical use,” he says.

Today, sustainable energy accounts for 20% of the energy produced in Denmark, but only 8% of the country’s energy consump-

SPECIAL EDITION November 2008

tion, simply because demand doesn’t increase when the wind blows. Using digital technology and weather reports, we can make precise prognoses calculating when we will be able to produce energy most efficiently. One example is Danish Cotas Computer Technology, now owned by Vestas.

The fact that Danish companies head the field in a limited number of technologies means that Danes tend to think outside the box and can combine existing technologies in new ways.

“We must concentrate efforts on integrating IT and technology by thinking of both aspects in a variety of operational scenarios,” says Peter Dreyer, who is partner in consultancy company Seismonaut, which works with innovation and strategic concept development, with IT at the core.

“Today the whole world is talking user-driven innovation. It’s no accident that this is a Danish discovery, far from it in fact. We have a long tradition in this country for thinking in terms of utility scenarios and we are aware that we must not just do things for the sake of technology. Rather, we innovate to benefit the end user.”

Dreyer believes that Danish companies should aim to produce green alternatives that require minimal changes in behaviour. In the electricity sector, for example, Information Technology is the means of communication between supplier and consumer, and

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IT systems monitor electricity consumption and prices relative to peak demand, and control the flow of excess energy from households back to the electricity grid – so called flexible energy.

Monday Morning’s contacts confirm that potential in this field extends far beyond Denmark.

Danfoss has been working in heating control, Lauritz Knudsen with light control, and NRGi has recently developed the Electronic Housekeeper concept, an intelligent system to monitor electricity in the home that works via a simple remote control unit that can shut down all electrical installations with a single click. “If we can roll this concept out to the world, we have a unique opportunity to amass very useful know-how. “And the export potential is enormous,” adds Peter Dreyer.

Optimising transport and working practices Globalisation involves companies joining forces in networks and supply chains across the globe. Many companies have supply chains that stretch from Shanghai via New York to Europe. If we optimise the logistics, huge benefits for our climate and massive economic savings can be achieved.

Maersk Logistics has developed a method that simultaneously reduces costs and CO2 emissions. Using computer simulation, the Supply Chain Carbon Check system calculates how much CO2 can be saved by, for example, improving space management inside their containers or by choosing sea freight instead of air freight. “Increasing numbers of our customers in Europe, the USA and Asia are showing an interest in reducing CO2 emissions by simplifying their supply chains,” confirms Erling J. Nielsen, who leads global Supply Chain Development at Maersk Logistics.

When companies reduce the cost of transport and travel, the climate benefits too. “Meetings and business travel activities are probably the biggest CO2 offenders in our budget,” says Dan Bælum, director at Microsoft and responsible for green IT at the company. He firmly believes in using Unified Communications, which includes simple-to-use videoconference equipment, as an alternative to meetings in person. “It makes little sense for all of us to travel three hours by air to sit and watch the same threehour presentation together and then all of us travel three hours again to get back home, when we can watch the presentation at the office,” he says.

In addition to Microsoft and IBM, Norwegian company Tandberg is also a major advocate of the technology in Scandinavia.

In its plan of action for green IT, the Danish Ministry for Science, Technology and Innovation recommends that more resources be allocated to videoconferences, virtual meetings and teleworking in both the public and private sector.

Denmark is already among the leaders. Public institutions and private companies in Denmark are, in fact, world leaders in the application of digital communication. What is more, the systems that have been developed for public and private sectors are exportable. A good example is SKAT, Denmark’s tax administration authority. More or less all communication with taxpayers is now digital. The same applies to Danish banks’ net banking systems.

Mandagmorgen

“Denmark has a wealth of expertise and know-how in this field that we can export to other countries,” says Keld Jersild Olsen from HP. Political will is crucial Several of Monday Morning’s sources emphasise that strict environmental standards are the driving force behind digital innovation in Denmark. Widespread environmental awareness means that both customers and consumers expect more. If you set higher goals for yourself than your peers, you have to expect to be in for a rough ride. In the long term, however, this approach will provide Denmark with the muscle needed to compete globally.

