How Denmark’s industry cut emissions and boosted productivity

The COVID-19 pandemic has made dark clouds gather all over the world, resulting in health and economic crises for countries, companies and communities. We cannot over-emphasize the severity of this. And here-and-now action is needed.

Paradoxically, the dark clouds of COVID-19 have also resulted in clear skies many places, as the pandemic has forced lockdowns upon societies and industries all over the world, cutting carbon emissions as a small, positive side-effect.

Currently, I’m thinking about how to make the skies stay clear, without the negative effects on the economy, which cause mass unemployment and insecurity. Because the fact is, the climate crisis remains. Without collective, decisive actions, it will not only stay – it will increase in severity and destabilize countries, companies and communities worldwide.

Fortunately, there are areas where we can make significant changes to collectively combat climate change and achieve the steep reduction of carbon emissions we need to avoid destroying the climate, while at the same time creating jobs. One of these decisive areas is industry. This sector accounts for 24% of the world’s carbon emissions. While this means that we are accountable for a massive part of the total carbon emissions, it also means that we are in a unique position to take action to change things for the better.

Having spent many years actively engaged in the climate agenda, with an industry outlook, most recently as Chairman of the Danish Climate Partnership for Manufacturing Industry, I would like to offer my perspective on how we can ensure a green rebound post COVID-19, making the coming decade a decade of action for the climate.

The manufacturing industry is a cornerstone in the Danish economy, accounting for more than 40% of the collective Danish export of goods. Through ongoing efforts, we are making Danish industry a living example that reducing our carbon footprint does not equate to poorer performance. Quite the contrary, we are proving that it can be done while increasing growth and improving productivity. Since 1990, the Danish manufacturing industry has reduced carbon emissions by 65%, while at the same time improving productivity by 35%.

Our ambitions reach further. We want to achieve net-zero in 2030 – probably as the first manufacturing industry in the world. While sceptics will say that the low-hanging fruit has already been picked, we find the reality promising.

In the Danish Climate Partnership we explored technologies that can help us reach our target in-depth. Our conclusion was to focus on four levers: energy efficiency, electrification, a shift to green mobility, and a shift to biogas, which can take the industry towards net-zero by 2030. In hard-to-abate sectors, a roadmap would also include carbon capture and storage (CCS) and carbon capture, utilization and storage (CCUS).

What we have learned from the Danish Climate Partnership goes beyond the final report and its facts and figures. It is a process – it is new ways of working and collaborating. We spent time on mobilizing representatives from the industries through online outreach, hackathons with industry experts, and in-depth sessions with industry spokespersons to establish a common language, understanding and a shared net-zero vision. This was a good route to move the net-zero ambition from a utopia to something doable and practical.

In the partnership, we did a survey from a representative sample of companies to gain insights to some of the barriers companies are experiencing when working on green initiatives. We learned that “other priorities” is the main reason for omitting green initiatives.

What we need to look further into, then, is giving companies the right incentive to make the green transition a higher priority. A policy tool which could be useful in that regard is a carbon tax. A recent survey among members of the World Economic Forum Alliance of CEO Climate Leaders points to an insufficient price on carbon as the number 1 policy barrier.

A current example from Denmark is the existing tax system. We have a tax on the use of surplus heat from industry, despite it being an effective way of using energy, while carbon emissions are only taxed in parts of industry and in general at too low a rate. If this was swapped around, you would have a strong economic incentive to make green investments rather than staying with a status quo, making a carbon tax an important policy tool to accelerate the journey towards net-zero.

Tax, however, cannot be the only policy tool. Many companies experience liquidity as a barrier. This is more relevant than ever as many are struggling with COVID-19 and its consequences for the economy. In the huge stimulus packages that the world’s governments are enacting to counter the pandemic, there are opportunities. In the G20 countries, these stimuli make up over 11% of combined GDP. With these, we can provide the needed liquidity for industry to kickstart its green transition and create jobs at the same time. For instance, investments in manufacturing have the largest employment multiplier effect of any sector in the US.

Green stimuli are not the only way to mobilize capital. In the Danish Climate Partnership, we have started a cross-sector collaboration between industry and the financial sector to develop new green investment models making sure capital is available for green initiatives. Work that is currently ongoing.

I realize that the road towards net-zero will differ from sector to sector and from country to country, with varying political systems. I know that some would be more likely to succeed by applying other approaches than the ones I have mentioned. I am aware that an extensive roadmap would also include indirect emissions from companies’ value-chains. However, I believe there is a common lesson to be learned: net-zero is not a distant goal. The roadmaps are there and we can find them if we look for them together across sectors and spheres.

As more join this journey, we can move towards achieving net-zero globally. Securing clean skies and creating jobs for the future.