The energy policies in the Nordic countries and the coordination between the energy, environmental and industrial goals

1. Berit Tennbakk, ECON Håkan Sköldberg and Bo Rydén, Profu The energy policies in the Nordic countries and the coordination between the energy, environmental and industrial goals and policy measures?

2. Present political goals and measures – a preliminary analysis What are the political goals in the Nordic countries and in EU? Are some goals more important than others? What are the similarities and differences in goals among the Nordic countries? To what extent is there coherence and/or conflict between policy goals and measures in the respective countries? How are the trade-offs made between national and international goals?

3. Why do we ask? – starting point: a Nordic perspective Are current national policies adequate from a Nordic perspective, when… … energy markets are highly integrated in the Nordic area? Is there a need for a more coordinated Nordic energy policy? Is more coordination possible given national differences?

4. Policies significant for the energy sector • Energy policies • Efficiency • Security of supply • Environmental policies • Climate policies • Nature conservation • General policy areas • Industrial policies • Employment and economic growth • Rural policies • Income distribution policies Politics is to find solutions where there is conflict between demands: --- Compromises --- --- Priorities --- … in a dynamic and complex real world

5. Examples of conflicting goals • Environment versus efficiency • Expensive wind power in stead of cheap coal power • Environment versus security of supply • Decommissioning of nuclear power • Required CO2 sequestration stops profitable gas power • Conservation of river systems versus new hydro power • Efficiency versus security of supply • ”Excessive” use of expensive domestic fuels • Cheap imports in stead of new domestic capacity • Measures to ensure availability of effect capacity blurs price signals on scarcity • Efficiency vs. industrial policy • Efficient energy prices versus competitive industry • Cost efficient renewables policy versus regional policy

6. Conflicting policies between countries • Conflicting priorities • Nuclear power (SV/SF) • CO2 emissions (N/DK) • Natural gas (SF&DK/N&SV) • What are the national interests? • Efficient renewables policy or domestic industrial policy • Complex political picture  need to compromise • Dynamic conflict picture – tensions between • National and international considerations • Environment and industrial policies/competition • Market and governance

7. The same goal can mean different things • Example: Security of supply • Sweden: Effect capacity • Norway: Dry year • Finland: Import dependency National, Nordic or European perspective? • Changes in focus and priorities create challenges • Domestic renewables • Administratively induced investments in effect capacity undermines the market mechanism • New interest in nuclear power • Coal more attractive than gas and oil (domestic resource/well functioning world market) • New interest in long-term gas contracts  New dynamics: The time of surplus capacity gone!

8. Discussion points ... Are policies balanced ... ? What are the most pressing concerns currently ... ? To what extent are policies determined outside the Nordic space … ? Is there really a need for more Nordic coordination … ?

9. Development trends in energy policies Changes in priorities over time ? Changes in public attitudes Changing governments, cf. gas power in Norway Not just political parties, but even political personalities External chocks, e.g. dry years and black-outs External pressure and directives, e.g. from the EU

10. After deregulation Before deregulation Effektivitet Efficiency Security of supply Efficiency Environment Environment Security of supply Security of supply Efficiency Welfare and industry policies Environment Possible trend in prioritiesAreas attracting most attention in the political debate Effektivitet Miljø

11. Does the energy related policy goals cover all policy areas? ? Effektivitet Miljø

12. Do the energy policy goals cover all policy areas?Yes, they do! Effektivitet Miljø

13. But if we use the policy measures as an indicator…? Effektivitet Miljø

14. Possible trend in prioritiesAreas attracting most attention in the political debate Effektivitet Miljø

15. A conclusion: Different goals are given different priorities in the political debate and in the policy measures… Is this conclusion correct? If so, is this normal or not…? Are policy measures good indicators…? Is our description of the present political debate correct…?

16. Goals and policy measures which influence different policy areas Limited emissions of green house gases – CO2 emission trading scheme Limited emissions of green house gases – CO2 tax Increased renewable electricity production – electricity certificates Efficient electricity market – deregulation of the electricity market Reductions in accident risk and radioactive waste – nuclear phase-out Conservation of unexploited river systems – hydro power moratorium Efficient use of electricity – voluntary agreements, LTA Efficient use of electricity – electricity tax Security of supply – expansion of the natural gas grid Efficient use of electricity – ban on electric heating

17. Consequences of a policy measure – EU ETS Security of supply:+: Supports renewable energy, which is often domestic-: Efficiency:+: Most cost effective measures are used-: Different allocation principles leads to suboptimal investments Climate, environment:+: Reduces emissions of CO2 since they lead to costs-: No control over where the emission reduction takes place-: Could lead to greater emissions of other substances Industry policies:+: -: Leads to costs if emissions increase-: Increases the electricity price

18. Tentative summary An attempt to summarize the most important effects of different goals/policies/measures in four different policy areas (Green = positive influence, Orange = negative influence)

19. Illustration An attempt to illustrate simi-larities and differences in effects of different goals/policies/measures in four different policy areas in Finland and Sweden Finland Sweden

20. Are consequences of policy measures analysed? Systematic analyses of consequences of specific policy measures in different policy areas Systematic analyses of the combined consequences of all relevant policy measures in different policy areas…

21. EU ETS and certificates in combination with ”old” policy measures - e.g. EU ETS together with CO2 tax in the trading sector Reduced cost-efficiency: The same European CO2-emissions, but at a higher total cost New function for CO2 tax: Larger CO2 reduction in country using CO2 tax, less in other countries=>The CO2 taxwill not be an environmental policy measure any longer!!

22. TGC schemes may be powerful instruments ! Electricity production from Swedish CHP 2015

23. International energy markets and national policies & measures – example: the Nordic electricity market Swedish nuclear phase-out (+) Finnish nuclear expansion (-) Restrictions on hydro power (+) Subsidies for conversion from electric heating (-) Investment subsidies for new electricity production (-) Swedish electricity certificate system (-) Increased transmission capacity between countries (+/-) Allocation of allowances

24. National vs Nordic Effects of national policy measures in the neighbouring countries – is this something that the specific country should take into consideration when policy measures are developed or evaluated?

25. Thank you! www.NordicEnergyPerspectives.org