Industry federations have welcomed the Science Ministry’s plan of action. The plan includes compiling a scientific catalogue of best practice designed to help companies; an information campaign targeted at consumers; green IT research funding, and an export offensive focused, in particular, on the new growth centres in Asia.

These are all prerequisite for green technologies developing into a yet another Danish export success. Nevertheless, according to agencies in the field, these activities are far from exhaustive. As many of the major software manufacturers are foreign, what Denmark has to do, first and foremost, is to make the country an attractive place for global players to locate development activities. Innovation happens when heavyweight companies meet unique Danish competencies.

While negotiating a new EU Directive for the EU’s internal energy market, planned for completion next year, the EU Parliament has, for example, proposed that all electricity consumers in Europe must switch to flexible energy. If this resolution is passed, it will open a huge market. However, the Danish Minister for Climate and Energy has deferred a decision about what will happen in Denmark until the autumn. The minister’s hesitation has provoked frustration in the industry: “We need to establish as fast as possible, the optimal framework and best development activities here in Denmark. If Denmark is too slow off the mark, key research and development will take place elsewhere,” says Lars Aagaard of the Danish Energy Agency.

The first priority must be, therefore, to get things off the ground as soon as possible. Several sources have voiced the opinion that there is an awful lot of talk about green IT. Now it is time to get on with the job, and exploit the advantages of being first mover at the UN Climate Change Conference. Danish companies are not alone in having set their sights on the new market.

MM Carolina Kamil | ck@mm.dk Bjarke Wiegand | bw@mm.dk

Sources • The Gartner Group: Green IT: The New Industry Shock Wave.

• Intellect: High Tech: Low Carbon. The role of technology in tackling climate change, February 2008.

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Mandagmorgen

The climate crisis is on its way to creating a leap in global innovation – We do not just want to see better and more effective technologies, but completely new product systems, business models, regulations and as yet unknown markets – Denmark has a key role – The UN Climate Summit to be held in Copenhagen in 2009 may kick start the next industrial revolution – Danish businesses can lead the revolt.

The call for new business models Advertisements in Business Week, Time and Fortune couldn’t be clearer. Global business – including a number of prominent Danish frontrunners – has really begun to focus attention on the climate market in the last three to four years. New hybrid vehicles, green IT systems and eco-friendly refrigeration systems are being developed as never before.

From the EU Energy Commissioner Andris Piebalgs through the former British Prime Minister Tony Blair to McKinsey and the Copenhagen Climate Council, more and more actors are applying the term “industrial revolution” to describe the changes required.

However, new products alone cannot possibly solve the climate crisis. Regardless of how impressive they may be, improvements to existing technologies and forms of business will not be enough if the global community is to stabilise global warming to the extent recommended by the UN Climate Panel.

The climate threat demands a quantum leap in innovation.

Global decision makers must fundamentally redefine basic market structures and develop entirely new product systems, business models, regulatory practices and forms of cooperation between business and consumers if targets are to be reached. In return, lucrative new markets await the first movers.

The first examples of new climate driven business models are already beginning to impact various markets: • Rather than owning consumer goods, such as washing machines, cars, refrigerators, etc., consumers can now lease them on long-term contracts, where the supplier takes responsibility for servicing and ensuring optimal operation so that they are as efficient and as eco-friendly as possible.

• Rather than investing in shares or bonds it is now possible to invest in rainforests, based on an expectation that the inherent natural value and CO2 uptake of rainforests will soon be commercially priced.

• Rather than trying to save energy yourself, you can now hire

SPECIAL EDITION November 2008

a new type of consultant to help optimise energy efficiency at your company– and pay for the process by giving the consultant a share of the money you save.

These new business models have sprung from the new regulations that have been created to counter global climate threat. In recent years, the UN Climate Panel has created a consensus regarding the scope of global climate threat – and the sheer scale of effort needed to combat it. Global CO2 emissions must be curbed by 2020. This means the world’s richest nations must reduce their CO2 emissions by at least 25% in the next twelve years. Global CO2 emissions have to be reduced by at least 80% by 2050.

