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An offshore wind farm near the Danish island of Samso. (BOB STRONG/BOB STRONG/REUTERS)
An offshore wind farm near the Danish island of Samso. (BOB STRONG/BOB STRONG/REUTERS)

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The economics of energy conservation Add to ...

That’s good news for the planet’s future. Despite its offshore wind farms, Denmark shows that carbon abatement isn’t limited to places with ideal conditions for wind power – or solar or hydroelectric, for that matter. Higher energy prices are a tactic that can be applied anywhere. The market is oblivious to whether the wind blows or the sun shines. Charge enough for power in any country in the world and people will use less electricity. It’s basic economics.

If capping carbon emissions is the goal, the solution isn’t to rush out and build wind turbines; simply raising prices will do the job. Consider, for instance, the state of Montana or the province of Alberta, both of which have huge coal reserves. What’s more, citizens there consider energy abundance a veritable birthright, so few think twice about burning as much of it as possible. Even in those places, though, I bet charging 30 cents per kilowatt-hour would cut the demand on the local power grid in a hurry.

To lower carbon emissions, you don’t need to build a single wind turbine or invest even a dollar in so-called clean coal technology. Just charge more for power and emissions will come down as a result.



Denmark’s track record of environmental success also has a lot to do with cars. Or I suppose I should really say a lack of cars. Cyclists are everywhere in Copenhagen, which boasts some of the best bicycle lanes in the world. They even have their own traffic signals. And it’s paid off. No matter where you go in Copenhagen, nearly everyone seems to get there on a bike.

It’s admirable, no doubt, and Danes should certainly be proud. But once again, the economist in me, ever on the lookout for price signals that explain human behavior, felt compelled to ask more questions.

It turns out that driving a car in Denmark, much like turning on the lights, is a very expensive proposition. The biggest cost isn’t even at the pumps. While fuel is more expensive in Denmark than it is in Canada or the United States, gasoline prices in Copenhagen are largely in line with the rest of Europe. Yet few other major European cities have the same volume of bike traffic as Copenhagen.

What differentiates Denmark from its neighbors is the cost of buying a car. Danish car buyers pay a tax ranging from 100 to 180 per cent of the vehicle’s sticker price; the exact amount depends on the size of the engine. For the cost of one vehicle with a gas-guzzling V-8 in Denmark, for instance, you could buy up to three cars in North America. If my fellow Torontonians had to pay those prices, the number of bikes on the road might start to rival Copenhagen.

Of course, ending a hundred-year-old love affair with the automobile won’t come easy. A few years ago, for example, Toronto’s city council passed a new annual vehicle registration tax that cost Toronto car owners the princely sum of $65 a year. That was too much for Torontonians to stomach. Facing disastrous pre-election polling numbers, the incumbent mayor headed for the exit. One of the first acts of the new mayor, Rob Ford, was to announce that the city’s war against the car was over. He and his new council cancelled the tax.

Defenders of North America’s car culture will also argue that the sprawling landscapes of cities such as Los Angeles, Phoenix and Calgary make Copenhagen-style bike usage impractical. Getting to work every day certainly can’t be like training for a triathlon. And frigid winter temperatures in some cities are also clearly unsuitable for year-round cycling. Those are fair points, but what the Danish model shows us is that prices influence demand. The Danes have crafted policies that encourage conservation. There’s nothing stopping civic governments in North America from doing the same.

The world won’t always look the way it does now. The sprawl that defines many North American cities is a result of cheap oil that makes it affordable for suburban homeowners to commute to work. Replace inexpensive oil with triple-digit prices and cities will eventually shrink back to their original bike-sized urban cores. When gasoline prices move high enough, you can also bet that suburbanites and city-dwellers will start agitating for better transit options. High fuel costs will force these types of changes on all of us before you know it. Denmark is meeting this pending reality on its own terms. The rest of us would be wise to consider how that country is doing it.

Copenhagen’s trademark windmills act as a smokescreen that obscures a more important takeaway than the mere viability of green energy. The power the Danes use is not much greener than anywhere else. Denmark is green because the Danes have learned how to use less power.

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