Denmark’s ambitions to cease oil production in order to become climate-neutral come at a cost. According to the EU’s largest oil producer, the move is worth it.
The Danish political establishment has reached an agreement to phase out oil production by 2050. While it comes at a cost, it is one that the country must bear, the country’s leading politicians assert.
According to the Finance Ministry, a total of DKK 13 billion ($2 billion) in profits will be lost due to this landmark decision by the EU’s largest oil producer. Climate Minister Dan Jørgensen described the decision as “historic, but not free”.
Lars Gårn Hansen, an environmental economics professor at Copenhagen University, argued that the figure may be understood in several ways.
“DKK 13 billion is a lot of money. I don’t know how many super hospitals there are, but it’s a lot,” Lars Gårn Hansen told TV2. “But spread over 30 years, is it an amount that means something huge or fundamental to the Treasury? No.”
This position is concurring with previous reports from the Taxation Ministry, which estimated that the North Sea is “no longer particularly important for our economic sustainability and longer-term positions”.
According to the professor, Denmark has more pressing goals to meet. For instance, Denmark’s Climate Act dictates that the country must be climate-neutral by 2050, with a 70-percent reduction in climate footprint by 2030. Achieving this goal has costs of its own, and the phasing out of oil and gas is one of the cheaper ways of doing so.
“Of course, it would be still cheaper to keep the oil and gas, but then we wouldn’t comply with the Climate Act, and we already have that,” Hansen explained.
Denmark currently has over 30 oil and gas fields in the North Sea. The three largest are Dan, Halfdan and Tyra, and all three are a good distance from the Danish coast. Hansen’s prognosis is that capital and labour from the oil industry will spread across other industries over time.
“Therefore, you won’t be able to feel it in employment in the long term when the labour market has adapted, and it isn’t something the average Dane would feel in everyday life,” Hansen underscored.
In recent years, Denmark’s oil earnings have plummeted – partly because the Danish oil fields produce less oil, and partly because the oil prices have fallen globally. In 2019, the oil income was DKK 5.9 billion (under $1 billion). Lars Gårn Hansen described it as “an industry under liquidation”.
“We’re at the end of our oil adventure. So it was most of all a matter of the time horizon,” he underscored.
Since 1972, North Sea oil has earned Denmark over DKK 541 billion ($88 billion), with further earnings over the next 30 years lying somewhere between DKK 88 and 240 billion ($14 to 40 billion), according to the Danish Energy Agency.