Business analysts and investment consultants across the globe expect a globally agreed CO2 emission quota system will be in place by 2012, which will create a market for trading in CO2 quotas. The first step was already taken with the creation of the EU quota system in 2005, which has been the inspiration for similar regional systems in the USA and Japan. It is an open question whether the foundation for a global system will be set out at Copenhagen. But it will certainly be discussed.

Goodbye to ‘product’ One of the most widely used new business models examples is the Product Service Systems (PSS), which has gained new popularity as a result of climate changes. PSS thinking is based on a new way of defining what a ‘product’ is. Instead of selling a physical product, for example a washing machine, a company sells a service that meets the customer’s needs, for example by leasing a washing machine to the customer, or leasing access to the machine and associated services. See figure 1.

This means that the customer not only avoids making a major investment, but also gets maintenance, repairs, etc. included in his purchase. Service providers achieve a much closer, long-term relationship with their customers, making it much easier for them to optimise their services on an ongoing basis. This gives them the incentive to be as efficient and as sustainable as possible. Providers are responsible for the product’s complete life-

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Mandagmorgen

MM | Kickstarting the next industrial revolution The Copenhagen Climate Council and its partners work with a host of leading business leaders and scientists, and have formed close partnerships with leading international organisations. The Council’s list of corporate partners also includes a range of large Danish companies.

This then is the powerful team that will kick start the new revolution.

International.

• Anders Eldrup, Denmark, CEO & President, DONG Energy.

• Lise Kingo, Denmark, CEO, Novo Nordisk.

• Rob Morrison, Asia, Chairman, CLSA Asia-Pacific Markets.

COPENHAGEN CLIMATE COUNCIL CHAIR

• Paul S. Otellini, USA, CEO & President, Intel.

• Tim Flannery, Australia, Writer & Scientist.

• Rob Purves, Australia, Chairman of Environment Business Australia & Board Member of WWF International.

• Erik Rasmussen, Denmark, Editor-in-Chief and CEO, Monday Morning.

COUNCIL MEMBERS, SCIENCE AND POLITICS • Professor Steven Chu, USA, Director, the Lawrence Berkeley National Laboratory and Nobel Prize winner • Lord Michael Jay, UK, Board Member, Globe International Advisory Board.

• Georg Kell, USA, Executive Director, UN Global Compact.

• Sir David King, UK, Scientist & Director, Smith School of Enterprise and the Environment, University of Oxford.

• Dr. Thomas Lovejoy, USA, Scientist & President, H. John Heinz III Center for Science, Economics and the Environment.

• Professor James Lovelock, UK, Scientist, Inventor & Writer.

• Sir Crispin Tickell, UK, Director, Policy Foresight Programme, James Martin Institute for Science and Civilization, University of Oxford.

• James E. Rogers, USA, Chairman of the Board, President & CEO, Duke Energy.

• Björn Stigson, Sweden, President for World Business Council for Sustainable Development.

• Moses Tsang, Hong Kong, Chairman & Managing Partner, Ajia Partners.

• Jens Ulltveit-Moe, Norway, CEO, Umoe.

• Li Xiaolin, China, Vice-Chairman & CEO, China Power International Development.

• Shi Zhengrong, China, Chairman & CEO, Suntech Power.

PARTNERS, COPENHAGEN CLIMATE COUNCIL • CITRIS – Center for Information Technology Research in the Interest of Society, University of California.

• The UN Global Compact.

COUNCIL MEMBERS, BUSINESS

• Pew Center on Global Climate Change.

• Shai Agassi, Israel, USA, Founder & CEO, Project Better Place.

• WBCSD – World Business Council for Sustainable Development.

• Paul Aquino, Philippines, CEO & President, PNOC Energy Development Corporation.

• GLOBE International – Global Legislators Organisation for a Balanced Environment.

