1 Transatlantic Perspectives on Energy Transition
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TRANSATLANTIC PERSPECTIVES ON ENERGY TRANSITION: BALANCING ECONOMY AND EMPLOYMENT WITH COLLECTIVE CLIMATE CHANGE RESPONSIBILITIES Presented on 23 April 2019 At the University of Copenhagen Faculty of Law To the Transatlantic University Collaboration on Climate and Energy Law Workshop “Honorable Mention” Designation Authors: Brad Cummings, Wissame En-Naoui, Sarah Gilmour, Tobias Mark Jensen, Christopher McMichael, Hansdeep Singh Abstract: Energy transition concerns the transformation of the global energy industry from a fossil fuel based to a zero-carbon, renewable based energy grid. This drastic change in how energy is produced and distributed raises important political, social, and economic issues. This paper will focus on how governments can ensure that energy transition occurs in a way that stimulates economic growth and creates jobs. We use a comparative approach between the European Union with Denmark and Norway as case examples , and the United States with Colorado as a specific case example to analyze the policies, regulations, and legal frameworks each government uses to ensure that energy transition occurs in a way that benefits employment and the economy. While the political, social, economic, and energy contexts of these jurisdictions are different, our research indicates that when governments invest, promote, and regulate renewable energy production they experience economic growth. Energy transition can occur in a way that stimulates the economy, but in ways that are different for each jurisdiction. Denmark is a leading example of how energy transition can positively impact the country’s economy and employment. Denmark invests in domestic wind energy production and charges users high tax rates on energy consumption to fund that investment. Similarly, Norway’s investment in hydropower and commitment to carbon-free economic sectors, such as transportation, have created economic growth. Despite the country’s economic reliance on oil and gas production, Norway strictly regulates it’s off- shore oil and gas production and seeks to transition most of the employment and economic impact of that sector to more renewable sources such as wind energy. Like Norway, the United States is heavily reliant on oil and gas production, but the United States is not currently making any investments or policies related to energy transition at the federal level. However, the renewable energy industry is having positive economic impacts at the state level, particularly in Colorado. Colorado has set ambitious goals to achieve a 100% renewable energy grid by 2040. The state plans to achieve these goals by imposing stringent regulations and requirements on oil and gas production while investing in the wind and solar industries. Keywords: Energy transition, renewable energy, economy, economic growth, employment, job growth, European Union, United States, Denmark, Norway, Colorado, wind, solar, hydropower 1 I INTRODUCTION 3 II EUROPEAN UNION 3 A. Legal and Policy Frameworks 3 Green Employment Initiative (GEI) 4 European Union Emissions Trading System (EU ETS) 4 B. Denmark 5 The Danish Energy Model 6 The Danish Experience 7 C. Norway 7 Regulation of Energy in Norway 7 Norway’s Energy Mix 8 Carbon Capture and Storage (CCS) 8 Legal Framework: Norway’s Aim to an Energy Policy Towards 2030 8 Risks and Opportunities for Employment and Economic Growth 9 Opportunities for Employment in the Renewable Energy Sector 9 III UNITED STATES OF AMERICA 9 A. Colorado 11 Energy and Economic Context in Colorado 11 Legal Analysis and Governmental Involvement 12 IV FINDINGS 13 A. Denmark 13 B. Norway 14 C. United States of America and Colorado 14 VI BIBLIOGRAPHY 16 2 I INTRODUCTION Energy transition is generally understood as a complex and “radical shift in the energy system from an existing model to a new paradigm,” involving the interaction of a variety of complex factors.1 While several energy transitions have occurred throughout history, current models are specifically concerned with the “transformation of the global energy sector from fossil-fuel based to zero-carbon by 2 the second half of this century,” driven by “the need to reduce energy-related CO2 emissions to limit climate change".3 This paper utilizes a comparative approach to analyze policy and legal frameworks which support energy transition, with particular focus on transition impacts to economic growth and employment. Energy transition poses a number of challenges for political groups and world leaders, who are faced with the responsibility of ensuring domestic economic growth and positive impacts on employment, while balancing the common responsibility of all states to take meaningful action to mitigate and slow the effects of climate