DK Opposition Proposes DKK 20bn Green Fund

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Stockholm (NordSIP) – Following the rollout of the Danish government’s renewable energy plan two weeks ago, the opposition Social Democrats (Socialdemokratiet) proposed a considerably more far-reaching initiative they themselves deem one of the world’s most green and sustainably ambitious late last week at a press conference in Kolding, Denmark.

Mette Frederiksen
Chairwoman, Danish Social Democratic Party

“The Social Democrats propose a vision where Denmark will be free from fossil fuels as early as 2045. We won’t wait until 2050, as the goal is today. Our vision is of a society without plastic and air pollution. A government led by the Social Democrats will make Denmark a green superpower again,” said Social Democrat leader Mette Frederiksen.

The centrepiece of the proposal is a new state-owned fund that will invest globally in green solutions. The fund, named The Global Future Foundation, would be financed by DKK20 billion ($3.2 billion) from the Danish Treasury.

The Social Democrats are also proposing deposits on bottles and carry bags to reduce plastic and chemicals, as well as a phase-out of the production of diesel cars as part of its transportation initiative, which would cease being for sale in Denmark by 2030. The government’s energy plan is thus far lacking such a component, pending transportation plans to be published later this summer.

A Fund for the Global Future

Nevertheless, where the plan goes furthest and distinguishes itself from the government the most is in the proposed establishment of the DKK20 billion green fund:

“The purpose of [The Global Future Foundation] is to invest primarily in ground breaking green projects that can counter catastrophic effects due to climate change and ensure more sustainable use of the planet’s resources,” Frederiksen said.

Specifically, the fund would support the development of new businesses and technologies that can create more green energy, which can help better save and renew the energy. The Fund also aims to provide clean drinking water and to feed the world’s growing population sustainably. The fund would invest in projects with both long and short-term horizons.

“The fund will be owned by the Danish state, which will infuse DKK20 billion in startup capital. But additionally, it must be politically independent and operate on market terms. An advisory board will be appointed, consisting of people from the world’s largest institutional investors, international companies and recognised researchers and experts in green investments and climate change,” said Dan Jørgensen, a former minister for Food, Agriculture and Fisheries and Frederiksen’s adjutant.

Jørgensen added that the fund would eventually generate returns that could be paid to the state in whole or in part, thus not affecting the public balance. A similar model already exists in The Danish Growth Fund (Vækstfonden).

“We expect this to yield a return, but we also have to make a commitment,” said Frederiksen. “We believe that results and jobs for many people could be created by this.” Frederiksen recently suggested that investments of DKK90 trillion in green conversion would be required if global goals of limiting temperature increases are to met, which corresponds to roughly 40 times Denmark’s GDP.

Another model for the fund is the Green Investment Bank, which was founded by the UK government in 2012 and funded with government money as a starting point. The initiative, which has since been renamed the Green Investment Group, is now owned by the Macquarie Group.

In addition, the plan sets a target of 500,000 green cars, including electric cars, plug-in hybrids and hydrogen cars, by 2030 (by comparison to the 12,000 on Danish roads today), and seeks to meet the objective of covering the entire electricity consumption in Denmark by wind, solar or other renewable energy by 2030, including via the introduction of three new wind parks.

The social democrats also called on the government to give specifics on how much the electricity tax, which would have consequences for e.g. electric cars, should be lowered and how this should be accomplished, following the proposal in the government’s energy plan made public two weeks ago.

Follow the Politics

The climate policy proposal from the social democrats, and particularly the establishment of a DKK20 billion state owned green investment fund, provides serious competition to the government’s energy plan, the centrepiece of which was the building of a giant wind farm. The proposal, however, is best viewed as a centrepiece of the social democrats’ campaign platform for the next general election in Denmark, which is due to be held within a year.

While the governing centre-right coalition is unlikely to agree to e.g. the establishment of a giant state-owned fund in the months before the election, it is more likely to agree to engage in talks in exchange for agreement on parts of its own energy platform (for example on the electricity tax), which it will attempt to implement in its remaining time in office. The establishment of the proposed fund, therefore, will be contingent on both the outcome of the upcoming election and whether the parties can agree to take the proposal forward, whichever party winds up in government and in power next year.

One thing seems certain: based on recent developments, the next general election in Denmark will almost certainly partly be fought over which party or parties can win the green argument.

 

 

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