• Carsten Bjerg, Denmark, CEO, Grundfos.

CORPORATE PARTNERS

• Sir Richard Branson, UK, Founder & CEO, Virgin Group.

• Novo Nordisk.

• James Cameron, UK, Vice Chairman, Climate Change Capital.

• Novozymes.

• Subhash Chandra, India, Chairman, Zee Entertainment Enterprises.

• Scandinavian Airlines.

• Jørgen Mads Clausen, Denmark, CEO, Danfoss.

• TrygVesta.

• Samuel A. DiPiazza, Jr., USA, CEO, PricewaterhouseCoopers

• Vestas Wind Systems.

cycle – from development, production, use and disposal. PSS can thus create a win-win-win situation for consumers, service providers and the environment.

According to Tim McAloone, Associate Professor at the Technical University of Denmark, the PSS ‘repairs’ an economic fault in the old traditional business model: “At the moment everything is based on the traditional producer/customer relationship, where the focus is on producing and selling as many products as possible. Instead, if we sold the service associated with a product, we could make colossal savings in terms of materials, energy and in environmentally impacting effects.”

He points out that PSS does not itself guarantee eco-friendly products. But he foresees that the environmental aspects of PSS will unfold in line with the increasing global focus on CO2 emissions and an increasing focus on customers and their needs.

The fifth fuel The PSS model can be applied to a number of areas. The news that that Project Better Place and DONG Energy are working to-

gether on an electric car is an example of PSS in the public transport sector.

American Duke Energy Corporation, a giant in the energy supply market, is involved in a similar revolution. Instead of just selling on power, the company now provides consumers with energy efficient solutions – ensuring benefits for the company, the customer and the climate.

Duke Energy’s initiative is based upon the realisation that the current energy market is built upon a fundamental flaw. You pay per unit. Energy providers therefore try to sell as many kilowatthours as possible, with the development of technology and the climate as the biggest losers.

With that in mind, Duke Energy applied to the North Carolina Energy Administration for a tax structure that balanced energy savings with energy production. Energy providers are compensated for the kilowatt-hours that energy efficiency saves the customer. Energy efficiency has been called the ‘fifth fuel’, in line with nuclear power, coal, natural gas and sustainable energy.

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When the application was granted in 2007, Duke was able to launch its ‘Save-a-watt’ initiative, directed at private and commercial customers alike. ‘Smart contracts’ give customers financial incentives to lower energy use during periods of peak usage. Efficiency savings make it possible for the customer to invest in energy efficient products without paying for them up front, but by making payments over their electricity bill. For every megawatt that the energy efficiency programme keeps Duke Energy from producing, it is able to scrap a megawatt from an older, less efficient coal power plant. When the energy company optimises consumers’ electricity consumption, it becomes possible to charge the customer an ‘energy efficiency fee’. The fee rate per saved kilowatt-hour is calculated by an independent organisation every year. With energy prices likely to continue to rise in the coming years, Duke expects that the energy efficiency kilowatt for the customer will be 10% less expensive than a kilowatt from a regular energy company.

The result of this and other initiatives is that energy customers lower their energy usage and investment in energy efficiency increases. Duke Energy’s CEO, Jim Rogers, describes the change in mentality: “Our engineers will wake up every morning thinking about how they can squeeze even higher productivity out of the technology instead of focusing on building more power plants.”

Consumers also get an improved and less expensive service in terms of energy and electricity, Duke Energy creates a profitable new service market and CO2 emissions are lowered.

“A bizarre industry” The expectation of a global CO2 market that sets prices on natural goods for the first time has already created new financial and investment opportunities. Investment banks and financial institutions such as Goldman Sachs, JPMorgan Chase and AES have already entered the carbon finance market.

“Investments in the new CO2 market are growing quite noticeably at the moment and there is still room for solid growth,” says Kate Hampton, Political Manager of Climate Change Capital, the world’s leading CO2 investment group. The group works exclusively on value-based climate investments and has launched the concept ‘wealth worth having’ – a form of ‘wealth 2.0’ that reflects economic and environmental benefits. It may sound idealistic, but Climate Change Capital has been quite successful in a highly competitive market. In the last two years, the number of employees has to 130 and the group administers a portfolio worth USD1.5 billion.