change. This common responsibility has been widely acknowledged, with 175 parties committing to nationally determined emission reduction targets under the Paris Agreement.4 As a highly complex legal and policy issue, it can certainly be valuable to draw on the experiences of countries which have already successfully commenced their energy transition. However, the experiences from such countries must be filtered through the lens of a country’s own national circumstances in order to positively impact on its economy and employment. In order to better quantify these factors, the approaches utilized by the European Union will be examined in part II, followed by specific case examples of nations i.e Denmark and Norway. Part III will focus on the United States, followed by a case study of the efforts/policies enacted by the state of Colorado. Finally, part IV will involve a comparative analysis and make policy suggestions for the jurisdictions based on the policies and programs analyzed in the earlier parts of the paper. II EUROPEAN UNION A. Legal and Policy Frameworks Several European Union regulations promote energy transition within its Member States and support its commitments under the Paris Agreement. Firstly, Directive 2009/28/EC gave binding force to the 2020 Climate and Energy Package, which set a number of key targets. Specifically related to energy transition, it provides 20% of energy in the European Union should be sourced from renewables by 2020.5 The 2030 Climate and Energy Framework, implemented by Directive 2018/2011, established a binding Union target that at least 32% of gross final consumption of energy will be from renewable sources by 1 Bassam Fattouh, Rahmatallah Poudineh & Rob West, The rise of renewables and energy transition: what adaptation strategy for oil companies and oil-exporting-countries? (2018), https://www.oxfordenergy.org/publications/rise-renewables-energy-transition-adaptation-strategy-oil-companies-oil- exporting-countries/ (last visited Apr 14, 2019). 2 IRENA-Energy Transition, available at https://www.irena.org/energytransition (last visited Apr 14, 2019). 3 Id. 4 The Paris Agreement | UNFCCC, available at https://unfccc.int/process-and-meetings/the-paris-agreement/the- paris-agreement (last visited Apr 14, 2019). 5 2020 Climate & Energy Package Climate Action - European Commission (2016), https://ec.europa.eu/clima/policies/strategies/2020_en (last visited Apr 14, 2019). 3 2030.6 The Commission also adopted a strategic vision to make Europe climate-neutral by 2050 through joint action in several strategic areas, including the deployment of renewables.7 In addition to these overall targets, other policies provide guidance on managing economic development and employment challenges associated with energy transition. Green Employment Initiative (GEI) The GEI was adopted by the European Commission in June 2015.8 It sets out a number of strategic policy actions to be taken by both the Commission and member states to support the labor market during energy transition, which is recognized as a key factor for promoting economic growth.9 One such action is to bridge existing skills gaps by fostering ‘green’ skills developments through upskilling and re-skilling of workers in sectors vulnerable to restructuring.10 This policy action explicitly recognizes the need for targeted intervention by public authorities to enhance education and training skills during the adaptation of the workforce driven by energy transition.11 The GEI also encourages member states to boost job creation through implementing tax changes.12 It recognizes that taxes on labor are detrimental to economic growth and consequently, recommends member states with the ability to remove subsidies in environmentally harmful industries, and implement tax shifts away from labor and towards consumption, property and environmental taxation, should do so.13 European Union Emissions Trading System (EU ETS) The EU ETS was first adopted in 2003,14 and amended in 2018.15 The system places an overall limit on emissions from covered installations, reduced each year. Within this cap, tradable allowances are distributed to covered operators which may be bought and sold as required. Operators must also measure and report their emissions, surrendering an allowance for every ton of CO2e emitted by their installation. This flexible system aims to harness market forces to find the cheapest ways to reduce emissions.16 6 DIRECTIVE (EU) 2018/ 2001 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL - On the Promotion of the Use of Energy From Renewable Sources (Dec 11, 2018). Art 3.I, available at https://eur- lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L2001&from=EN> 7 2050 Long-Term Strategy Climate Action - European Commission (2016), https://ec.europa.eu/clima/policies/strategies/2050_en