“If the world community is to meet the ambitious goal, the financial market must be an active participant. Or it simply won’t happen. It is completely acceptable to make a profit on the environment, as long as the investment promotes the environment,” says Kate Hampton.

There are plenty of examples of new investment areas: The British financing bank, Canopy Capital, offers investments in the Iwokrama rainforest in Guyana. Merrill Lynch, one of the leading Wall Street institutions, invested USD 9 billion in 750,000 hectares of rainforest in Aceh province in Indonesia. The expectation is that in the future you will be able to sell CO2 credits based on the

SPECIAL EDITION November 2008

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rainforests positive contribution to the global climate balance.

Tropical rainforests absorb approximately 40% of the world’s CO2, while the UN Climate Panel estimates that the deforestation accounts for 18% of global CO2 emissions.

The acquisition of rainforests and other natural resources introduces a host of ethical dilemmas regarding the land rights of indigenous peoples, etc. These ideas are viewed by international environmental organisations with scepticism. But they do agree on one thing: The conservation of the world’s rainforests is essential for the climate and a range of other environmental goals, including biodiversity.

According to figures published by Point Carbon, USD 60 billion of emission concessions were sold under EU and Japanese quota systems during 2007. If the US were to join, the expected annual turnover of the CO2 market by the year 2020 would be USD 1 billion, which Fortune Magazine has called “The 21st Century’s most bizarre, complex and controversial new industry.”

Bizarre or not, putting a price on natural resource damage, as environmental economists call it, means that money is literally being invested in rubbish – from the prevention of waste and methane build-up from disposal sites to fertiliser technologies and enzymes that reduce emissions from cow flatulence.

Sell CO2 to your neighbour Innovative legislative initiatives are also on the way. Consumers around the world can look forward to even more radical national and international initiatives.

For example, since 2005, the UK government has been assessing the feasibility of introducing CO2 quotas for private consumers. The amount of CO2 that Mr and Mrs Jones would be allowed to release into the atmosphere when driving their car, doing the weekly shopping, heating the house, etc., would be limited. CO2 emissions would be registered on a credit card each time they purchased fuel, groceries or oil/gas. Quotas could be increased by, for example, buying some from a neighbour, who had saved enough energy to allow the sale of his remaining CO2 allowance. The UK Government department, DEFRA, and the leading research institution, the Tyndall Centre for Climate Change Research, worked for two years to devise a workable model. The model was originally initiated by the then Minister for the Environment, David Miliband, who today holds the post of Foreign Secretary. His government recently announced plans to reduce UK CO2 emissions by 60% by the year 2050.

Personal CO2 quotas will significantly accelerate the market for eco-friendly products and services – from airplanes to highermileage cars, to passive houses and energy-saving flat screen televisions.

In contrast to a one-size-fits-all energy tax, personal CO2 quotas provide a dynamic, market-regulated pricing structure that reflects the need to reduce CO2 emissions. According to analysis carried out by the Tyndall Centre, this is also a fairer method of taxation, as wealthier households typically consume larger amounts of energy.

38

Mandagmorgen

MM | The business model of the future From the traditional product sale to the innovative product-service systems Traditional product sale

Innovative alternatives: Product-service systems

Phase 1a: Purchase of product

The customer buys a washing machine to be able to wash his clothes.

The customer leases a washing machine to be able to wash his clothes.

The customer buys a laundry service through a company. The company determines the best laundry solution for their client based on the client’s needs.

Phase 1b: Economy

The initial investment is comprehensive for the customer.

The customer’s expenses are spread out over time (the initial investment is small and later paid per washing).

The customer’s expenses are spread out over time as he pays per washing.

Phase 2: Use of product

The customer owns and keeps the washing machine, and is responsible for maintenance and washing quality.

The company retains ownership and responsibility for maintainance of the laundry machine. The customer is responsible for use and washing quality.

The company owns, maintains and keeps the washing equipment, the washing machine included. The company is responsible for the washing quality

Phase 3: Repetition

Finally, the customer disposes of the washing machine and purchases another.

The company is responsible for disposal and has incentive to prolong the use of the product and recycle components and materials.

The company is responsible for disposal and has incentive to prolong the use of the product and recycle components and materials.

Figur 2: In traditional products sales, the customer buys, maintains and disposes of his own washing machine. In the alternative scenario the customer leases a machine and therefore does not have to worry about maintenance and disposal. The washing machine supplier manages product-service system innovation and improvements.

Source: UNEP: Product-Service Systems and Sustainability, 2002.

Personal CO2 quotas are a comprehensive form of regulation.

Yet the recommendation builds on an existing and proven model, namely the EU quota system. Today, however, this typically applies only to large energy consuming companies. However, there is no doubt that over time, this system will be expanded to include more industry sectors that contribute to CO2 emissions, such as the airline and shipping industries.

What you save, you earn Climate innovation will accelerate on all fronts. Last year, Monday Morning wrote about the emergence of an entirely new type of company – the so-called Energy Services Company (ESCO), which funds and carries out energy saving improvements to a company's premises. Money saved by the improvements is then used to repay the original ESCO investment. This type of initiative means that there are extremely large financial gains to be made.

There is also a clear message from Danfoss Solutions, which for a number of years has trodden a lonely path in the Danish market for energy providers. CFO Johnnie Rask Jensen expounds the Monday Morning project at the Carlsberg breweries in Denmark. “We reduced CO2 emissions by around 5,000 tons per year. This equates to 18 million kWh – or the amount consumed by 750 to 1,000 private households. From a financial perspective, this is no less than 40% per annum,” he concludes.

In recent years, more and more firms have entered the Danish market, with Finnish concern YIT among the largest. They actively implement ESCO solutions in both the private and public sector. In Sweden, YIT is currently implementing projects totalling DKK 150–180 million, and the market is growing significantly. In Denmark, the goal is to achieve a turnover of half a billion kroner within the next two years. Among other areas, YIT has identified the public sector as being of particular interest and pilot projects are about to start up in three municipalities.

Denmark in the eye of the storm In the new industrial revolution, Denmark has an historic role to play in two areas: By hosting the UN Climate Summit COP15, the Danish Government has positioned itself in the eye of the storm.

It is here that 189 of the world's nations will have the opportunity to take a united stand against greenhouse gases, laying the foundations for the next industrial revolution. Since becoming a minister in 2004, Connie Hedegaard has focused on creating a win-win situation for both nature and commercial competitiveness. And there is a clear Danish strategy to ensure the COP15 delegates reach agreement on global CO2 regulation encompassing every country and all sectors. The quicker this is achieved, the easier and less costly it will be to solve the climate problem. According to Kate Hampton of Climate Change Capital, such an agreement would bring about “massive growth in CO2 investment”.

Denmark is unique in commercial terms of commercial preparedness. The issues that have brought about the paradigm shift have been the focal point of Danish innovation and product development for decades. Thanks to stringent local environmental legislation, attractive conditions for eco-friendly solutions and the world’s highest environmental taxation, many of Denmark’s largest companies are well prepared to reap the rewards of the new, global market. Danfoss, Grundfos, Novozymes, Novo Nordisk, Danisco, Haldor Topsøe, Vestas, Rockwool and the energy companies are all sector experts in innovation and green solutions, including the new business models and systems. Seen in context, Denmark’s hosting of the UN Summit offers an excellent opportunity, not only for the planet but also for the 44,000 km2 of land that make up the country of Denmark.

MM

Bjarke Hauerslev Larsen | bhl@mm.dk Per Meilstrup | pm@mm.dk

SPECIAL EDITION November 2008

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13-10-2008 14:42:34

Deloitte Climate & Cleantech Services. www.deloitte.com/ dk/climate

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